It’s the moment of truth for the silent majority

First Brexit, then Trump, then Matteo Salvini, then Jair Bolsonaro and now Merkel is leaving after dismal results in German regional elections. Add in a Saudi assassination, a far-right Austrian, Hungarian and Polish axis in the EU and a constitutional change to make President Xi Jinping the new President for life…It has not been a good few years for the supposedly growing moderate majority of the world’s population, who apparently long for non-ideological, pragmatic and technocratic policymaking.

In Latin America, North America, Africa, Europe, the Middle East and Asia, populists are in vogue and established parties are reeling. The CDU and SPD in Germany are increasingly shadows of their former glory, but even they’ve fared better than the total annihilation of the French Republican and Socialist parties, not to mention Forsa Italia or the Socialist Party in Italy. Indeed, few social liberal democratic parties are doing well in any global context, nevermind a European one.

All of this poses a paradox. The world today is infinitely richer than at any previous point in history. There are no new ideological positions for developing a global economy, that have shown any evidence of gaining greater popularity than capitalism. Nor is there any sign that the world has become more violent or that global health has gotten worse. Indeed, to objective analysts the world seems to be doing really rather well. It is this analysis that is part of the problem.

Believers in centre ground politics believe that the majority of voters and citizens are rational. Given sufficient education, economic opportunity and information, political centrists maintain that the world will become less religious, less racist, less sexist, less LGBTQ-phobc and will prefer government policies set by highly educated panels of experts. Indeed the whole theory of modern liberal democracy and centrist movements like New Labour depends on these assumptions being true. But if they are true, why don’t we see people talking in favour of them, standing up for them and voting for these ideas, parties, movements and centrist leaders?

The answer, according to believers of centrist politics, is that the “silent majority” want centrist policies, ideas, parties and people, but they do not want to actively engage in the process. According to this theory, as soon as a candidate occupies the centre ground, where it has been abandoned, they will succeed. Indeed, the election of Emmanuel Macro and En Marche is held up as the perfect illustration of this phenomenon. The problem is that its wrong.

Politics is fundamentally a spectrum. There is no such defined place as “the left” and “the right”. What there is however, is a tendancy for society to cluster at points along the spectrum. Contrary to theories about centrist politics, they do not gather at the centre. Indeed, the reason why there exists a dominant political left party and political right party in every global democracy is because the number of people who truly seek out a “middle ground” is extremely small. Thus by focusing on the middle ground as a political tactic, parties actually alienate the majority of their constituency by chasing a small vote. This can work in an extremely tribal political system, where party loyalties is seen as a badge of identity and is often more important than the parties actual policies. But in the long run, parties that focus only on the centre lose touch with their base. This is the problem facing democracies today.

En Marche is the wrong lesson to learn. Electing a party consisting of a re-hash of Socialist and Republican candidates, run by a former socialist minister, who was ultimately pushed into power by a French public who were loath to support the National Front, is not an endorsement of technocracy and centrism. Indeed, the fact that Macron now has lower public opinion polling than his predecessor did (Macron now has the record for the most unfavorable reviews of any French President in the history of the French republic), shows that his political movement has little real support. Nor has the USA done any better. Rather than creating a fracture in the political right, the Republican party has embraced as its leader a dangerous egotist, whose attempts to sow division and hatred will leave scars across the national landscape that will outlast his own hotel chain.

There is a better way.

True democracies focus on addressing politics and how people feel. Worrying about trigger words, safe spaces, what is political acceptable to discuss and avoiding giving a “platform to hate” are terrible tactics that will end in misery and failure. What is actually needed is for centrist voters and politicians to hold their breath and dive into public discussions on anything and everything. Failing to engage with a problem is more dangerous than ignoring it. Nowhere is this guidance clearer than in the unmitigated disaster than is the European Union’s immigration policy and that of its individual member states (including the UK).

 

Governance is not meant to be easy. It is a service, not a stepping point for another career. The politics of the centre has believed that it is easier to talk about complex topics behind closed doors, amongst small groups of PHd armed individuals and then to return to the public eye with a flourish and say “we have studied and can empirically prove that this is the optimal way forward”. To anyone who has actually worked in business (and spoiler here, many centrists politicans and technocrats have not), the idea that you can make significant changes happen without buy-in and engagement with key stakeholders is laughable. If you do not explain the problem to people and talk about what the solutions are, then the idea will get nowhere.

Small steps could help moderate political forces take to move their agendas forward. Explaining a complex concept in an accessible way is among the most powerful. The impact of Blue Planet II on public and corporate attitudes to plastic has been phenomenal. Just as the original Al Gore film, an Inconvenient Truth, also helped transform the global climate debate. But real change cant be done by a film, documentary, art installation or music video. Certainly not on their own. Real change needs families, friends, co-workers and residents of communities to actually sit down and talk. Importantly, they need to get off their phone and do it in person.

In 2017 Heineken captured this idea with a wonderful video called Open Your World: https://www.youtube.com/watch?v=etIqln7vT4w but turning an ad campaign into reality would do more than help sell beers.

It may be the case that the world is full of a silent, moderate majority. But if they don’t talk to each other and the wider world, there is only one obvious outcome. Political parties and their voters will move away from centre ground politics.

