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May 23, 2008

Gordon Brown is politically on the slide

Brown wanted so badly to be British Prime Minister. Moving from the office of Chancellor to that of Prime Minister was never going to be a smooth transition. Brown faced one problem after another. Labour has now lost a by-election and the Conservatives are actively rejoicing. What has happened to Gordon Brown? What are his chances of making a political recovery?

Gordon Brown has made a series of political misjudgments and his government has also experienced ‘bad luck’. His initial days in the Premiership were ruffled by serious flooding and a potential foot and mouth outbreak. He chose not to fight, unwisely in hindsight, an autumn election that would have tested his legitimacy at the ballot box. His government was then faced with the scandal of the loss of confidentially information on millions of citizens. His performance during Prime Minister’s question time has not been exactly sparkling, especially when he earned the accolade, as a result of the loss of confidential information, of having gone from ‘Stalin to Mr. Bean’ in a matter of days. Style matters as well as substance, especially the performance in the most brutal parliamentary cross-fire in any democratic system, that of Prime Minister’s Question Time. Then there was the mistake in taxation policy of cutting the basic rate but abolishing the lower 10% rate, made when he was Chancellor, but which has come back to haunt him as an unfair ‘confidence trick’. Underneath it all is still the lingering resentment about the war in Iraq. The by-election loss of a fairly solid Labour seat to the Conservatives this week has added to the evidence of his unpopularity and that of his Government. This was the first Tory by-election gain in over two decades, a gain that Tory-leader David Cameron is calling a ‘remarkable victory’ whilst condemning the Labour campaign as ‘negative’ and ‘backward looking’ as well as ‘xenophobic’. Cameron claims that the victory is a victory for those who are against ‘tax and spend’, the traditional policy of old Labour.

Reactions to the by-election defeat within the Labour Party have been swift. The party did run a negative campaign against the ‘Tory toff’, the epithet used by Labour to describe Edward Timpson the victorious candidate. The Labour MP David Lamey is quoted on the BBC web-site as saying that ‘the ‘Tory toff’ campaign picked the wrong target. The public do feel that politicians are out of touch- but it is the political class, not the upper class, that is the problem’. Many think that it is Gordon Brown and his policies that are the problem. The feeling that Labour MPs are ‘fighting for our political lives’ is echoed by another Labour MP John Grogan (again quoted on the BBC web site). A danger for Labour is that the party will now start to squabble about Brown’s leadership and so add to its own troubles.

Brown cannot re-launch himself. That has been tried and failed. The Labour Party does not tend to go in for brutal removal of its leaders (that is more a Tory practice). It is stuck with Brown. Brown’s reputation was that of a good Chancellor, capable of maintaining economic growth. Brown sees that economic uncertainty is what is underlying his unpopularity (‘They’re concerned about what’s happening to the economy’) and it is alleviating the economic uncertainty that Brown will address himself. Although Brown has strengths in this area, he has only limited room to maneuver. If he cuts taxation, he will need also to cut Government expenditure. With the price of oil what it is and the general world uncertainty, the economy will not readily responding to traditional ‘steering’ methods. He is between a rock and a hard place.

May 19, 2008

Italy, Berlusconi and the economy

Commenting on Italian politics is not for the feint hearted. Silvio Berlusconi, the darling of the right and bogeyman of the left, and alleged ‘good-friend of Bush’, is back in the Prime Minister’s office. In the middle of May he gave his first address to the Chamber of Deputies. Italy is faced with huge economic problems. In the context of the EU, Italy’s economy is not insignificant. The problems include a significant budget deficit, insignificant economic growth, the persistent problem if Alitalia and the refuse crisis in Naples. What has Berlusconi promised? Has he changed his old ways?

Berlusconi’s address has been widely seen as one that intended to build common-ground in order to tackle Italy’s many problems. Even although he has a very secure position in both the Senate and the Chamber of Deputies (his alliance took about 47% of the vote), he intends to build bridges to the main opposition group in the Parliament, a centre-left coalition. He claimed to be searching for a ‘transparent dialogue’ across party divisions. He will need to be consistent and stick to his policies, inherited from the previous government, of budgetary constraint and economic and political change. Italy has too many politicians and too many civil servants in national and regional governments. Common-ground is needed because the politicians are divided and the economic problems are serious. Even on the issue of dealing with Alitalia, an airline threatened with bankruptcy, there has been no consensus over the last couple of years. This should not be a difficult issue as market solutions are fairly readily available but in Italy’s tortured politics, it is. Berlusconi is reported as saying that he would not take Alitalia into state-ownership. Berlusconi will look for a market solution. His political problems are real for to achieve economic growth and maintain budget constraint he will have to tackle the expectations of his own (often privileged) supporters and secure the inflow of taxation whilst reducing expenditures. Keeping the political and personal balance is not going to be easy for a man with a record for letting things go their own way.

