May’s masterclass in politics

It may have been long overdue (like the pun there?), but the UK Prime Minister’s decision to call a general election this morning was a piece of political masterclass and a bold, calculated gamble.

By calling a general election Theresa May is attempting to resolve several major headaches at once, assuming that she is successful: Firstly, the move creates political certainty in the UK at a time where it is sorely needed. Secondly, the move will end questions around the Theresa May’s political support within the party itself and lastly it will strengthen the UK’s negotiating hand with the EU.

If the Conservatives win (especially by an increased margin), then Theresa May will have a clear mandate for her Brexit negotiation strategy. This will give investors, businesses and political leaders a greater sense of what the UK will choose to prioritise and a clearer idea of which figures will manage the UK’s transition from a full EU member state to an independent nation. Assuming that the PM will stay for a full five-year term, the Conservatives would govern until 2022, giving them the ability to handle the transition after Brexit as well and a chance to resolve any outstanding issues with EU members, the WTO and Scotland.

The surprise election is also likely to be popular with the Conservative political base, partly because the opposition are so weak. Labour remains extremely divided between its core factions, while the Lib Dems will have a mountain to climb to recover even the 40 seats it previously held before 2015. The SNP can only lose from their current position and Northern Ireland has been in deadlock since the last regional government collapsed. In 2015 UKIP won 3.9 million votes, today the country has voted to leave and they have no credible or popular leader. All of this explains why the polls suggest a clear Conservative lead, and even though polls have been consistently unreliable in the last 18 months, few polls have predicted a winning margin of this magnitude that has been overturned in such a short time period.

The reason why winning an election is important however is that it is the key to ensuring party unity. The Conservative party is famous for its political backstabbing and without an election win under her belt, the PM would have been vulnerable to challengers if the EU negotiations turn ugly. Incidentally there are even rumours that the election will help to neutralise the Conservative political right, by forcing the PM to adopt a less aggressive position to win the election. If the Conservatives wish to keep seats in London and the South West, they will need to win over unhappy remain voters and soft Brexit voters. With a mandate to govern secured on a hard Brexit, with very flexible immigration and extremely close ties to the EU, the PM will neutralise the Tory right and move the negotiations towards a less confrontational position.

The UK has had a number of challenges in getting the EU to agree on even basic terms for Brexit. The UK gave notice that they would invoke Article 50 at the end of March, but the EU has focused on the “negotiating framework” for the Brexit discussions. This focus has been both strategically and tactically driven. Strategically, by agreeing the framework for talks in advance the EU can already try and dictate the terms of the UK’s exit. Tactically, the major EU decision making member states either have elections, just had elections or have elections due in the next five months (The Netherlands, France and Germany), so delaying the main issues until after September avoids discussing the issues during elections.

The EU commission had assumed that after the EU’s major elections, its leaders would have fresh electoral mandates and solidarity across the block. This would have put the PM at a considerable disadvantage, as the EU could have decided to target politically sensitive areas like agricultural tariffs or financial service access to secure concessions. This threat has now been taken off the table. Even if the EU makes threats against these sectors, it will take years for the full effects to come through and politically speaking, the EU has lost its ability to alter who it will be negotiating with on the UK side of the table.

This is a move that carries risks though. Firstly, Labour may be more resilient than expected and the Lib Dems may well recover the 40 seats that they lost. If such an outcome occurs, the UK would have a hung parliament and the UK would enter a constitutional crisis. It is unlikely that the Conservatives could form a viable coalition at this time, but it is also unclear whether an SNP/Labour/Lib Dem coalition would be any better. This being the case, there is a chance that the UK might have a second election within a few months of the new one in June. Needless to say, Theresa May would be extremely damaged as a leader if the Conservative party did not retain an overall majority, while any further Labour party losses would trigger another bout of in-fighting over the need for  new leader to replace Corbyn.

The last piece of this story is that an election on which party will govern during and after Brexit, is also a tacit election on the Brexit process itself. If the Lib Dems did the unthinkable and gained north of 60 seats, with minimal Labour losses, the UK could very well have a crisis about the declaration of article 50 itself. More realistically however, the end of a conservative majority would likely lead to the UK seeking to remain as a member of the Single Market. Such a move would send political shockwaves through the UK and EU political system (assuming the EU even allowed it) and would leave the UK bitterly divided, in a far more dramatic way than it has been since the vote itself. Still, the election is the last chance that the British public will have to go out and vote on what relationship the UK will have with the EU.

If you haven’t registered to vote, then go out and do so. This may be one of the defining moments of British politics in the 21st century.