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Brexit remains the right choice for Britain

On the 21st of February 2016 I publicly advocated for the UK electorate to vote leave in the UK’s referendum on continued membership of the European Union. Between that time and the night of the referendum, I campaigned constantly for the campaign to leave the European Union, with my final public plea published on the 21st of June 2016. On the 23rd of June 2016, 17.4 million UK nationals voted to leave the European Union; a majority of 52%.

Since that time friends and acquaintances have often asked me if I made a mistake. More importantly, many of those who listened to my views during the Brexit campaign, and who voted Leave subsequently, asked me if they have made a mistake. It is for those who listened to me and who followed my guidance that I say this clearly: Brexit remains the right choice for Britain.

Brexit myths:

I want to start by dispelling some Brexit myths that have built up since the referendum.

Firstly, I want to dispel you of the notion that the UK government is doing nothing, has developed no plans, no ideas or serious proposals for how to implement Brexit. The UK has issued extensive strategies, contingencies and proposals to work alongside the EU that cover atomic energy, a new EU trade deal, EU citizens’ rights, Northern Ireland, existing judicial proceedings, law & securityscience and innovation, Data protection for UK & EU citizens, advice for UK citizens living in the EU, advice for EU citizens living in the UKguidance on trucking, on aviation, and so on. The UK has also guaranteed UK organisations all funding they would have received from the EU until 2020 (when the EU budget was due to end anyway). When people read in the papers that the UK has done nothing and has no plan, you need to understand that this is a tactic not a description of reality.

It suits the EU negotiators to refuse to engage with the UK, to run down the clock and ignore proposals. This includes the use of technology on Northern Ireland’s border, which the EU’s own investigation showed was a feasible and practical solution. Smart and sensible ideas are being ignored by EU negotiators as part of the EU’s negotiating tactics. These tactics are brilliantly described by Yanis Varoufakis in his book on how the EU ignored extremely detailed, expertly modelled and internationally supported Greek proposals during their debt renegotiation with the EU in 2015.  In short, ignoring sensible suggestions to force an ultimatum is a tried and tested EU tactic, along with leaking and selectively quoting private conversations. This is normal and should be expected. Importantly, it should be understood that the EU is trying to create a narrative that the UK is unprepared, but this is only a cleverly fabricated narrative. It is not grounded in facts.

Secondly, I want to emphasise that the existential challenges at the heart of the European Union, namely its democratic deficit, its growing illiberal tendencies, and the failure of the EU principle of solidarity, remain unresolved. As the famous pro-European, Hungarian philosopher Ivan Krastev recently noted, the EU’s continued failure to resolve the bloc’s divisions on immigration is straining the solidarity of members and even their adherence to the EU’s Human Rights Act. The rejection of drowning refugees by Italy is one recent example of this, and Hungary’s recent anti-migrant act is another. Moreover, despite the best efforts of strongly pro-European individuals, such as Guy Verhofstadt and Emmanuel Macron, to warn of Europe’s need for reform, the only concession that has been granted to these voices has been the creation of a small EU budget (separate from the EU commission budget). However, even this proposal is less progressive than it seems, because of a German-imposed requirement for funds to be linked to acceptance of migrants, thus immediately reducing funding to countries in Eastern Europe and increasing Germany’s receipts of EU funds.

Thirdly, while it has been popular for commentators to accuse people who voted Brexit of being racist and suggesting that the country wishes to revert to a little England mentality, the facts do not support their narrative. While Austria, Hungary, Italy and Poland discuss plans for an “anti-migrant Axis”, recent polling data from June 2018, shows that UK public attitudes towards immigration in the UK were more positive than at any time since 2011, a stunning rebuke to the initial rise in hate crime that immediately followed Brexit[1].

Brexit migrants FT

Brexit migrants eurobarometer 1Brexit migrants eurobarometer 2

It is also important to dispel another Brexit myth that if the referendum were to be held again today the result would be different. The data proves otherwise. As of December 2017, polling from YouGov showed that 55% of the UK public thought that Brexit should happen, regardless of their original view on the referendum. Recent data all indicates a similar result. None of which is to say the current British government is doing a great job. It is plain for the British public to see that they are not.

Building a better Britain:

Rebuffing growing misinformation is vital, but the backbone of my belief in Brexit is distinct from these arguments. I believe in Brexit for the following reasons:

I believe Brexit remains the right choice for Britain because I believe it allows us to build a trade policy that is fairer to the British people, delivering better economic outcomes. While the US, Chinese and Indian economies boom, the UK is locked into a customs union with the slowest growing economic area on earth. As of 2017, 15 out of Britain’s top 25 trading export partners are from outside the EU, and 11 of those (including US, India, China, Australia, Japan and Canada) accounted for 36.4% of all UK exports. These trading relationships relied on the dreaded WTO rules. Amusingly, Canada has confirmed that the UK could have enhanced free trade access from the first day of Brexit. They will not be alone[2].

Brexit economies

I believe Brexit will also make Britain’s immigration policy fairer. For immigration it remains fundamentally unjust that a doctor, engineer or an experienced entrepreneur will find it harder to work in the UK if they come from the USA, Canada, Chile, Japan or Colombia than an 18-year-old from France, Estonia, Portugal or Austria. Moreover, despite having a free-movement area with the EU, data from the UN overwhelmingly shows that British citizens would rather live in Australia, Canada and the USA than any country in Europe[3]. UN data shows that more Brits have chosen to live in Australia than all of Western Europe combined.

