Category: Political Economy

A bargain-basement Churchill who is really the new Anthony Eden

For a long while Boris Johnson seemed to be playing a political blinder in tackling the corona virus pandemic.  Despite the manifest failures of government policy, the lockdown was being observed with little need for special bureaucracy or enforcement and he rode high in the opinion polls, while little attention was paid to Opposition voices.

But with tens of thousands now dead, criticism of the government’s handling of the crisis has grown and Sir Keir Starmer is winning media praise as the new leader of the Opposition.  The wonder is that Johnson scored so well in the early stages.  How did it happen?

The shifts of public opinion during the pandemic

Symbolically the high point might be seen in the 75th anniversary of the end of the Second World War in Europe on May 8th.  The celebrations (note: not ‘commemorations’) were tacitly permitted to break lockdown rules – just like the Thursday evening applause on Westminster Bridge, with the Metropolitan Police Commissioner present, a few days after Johnson was discharged from hospital nearby. Displays of loyalty, it seems, took priority over the need to save lives.

And Victory in Europe (VE) Day fitted seamlessly into the government’s programme for the virus, which used every means available to evoke that war and the state’s military role in it. The whole effort focused on the imagined New Churchill in Downing Street speaking directly to the nation.  It reflected Brexiteers’ twin obsessions with relations with the rest of Europe and the World War.

Little experience

The current Cabinet had come into office in July 2019 with very little experience of government.  The Prime Minister had held only one ministerial post, as a markedly unsuccessful Foreign Secretary from 2016-18, after eight years as Mayor of London.  His greatest prominence came in the Vote Leave campaign in the European Union referendum in 2016 (whose director was Dominic Cummings, appointed as his Chief Advisor when he became Prime Minister).

At the end of January 2020 the Vote Leave team duly saw its dream realised in the formal ending of British membership of the EU and they expected to thrive on political celebrations of this for at least another year.  However, that very day the UK’s first two cases of Covid-19 were confirmed.  Although Johnson had desperately wanted to be Prime Minister, he was singularly ill-prepared for the hard slog and adaptability the job requires: he did not seem to want to govern, merely to be at No. 10.  But suddenly he was faced with as serious and demanding a task of government as there can be.

The government reacted the only way that Johnson knew how: it procrastinated and then tackled the pandemic not as a complex and urgent requirement of administration but primarily as a campaigning opportunity. The aim was to advance its wider project and build up the government’s power and Johnson’s own political image.

Government by slogan and rhetoric

And so we had government by slogan, with rhetorical targets used to silence criticism.  I have just read a book about Russian revolutionaries in the run-up to 1917.  Whichever faction they belonged to, a major preoccupation was always to devise the right slogans to campaign with.  And so it is in Britain now.  After the three-word phrases of Take Back Control (June 2016) and Get Brexit Done (December 2019) we have tripartite slogans in Stay At Home – Protect the NHS – Save Lives and now Stay Alert – Control The Virus – Save Lives.  To these we must add an enduring motif of the campaign, which is really another three-word slogan meant to plant a certain idea in voters’ minds: Follow The Science.

Early on, the government resorted to daily televised press conferences instead of announcements in Parliament.  Then Parliament itself was sent on a needlessly extended Easter recess, placing the political focus on a handful of ministers and their scientific advisors.  They pushed this bold move through with the Opposition demoralised after the election defeat in December 2019 and the Labour Party preoccupied with electing a new leader.  Another needless recess of a fortnight has just started.

Not content with this, Johnson also made direct addresses to the nation, after which the broadcasters generally forgot the convention of inviting the Leader of the Opposition to reply.  The Queen was wheeled in too, and she duly obliged with a sentimental reference to Vera Lynn, the wartime ‘forces’ sweetheart.’  This was perfectly in tune with the government’s bellicose talk of ‘defeating’ the virus and the VE festivities to come.

The avoidance of Parliament matches a general imperviousness to criticism, in a novel, aggressive form that seems to have wrongfooted many critics.  Every time another extraordinary failure is pointed to, ministers respond with an incredible promise of something else two or three months later: for example, successive, ever more ambitious promises of virus tests to silence questions about how far the government has fallen behind previous schedules.  This promise is then dutifully reported instead of the failure to reply to the criticism.  It seems to be Cummings’ inventive way of burying bad news.

A new Anthony Eden?

The mood seems to be changing now, despite continuing government successes in presentation.  They cannot hide their unsought position in the world’s eyes as one of the maladroit villains of the pandemic, alongside Donald Trump’s USA, Jair Bolsonaro’s Brazil and, perhaps, Vladimir Putin’s Russia.  In early April a health research institute in Seattle had already forecast that the UK would have the largest number of deaths in Europe – despite early crowing that the country had the best epidemiologists, was one of the best prepared for a pandemic and so on.

So, far from the country’s heroic self-image of standing alone in 1940, this is turning into a national humiliation.  Governments are rarely appreciated if they bring humiliation down on their country, especially if it entails great, avoidable loss of lives from hunger or disease.  This spring’s ugly events in the hospitals and care homes of England must surely catch up with the administration, just as the fiasco of Suez in 1956 did with Sir Anthony Eden’s.  Boris Johnson will find no fridge to hide in then. 