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A few words at the end of 2016

It is easy as a commentator on events to assume that we have a unique perspective or insight that people will benefit from reading. After all, if we didn’t believe our opinions were of interest we would hardly be sharing them. But what is often forgotten when we write pieces is the reader themselves. It is easy to fixate on the issues which we are passionate about, to analyse every scrap of detail under the most forensic microscopes we are able to acquire and to wax lyrical on the importance of the issue we are discussing. What it is harder to do is to create something that is relevant, that is interesting, that is inspiring and that is thought provoking. It is for this reason that the default subject of articles often becomes current events and specifically critiques of current politics, people and passions. But while this may be easy and often immensely enjoyable for the writer, it often leaves the readers despondent, overwhelmed and occasionally depressed.

It is partly for these reasons why I think that people have found 2016 such a challenging year. As our world develops increasing ways to communicate with each other faster and in greater detail, it becomes easy to get lost in the noise. In fact, part of what has made 2016 so difficult is how ingrained our habits of checking social media and our phone have become. Instead of using communication to supplement our lives, it has increasingly taken over our lives. Try for a week to count how many meals or meetings you attend where attendees place their phone on the table before the event has even started and consider how many would have done so 10 years ago. It may well be understandable in the context of the world we live in today, but the fact that it has become understandable and that our obsession with constantly accessing information has become rationalised, is also part of the problem. It is important to know what is happening in the world and to know what is happening in our communities, but what people have forgotten is that life moves on regardless. There are no shortage of years where American’s have elected a president, convinced that the electoral system has failed and the candidate will be a disaster, nor are there a shortage of events where major referendums have been forecast to doom entire nations. But these events, while seemingly seismic in nature, often fade quickly into the background for most people, with the challenges they create becoming quickly assimilated into most people’s daily routines.

At the end of 2016 many people are still lost in the noise of Brexit, Trump, Paris, Berlin, Aleppo, Prince and the scores of other events that have left markers this year. But what we shouldn’t lose sight of is the fact that slowly but surely, changes have been happening in the world that are making it better too. At the end of this year the world will have made its first real commitment to keeping carbon emissions below 2 degrees centigrade and the world will have invested more in installing new energy from renewable sources than fossil fuels (the first time since before the industrial era). The world also will have seen the largest single philanthropic endowment of over $100bn from wealthy individuals to fight climate change.

On gender, the proportion of women in finance, notably venture and private equity, will have more than doubled in the last decade. Women’s sport numbers continue to rise, with over 700 million people watching the women’s world cup last year and in the armed services, women will be seen in more active combat roles than at any time in modern history. In politics, the UK has its second ever female Prime Minister, alongside a female German Chancellor and 22 other female world leaders, the highest number in recorded history. On race, we have had the first ever black president of the United States and the UK has its first ever Pakistani mayor of London, with Romania almost electing a Muslim PM for the first time in the country’s history.

On poverty, world poverty and world extreme poverty continue to decline, as does access to energy and access to medication. Technology is also changing people’s lives in profound ways that we take for granted in the west. For the first time this year, Burma has been able to store anti-snake venom across the countryside thanks to renewable technologies and energy storage, a vital innovation in a country with the world’s highest number of snake related fatalities (1.4 per 100,000 people). We also now have developed a cure for ebola and drugs that allow individuals with HIV to have sex without protection, with no risk of passing the disease onto their partners.

There are certainly many more such stories. Perhaps only small and incremental in many cases, but cumulatively they are changing our world for the better. But we risk forgetting about these changes, or even worse, ignoring these advances, if instead of carrying on with our lives we instead fixate on the few issues that constantly catch the headlines.

So at the end of 2016 and the start of the new year we should all consider a piece of advice from older British history, a piece of advice now seen across the world, “Keep Calm and Carry on”. It may not be glamourous and it is certainly clichéd, but during the Blitz in Britain people carried on with their lives regardless of the perilous and fluid environment around them. People knew that major events were unfolding, but they also recognised that the main determinant of their own lives were not the actions of governments but the decisions they took themselves as individuals. That message is one I want share again for the new year’s.

The world is scary and chaotic, but we as individuals determine what role that will play in our lives. So, enjoy your drinks at New Years, the potential hangovers the next day and remember in 2017, whenever you feel overwhelmed, that life still moves on even when your social media is exploding. And when it is, try turning off your phone!

Happy New Years all!

Our system isn’t working – let’s make it better

The case for more humility in global politics and reducing the role of individualism in society.

To look at the state of the world today and believe that everything was going well would require a degree of optimism bordering on insanity. The world economy is not growing, the world’s climate is dying, and intra-country inequality continues to rise. In short, our current model for society and global governance doesn’t work. We need to try something new.

While we could point to a range of factors to explain our current predicament, the bottom line is that the way humans behave in the world today is wrong. We consume too much, we share too little and we are too insular in the way we make decisions. The question therefore is why do we behave in a way which makes our world worse and importantly, how do we change that?