UK immigrants

Brexit allows the UK to correct these imbalances and create an immigration system based on reciprocity that allows British citizens to live and work where they actually are trying to go, whilst building trade bridges with nations that are growing. Dynamic ideas to addressing these opportunities of new immigration systems and free trade deals include the potential of the UK joining regional free trade groupings such as NAFTA and the TPP, while others have also floated the idea of a new Australia, Canada, New Zealand UK free trade zone (CANZUK). I would suggest that the UK should explore new trade and visa options with dynamic regional markets such as the Pacific Alliance in Latin America too.

Lastly, I believe in Brexit because of the phenomenal role it has played in restoring British democracy. While the traditional major political parties in France, Germany, Italy, Austria, Greece, Spain and the Netherlands have almost all collapsed, or seen their share of the vote significantly cut, the British main parties have rebounded to their highest combined share of the vote in almost 30 years. It is not hard to see why. In the 2000’s Europe grew up with a political obsession for “middle-way” politics, a convenient euphemism for technocratic governance and offering voters no real choice. It was common to hear the refrain “they are all the same”, and why bother voting? The electorate didn’t see the point in voting, and UK voter turnout fell below 70% for the first time since the advent of universal franchise. It appears that if people are not offered a chance to vote for what matters to them, they turn to parties that will offer them that choice. Across Europe the radical left and fascist right-wing parties have surged. Many of them are now in government. Brexit has stopped all of this. The far-right is almost entirely annihilated in polling (with the only revival recently due to the risk of a soft Brexit), the Labour party is the largest political movement in Europe and the UK’s election turnout is at its highest in over 20 years.

Closing Comments:

Before I finish, I also want to address the recent news surrounding Brexit. It is clear that the Conservative cabinet is deeply divided by it, but reassuringly so is the nation and so are the Labour party. It can seem concerning to see bickering at a public level from the Cabinet, but the very fact that there are disagreements and strongly held views attests to the fact that the current UK government is reflecting a broader sway of stakeholder interests than it is credited with. The current UK white paper is a demonstration of this. While ensuring the UK leaves the Single Market and the Customs Union, it also ensures that the UK regulatory framework is aligned on goods with the EU so that businesses do not face disruption. Clearly this deal does not suit all parties, but this is the point of compromise.

The resignations of Boris Johnson and David Davis are less controversial than the press would like them to be. The fact that they were staggered suggests an attempt to avoid triggering a crisis of confidence and a leadership challenge, as has been affirmed by David Davis. Secondly, it leaves Theresa May free to pursue a plan she believes in without cabinet members who do not endorse that plan. The greater risk does not come from the resignations but rather any further attempts by naïve and reckless cabinet members like Phillip Hammond to pretend that the Conservatives can repeal Brexit and escape without being destroyed and permanently dividing the nation. As the FT recently put it, the Conservative party is the party of Brexit.

It is easy to become disheartened by Brexit when the headlines often seem full of gloom, but it is important to take a step back. For every well-timed fear story like the Airbus threat to leave the UK, there are stories like Boeing committing to further UK spending and Australia awarding BAE UK massive defence export contracts. For every threat of jobs leaving London, like the 5,000 threatened finance roles, there are new commitments by companies like Facebook to employ up to 800 new staff, with office space for 6,000. The news will always try to showcase a clickbait headline, but if you can, try and ignore the noise.

Lastly we should not be afraid of a “no-deal Brexit”. Such an event would cost the EU over £100 billion, creating a continent wide recession, with the most severe impact being felt in Ireland and Germany. Given the growing anger and division in Europe over the increased EU contributions required by the EU’s wealthier states (Germany’s contribution will increase 16%) and how the shortfall in funding should be addressed, combined with the on-going battles over asylum, immigration and law & order, the EU would be suicidal to refuse to offer concessions in the face of a ‘no deal’. The path has been challenging and we are not out of the woods yet, so one should steel one’s nerves and prepare to witness continued anti-Brexit campaigning right until the eleventh hour. Just remember – Brexit is the best choice for the future of Britain.

 

 

[1] For further great information and graphics on how the UK is considerably more tolerant towards immigration than the majority of EU members, check out the Eurobarometer scores from April 2018: https://ec.europa.eu/home-affairs/news/results-special-eurobarometer-integration-immigrants-european-union_en

[2] There has been a significant effort by the EU to scare Britons about the challenges of trading from outside the single market and relying on WTO rules. Lets put this in context: The EU’s average tariff rate for countries like the US, Canada, etc, was 2.3% on goods as of 2013 (spoiler: it has not increased since), while for cars the EU recently proposed reducing global car tariffs to zero. While many organisations have highlighted the importance of non-tariff barriers, i.e. different product rules & standards, it is worth noting that batteries (for electric vehicles), micro-chips for phone, computers and tablets, as well as basic raw materials, all enter the EU from non-EU members. In short it may increase some short term costs, but accessing a broader array of markets will make UK goods more competitive as further free trade deals are signed.

[3] To put this into context, as of 2017 the UN estimated that there were 3.8 million UK expats across the world. The largest EU locations for British nationals were Spain (308,872), Ireland (278,000 people), France (188,000), Germany (103,700) and Italy (72,000). Many of which are retired and not of working age. In the Anglosphere the largest locations were Australia (1,351,846), USA (748,206), Canada (624,411) and New Zealand (272,071).