Berlusconi has started well. He has set the mission statements with economic growth and reform as key elements. Even with this good start however there is an element of showmanship. He is going to be in Naples three times a week until the refuse crises is solved as if his mere presence will lead to a solution. With many ‘Northern League’ ministers in his government this could backfire as the symbolism stikes home. The problem in Naples is not only one of capacity but of deeply embedded political corruption. Berlusconi needs policies and political muscle, not rhetorical gestures. Palermo in Sicily had several years of recurrent crises with respect to refuse collection and disposal before the problem was rooted out. There is no reason to assume that the same will not be true of Naples. Berlusconi’s real test will be whether he can maintain his promises on economic and political reform and revive the Italian economy. To do this he needs to balance diverse elements in the political scene. There is no doubting his entrepreneurial skills, though these have been used in ways that do not always square with good business practices. To maintain his pledges, and keep the political system and its participants focused on rescuing Italy from its economic and political crisis will require a different kind of leadership, perhaps even statesmanship. People can change. Can Berlusconi?

May 6, 2008

Indian and African relations

Indian is a major driver-economy in Asia. Like China it is looking to a dynamic future and attempting to position itself to ensure it has access to a future supply of raw materials and to future export markets. India is a country and Africa is a continent. China has been very active on the African continent. What is India trying to achieve? What are the similarities and differences when its developing policies are compared to those of China?

In early April 2008, India was host to a two-day India-Africa Summit in the capital New Delhi. Although only fourteen African countries attended this was a significant all-Africa event as it included representatives from the Mediterranean countries as well as from sub-Saharan Africa. The summit is the outcome of significant diplomatic activity. India’s Minister for External Affairs (Prefab Mukherjee) had been to South Africa, shortly before the meeting, for example, to sign agreements to boost bilateral ties between South Africa and India. Such bilateral agreements, becoming more significant in a world where multilateral agreement has been stalled, do not come into being overnight. India, South Africa and Brazil are also engaged in interesting trade discussions and political cooperation within the framework of the WTO. The Summit itself was preceded by an India-Africa Business Conclave in March. It was also bolstered by discussion concerning development project and development aid. The Summit was also surrounded by cultural events.

There is no doubt that the concerns are economic. India is a significant Asian driver economy, home of developing multi-national enterprises and a significant trading partner with the African continent. India is looking to secure its position on the continent in the light of its own resources needs (less acute than those of the Chinese but significant nonetheless) and in the light of Chinese economic and political ambitions. Indian commentators wish to play down this aspect and stress the historical links between India and Africa, particularly East Africa, and the contribution India made to the process of decolonization. This is a form of window-dressing and needs to be seen as such. Some African political and economic commentators have been skeptical, given the Indian Diaspora (roughly two million people of Indian descent live in a variety of African countries) and the fears of another ‘scramble for Africa’. Having India compete with China, however, can only be a good thing for exports from the African continent. China still has the economic edge when it comes to African exports but Indian tariff reductions will impact on the export prospects of poorer countries. The issues however they are dressed are about trade, aid and political influence in a changing world. India needs to orientate its foreign and trade policy to a new set of international circumstances, as do the countries of Africa. It may be paralleling moves made by the Chinese but it is seeking a different kind of relationship.

By stressing historical ties and mutuality India hopes that it will avoid any suggestion of crude exploitation of the African economic environment. By stressing a political basis for cooperation as specified by the Delhi Declaration, India is illustrating its common interests with African countries on the international stage. These include food security, climate change and the Doha round (Western food production subsidies in particular) and some continental representation on the United Nations Security Council. Security issues are also important as sea trade has significance for countries such as South Africa as well as for India. By stressing aid and the aid relationship, India is presenting itself as making a significant contribution to African social and economic development activities. At the start of the conference the Prime Minister of India (Manmohan Singh) announced a huge package of development grants for implementation over a five year period.

India is, unlike China, a democracy and its trade, aid and political cooperation subject to domestic democratic scrutiny. Its moves in Africa will increasingly bring its investment strategies, trade and aid polices to the attention of the wider world. It has a better record than China but like China it has an involvement with some unsavory regimes. The India-Africa Summit did not get much coverage in the United States. It deserves more.