Will the corona virus save the Brexiteers’ skin?

As Rishi Sunak prepares his first budget today, an ‘unexpected’ stalling was reported in British economic growth in January.

In point of fact the accompanying data show a slowdown since the autumn of 2019.  But the notion of a setback has only been generally reported this week – and almost exclusively as a consequence of the corona virus epidemic.

Signs that economic crisis has already begun

So, while he and his Cabinet colleagues bask in their government’s political summer, Sunak faces one of the worst economic situations I can remember.  Three – or maybe three-and-a-half – major factors are converging to bring Britain down over the next year or so.  The emerging pandemic is only the latest of them.

Three factors converge to bring Britain down

The first dates back over ten years to the banking crash in 2008, when the authorities relied on ‘quantitative easing’ (QE) – a huge expansion in the money supply – as its main response, while doing little to prevent a repetition of the excesses of hedge funds and financial derivatives which led to the crash, or reduce the accompanying high levels of private indebtedness.

Since QE began in 2009, the economy has never been strong enough to put it in reverse, and it has been clear for many years that when the next downturn came, the monetary authorities would have run out of ammunition to tackle it.  Private debt has continued to expand, making the situation even more precarious than it was in August 2007, when the credit crunch initiated the great crisis.

In 2009 Gordon Brown’s government, to its credit, embarked on an unfashionable ‘Keynesian’ policy of fiscal expansion to revive demand.  Month on month, economic activity began to recover – but it suddenly stalled again when David Cameron’s Conservative government was elected in May 2010.  The new government slammed on the fiscal brakes with the 1930s-style policy of austerity, leading to the last ten years of stagnation.

And so, to the first element of the banking crash and excessive monetary expansion, the half-factor of austerity was added.

How Brown went one way, and then Cameron the other

Then in 2016 came the EU referendum.  General predictions of an economic reverse on leaving the European Union were shouted down by Brexiteers as ‘Project Fear’ – and they continue to be so.  But the actual shock of leaving has not been felt yet, as the UK remains in the Single Market and Customs Union until at least the end of 2020.  But a foretaste is there in the GDP figures of the last few months.

Already an air of crisis

Nevertheless, there is already an air of crisis as the stock markets crashed on March 9th, 2020 – only two days before Sunak’s budget.  The proximate cause is the non-economic fact of the gathering pandemic, reinforced by a collapse in oil prices after Saudi Arabia and Russia failed to agree on cutting output.

And that pandemic is Sunak’s third big reason to worry.  And it is all that we are hearing from most of the media about the pending state of the economy: the pandemic alone, the rapid progress of which naturally causes widespread concern on its own account.

Despite the Bank of England’s 0.5 per cent interest rate cut this morning, the authorities are in no position now to cope with any serious economic reverse by their long-preferred means, as a result of QE.  The only solution from macro-economic policy is to reverse austerity – and renew the fiscal expansion which stopped dead in its tracks just under ten years ago.  Even Johnson and Sunak seem to have understood that.

What does this mean politically for their new government?  Ten years of recovery from the financial crisis (much faster in other countries than the UK) have already lasted several years longer than most economic upturns, and a recession is overdue.  If it occurs – as seems more than likely now – the conventional expectation would be that the government’s popularity would slide.

But will it?  After all, Johnson, Sunak and Dominic Cummings have a ready excuse: the semi-fake news of attributing it all to the virus which came over from China.  The Remainers – or Rejoiners – might lose the opportunity next year to demonstrate that their predictions about Brexit were not fear-mongering at all.

The clamour will arise from Brexiteers that this is nonsense.  An economic crash may have been predictable well before the end of 2019, and yet when it happens they will say it had nothing at all to do with Brexit, or even austerity: it was entirely due to an Act of God.

Five weeks with no checks on Johnson’s and Cummings’ behaviour

By Thomas Lines – September 8th, 2019

Yesterday I received an e-mail from my MP, Caroline Lucas, which says:

‘This week has seen politicians from all parties unite to block the Prime Minister’s plans for Britain to crash out of the EU with no deal.

‘It’s a huge achievement and Greens have played a leading role…

‘…we have called out his trap.’

This confident statement reflects the sense of buoyancy and even triumph on display among MPs on the rostrum and members of the crowd at last Wednesday’s rally in Parliament Square, which took place as the Commons vote on that bill was going through.

But hearing the news this morning I could not help thinking that, with Parliament about to close down, that mood is at odds with what is actually happening.  Today’s big story is Amber Rudd’s resignation, just as Friday’s was Jo Johnson’s.  Commentators are dismayed by the Prime Minister’s callousness and insincerity, and the devastating implications for the Conservative Party.

But I think this misses the point.  We need to consider what happens next, not look back on the latest outrage against the usual norms.  Here, Boris Johnson and Dominic Cummings remain one step ahead of their opponents.