Wham, Bham, thank you Ma’am! – Financial Market chaos in 2018

On the 5th of February 2018, the Dow Jones witnessed its largest one-day point decline in its 120-year history. In total, the 30 largest US listed companies from across the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ) dropped 4.6%, a percentage decline not seen since the eurozone crisis in August 2011. Nor was the Dow alone.

As investors across the world saw the roaring US stock market come to a violent halt, stock markets in Asia and Europe started to collapse as well.

Why? What went so badly wrong that the world suddenly lost its cool and within a week almost all global indices had fallen by 6%-12%?

Most of the news for 2018 actually looked pretty great.

The IMF had upgraded global growth forecasts for 2017, 2018 and 2019, while claiming that the world was about to witness the “‘broadest’ upsurge in global growth since 2010”. Global Mergers & Acquisition activity was at its highest since the dot.com boom over 17 years ago, the eurozone grew at its fastest rate in a decade and manufacturing growth has exploded across the US, Europe and the UK.

Given these factors, many retail investors and ordinary people reasonably asked the question: “Why did everything collapse and what should I do with my money now”? In an attempt to answer the first part, we have to begin with separating the event itself (the stock market collapse), and the reasons behind the crash (the fundamentals).

There are many different and authoritative views on this issue, including a very easy and concise piece by Bloomberg available here. My take is below:

With interest rates at record lows, the stock-market continuing to grow at breakneck speed and the global economy expanding, people have thrown caution to the wind and invested in the stock markets. In fact, January 2018 witnessed record levels of investment in the stock-market, as confidence took over and people from all walks of life began to invest. This is where the problem started.

Everyone in the stock market had been waiting for a fall. But knowing when it would come had been a significant challenge. If investors left too early, they would be potentially giving up the chance to make more money. If they left too late, they may lose everything. On January 29th and 30th, the first investors lost their calm and pocketed their gains and as January came to a close, the US stock market saw two days of consecutive decline and its largest fall since May 2017 (a small blip in comparison to what would happen later).

But why were the professional investors sceptical of the market? Here again we must return to expectations.

The aim of a professional investor is to generate returns that exceed what could be earned by investing in a risk-free asset. In simple terms “risk free” usually means bank deposits and the bonds of the worlds most financial secure markets (US, UK, Switzerland, German). The reason they are “risk free” is because most bank deposits are covered by insurance and because these governments are considered financially prudent enough to guarantee that any money owed to investors will always be repaid. Naturally this sounds like a great deal for investors. Put your money into a bond and earn a guaranteed amount of interest. What is not to like? Well the problem is that after the financial crisis too many investors thought that this was a good idea and so as the demand for bonds increased, their price increased. To cut a long story short, when the price of a bond increases the interest (read return) gets smaller. This is where the problem started.

Risk free bonds are the benchmark for professional investors. The expectation is to beat the risk free rate and the more risk the investor is asked to take, the bigger the return they expect (over the risk free rate). But if the risk free rate is extremely low, then risky investments can look increasingly attractive if investors cannot reach their target return through traditional investments. Pension funds are an excellent example of this. Prior to 2008 a pension fund would expect to pay 3% of all its funds under management out to its retirees every year. Therefore, as long as the pension fund could earn over 3% the fund would meet its obligations. Conveniently several types of government bond from the UK, USA and across leading economies were paying around 5% prior to 2008, allowing pension funds to make a 2% profit and meet all of their commitments, with minimal risk. But the financial crisis and ultra-low interest rates changed everything.

 As interest rates dropped to nearly 0% (in some cases negative), investors like pension funds, were forced to find other ways to generate their returns and so they piled into property, real assets (gold, oil, etc) and stocks. Accordingly, the stock market exploded. It didn’t matter that a company was now generating 3% return a year (compared to 5%) because its share price had risen. The alternative was a 1% government bond.

So back to 2018, the key question for investors was this: when would interest rates rise sufficiently that large money managers would sell their stocks? After all, if the interest rate rises then the return from the stock must price in tandem at every step. But that cannot happen forever.

So the magic number was 3%. Specifically, investors began to believe that rising wage inflation in the US at the end of January would increase the interest rate on US ten-year debt to 3%. If inflation was high, the US Federal Reserve would increase rates and money managers would sell their stocks. In Germany the same thing happened when the largest German workers union negotiated an inflation busting pay rise in February, leading to significant stock market declines in the US stock market (the 2nd worst performer after the Dow Jones).

What next?

The financial markets have broadly calmed following their collapse at the start of the month, but the truce remains uneasy. It is clear that investors remain extremely uncertain whether the sharp decline in share prices remains the only price “correction” that we shall see for the year, or if it is merely an early warnings tremor before a larger financial earthquake later in the year. On this question, expert opinion is fiercely divided.

However, for people interested in following the stock market closely its worth looking at whether any of the large companies, famously called “Unicorns” choose to finally go public this year. Traditionally private companies go public when they believe that valuations are at record highs, not when they believe that there is space to grow. So if you see AirBnB, Uber or even Spotify go public, then maybe consider putting some more cash in the bank and out of the stock market.

Important disclaimer here: This piece merely reflects the views of the author and should not be considered as financial guidance or advice.

