Lack of money isn't the problem

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It has long been understood that the one thing that governments can always find money for is war. War is undoubtedly costly, as the US is currently finding out. It is not really, though, a financial problem. As Professor Richard Murphy points out today, the real constraint isn’t financial, it’s about the availability of bombs and missiles and the ability of even the US economy to replace them at a fast enough rate. The US will run out of Tomahawk missiles because it can’t manufacture them with sufficient speed, not because it can’t pay for them. Similar considerations apply to Iran, of course – although an economy using lower cost, easier-to-produce weaponry can to some extent compensate for its relatively smaller size.

There is another corollary to this as well. There is talk that reducing the level of sanctions enforcement on Russian oil and gas to mitigate the economic impact of the war in Iran will enable Russia to prolong its own war in Ukraine by increasing the flow of money into Moscow’s Treasury. It’s true in only one important respect: to the extent that Russia needs materials, components etc from outside its own economy, increasing its flow of foreign exchange will assist it, but to the extent that it can meet those needs internally, then, just like the US, it won’t be a lack of money which constrains it.

Russia is vast; it has a huge range of raw materials available to it. It’s also a dictatorship: switching the use of its natural and human resources from peace time activities to war time ones is a lot easier than it is in a supposed democracy. Much of the response from ‘the West’ to the war in Ukraine has been based on the assumption that economic sanctions will reduce the sums available to the Russian government to spend on armaments and eventually force it to stop its aggression. But if those sanctions only impact Putin’s ability to make purchases outside the Russian economy, and Russia can meet most of its own needs within that economy, then the assumption is invalid. Russia can never run out of money, and can continue its war as long as it has the resources to do so available within its economy.

That’s not to argue that sanctions should not be applied, even if we know that they are widely being broken by back door transactions. It does, though, suggest that merely cutting off economic contact with a country with access to such vast resources of materials and labour will not bring that country to its knees any time soon. It’s more tokenistic than effective. It’s not a new lesson – Iran, for example, has been subject to severe sanctions for decades, and is still able to produce drones not only for its own use but also for export. The mistaken belief that money (or lack thereof) is a constraint on action by sovereign governments running their own currency has a lot to answer for.

Should we demand the abolition of the USA?

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Annoyed at being fined for failing to comply with EU regulations, Elon Musk has demanded that: “The EU should be abolished and sovereignty returned to individual countries”. Perhaps the EU should respond with the counter-demand that: “The US should be abolished and sovereignty returned to individual states”. Actually, Musk might even agree with that in principle, if he had any principles – but it looks as though his real beef is about any state, or co-ordinated alliance of states, being big enough and strong enough to stand up to what he regards as the natural order of things: rule by billionaire. The difference, though, is that the US federal government has already been captured by the billionaires, and doesn’t need to be broken up to facilitate their rule.

There are, and always have been, questions over how much sovereignty (and in what fields) the EU’s member states should exercise individually and how much they should share; but acting jointly on some issues and agreeing rules which all members must follow is undoubtedly advantageous in a world where some corporations and individuals wield excessive power. It’s easy to understand why monopolists would prefer to deal with a host of weaker individual states on which they can impose their power. The real issue, though, and it’s not one which the EU seems minded even to consider, let alone tackle, is about how we collectively free ourselves from the increasingly oppressive rule of kleptocrats and billionaires. There is nothing natural or inevitable about the accumulation of wealth and power into fewer and fewer hands; it happens because the laws and rules under which the economy operates have been written to allow and facilitate it. But those laws and rules are made by humans, and humans acting collectively could change them. If enough of us wanted to do so.

Sir Billy No-Mates

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It’s unclear exactly what Trump is hoping to achieve by imposing tariffs on all good imported to the US. Sometimes he implies that it’s a temporary move to restore what he calls 'fairness', whilst at other times, he implies that it’s intended to be a long term replacement for income tax – a way, in effect, of transferring taxation from the income of the richest to the expenditure of the poorest. He either doesn’t understand, or is pretending not to understand, what tariffs are or how they work. My money’s on the former; partly because it’s the simplest explanation and Occam’s Razor applies, and partly because anyone who thinks that tariffs can be applied to smuggled fentanyl is clearly demonstrating his lack of understanding. Whilst the idea that smugglers would stop at the border to fill in forms and pay the tariff is attractive, its relationship to reality is somewhat distant.

The underlying statistics on which the tariffs are based are also questionable: the idea than an island group only inhabited by penguins and seals is exporting quantities of “machinery and electrical” goods to the US is fanciful at best. Whoever produced the figures for his show yesterday clearly didn’t apply any sort of ‘sense check’ to the numbers before letting His Orangeness loose to announce them. The calculation of the total value of tariff and non-tariff barriers is opaque, to say the least, but then basing decisions on arbitrary figures pulled out of thin air is his normal modus operandi.