Stories this morning from inside the government camp seem deeply sinister and worrying.  This should not surprise us, since it seems that both Johnson and Cummings are utterly ruthless and sinister men.

Sabotaging the EU’s business

Thus, it was reported that Johnson intends the government to do all that it can to sabotage the EU’s business over the next few weeks (since, after all, the UK is still a member), in order to provoke the other 27 into rejecting the request for an Article 50 extension.

Meanwhile, they will set about suborning the civil service as well as the Conservative Party to their own political diktats.  In this too, any resistance will be broadcast (I use the word advisedly) as acts of Remoaners and the metropolitan élite who are out to sabotage the People’s Will.

These reports came from behind the scenes and, of course, are impossible to verify.  But they are in keeping with the whole demeanour of the Brexit campaign since Johnson, Gove and Cummings collaborated in Vote Leave.

They are particularly sinister simply because Parliament will not be able to keep a check on them.  The means of achieving that were themselves instructive: Johnson manipulated a constitutional convention (that the Queen must always accept Prime Ministerial advice) to make her officially legitimise something that reminds me of nothing more than the fatal mistakes of her forebear, Charles I.  This is one of many signs that Britain’s antiquated institutions are not capable of constraining a man with Johnson’s character (see my blog of August 6th below).

Applauding the Leader

Inside the anti-Brexit bubble it is easy to ignore how well last week’s events – and Johnson’s personality in general – seem to have gone down with some of the public.  Many people are not holding up their hands in horror but applauding a Leader who is At Last Getting Things Done.  One man on Twitter on Friday said how much he was warming towards Mr Johnson with his ‘alpha-male’ character.

I am sure that is not a majority of the population.  I doubt strongly whether it is the 40 per cent or so that are usually required to get a British government elected (another outmoded mechanism in a situation of multi-party politics).

But to all appearances it is something like one-third of voters.  And as long as the opposing parties are electorally divided, while (conversely) the pro-Johnson media can continue to represent them all as playing to the evil Jeremy Corbyn’s tune, it is probably enough to win a good majority in a forthcoming election.

What leads to these reactions from people?  I think there are two sources.  The first is the cult of the Leader, which has been a factor in British politics since Mrs Thatcher’s time.  When people feel uncertain and insecure, many put their faith in a Strong Leader whose demagoguery seems to offer reassurance than in the tedious processes of democracy.  This is as true in Britain today as in Germany in the 1930s or, it seems, Russia nearly all the time.

Secondly, we cannot dismiss the real sense of grievance felt by many in the fact that, over three years on, the UK is still in the EU.  This cannot be as easily dismissed as the mostly specious arguments we’ve heard for leaving the EU itself.

Pro-European commentators tend to look on hardline Brexiteers as people from another planet – deluded, wild-eyed fantasists who want to have their unicorns and eat them.  But we must not forget that many Leave voters dismiss the alternative case just as firmly, as no more than diversionary tactics from Project Fear.

Wanting to see the back of us

Moreover, it is now looking entirely likely that the 27 other member states will reject the request for a further extension of Article 50 – with or without any further provocation from Johnson.  The week before last, there were reports that they were thinking of offering an extension without being asked, as a way of undermining Johnson’s cause.  But it did not happen.

Instead, in the last few days we have heard that some of them just want to see the back of this country.  France in particular is making noises to that effect.  This of course would play directly into Johnson’s hands.  But in their state of utter exasperation with it all – and contempt for what they already know of Johnson the politician – whoever could blame them for that?

We are about to enter something quite unknown in modern Britain: a month in which Parliament has been constitutionally debarred from scrutinising the government.  If indeed the UK crashes out without a deal, last week’s new law notwithstanding, the best hope might be now that the consequences of that event will finally reveal that all the warnings were not Project Fear but fully justified.  A mid-November election might then circle around how to repair the colossal damage wrought by three years of political hooliganism from the Brexit camp.  And that, perhaps, is the optimistic scenario.

Now is the time for democracy, not a fictional Parliamentary sovereignty

By Thomas Lines – August 6th, 2019

In the early years of membership, British opposition to the ‘Common Market’ was led by constitutional conservatives of the Right and the Left, such as Enoch Powell and Tony Benn.  They argued against its deficiencies in democracy, which gave them affront in comparison with the United Kingdom’s parliamentary tradition.  They thought that parliamentary sovereignty – the fulcrum of British constitutional tradition – could only be upheld by leaving the European Economic Community.

However, since then the EEC has evolved into the European Union, which has a proper democratic shape due to the real power and direct accountability of the European Parliament.  I would suggest that its institutions are at least as democratic as those of the United States (with which they have much in common) and a lot more so than the UK’s, with its centralised structure while composed of three-and-a-bit different countries, its appointed and hereditary upper house, distorted electoral system for the House of Commons and hereditary head of state.