The renewables driven revolution in electricity pricing

Away from the public eyes, one of the most radical transformations of wholesale electricity markets in the last 100 years is occurring. Since the time of Thomas Edison, almost all the electricity that we use has come from the combustion of fuels. By releasing the latent energy in coal, gas, wood or oil, we convert latent energy into heat, and use that heat to create steam. The steam forces a magnet to spin around a set of wire coils, thus creating a current. It is this innovation in science that created the modern world, but today a growing proportion of the developed (and developing) world’s electricity no longer comes from fuels. I am of course talking about wind and solar.

When power is created from the combustion of fuels it is dispatchable. This means that it can be turned on and off whenever the owner of the power station wishes. While a Nuclear plant will often generate electricity around 92% of the time, making it effectively a constant (hence “base”) generation source, most fuel based generation sources run for much less time. In the USA, coal and gas plants often run less than 60% of the time. By contrast wind and solar are not dispatchable. Rather, their production output is variable. Wind and Solar do not require a fuel to create energy, but they cannot control when they will produce electricity. It is this contrast that is at the crux of the challenge.

To ensure a power grid has sufficient electricity for all consumers, a grid operator such as National Grid, must estimate demand and source that demand on an annual, monthly, daily, hourly and sub-hourly basis. In complex power markets like the UK, the sourcing of electricity supply comes from an auction system. This is why wholesale power prices are in upheaval.

To match supply with demand, national grid asks companies that produce electricity to make offers to supply electricity. Each company states how much electricity it can supply and the price it will accept to supply that level. These prices are then sorted from lowest to highest and national grid will accept all bids necessary until it reaches the supply level it requested. This is called “Merit Order Dispatch”.

To explain this is shown in the table below:

Electricity needed 100MW   
Clearing auction price £30/MWh  
       
Bidder name Bidding price Quantity of power offered Quantity of Power Accepted
Wind 1 £10/MWh 20MW 20MW
Solar 1 £20/MWh 20MW 20MW
Nuclear 1 £25/MWh 30MW 30MW
Gas 1 £30/MWh 30MW 30MW
Coal 1 £40/MWh 30MW 0MW

As wind and solar have no fuel, their cost to run is essentially zero. As such they can bid any price they like. For Nuclear, the cost of fuel is considerably less than building the site, so it also bids a low price. By contrast gas and coal have to buy their fuels to combust them. As shown in the table above, coal can’t compete against wind and solar on cost and so it losses the auction. Everyone else is paid the marginal cost of production, which is the amount that gas receives (£30/MWh) and they supply the grid.

So what does this mean? Essentially as we build more wind and more solar, we will increase the number of electricity supply bids into the market which are below the viable level for any fuel based generation. This is why the USA’s Department of Energy wants to pay a subsidy to coal and nuclear. As wind and solar are not dispatchable, there is a concern that all dispatchable fuel sources will be unable to compete in the price auctions for the majority of the year, except for periods when electricity demand is extremely high. That would make most plants economically unviable, as they would be required to cover all of their capital costs, maintenance and staffing, based on generating electricity for less than 50% of the year. If these plants go, then what will provide the electricity when the sun goes down and the wind doesn’t blow? That is the question that energy market regulators are asking in the UK, USA, Europe and across the developed world.

To many the concept that renewables are cheaper than fuel based sources doesn’t seem correct. Indeed, most renewables remain more expensive than coal (though not in all areas and not by much), when considering the total cost of the system. But it is important to understand that wind and solar are fundamentally different in how they are financially structured and that explains the pricing disruption. Operations and maintenance of renewable power plants are minimal. Building the assets is the expensive part. As a result, Renewables always want to sell their power at any price in order to re-coup the cost of construction. By contrast a coal plant or gas plant will lose money if they try to sell electricity for below the cost of their fuel source. This gives renewables an incentive to bid almost zero, thus guaranteeing that they will be able to sell almost all their electricity they generate at any time.

This is actually worse in countries that have adopted a renewable government subsidy called a Feed-In-Tarriff (FIT). Under a FIT, the government guarantees the owner of a renewable company that they will receive a fixed price for the production of their electricity. However, the electricity has to be generated and supplied to the market in order to claim the subsidy. As a result, renewables have no incentive to put in competitive prices for auctions because they already have a fixed price.

What does all of this mean though for businesses, consumers and investors? Well for now it means that the annual average wholesale cost of electricity has fallen in countries like the UK on a constant basis. That also means that most households and industries have paid less in energy bills than would otherwise have been the case.Wholesale market

But while the costs of electricity have fallen, other costs are occurring across the system. As coal and gas plants cannot compete in the market they are forced to close the plants early and suspend new constructions. A great win for climate change, but an outcome that has cost European utilities half a trillion euros according to the economist. In California, where solar PV deployment is high, prices in the wholesale market now go negative for periods of the day. Yes that is correct. Producers effectively pay other people to take the power that is being produced. In the same is happening in Germany.

The move towards greater renewables in the electricity mix is vital. But like any great transformation there will be unintended and unanticipated consequences. The greater the growth of renewable energy, the more inevitable it will become that wholesale power markets will change. If consumers are focused that could potentially lead to longer term price stability and cost savings. But only if they know where to look.