The way that people behave is determined by the incentives that their society creates for them. These incentives seek to constrain the actions of individuals to a “reasonable band” of conduct, that allows a community to live alongside each other without resorting to conflict. While these incentive structures have evolved over many years, the challenge we face today is that our incentive structures over-emphasise the role of the individual and the right to individualism over the rights of the community writ large.

Individualism as an ideology is built upon two essential pillars: freedom of thought and freedom of economic opportunity. In pre-enlightenment societies individuals had neither. People were told what religion to believe, what job to do, where to live, who to marry and who to fight. The church and aristocracy worked in parallel to control as rival, but mutually reinforcing, power structures to ensure that those who sought to challenge their ideas would be mercilessly punished. During this time the role of the state was essential to ensuring that individualism was constrained. It is for these reasons today that Individualist ideas strongly reject the idea of a powerful state structure (think the USA).

 Individualism was/and is always threatened by the community, which may constrain it. From this principle individualism is synonymous with the idea of free markets and freedom of expression in their fullest forms. Individualisms strength is that it allows the individual to explore their creative impulses without the constraint imposed by their community. By freeing individuals from their communities, we allow individuals to develop in their own unique way. Diversity of outcomes and experiences act as a force multipliers, allowing for an exponential growth in interactions and facilitating an extremely powerful creative process. It is for precisely this reason that the West has been so successful for so long. The power of human creativity has been the engine that drove the development of our world today.

 But as many parts of the world today know only too well, individualism also carries great costs.

 Communitarianism is the idea that ones community matters more than the individual and the idea that all members of the community are bound to help and support one another. While some of this process is encouraged by local elites, seeking to enhance their ability to control their community, much of it is also intuitive and self-serving. Communities provide a natural safety net for individuals, an alternative form of insurance against misfortune. It also serves as an effective mechanism to mobilise large numbers of individuals and channel their energies into creating public goods.

 The rise of Individualism as a global ideology however is weakening those social safety nets. By placing the importance of ones self as above that of the broader community, people become detached from those around them. It is this detachment which leads to inadvertent selfishness in decision-making and which also reduces our natural tendency to share with others.

 So what then can we do and how do we try and resolve this conundrum?

 Politics is about providing channels for groups in society to exercise power. By power, I simply mean the ability to do (or not do) an activity. In this context, the problem is that our political structures do not allow us to re-draw the incentive structures that currently govern our societies. We need to find a way to allow our communitarian concerns for others to constrain our individual excesses, in manner that clearly benefits everyone and does not prevent individuals pursuing their own liberty.

 I personally believe the simplest way to start this long process is by making government more transparent and increasingly returning responsibility for governance back to the people. If society is not engaged in making the key decisions that affect it, then members of society will feel no attachment to ensuring these decisions succeed. Individualism has costs, but currently it is too easy for people to shift the blame for society’s failings onto others rather than themselves. We have forgotten the old adage that “No man is an island”. Our decisions have consequences and recognition that as individuals we may be making things worse for others and ourselves is essential to addressing these problems. If we can return responsibility back to society itself and we can remove the excuses for people in society to deflect blame by feigning ignorance, we can begin to come to the real solution to balancing our communal responsibilities with our individual societies: humility.

 Often in society Individuals believe that they have all the answers to societies problems and I am personally very guilty of this. However if we do not all become better at recognising the limits of our abilities and acknowledging our need to listen and respect others, we will not overcome our selfish impulse to follow our own course rather than partnering with others. This is what I mean by Humility today. In politics it remains the case that elected officials remain more interested in trying to secure their re-election and the unilateral enforcement of their ideas, rather than in the complex negotiations of engaging with all elements of society.

 Many of our greatest challenges in the world today could be resolved by people collectively demonstrating more humility than they have shown thus far. Our politicians are meant to be the leaders in our society. A bit more humility at the top may be the answer our world sorely needs.

The Coming Digital Revolutions

Beware the promises of the third industrial revolution – the first phase may be a real revolution

It has become exceedingly fashionable in certain circles to wax lyrical about the virtues and endless possibilities of what is being termed “The Third Industrial Revolution” (TIR). While the term itself is still nebulous, it broadly refers to an assumed new paradigm in the global economy, where the rapid spread of knowledge and communications via the internet and electronic devices, is fundamentally transforming the nature of the global economy.

For many this phase is spoken of as a hallmark of human success. Whether it be through promises such as the delivery of free internet access to millions via Facebook drones, taxi-services through driverless vehicles, advanced systems that monitor weather patterns and instruct farming machinery when and where to plant, or health systems which notify their user when they are unwell before symptoms occur, the possibilities are seemingly endless. Leading this recent wave of exuberance has been the rise of AR/VR technology and advanced robotics. Augmented Reality (AR) such as Pokemon Go and Virtual Reality (such as vTime), are the innovations that are bringing digital into the real world. These innovations can revolutionise the education and health sectors, removing the need for people to be physically present and allowing for constant access to these services irrespective of ones location or time-zone.