And here lies the rub.  Unlike other parliamentary democracies, a new British government does not have to win Parliament’s approval before it takes office: confirmation of a new Prime Minister by the Queen suffices.  That even applies in mid-Parliament in a situation where the single governing party represents only a minority in the Commons (although supported by the DUP’s confidence-and-supply arrangement), while MPs have already rejected the main plank of the new government’s policy – the threat of crashing out of the EU without a deal.

No confidence but no resignation

But with only a few weeks to go till October 31st, those MPs must now wait for an opportunity to express a lack of confidence.  Moreover, we have just learnt that even after a vote of no confidence, a Prime Minister is under no obligation to resign: he can hold on in the hope that the two weeks provided by the Fixed-Term Parliaments Act will not be long enough for the formation of a new cross-party government, and then call a general election at a time of his choosing.  And before that election takes place, he will be able to take the UK out of the EU without a deal and without having to seek parliamentary support for it.

I was taken aback yesterday when I read that Dominic Cummings – who seems to be the real leader of the government, Boris Johnson being its political front man – asserted that this was so.  But it was calmly confirmed on the BBC’s Today programme by Lord Sumption, a retired Supreme Court judge and constitutional authority.  An Old Etonian and former advisor of Margaret Thatcher’s political mentor, Sir Keith Joseph, recent remarks of his nevertheless suggest that Sumption is not a fan of Boris Johnson.

But how can this be?  If the elected chamber expresses no confidence in the Prime Minister shortly after he takes office, how can he be in control of the events that ensue, including a general election as well as a fundamental constitutional change, to be achieved by gravely damaging means that to all appearances do not have majority support in the country either?

The answer lies in the two bulwarks of the British political system: parliamentary sovereignty and constitutional monarchy.  Parliamentary sovereignty has gradually morphed since 1689 into government by Cabinet and, most recently, centralised personal rule by the Prime Minister – all this in a typically British way, with little or no debate or expressed opposition to the changes.  And then, eight years ago, we had an important constitutional change in the Fixed-Term Parliaments Act, passed as ever by simple majorities in Parliament to serve David Cameron’s short-term desire to lock the Liberal Democrats into a coalition for a full five years.

A problem of Hindenburg-esque proportions

This Act allows the follow-up to a statutory vote of no confidence to be controlled by the rejected Prime Minister him- or herself, not a politically detached authority such as an elected President.  This brings us to the position of the Queen.  It is established practice – another of those far-reaching but unwritten conventions on which British politics relies – that the monarch cannot intervene politically.  This has come to mean that in general they must do whatever the Prime Minister of the day advises.  This self-serving governmental interpretation of impartiality means that the Queen cannot exercise any power or discretion even when it is most needed, such as a constitutional crisis of the sort we may be about to face.  This could become a problem of Hindenburg-esque proportions.

In other countries, if a Prime Minister loses a vote of confidence, they have to resign immediately and the constitutional head of state determines what happens next.  Usually, the same person will run a caretaker government, while the President discovers whether there is parliamentary support for a replacement government or if an election is needed instead.

This happened last year in the constitutional monarchy of Spain, where the King used his discretion to ask the previous opposition to form a government after Mariano Rajoy lost a vote of confidence.  Unlike his British counterpart, the Spanish monarch is protected from suspicions of bias by the circumscription of his role in a formal, written constitution.

Essential safeguards do not exist

However, no caretaker government in other countries is permitted to pursue any partisan or controversial policy: that has to wait for a replacement government to emerge according to the procedures.  Least of all can they carry out a big constitutional change, such as taking the UK out of the EU without a deal.

But if Lord Sumption’s interpretation of the arrangements is correct, such essential democratic safeguards do not exist under the purported Mother of Parliaments.

Some people have called Boris Johnson’s accession to office last week a kind of constitutional coup d’état.  However that may be, it seems clear that the ragbag of political conventions and statutes which passes for a constitution in this country is not up to the task at this time.  The means provided by the 2011 Act for votes of no confidence seems to have too many loopholes through which a failed government can pass, while the British version of constitutional monarchy provides no protection from such manipulations either.  The best we can hope for is that the Speaker of the House of Commons will stand firmly by the rights of Parliament, just as his predecessor had to in the early 1640s.

My time in newly independent Azerbaijan

An interview by Cavid Ağa

First published at https://cavidaga.com/interview-with-tom-lines/ on July 11th, 2019. Azerbaijani translation posted at https://www.abzas.org/2019/07/britaniyali-jurnalist-az%C9%99rbaycanli-aktivistl%C9%99rin-v%C9%99-jurnalistl%C9%99rin-donm%C9%99zliyi-m%C9%99n%C9%99-ruh-verir-musahib%C9%99/.

(I have made a few minor sub-edits here and indicate them with square brackets.)

Did you have any opinions about Azerbaijan prior [to] visiting?

Nothing firm.  I worked for a few weeks in Russia (mainly Moscow) in the spring of 1992, and when I later told my Russian friends that I was going to Azerbaijan their typical reply was, ‘Тебе не страшно?’ (‘Aren’t you afraid?’).  So before going there, I bought a wallet with a chain which attached it to my clothes, as a precaution.  In general it has been very useful and I still use one like it (because of it, I always know which pocket my wallet is in!).  But I did not require it for security in Azerbaijan (or anywhere else).  What those friends said to me revealed more about Russian prejudices than the reality I found in Azerbaijan.