All the wrong issues

Despite 7 years of stagnant economic growth in Europe, austerity in Britain and growing inequality in the US, the political left has never looked weaker. That is a problem. All good political systems require competition of ideas to help both sides refine and improve the policies which they offer their electorates. In the founding of any democracy it is widely acknowledged that a failure to create two equal political parties, who can act as counterweights to one another, is essential. Some even believe that if the Russian Communist party had split into two parties in 1990, one moderate and the other traditionalist, it would have fundamentally changed the trajectory of Russian democracy.

But why are the political left so weak? The answer is that they are focusing on all the wrong issues. LGTBQQ rights, climate change, religious tolerance and gender equality are important issues in making our world a better place. But they are not the reason why people decide to vote for one party or another at the ballot box. Hillary Clinton did not lose because every Trump voter is a climate-denier, racist, misogynistic homophobe who wishes to punishes poor people. Though there were likely many of those too. But the reality is that people vote for bread and butter issues and as Bill Clinton once famously quipped, it’s often about “the economy stupid”.

Politicians in the modern era have a tendancy to focus on issues that are at best tangental and at worst, irrelevant, to the day-to-day lives of most citizens. Climate change is a huge issue, one that I passionately seek to help fix every day. But it isn’t something you can explain or resolve in a tweet. It also is something that is extremely hard to explain to citizens that work 9am – 5pm in an office. The same is true with the rise of identity politics issues. It is morally clear that Donald Trump’s ban on transgender service in the military is wrong, but if democrats think that they will win votes over these issues then they are misguided. As sympathetic as the ordinary citizen is to the suffering of others, it takes more than the empathy that one may feel from an article or a youtube clip to vote for a political party that is also raising your taxes or restricting your social rights.

If we acknowledge that the issues championed by left wing parties are the wrong issue to win elections and political power, then intuitively one must ask why parties cover these issues. In part the answer lies in the  membership base and in part it is a feature of the social media age. Political parties draw their strength from loyal members, who contribute funds as well as time to help win elections and in exchange they are granted an input into the policy making process. Today though, members are no longer content with “an input”. Grass root activists, inspired by social justice movements like Occupy Wall Street and other online anarchist strctures, are seeking to rebuild the entire political governance of their parties. In doing so, the parties are sacrificing external clarity of message for the ostensible goal of greater internal cohesion, as all factions and members feel more engaged in the policy creation process.

In the social media age, these internal struggles play out across the public sphere and muddle the waters. Moreover, the areas of greatest acrimony and therefore greatest publicity, are not issues of inequality or climate change (where agreement is much stronger) but rather the extent of engagement with identity politics issues. These topics, ranging from the appropriate use of social pronouns (if such a thing still exists), towards use of public facilities (notably toilets) and removing statues, hold no interest to the vast majority of society but they are fought though they are an existential battle, by left wing activists across social media platforms. In the maelstrom all other issues are lost. The conservatives in the US understand this well. Breitbart, Fox and other right wing activist groups are easily able to distract the political left from delivering clear messages on inequality, healthcare and the economy by effectively trolling the political left with social politic clickbait. Milo Yiannopolous andDonald  Trump are experts at this.

Many could contest that the political left is stronger than it has been portrayed, but the success of Jeremy Corbyn in the UK and Macron in France is misleading. Macron was the ultimate example of the “lesser of many evils vote”, a product ofthe disastrous   Socialist government election process, a crippling leadership scandal in the Republican party and a desperation to keep the National Front out of power. Corbyn is even stranger. A product of the anger felt by many in the UK who suffered disproportionally from the reduction of public spending in social services and a rising anger that the system is rigged which came from the financial crisis. Such anger against elites is ironically why Corbyn and Macron share so many similarities with Trump, in that they are all populists that are riding a wave of anger against the perceived liberal, effete elite. But the perceived success of these leaders is due to electoral circumstance, not the strength of their political positions.

Jeremy Corbyn persuaded young students that their debt would be removed, while sending two contrasting visions of Brexit to Labour voters in the north and labour voters in the south. Macron did even less. It is perhaps unsurprising therefore that Macron’s popularity has dropped faster than any French president in the last 20 years. Meanwhile Labour may being riding high in the polls, but Jeremy Corbyn still polls as a “less trusted to govern” leader than Theresa May. A leader that lost an election and is expected to be removed in the next 12 months.

In politics there is a disctinction between doing the right thing because its right and doing it because it looks right. The Conservative party in the UK will never outliberal the Liberal Democrats and they will never be seen as more progressive than parties whose foundations were built on championing the rights of excluded groups in society. Similarly the Labour party and Democratic party will never win over aspirational voters, who want a better quality of life by championing social issues as their primary selling point.

The obsession with social politics issues is a problem for the political systems of western liberal democracies. If we can’t move on from it and focus on the bigger picture issues that affect the day-to-day lives of millions, citizens will start to wonder what democracy is doing for them anyway. Confused onlookers from China and Sinagpore may be asking that already.

A new governing strategy for the Conservative Party

The Conservative party today lies in tatters. A leader that has lost the support of the public and her party. A party that is seen as out of touch, ruthless and clueless by the British public and nations afar. A government that has no vision and an opponent that offers hope, change and momentum. A momentum towards a past that the Conservative party and its leaders have spent nearly 40 years fighting. Perhaps the only saving grace is that the Conservative party is not alone in its struggles.