However flimsy the factual basis, however arbitrary the decisions taken as a result, the fact is that the tariffs are going to be in force (until he changes his mind, which could be tomorrow - or even later today - based on experience to date), and the question is about how to respond. The main losers, in the immediate short term at least, will be US consumers. Even if the companies importing goods from elsewhere succeed in ‘persuading’ their suppliers to drop prices, or themselves decide to somehow ‘absorb’ part of the increase, the bottom line is that, for US consumers, prices of imported goods will rise. That isn’t a bug, it’s a feature; intended to encourage more domestic production. It might even work, but not on a large scale in the timescale of the current Trump presidency. Investment decisions required to build domestic capacity to replace imports aren’t going to happen overnight. To the extent that US demand for their products reduces or they feel obliged to reduce their pre-tariff prices, companies in all of the countries hit by tariffs, as well as their employees, will also be losers although, again, the timescale of that happening depends on how inelastic the demand for their products is.

For all the same reasons, it follows that the main losers when countries impose retaliatory tariffs will, in the short term, be the consumers in those countries; the process is a reciprocal one. For that reason, and despite all the natural desire to hit back at the person and country responsible, the immediate reaction of Sir Starmer (which is that he should not react immediately) is probably sensible as far as it goes. If and when it becomes clear that Trump’s approach is giving some US companies either individually or by sector an advantage over UK companies, that is the time to respond forcefully. Protectionism can also be reciprocal, another of those unfortunate facts which Trump seems incapable of understanding.

The bigger concern with Sir Starmer’s response is about whether trying to ingratiate himself and the UK with His Orangeness is the best way to deal with a bully. Being best mates with a bully might buy some relief in the short term, but it facilitates the bullying of others and, in the long term, the bully will always come back for more. Sir Starmer’s apparent unwillingness to collaborate with others rather than seek advantage over them is unhelpful, and fails to acknowledge that, however important the UK might have thought itself to be in the past, the future of these islands is inevitably linked to that of the rest of Europe. His reluctance to accept that a choice has to be made is itself making the default choice of sucking up to the bully. Talk of a reset of the relationship between the UK and the EU is just hot air when the government is seeking to negotiate an advantage for itself over the EU partners. Pretending to be everyone’s best friend is the best way to end up friendless.

Don't do as I do

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After more than six decades, it’s hard to remember exactly what I was taught about history in primary school, but such odd strands as come to mind relate more to the stories of individuals than those of peoples and cultures. The kings and queens of England certainly featured a little; the princes of Wales rather less, except around March 1st. For some people, that may be the only sort of history they ever learned, a version based on the idea of ‘great men’ whose deeds are treated as though they drove history rather than as sitting in any sort of wider context.

Whether it’s an accurate way of looking at history is another question entirely. How different, for instance, would the twentieth century have looked without a Churchill? He certainly had a way with words and many found him inspirational during a period of great challenge, although a more rounded picture can’t escape his innate racism, nor avoid wondering whether all his war time decisions were really as brilliant as they have been painted. If he hadn’t been there, who would have been in charge during the second world war, and would it have changed the outcome greatly? Would a different individual have risen to the challenge? We can never know, because we only live history once, and it is what it is. Related questions can be asked about Hitler, or Stalin. Were these uniquely evil people or, given the circumstances at the time, would they have simply been replaced by other, equally evil, individuals?

One of the justifications for political assassinations – a field in which the USA tends to excel, even if normally practiced outside the territory of the USA itself – is that killing evil men protects the rest of the world. And I’ve even seen some argue that if Hitler had been assassinated in the 1930s, the holocaust could have been avoided. Maybe, if the entire Nazi leadership had been ‘taken out’ before coming to power (even assuming that to be possible), things might have been different; but it’s impossible to tell and, by the time they had taken control of Germany, there were more than enough potential replacements. But there are at least two other problems with that scenario, even if we conclude that it would indeed have made a difference. The first is that it really means eliminating people before they’ve committed the crimes, and pre-emptive extra-judiciary execution isn’t something which can be easily justified morally. But the second is a much bigger, albeit incredibly simple, question with no easy answer – who decides?

Whilst Trump appears, at times at least, to be seriously unhinged and whilst he is, for many of us, a deeply unpleasant person generally unsuited to the job of president, his first term in office didn’t put him in the same category as a Stalin or a Hitler. Some of the proposals being floated for his second term have some very unlovely historical precedents but, given his propensity for distancing himself from concepts such as truth, judging him guilty to the extent of deserving to be executed on the basis of what he says today is, at the least, premature. It’s certainly not the sort of decision which any society with even the remotest claims to being democratic and abiding by the rule of law should be leaving to a lone gunman with a rifle.