As for politics, I had followed the break-up of the USSR for my previous job in 1990-91, and Soviet politics generally for over 20 years before that, and I was familiar with the specifics of several countries, including the Baltic states and the Ukraine as well as Russia.  In the previous two years I had made working visits to all of those countries as well as Belarus and Kazakhstan, but nowhere in the Caucasus region, and so I knew very little about what I discovered to be a very interesting situation in Azerbaijan.

How would you describe [the] socio-political situation during your stay?

Very unstable.  I arrived in September 1992, not long after President Mutalibov was overthrown and replaced by President Elchibey of the Popular Front, and then I lived in Baku through the worst of the war in Dağlıq Qarabağ [Nagorno-Karabagh].  I was evacuated back to Brussels during Heydar Aliyev’s slow-motion coup d’état the following summer, and returned for a few months before finally finishing my job there in about November 1993.  Despite the military reverses and political turmoil Baku never felt like a city at war or in serious crisis, but it also lacked the fervour one might expect in a small country that had gained independence for the first time in 185 years.  The atmosphere was quiet – almost too quiet in the circumstances, I thought – but subdued.  I put that mood down to the defeats in the war, which were reflected in the sad visits that people made to the memorials to fallen soldiers in the city centre.  But falling living standards [amid] economic and political confusion after the collapse of the old system may have contributed as much to it too.

Do you remember any interesting events that you found odd?

I’m sure there were lots of them!  That’s why I loved being there.  After all, I was in a distant country for the first time, I did not know the national language and the country was going through a very difficult time of change.  Perhaps the oddest thing was that, as it seemed to me, no foreign visitor would have guessed the country was at war if they had not known it.

Two other things occur to me right now.  One was the experience of working in an office in part of the former Soviet Union for the first time, because the arrangements and even some of the tools and equipment were very different from what I knew.  For example, the secretaries and typists who used to play a big role in Western office life were entirely absent, except for the occasional ‘референт’ [‘referent’], as were their accompanying skills such as touch-typing.  The same for some basic stationery, such as sticky tape: papers were attached with pins or glue or string.  And when the head of my office once wrote an important letter to a senior official, he showed me the draft.  I was struck by how little it said and how much space it took to say it, filled with flattery for the official.  That revealed something to me about the nature of official relationships, at least within the civil service, in what until just recently was the USSR: back home, business letters and memoranda deal with facts and generally in as few words as possible.  But in the outgoing culture facts and opinions were dangerous to set down in writing.  That, at least, is how I interpreted it.

My final oddity is a little incident in December 1992.  I returned to Baku after a couple of weeks at home feeling rather low, being in an unfamiliar place with a new job which had not been set up well by my employers.  The first morning I flagged down an old [two-door] Zaporozhets car for a lift to the office (under the system of the time in which private car owners used their cars as taxis to earn some money).  I had to sit in the back seat as the front passenger seat had been removed to make way, as far as I can remember, for a load of eggs.  My spirits immediately rose with that reminder of people’s lively spirit of improvisation and ‘making do.’

What about your contacts with dominant political figures? Have you personally met Elchibey or elder Aliyev? How would you describe them?

My relations were not that high up.  Unfortunately I forget the names now, but the most senior people I met were the acting Prime Minister (Ali Masimov?) and the President’s chief economic advisor (Mammedov?) in early 1993, in Elchibey’s time.  Meetings with the latter were due to my own work, while with the former I was an informal interpreter for a couple of EU officials who were visiting in connection with humanitarian aid.  But I do not remember very much about the meetings or what the personalities were like.

How was your relation with locals? By what means did you communicate with them? How many of them spoke English?

My relations with local people were good, conditioned by the strong Azeri and Muslim traditions of hospitality, which would always have protected me from any harm that might arise (but in fact never did).  At that time there were very few people from the western world in Baku and we could be immediately identified as such from our style of dress and so on.  I made particularly good friends with a young man in our office and his young family, who I visited several times.  By training he was a physicist but he had moved to that job like many people who had to change career paths suddenly in that era (while others simply lost their careers); he was very intelligent and interesting to talk to.  Very few people spoke any English but it did not matter because I spoke good Russian.  I tried to learn Azerbaijani but did not get very far because not only at work but in the bazaars and everywhere else everyone knew Russian, so it was not easy to try out the little Azeri that I learnt.

Did you monitor events in Azerbaijan after your departure? If you did, how would you evaluate [the] Western media’s view of early Azerbaijan? Positive? Negative? Curious?

I have remained curious about Azerbaijan, but at a distance.  When I returned home I had to look for other work somewhere, and the next jobs I did, in the first half of 1994, were in the Ukraine [and] Serbia/Montenegro.  In the end by 2000 I worked for at least a short time in every ex-Soviet country except Armenia, as well as Mongolia and some countries further west, so Azerbaijan was only one of many countries that I became acquainted with.  However, it was special as my introduction to a very interesting series of experiences.  So I have fond memories of the place.