Today we see in America, in France, in Italy and across the Western World, that the old political systems and their parties are collapsing. Some are being replaced by new liberal structures. Many are not. During the Cold War the terms of debate were clear and the enemy was clearer. With the end of the Cold War, liberal parties rejoiced in their hard one victory. But they got complacent. They ignored the people and they forgot that Liberalism is not a finite end in and of itself. Rather, it is a mechanism for helping those who govern to make choices for the future. But there was no plan for the future. No dream end game or envisaged utopia. In short, they forgot the most human of all things. They forgot that people need hope of a brighter and better tomorrow.

The problem of the Conservative party today is less the methods by which it governs, than it is about the vision and ideology which it has governed by. In 2010 the British public understood that sacrifices needed to be made under the banner of “Austerity”, but what no-one understood was what was supposed to come after Austerity. What was the reward at the end of the march? It is on this charge that the Conservatives failed to win a majority in 2010 and it is for this reason why the party is so rudderless today.

More than anything what Conservatives of all colours need to show is humility. We underestimated the deep sense of injustice and inequality within society and we did too little to address it. We let our overwhelming desire to replace New Labour cloud our vision of what our party stood for and its principles. As a party we lost track of the fundamental tenants of Liberalism, that a belief in the inherent good of human nature and freedom, requires us to do good to others with that freedom. The free market, if it ever can be said to exist, is not a thing of emotions. The free market is a mechanism that allocates resources to where their perceived value is highest. It does not exercise compassion, fairness, tolerance or diversity. It does not support those who fall or offer a hand to those who need a boost to get started. If Conservatism is to return to its values and principles it must start by recognising that the free market may create wealth but it is people who distribute it. If the wealth creators in society do not see the value in distributing wealth and in helping those less fortunate, then the system will not fix the problem. It was never designed to do so.

Despite her many failings as a leadership figure, Theresa May knew this. As did David Cameron’s team, with their talk of the “Big Society” and Ian Duncan-Smith’s work on benefit reform. Like many problems, it seems less an issue that the sickness hasn’t been diagnosed than a question of how to solve the ailment. It is precisely the failure of the Conservatives to find an answer, while Jeremy Corbyn does offer a solution, that may be the hammer blow for Britain. But all is not lost and the party that led us through our darkest hours in WW2, the financial crash of 1979, the Falklands war in 1992 and one of the strongest G7 recoveries after 2010 is not finished yet.

The Conservative party needs to start by being brave and being honest. It needs a full public confession and admission that it got things wrong. When you have wronged a friend, you do not explain to them your reasoning for why you behaved wrong before you apologise. You apologise first. The British public want and need that apology first.

Further, we need to recognise that if there is no single leader in the Conservative party today that can represent the party as a united body, then we should govern as a party and present ourselves to the people as a party. The Conservatives may not represent the nation perfectly, but there are MPs that represent women, ethnic minorities, different religious groups and sexual orientations. They need to be heard and they need to be seen. Rather than worrying about threats to the leadership, the Tory party needs to show that it is a party that is focused on delivering a better life and better opportunities for the people of the UK before the personal career interests of its own members.

Today the Conservative party must answer two questions: firstly, how would a Conservative government make the country happier and wealthier for all. Secondly the party must explain why Liberalism must be the guiding set of principles to achieve that end and not Socialism.  In the UK we have the ability to choose where our children study, where we want to live, for whom we want to work, the type of car we want to buy and how we want to allocate our pay check across these things at the end of each month. That is the freedom of choice which Liberalism gives us. The freedom to make decisions, both good and bad. But it also requires us to be responsible for the failures which we create ourselves.

The world is not fair, nor equal and in the absence of intervention these market failures will not be improved. Liberalism in the 21st century must begin with this realisation that the public will no longer accept the trade-off of total freedom of choice in exchange for personal accountability of all outcomes. Instead, people believe there are some things that they will always need help to protect themselves against. Modern psychology seems to agree. Study after study shows that life in poverty reduces the most intelligent people into making seemingly irrational decisions, as people are forced to make decisions to live day by day. The ability to plan for the future is a luxury for those starving today. Society needs a basic safety net of human decency and when over 2,000 food banks exist in one of the world’s richest nations, we can safely say that the basic net is not being provided. A new compassionate Liberalism needs to start by understanding that for people to make rational choices they have to be in a position to think rationally.

The Conservatives have always been called the “nasty party” because they have never been afraid to let people fail. But the biggest problem has been that not enough are succeeding. A Conservative party that can breathe life into the promise of Liberalism, with an understanding that no society can be called rich when its poorest must rely on charity to eat, has a chance to turn the tables on the false promises of Labour today.

Make no mistake, today Jeremy Corbyn’s Labour Party is a populist one and it will not be beaten by patronising it or dismissing its central arguments alone. Instead the Conservatives must show the British public once again that they are the only adults in political room that can deliver a better Britain for all. Showing more humility, compassion and humanity would be a welcome place to start.

Why is it so difficult to be a Conservative?

The election today represents a reversion to the mean for British politics. For the first time since 1992, the voters of the UK face a clear choice between Labour and Conservatives. For many this is unsettling. My generation grew up with the Centre Ground. A place where limited ideologies existed and variations between the parties were driven more by local issues and individual biases than existential differences in party governing ideologies. This is how the awfully phrased “millennials” think of politics. A choice between technocratic governments with different faces. Until today.