But while the TIR undoubtedly offers a glimpse of a new reality, its visionaries have been woeful at looking at its darker consequences. In the first industrial revolution, the term “luddite” was coined and today it is commonly understood to represent those who reject technological change. However, the term is too simple. The Luddites were indeed upset with technological innovations, but not because they could not see its potential or the benefits to society, but rather they didn’t see the benefits to them. The First Industrial Revolution transformed society by creating mass unemployment and by forcing entire families and communities to uproot, re-train and re-establish their place in the new economy that was transforming around them. It is perhaps hardly surprising therefore that the first and second industrial revolutions witnessed widespread rioting, periods of extreme localised unemployment and the explosion of new ideas about society, how people should live and how people should be governed.

This re-drawing of national economies had profound implications for national wealth and power, which resulted in a fundamental change in the very structure of society. Consequently, the innovations and their associated changes were fought bitterly and by many. These industrial revolutions re-wrote the concept of “The Sovereign” nation and spawned the birth of new ideas such as Nationalism, Socialism and Communism. These new ideas, driven by the new power elite “The Merchant Class”, destroyed the traditional pillars of the pre-industrial state: The Nobility, the Church and the Sovereign (Whether King, Emperor, Sultan or other), as a vital pre-cursor to make way for the new societal power – the merchants themselves. This process was not entirely unpredicted, with a certain German philosopher adroitly predicting the process of power transformation in society as a result of the new technological changes, and he had already created a term for this new rising class, “The Bourgeoisie”.

Today the Third Industrial Revolution is seen as distinct from the challenges facing society. It is in fact, the source of many of the problems. As yet the new rising power is society are poorly understood and the losers of this new wave of change cannot yet understand or associate the challenges facing their personal circumstances, with the wider melee of changes circling them on the global stage. But while details are limited, we do already know some characteristics of the winners and of the losers, which are worth further study.

The new elite are international in a manner that is unfathomable in any other epoch of human history. The easy transfer of wealth, ideas and the ease of travel globally has created the environment which allows individuals to transcend the constraints which may be imposed on them by their country of origin. Members of this class recognise no barriers as legitimate and many see even the concept of national identity as an outdated relic, to be consigned to the dustbin of history. Leading this charge are the technology gurus, the programmers, the start-up founders, the VC backers, all of whom represent the new and rising elite. These are the “Digerati”.

Standing opposed to the digerati are those who have been left behind in this great wave of human advancement. They are the sullen, disposed, disenfranchised citizens of the 20th and early 21st century, who have been cast aside in the maelstrom of economic change that is occurring. These groups think locally, not internationally and view technological innovation as a source of instability that threatens their livelihoods, their communities, their sources of income and their very identity. These are the “Digitally Dispossessed”.

These two groups hold ideologies that are implacably opposed to the other. The Digerati resent the actions of the state, displaying a profoundly free market ideology that rejects national boundaries, taxation systems, societal attitudes towards social issues and in many cases, even intellectual property rights and democratic processes more generally. Consider the bankruptcy of the gossip site Gawker by Peter Tiel, the actions of PirateBay, Napster & Wikileaks or the aggressive tax evasion methods of Facebook, Google and Uber. The new elite reject the state as the lead actor in international and domestic affairs. By contrast, for the Digitally Disposed it is the state who remain the last line of defence against the free market’s radicalism and it’s focus on individualism, which drives the Digerati. Identity based on location and traditional values holds huge importance for the Digitally Dispossed, in a way which the Digerati cannot fathom. Freedom of expression v.s. safety of individuals in particular, is a vast dividing line in the digital debate.

Fault lines are already being drawn. Whether it is the EU’s actions against US tech giants, Brazilian judges against Whatsapp, the FBI v.s. Apple or the battles raging against China’s “Great Digital wall”, the digital revolutions are coming. In 2011 people saw the power of social media vividly re-write the political landscape of the Middle East, in a region with low mobile and internet penetration. Between 2015 and 2016, Donald Trump secured the Republican party nomination, ISIS recruited 1,000’s of foreign fighters and two photos secured refugee access for circa 1 million people into Germany. This is just the beginning.

Technological innovation is not inherently bad, just as the NRA’s old slogan goes: “guns don’t kill people, people kill people”, it is perfectly fair to argue that technology alone is not responsible for societies troubles. But it certainly is a catalyst. In short those who pursue innovation and those who regulate society have reached a fork in the road: Is innovation always good and worth pursuing, with the consequences being addressable later? Or should innovation be closely controlled and channelled, to ensure its affects on society are managed and the vulnerable are protected?

This is the battleground space of the Third Industrial Revolution, and it has only just begun.