As for the Western media, I would describe their attitude as incurious but also negative, in spite of that lack of knowledge.  The USSR had always been seen through Moscow’s eyes and the wider world had little understanding of its many complexities.  To this day, that Russian viewpoint often colours the understanding of the Ukraine, let alone smaller and more distant countries.  In England, the famous Azerbaijani linesman in the 1966 football World Cup Final was until very recently remembered as Russian: people did not distinguish between Russia and the USSR.  The large Armenian diaspora (especially in the USA and France), Azerbaijan’s Turkic and Muslim associations and the rather closed nature of Azerbaijani society (with almost no contact with the world outside the USSR) all led to further prejudices and misunderstandings, and probably still do to some extent.  I find all of that very regrettable.

Something of this arose only this spring with the Armenian footballer Mkhitaryan’s refusal to play [for Arsenal] in the Europa Cup Final in Baku.  English journalists made no attempt to understand the politics of the situation, or what Mkhitaryan had himself done to earn Azerbaijan’s displeasure.  They just assumed that he was right and the Azeri authorities were wrong – even though, as far as I could see, they behaved very correctly throughout the affair.

What do you think about current situation of Azerbaijan? How much did it change?

Since I have not visited Azerbaijan since 1993, I find it very hard to say.  While I was there I sympathised strongly with the Popular Front government in spite of its failings.  Alongside it, I was impressed by the deep roots of the country’s independence movement when I found out about it, with (as I understood) working class [people] much more involved than in other Soviet republics, where the demands for political freedom and independence came mostly from middle-class intellectuals.  Naturally I was disappointed by Aliyev’s return to power, even though he was a very experienced politician and managed to restore order in an unruly situation.  I remain saddened by authoritarian rule there, but enormously impressed when I read of the determined spirit of some activists and journalists in spite of it all.

Would you like to visit Azerbaijan again?

Of course!  I have fond memories of a small, remote country trying to make its own way in the most adverse circumstances.  A few years ago the England football team played a World Cup qualifying match in Baku and I thought about going there for it, but unfortunately it wasn’t a practical proposition.  Baku is a beautiful [and historical] city and I would love to see it again, although it was in a very poor condition after several decades of neglect at the time.  (I am a keen student of architecture.)  From everything I hear it has been transformed in the intervening period, with some world-famous new buildings that I would love to see.  I would also love to try the fresh sturgeon, the pomegranates, the wonderful fruits, nuts and vegetables, Azeri plov and so many other delicacies again!

Reference to Azerbaijani translation added on July 23rd, 2019.

Helping countries to tax more

Tax havens and tax dodging by big corporations and the super-rich have generated much anger in recent years.  Most of all, they are a problem for developing countries, and they have long been recognised as such.

However, the biggest international push on developing countries at present is simply to raise more tax.  The stated purpose of this is to contribute to the huge costs[1] of the Sustainable Development Goals, which were approved by the United Nations General Assembly in September 2015.

But advocates of developing-country tax reform say more taxation is also necessary for what they call state-building.  They point out how few people in many countries actually pay direct taxes, and say this weakens accountability between a country’s government and its population.  An example is Tanzania, where in 2008 there were only about 400,000 names in the Taxpayer Identification System for a population of over 45 million,[2] whilst in 2010 under 400 large taxpayers (mostly companies) contributed about 80 per cent of government revenue.[3]

The Addis Tax Initiative

In July 2015 the aspiration of higher levels of taxation was embodied in the Addis Tax Initiative (ATI), which was launched at the third UN Financing for Development (FFD) conference in Addis Ababa, Ethiopia.  Its founding declaration included three separate commitments: for donor countries, aid recipient countries and both groups of countries together, respectively.  It is the first of these that really mattered because it alone provided a target: not to increase taxes, but to double by 2020 the value of foreign aid projects in this area (mainly to help administrative capacity-building).

But this did not go down well in all quarters, as tax justice campaigners saw it as a diversionary tactic.  Their demands were not about the SDGs but for new global tax rules to be determined by all countries together – not just the rich ones, which were already developing rules under the auspices of the Organisation for Economic Cooperation and Development (OECD).

Forced financial inclusion

Besides, in many countries – and not just the very poorest – most people have insufficient income and wealth to allow for any significant increase in their tax payments.  So where reforms concentrate on taxes on income or consumption, they can look like a form of forced inclusion in the financial system. That is not unlike the taxes used by colonial administrations to force people on to the labour market.

If it succeeds in increasing tax revenues, this aid could also enable developed countries eventually to cut back on aid to developing countries – or alternatively, to reduce the latter’s unhealthy dependence on aid, depending on your point of view.  That dependency is huge: for example, in 2017 net receipts of foreign aid were equal to 71 per cent of central government expenses in Mali and 76 per cent in Mozambique, while in Malawi they exceeded government expenditure by 28 per cent.  Where few people pay direct taxes, this effectively makes governments more accountable to foreign donors than their own citizens.