The condemnation of yesterday’s attack has rightly been near-universal, but the reaction of both Trump and Biden would sound a lot more sincere if there was some sign that it had caused either of them to reflect on the USA’s long-standing proclivity for conducting or facilitating assassinations elsewhere.

Chancellor achieves new heights

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Last week, the Chancellor of the Exchequer did his best to sabotage any hope of retaining good access to EU markets by insisting that the UK will deliberately diverge from EU standards and regulations; this week he went to Davos and came close to starting a tariff war with the USA.  It certainly honours the government’s commitment to run talks with the EU and the USA in parallel rather than in series, but I hadn’t realised that the objective of doing that was to wreck both.  But, wait a moment – what was the Chancellor even doing in Davos?  It’s only a month since the PM banned all cabinet ministers from attending the gathering saying that they were going to be far too busy at home.  It was, of course, a ‘Boris Johnson pledge’, and therefore not meant to be taken seriously, but it’s a pretty blatant U-turn even by his standards.  Perhaps the PM thought that, after attempting to sabotage the EU talks last week, the Chancellor could do less damage in Davos than he could if he stayed in London.  If he did, the PM may have, to use a Bushism, seriously misunderestimated Javid’s capacity for following his own example.

Highlighting the article

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UK Prime Ministers, of whatever colour, bang on about ‘the special relationship’ with the US.  In fairness, all US Presidents refer, in return, to ‘a special relationship’ with the UK.  The difference between the two positions is small; so small that some don’t even notice the difference when people speak, but the use of the indefinite article highlights a huge gulf in what the phrase means.

For the US, the relationship with the UK is one of a number of ‘special relationships’; it’s not unique.  The degree of ‘specialness’, as well as the number of such relationships varies over time, depending on the perceived interests of the US at any given point.  That difference was highlighted by the fact that the UK Prime Minister was apparently around eighth on the list to receive a call from the President-elect.  For the UK, there is one and only one such relationship.  That alone underlines that this is not as reciprocal as it is generally painted.  It also tells us something about the attitude of successive UK governments; whilst they are always extremely keen to avoid upsetting the US, it doesn’t work the same way in the other direction.

The question which interests me is why UK governments are so keen on this particular relationship that they are prepared to prostrate themselves before whoever the US citizens elect to lead their country.  There’s surely more to it than the parody in ‘Yes, Minister’ when Hacker gets so excited about the photos of him on the White House lawn appearing in the UK press.

It may stem partly from the linguistic connection.  Churchill described the US and UK as “two countries divided by a common language”, but we shouldn’t underestimate the impact of direct communication unmediated by translation in the way people relate to each other.  That language issue in turn isn’t unrelated to the imperial past; one of the glories of empire is, apparently, bequeathing the English language to the world, even if that language is increasingly, and with considerable justification, being referred to as American.

And that imperial past is relevant in another way as well: there are those who seem still to regard the US as some sort of wayward child, for which the ‘mother country’ still has a fond (if not always entirely deserved) regard.  It’s yet another example of the way in which the UK establishment appear to be so attached to the past that they are determined to continue living there.

But, tempting as it is to regard all this as touching, not to say a little touched, it has at least two major problems for the citizens at large.  In the first place, it means that much of what passes for UK foreign policy is decided in Washington rather than in London (it’s called ‘getting our country back’, apparently), even if those who benefit from that policy are also on the other side of the Atlantic; and the second is that it has been part of the reason, for decades, that the UK has failed to engage properly or enthusiastically with our more natural partners in Europe.

One of the reasons for de Gaulle’s vetoes on UK membership of the EEC was that he feared a US Trojan horse in the top councils of Europe.  And I suspect that, on the one issue where a popular referendum has gone against the US’s wishes (for the UK to stay in the EU), the US policy was driven by exactly that which de Gaulle feared – a desire to have a tame voice in those councils.

Even with a Trump government for which trade deals are about the US getting what it wants at everyone else’s expense, the siren voices of the US puppets are still telling us that the wayward child will make an exception for us, because we’re so ‘special’, despite all the hard evidence to the contrary.  Just what will it take for the UK to wake up to reality and accept that it’s a middling size state in a global economy rather than a superpower ruling the waves in a two-country alliance?  I suspect that the only thing that will achieve that is the end of the UK as a single state.  And given where they’re now taking us, that can’t come soon enough.