A letter to the nation

 Alea Iacta est – The die is cast

(Julius Caesar)

On the 23rd of June our nation took the first step in a long process to separate from political union with Europe. It was neither expected, nor were people prepared for it. Understandably, many people feel devastated. In the time since the results were known the nation has witnessed an outpouring of love for Europe never seen in my lifetime, nor perhaps in the lifetime of any individual still with us today. First came shock, then anger. Anger turned to fear, then fear into numbness. A nation feels subdued and for the first time, in a long time, people are uncertain of their future and perhaps even scared of the country they call home.

But just as every life is has a different story, the history of every nation has many chapters. A chapter in the history of our nation is now closed, but the next chapters are still to be written. In all novels, the day is always darkest before that dawning moment. Right now we are in that darkest moment. A moment filled with fear, with anger, with pain and with sorrow. But this is not how our future must be nor how our destiny can be.  I said once before that I am a romantic. I believe that love, kindness and compassion, when deployed in unison, truly create an unstoppable momentum that can move mountains and carry nations, people and societies towards greater things.

The referendum was never more than the beginning of a process and like all turning points in history, what matters is what comes next. It is for this reason that now more than ever is time for people to come together. So how do we come together, how do we heal and where can our country go from here?

This referendum was, at its core, about identity and about people feeling disconnected from the society the live in. For the first time in many decades, the poor and often disenfranchised in the UK came out to vote because they felt their voice would be heard and the issues raised were the ones that really mattered to them. They felt powerless and downtrodden. Now they feel emboldened. That is not a bad thing for society and in fact if this can be channeled, it could be the very key to making our society better.

Our society used to be governed centrally by a small group of individuals, often chosen behind closed doors, by procedures that few understood. This referendum has shown more than ever that such a model is wrong for a modern society. For people to support ideas and to accept their consequences, they must feel as though they have ownership of them. Devolution of political power within the UK has long been talked about and now is the time to revisit it again. Let’s give our cities and our regions the resources and support to make their own choices and lets end the central dominance of London and Westminster, that has upset so many in this nation.

We must also re-imagine how our nation sits within the global community which we operate in. To do so we must re-assure our friends, rebuild old connections and start new relationships.  We are a part of this continent of Europe in a very physical way. The UK may no longer wish to stay with its neighbors in a political union, but that is not a sign that the UK does not love many of the things that make Europe the envy of the world in the eyes of our global community. Now, more than ever, we need to show Europe that love, as many have already done so over the last few days and we need to go further.

Few people bothered to talk to those Europeans who live in the UK and who call it home during this referendum. That is both a disgrace and a tragedy. These people, many whom I proudly call my friends, have made this nation so much richer for their presence. They need us now more than ever to show that we appreciate all that they give us. The UK must also look more to its fellow commonwealth nations and revisit how it can do more to help them and to work closer with them. From 1999-2003 over a third of all Australian expatriates lived in the UK, while our links with Canada, the USA, New Zealand, South Africa and Hong Kong remain extremely strong. Now is the time to make them stronger and deeper. As to the rest of the world, it is clear that talented and passionate people are everywhere and many still wish to make the UK their home. We need to make sure that a future UK creates a fair and transparent system to help these people come to the UK and make it even better.

Furthermore, we must all recognise that politics is no longer something that we can ignore and  disengage from. From 1997 – 2015, less than 70% of UK registered voters turned out at general elections to choose their leaders. At local elections this was often even lower, in some places below 30%. Our power to decide who governs us is a great privilege and something many take for granted. People often feel as though their vote is irrelevant in a First Past the Post system and as a result they do not vote, nor do they bother engaging with politics in their constituency. I believe that devolution can do much to change that, as it has with the Mayor of London elections and the Scottish Parliament, but it can only do so much. People in the UK also need to be willing to commit some of their time to engaging with politics within their communities. They need to talk to local parties, perhaps attend local events and above all, they need to communicate with those who they elect to govern them.

For those who are afraid and uncertain of the future, this is a rallying cry for those who call Britain their home. We have a chance to make a better Britain, one that is global, modern and uniquely ours. Let us make sure that we take this chance and that the next chapter in our nation’s history is one that we can be proud of.

The World in crisis and the cyclicality of history

Looking at the world there are many reasons to be optimistic. No war between the major powers has occurred for several decades. Global economic growth has raised the quality of living for millions of people, meanwhile major scientific discoveries continue to advance human understanding of our world. Furthermore, modern technology continues to enhance human productivity and with advances in modern telecommunications, global inter-connectivity is at an all time high.

Or so the optimists of the early 1900’s thought.

For individuals like President Truman and Sir Norman Angell, the famous British Labour MP, the world before 1914 had reached a new level of civilisation. The continuing advances of modern technology alongside a seemingly growing global endorsement of liberalism and democracy, would slowly convert the world and its citizens, and in so doing, consign war and global poverty into oblivion.