Nevertheless, most developing countries’ tax revenues are well below the levels found in developed countries.  Among the ATI’s developing-country members in 2016, tax was worth on average just 15 per cent of gross domestic product (GDP), while the average in the OECD countries was 34 per cent.[4]

Old warnings about revenue

There were warnings about this during the period of decolonisation.  In 1963 the economist Nicholas Kaldor wrote this advice (using the terminology that was current at the time):

The importance of public revenue to the underdeveloped countries can hardly be exaggerated if they are to achieve their hopes of accelerated economic progress…  foreign aid is likely to be fruitful only when it is a complement to domestic effort, not when it is treated as a substitute for it.[5]

But most newly independent countries were more interested in nation-building – creating a sense of nationhood and replacing European officials with national ones – than state-building.  Foreign aid was readily presented as a way not only to pay for services but design them, and it filled the revenue gap instead.

At best a guarded welcome

The jargon name for this push for more taxation is Domestic Resource Mobilisation (DRM) and as a broad aim, it is widely shared among donors.  However, it has met, at best, a guarded welcome from potential beneficiary countries.  In 2016 there were 98 developing countries with DRM projects in place, but by now only 23 have joined the ATI itself.  The ATI’s monitoring report for 2015 commented drily, ‘Other countries have refrained from joining as their current political priorities lie elsewhere too or the topic of domestic revenue mobilisation is considered a highly sensitive issue for such a visible commitment.’[6]

There has been foreign aid for improving tax administration since at least 1985: Tanzania has been in more or less continuous receipt of it ever since.  Most such aid goes to countries which – like Tanzania – have always been major aid recipients, and not necessarily those that need it most.  But even there it has been very patchy.  Thus, in 2016 Ghana received US$18 million worth of aid for DRM, but Ethiopia – one of Africa’s largest countries – got no more than US$1.8 million and its little neighbour, Djibouti, none at all.  The US$11 million worth of this aid received by Tanzania in 2015 came in the form of 13 projects from seven donor countries – Canada, Finland, Germany, Japan, Norway, the UK and the USA.

Even without such an evident risk of duplication, it is not clear whether this aid is effective, even in its own terms.  After 30 years of such assistance, Tanzania’s tax revenue was still only worth 12 per cent of its GDP in 2016.[7]

Sidestepping the issues

However, an urgent need to tackle corporate tax dodging remains.  In some DRM programmes (such as Norway’s) it is one of the ways pursued to raise more revenue.  But as long as the rules of corporate taxation are determined by the countries that transnational corporations come from, it will fall short of that need.

The OECD’s own package of measures to tackle tax dodging was ‘delivered’ in October 2015 and developed by 44 countries, including every member of the OECD and the Group of 20[8] plus an expanded ‘inclusive framework’ of 85 more.[9]  Taken together, these 129 countries are said to represent ‘more than 90% of the world’s economy and more than 75% of the world’s population.’[10]

But the final decisions were left in the hands of the 44 richest and most powerful countries.  Meanwhile, the problems are most acutely felt precisely in those other countries which have a quarter of the population but only 10 per cent of the world’s output.  Above all, it is that quarter of the planet that the SDGs were set up for, and their voices need to be heard.  The ATI effectively sidesteps these issues and can even be seen to perpetuate a global system that is inequitable and flawed.

[1]  Estimated at US$5-7 trillion per year until 2030.  See United Nations (2018), ‘Financing for SDGs: Concept Note,’ New York, www.un.org/pga/72/wp-content/uploads/sites/51/2018/05/Financing-for-SDGs-29-May.pdf (March 2019), citing UNCTAD, World Investment Report 2014, Geneva.

[2]  Fjeldstad, O.-H. (2013), ‘Taxation and Development: A review of donor support to strengthen tax systems in developing countries,’ Helsinki: UNU-WIDER, Working Paper no. 2013/010, www.wider.unu.edu/sites/default/files/WP2013-010.pdf (March 2019), p. 10, citing O.-H. Fjeldstad and K. Heggstad (2011), ‘The Tax Systems in Mozambique, Tanzania and,Zambia: Capacity and Constraints,’ Bergen: Chr. Michelsen,Institute.

[3]  Fjeldstad (2013), p. 10.

[4]  Addis Tax Initiative (2018), ‘ATI Monitoring Brief 2016: ATI Commitment 2,’ Berlin: International Tax Compact, www.addistaxinitiative.net/documents/2016_ATI_Monitoring_Brief_2.pdf, p. 8; K. Markensten (2018), ‘Sweden’s Development Support to Tax Systems,’ Stockholm: Expert Group for Aid Studies (Expertgruppen för Biståndsanalys): April, https://eba.se/wp-content/uploads/2018/04/Taxes-Markensten-Webb.pdf, p. 9; and Ministry for Foreign Affairs of Finland (2018), ‘Finland’s Development Policy Results Report 2018,’ Helsinki: https://um.fi/documents/35732/0/UM+KPR+2018+ENG+WEB.pdf/944cf817-9d4a-43ca-07a7-2aebd6053801, p. 37 (all visited in March 2019).