Today ideology is back, and as I have written before, this has been a shot in the arm for the health of UK democracy. The Brexit referendum marked the first nationwide turnout above 70% in 30 years and repeated polling suggests that the 18-24yr old turnout will be a record 60% or better. But with ideology and passion comes clear winners and clear losers. In part that is why this election is so much harder than those before. There is a trade-off and whoever wins the election will change the face of Britain.

I grew up hearing the phrase that “if you don’t vote for labour when you are young you have no heart and if you don’t vote conservative when you are older, you have no brain”. The polls seem to reflect this adage. Only 17% of 18-24yr olds are due to vote Conservative today, yet over 40% of 65+ voters will vote Conservative. So today I am in a minority in my nation and my generation. As I was for Brexit. So why be the contrarian? Why stand against your own generation and be different? Surely, they can’t all be wrong? And with all of these thoughts comes the question, why would anyone be a Conservative at all?

The charges against the Conservative party are steep. Consistent cuts to mental health, hospitals, schools and police for nearly 7 years, a Brexit campaign fought with no plan B and a leadership election straight after when leadership was most needed. A party that tacitly supports foxhunting, that supports nuclear weapons that could kill millions. A party that cuts taxes on businesses while reducing welfare to those most in need. A decade of lost wage growth and declining real incomes and a boom in food banks. Surely, my generation asks, it is time for something different.

Today stands Jeremy Corbyn as that “different”. An insider of parliament for 30yrs, yet an outsider in his party for most of them. An avowed pacifist, active human rights campaigner and strong defender of minorities. Especially immigrants and religious communities. A brand of politics where all are equal. A deal for the nation – a new social compact for the people. Sounds appealing doesn’t it?

It is difficult to be a Conservative because at its core, Conservatism is about faith. Not religious, though for some it may be. Rather, Conservatism is about faith in people. To be a Conservative means placing your faith that individuals excel when given the freedom to act and the opportunities to improve their own lives. Being a Conservative means holding a belief that it is not the State that can help an individual to find the drive, passion and bravery to excel in their lives. It is people themselves.

This election is about ideology and for many of my generation the wrong conclusions have been drawn. Conservatism is not about every man and woman for themselves, a free market gone wild. Rather, Conservatism is a belief that people know what matters to them more in their own lives than the state does and that people are better able to decide how to use scarce resources to improve their lives than the State.

In the UK today deep inequality and poverty exist. The question is how do we make them better. It is easy to talk about incomes and to compare ourselves to wages in Europe. This is deeply misleading. There is a reason why people from Europe have been desperate to come to the UK, USA and Germany. That reason is jobs. The UK Unemployment rate hovers around 5% and at around 11% for specifically the 18-24yr old range. In France those figures are around 11% and 20%. In Greece, they are nearer 25% and 40%. This is Conservatism in action. A belief that State intervention in job markets and in regulating businesses heavily, will more often tend to privilege a few rather than helping the many. This is the effect of Unionisation across Europe. Lower jobs and fewer opportunities for young people, to protect the few who have succeeded.

If you want to remove inequality and poverty you need to start with jobs. You also need to start by realising the nature of inequality. Today in the western world inequality is different to the 1980s and before. If you look at the houses of millionaires in London, the Home Counties and other leading cities across the UK and you’ll notice something quickly, many are no longer owned by Brits. The rich across the world are not defined by their nationalities. They move freely between nations depending on where they enjoy the highest quality of life for themselves, their families and their careers. London is a symptom of this, but no different to New York, San Francisco, Hong Kong or Geneva. The wealth that this group enjoys cannot be amended by new national taxes or by restrictions on investment. They simply move, as many did from France under President Hollande. No one from the France became richer since then and no-one in the UK will become richer after Labour’s tax raids either.

It is difficult to be a Conservative because people belief that Conservatives lack compassion. It seems brutal, shocking, barbaric and wrong to let people fail, communities fail and businesses fail, while allowing old beliefs and prejudices to exist. In the mindset of Labour and Socialism, this is why Conservatism is so deeply unpopular in public discourse. It is also why Conservatism and right-wing ideologies are so unpopular in the arts. Bands, dance troupes, painters, poets, writers, singers, all rely and draw from a deep community of people who broadly seek to expose the flaws in the world and to dream of better futures. Critiques of the past and a desire for a new idealist future is what drives concepts like Socialism, Futurism and Idealism. The present is awful, but the future can be better. Who doesn’t want a better future? Who is perfectly happy with the present? Often very few.

In the election today these ideas were barely discussed. The campaign focused on personal histories and efforts to show who would be better to handle Terrorism and Brexit. For many, myself included, our votes will have been cast without much enthusiasm. But our votes do matter and will have consequences. I voted Conservatives today because while Theresa May is our PM today, the Conservative party itself is over 100 years old. The belief that individuals can and should be trusted, supported and given the freedom to make a better life for themselves, rather than a patronising, paternalistic hand of the State determining the terms and conditions of our future, remains the core reason behind why I remain a proud Conservative.

Sometimes the right decisions are the most difficult ones. It is easy to be led by the heart and seduced by dreams of a better utopia. But life is about making tough choices and when it comes to determining who governs our nation in its period of deep transition, I put my faith in a party whose ideology is driven by trust in people. Being a Conservative isn’t easy, but it remains the right choice.