If all of this sounds oddly familiar, it should. Just as in the early 20th century the men of the hour trumpeted the success of mankind, so too do the modern heroes of the early 21st century. In the same tradition that Norman Angel followed, when he wrote his famous book “The Great Illusion”, arguing that war was rendered essentially impossible because of global integration, the 21st century has its own optimists. Whether it be Lawrence Summers recent piece, “The case for Global Optimism” or Steven Pinker’s work on declining violence, the optimists are out in force. Moreover, so are the idealists.

From Mark Zuckerberg to Jeff Bezos, Tim Cook, Elon Musk, Jack Ma and many more, the future appears bright and full of promise. Except they are wrong, all wrong. And the biggest problem is that no-one seems to have realised it.

Across the OECD, household, private and government debt is high, with weak economic growth across all the major economies. In China, despite unprecedented economic stimulus, the economy is rapidly decelerating. Climate change and high birth rates across the world’s poorest nations continue to drive increasing numbers of people to migrate from their homes, many travelling thousands of miles in search of a new life. Thus as the global economic engine groans and as new migrants seek the opportunity of a better life in the worlds more developed economies, a resurgence of nationalism, often coupled with xenophobia and racism is spreading.

But that is not all. Global fear and insecurity, economic weakness and popular anxiety are a breading ground for nations with a penchant for making their country great again. These leaders believe in cultural exceptionalism, they focus on the global balance of power and they view the world as a zero sum game. Moreover, such leaders are not confined to the developing world, and as time continues, their message is gaining traction globally.

But what is driving all of these issues? What is the problem?

Many would suggest that the world is facing a crisis of global economic demand. A slump in commodity prices, combined with nearly three consecutive years of stagnant or falling prices for manufactured goods, is threatening global growth, so the argument goes. Thus follows the inevitable argument of trade restrictions v.s. trade imbalances. To simplify the points, the debate circulates around whether the only way to improve the demand for a countries domestic goods is to introduce protectionist trade measures, or whether countries with “excess” levels of savings and large trade surpluses should be forced to spend more, thus allowing other nations with large trade and savings deficits to catch up. Such is the debate over China within the USA today. But the debate misses the core issue. While the US and China may fight over the issue of trade imbalances, the problem facing the world economy is much more simple:

The world is facing a crisis of inequality.

The World Bank and Asian Development Bank speak of the worlds’ success in reducing global poverty by 950 million people and thus achieving the Millennium Development Goals. But this figure hides all manner of sins. True, the number of people living on $1.90 a day has fallen by 950 million between 1990 and 2015, but if we move to $3.10 a day benchmark, then the poverty rate still stands at 35% of the world. More simply, the actual number of people in extreme poverty today, Paul Collier’s “Bottom Billion”, has not changed in over 20 years.

P1070774I need not re-hash the work of Thomas Piketty on inequality in the western world, or dwell a huge amount further on the fact that 400 americans are worth more than the remaining 50% of the country put together. Nor do I need to dwell on the estimated $21-32 trillion sitting in offshore tax havens by multinational companies and high net worth individuals. Rather, I want to explain why this inequality, if it isn’t tackled, is going to break the whole global system as we know it. And that is the biggest problem.

It is an old tenant of classical Keynesian economic, that as incomes rise, an individuals desire to save a proportion of their income will increase. While this sounds sensible, the reality has long been considered problematic. If those who are wealthier save an increasingly larger portion of their income than they spend, then global demand for goods will get relatively weaker as this proportion of people get richer. If demand does not grow as fast as income, the economy ends up with a large surplus of funds. But while this was a cause of great concern for classical economists, in the early half of the century this fear was alleviated through the work of Simon Kuznets. Kuznets demonstrated that as technology continued to develop, new demand would be created for new products, meanwhile an expansion government spending would also occur, thus collectively helping to offset a fall in demand. Thus with this discovery, economists relaxed and the fear of a global collapse in aggregate demand was averted.

Only, the essential questions were never truly explored: How would private demand for goods rise without a fall in savings? And how would government demand for goods offset a fall without absorbing the excess savings?

The answer, perhaps predictably, was debt.

The most revolutionary concepts in the global economy since the Peace of Westphalia in 1648 have been the creation of new means to raise money. Whether they be in the form of bonds, equity, derivative contracts and so on, finding new ways to help stimulate consumption has been the cornerstone of continuing economic growth. However, when analysing the power dynamics of debt, the one party that will always be better positioned is the party that has the capital. If you want evidence of this, I would advise looking at Greece’s position or that of Argentina.

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It is self evident that the use of debt allows people, who need to consume goods, to consume beyond their means whilst also allowing governments to spend beyond their tax base. In both cases, this can be sustainable, as long as the economy grows and the interest on the debt remains affordable. But what happens when people can no longer pay for the debt and perhaps even worse, what happens when there is no-one who wants to take on more debt?