[5]  Kaldor, N. (1963), ‘Will Underdeveloped Countries Learn To Tax?,’ Foreign Affairs, Vol. 41, No. 2 (Jan., 1963), pp. 410-419, www.jstor.org/stable/20029626 (January 2019), p. 410.  Cited in Fjeldstad (2013), p. 2.

[6]  Addis Tax Initiative (2017), ‘ATI Monitoring Report 2015,’ Berlin: International Tax Compact, www.addistaxinitiative.net/documents/Addis-Tax-Initiative_Monitoring-Report_2015_EN.pdf (March 2019), p. 26 (emphasis in the original).

[7]  Addis Tax Initiative (2018), p. 9, Fig. 2.

[8]  OECD (2017), ‘Inclusive Framework on BEPS: Progress report July 2016-June 2017,’ www.oecd.org/tax/beps/inclusive-framework-on-BEPS-progress-report-july-2016-june-2017.pdf, p. 3 (March 2019).

[9]  These are listed by the OECD at www.oecd.org/tax/beps/inclusive-framework-on-beps-composition.pdf (March 2019).

[10] Fung, S. (2017), ‘The Questionable Legitimacy of the OECD/G20 BEPS Project,’ Erasmus Law Review, No. 2, December, doi 10.5553/ELR.000085, www.erasmuslawreview.nl/tijdschrift/ELR/2017/2/ELR_2017_010_002.pdf, p. 76 (March 2019).

    Why I’m a centrist

    I have always voted left of centre – never Conservative.  I stood as a parliamentary candidate in 2005, opposing a Liberal Democrat MP.

    However, in my views on economics you could say I am a centrist.

    Does this mean I stand somewhere between the Tory chancellor, Philip Hammond, and the Labour Party’s John McDonnell?  No, my opinions on economics are much closer to McDonnell’s.

    I have reported on financial markets and studied both economic development and the USSR – I visited it for the first time in 1971.  I saw that the complete repression of markets there was obviously excessive, even though central planning had produced remarkable results in industrialising the country between about 1930 and 1960. But it was accompanied by gross inefficiency, poor quality, a lack of innovation – in short, pretty well everything that market evangelists say of state control in the economy.

    So I do think that markets are best?

    No. Market evangelists make the same mistake as the Bolsheviks and Stalinists did – or a mirror image of it.  Their economic policies over the last 40 years have not been crowned with success either.

    For the old dichotomy of ‘state v. market’ is false.  A good economic policy makes use of both the state and the market.  It is futile to try to make one do what the other is better at.  The difficulty often lies in knowing which is better for a particular purpose, or what combination is best.  But ever since at least the 1980s, the balance in both domestic British and international policymaking has swung far too far towards the market.

    It seems to me that there are in fact three guiding principles of economic organisation:
    • Hierarchy, or a pyramid of command which takes authority from above. Typical of state structures, especially undemocratic ones like the Soviet Union, it is also how most companies are organised.
    • Horizontal, democratic structures, taking authority from below or alongside – cooperatives and mutual societies, as well as decisions made by elected councils and governments.
    • Decentralised monetary exchange, operating through markets.  Relations of economic power are mediated through changes in price.

    Each of the three has its place, and more than one of them often combine effectively: education was traditionally organised on a mixture of the horizontal and vertical principles, to which the market idea has been increasingly added recently.  All three principles must be described and analysed on equal terms, if economics is to lay any claim at all to scientific objectivity and rigour.

    Rather laughably, conventional economists do make that claim; but their actual language does not bear it out.  Mainstream economics only takes a serious interest in one of the three elements but, more or less explicitly, presents that element as the ideal.  Non-market methods are called ‘distortions’ or ‘interventions’ in the proper working of the economy.  That language is not impartial and cannot be called scientific.  Do orthodox economists ever tell us of the financial markets ‘intervening’ in democratic processes?  Yet they do so every day of the working week.

    This failing is true of the basic theory underlying nearly every school of economics, except Marxism.  It is truest of all in the neo-classical school, which has been dominant since the 1980s.  But in 2008 the economic policies of that period, based on neo-classical ideas, brought us close to catastrophe.

    And that is why I’m a centrist.  I do not believe in the market or the state.  I don’t think it is the job of a serious thinker to ‘believe’ in any such principle.  The economic analyst should appraise their advantages and disadvantages, and determine where one is fit and where another is.  We need an economics which will appraise things as they are, and not start from loaded concepts such as the ‘perfect market’, ‘perfect competition’, ‘general equilibrium’ (where is equilibrium less apparent than in financial markets?), ‘natural prices’, narrow economic ‘rationality’, economic ‘welfare’ and so on.

    But to achieve that, economic theory probably has to be rebuilt from the ground up.

    30/5/18

    This is a revised version of an earlier piece which you can find at https://tomlines.org/wp-content/uploads/2018/04/Lines-Why-I’m-a-centrist-rev.pdf.