Thus the crisis in the world today is not a crisis of demand, a crisis of leadership or a failure of free trade. The crisis today is that too much capital is held in the hands of too few people and organisations, who do not see sufficient opportunities to earn long term returns on their money through making investments in the real economy. If you want to understand why billions is being spent on über, amazon, facebook, airbnb, twitter, tesla, virgin galactic, whatsapp or any of the other global technology giants, it is because the worlds largest investors don’t see demand growing anywhere else. Moreover, demand growth is so weak in the real economy (i.e. commodities, manufacturing, agriculture, etc), that 100’s of billions is being invested in companies that have never made a profit, and by some forecasts may never make a profit.

Bubbles in technology, bubbles in real estate, stagnant, excess global production capacity and global unemployment (and underemployment), spell one thing: deflation. The sirens call of every major financial crisis is deflation. It is here in Europe and soon to be in the US as well. Speculative bubbles, deflation and currency crises are the hallmarks of the world’s largest recessions, but this time the central banks have no more levers and the governments have no more capacity to borrow.

In short, the world is standing on the edge of what may be the largest precipice in world economic history since the great depression. And on current trajectories, with current policies, there is nothing to stop it.

I need not elaborate on what a global economic crisis, greater than 2007-2010, would mean for the world at large. But a few points are worth mentioning. Firstly expect famines on a scale unheard of in history, as subsidies to the third world for food and agriculture collapse. Secondly expect mass unemployment, as countries fail to agree on how to reform the global economic system and protectionist trade measures return with a vengeance. Thirdly, expect a global uptick in violence. Whether from desperate authoritarian regimes, seeking to desperately shore up their legitimacy or from non-state actors capitalising on new power vacuums, the era of violence is near our doorstep. Above all, expect migration on a scale never seen in human history.

But is there another way? Is there a way to fix this economic system and to escape from this collapse into crisis?

Maybe there is….but will we be brave enough, and are we capable enough to make it happen?

The world’s demands have never been greater. Across developing and developed nations there are sufficient projects and investments that could absorb the worlds available capital many times over. The problem is that the capital needs to be channelled. Wealth that is hidden offshore must be repatriated and taxed. The financial services sector must become transparent so that corruption can be mitigated to the greatest degree imaginable. Leaders in business and politics must realise that facilitating corrupt behaviour is never an acceptable price and that any short term gains that may be won by accommodating “gangster capitalists” are illusory. In this role, the general public must vote for parties who really push these issues and they must exercise their influence over their pension providers who sit at company boards.

In the longer term the world needs to realise that we will not resolve our problems when we assume that one person is different to another. Yes, people may have different values and beliefs. Yes people may wish for a different world to the one that you want and yes, the western world as we know it, human rights and all, may never become truly universal in the way we hoped they would. But inequality is the poison in our global system which breads fear, insecurity, anger and resentment. If we do not deal with it now, we will be fighting the challenge for the remainder of our lifetimes.

This is our future. If we do not act now and put pressure on our leaders across the world to tackle inequality, then our system will fracture and collapse. One only needs to read the horrors of the early world wars or the great depression to realise that there in no price to high to avoid that fate.

This is our world. And we have to be the one’s who change it.

The Case for BREXIT

The starting gun has been fired and now begins the race. By the end of June 2016, the UK will have made the most important decision it has faced in 25 years. Do we stay or do we go?

The BREXIT debate is one of identity, and it is on this issue that the referendum must deliver a clear answer. The question of Britain’s role and place in Europe has always been defined by this question: are we Europeans or are we something different?

Many misunderstand this notion. To say you are different makes people uncomfortable. In this context, it inspires claims either that British people are exhibiting national chauvinism or that they are being willfully ignorant of the realities of today’s world. These claims, however natural they may be given the appalling narrative on immigration in Britain today, are wrong. Britain is different not because we do not share with other Europeans the common bonds of humanity, shared love and respect for liberty and human decency, respect and tolerance of others and a commitment to helping those in need. We are different because we do not believe, nor do we accept, that Europe’s methods of how to build a society are the right ones.

Most would like this vote to be about a simpler issue. The “vote leave” seeks a migration narrative, the “vote stay” wants an economic narrative. But for the future of Britain, they must both fail in their endeavours. Instead, voters should understand the clear meaning of their actions. To “vote stay” means that British people must finally accept that they have a shared responsibility to working with Europeans to help solve their problems as well as our own. To “vote leave” requires British people to acknowledge that if we do not feel a responsibility to help Europeans outside of our national interest, then we must acknowledge simultaneously that Europe has no responsibilities to support our national interest.

In the narrative of history, we must all hope that the story of Europe continues. The European Union has made life better for the continent and its people. It is a symbol of hope and idealism to many across the world, despite all its failings. But it is not our story. I believe in BREXIT because in viewing my home and those from it, I see the world differently from those on the continent. Our nation is not afraid of no longer being a titan on the world stage, nor are we afraid of a world where we do not control the global agenda. Britain has always thrived on its ability to innovate, to be pragmatic and to take risks in order to survive. Such has always been the necessity of island nations.

Europeans see the EU as a mechanism to sit at the world table in the rising new world order. As an equal to China, the US and to India. Today’s modern Britain does not see that necessity. The reality of the modern world is that no nation, or body of nations, can unilaterally determine their economic environment or their security environment. The age of autarky and isolationism is dead. The challenge of our time is not do we choose to work with others, but how we choose to do so. In this context, one must always remember that national interests reflect national character.

The UK does not believe that protectionist trade tariffs, strict labour laws, state controlled economies or heavy state regulation leads to a greater quality of life for our people. The history of our nation shows that our prosperity has been driven by the periods where we innovate, where we seek out new ideas and where we search the world for new markets. The wealth of our nation similarly should never be dependant on one single trading block. It is often forgotten that before the European Union the UK’s biggest trading market was India. Why it is that such a pattern could not re-emerge is one of many unanswered questions that the “Vote stay” movement has yet to address.

The security of our nation has been achieved through the strength of our national endeavours. No foreign-armed force has landed on the British islands in over 300 years and when left alone to defend our citizens rights abroad, we have shown our ability to act unilaterally to protect them. Many mistakenly associate peace in Europe with the European Union. This is wrong. Peace in Europe has been achieved by NATO and de-facto by America. The “Special relationship”, for all its failings, has always been the recognition by Britain that Europe lacks the motivation internally to unite collectively in its own self-defence. If evidence of that were ever needed, the use of NATO in the Balkans and the European reliance on new US armoured brigades in Eastern Europe, provide two immediate examples (there are of course others). The Freedom of our nation therefore will always rely, first and foremost, on our own efforts and our relationship with the US. As to threats of terrorism and transnational crime, it is often forgotten that the UK’s worst period of terrorism came during the “Troubles” in Northern Ireland. If at the height of the cold war our allies were unwilling to help us when it conflicted with their national interest, it seems disingenuous (to say the least) that this will change in the future.

The challenge facing those who campaign to leave has been to explain “what comes next”. Setting aside the unchallenged assumption that staying in Europe will ensure that the UK follows a clear and predictable path for 20 years, it is not unreasonable to say that a vote to leave also requires a plan on how to leave and what should happen after we leave. As with all well laid plans, few survive contact with reality. Assumptions of behaviour and of processes are notoriously challenging even where precedents exist, let alone where they do not. But setting these aspects aside, a strategy for the UK would go as follows.

Following a vote to leave the UK will not immediately leave the EU. This is the reality and yet it appears often ignored. The UK will enter into a period of negotiation on the terms of our exit, while remaining in the Union. The negotiations are likely to require 4-5 years and, in essence, they will require the UK to accept EU governance for its companies who wish to trade in Europe. Conversely, European firms who wish to trade in the UK will have to follow English laws and governance. As most global regulation is increasingly being harmonised, over time there will remain few significant differences in regulation between the two. On immigration, the UK will move to a points based system. In so doing, it will significantly ease work and residency related visa requirements for Australian, New Zealand, US and Canadian nationals. Over time, these restrictions are likely to be expanded to other commonwealth states as their levels of development increasingly reach parity with our own.

From a trade perspective, we will work with the WTO to expand its effort for a new set of global standards and a reduction in global trade restrictions. We will also explore deals with ASEAN and other regional markets across the world. Such action was how we once thrived. We will re-discover this talent, as many of our young entrepreneurs already are doing.

At the International level, the UK will continue to sit and act in partnership with European nations. We will join with Canada, Australia, Norway, Switzerland, Turkey, New Zealand (and occasional the USA and Japan) as part of the EU+ grouping which exists within the major multilateral banks and other international organisations. On security matters, we will remain committed to the defence of Europe and particularly Eastern Europe, where we have already increased our presence and where we played an instrumental role in bringing these nations into both the EU and NATO. For issues of transnational crime, a bilateral extradition agreement will be made with the EU as part of our terms of exit. On this last matter, there is little disagreement between the EU and the UK and little incentive from either party to prevent such an outcome.

This is the case for BREXIT. A UK that remains a friend and partner of Europe, whilst remaining an independent nation state that pursues the best interests of its people on its own terms. To “Vote leave” is not a rejection of liberal values and a statement of disregard for the well-being of Europeans. Instead, it is a re-assertion of the well known principle that the best form of governance is self-governance. It is time British people remembered this principle.

To my countrymen and women, whatever your opinion, please make sure that you vote on 23rd June. This is our future and I hope you vote to leave with me.