Let's Hear it for Nick Clegg

I’m serious. The much maligned Nick Clegg, leader of the Liberal Democratic Party- the smaller coalition partner in the UK Government- is actually deserving of praise for his role in supporting the Government sell its austerity efforts to a fretful bond market. Well, at least, in the view of this blogger!

Government Austerity Plans and Bond Markets

There are two issues with Governments being able to convince investors that they have put together a credible plan to deal with their deficits. The first is the plan itself, and the second is the credibility of their ability and willingness to carry out the plan. For a British observer, the latter point can be seen as a display of the lack of fortitude and consistency that categorises Continental European style coalition politics.  All it takes is the opposition of a few extremists within a coalition Government and significant resistance can be generated. 

Greece has had to deal with its main opposition leader (Antonis Samaras) opposing austerity programs. Angela Merkel is constantly engaging with mounting opposition to ‘bailing’ out the rest of Europe. Berlusconi appears to be at loggerheads with Economy Minister Giulio Tremonti (the most credible austerity hardliner in Italy) and the opposition parties are calling for his head. The list goes on and on in Continental Europe, however, the British system is seen as being a kind of ‘elected dictatorship’ whereby the Government can-more or less- get legislation through parliament with ease. Or can it?

Ed Balls the Most Dangerous Man in Britain?

The fact is that, the UK Government is a Conservative/Liberal Democrat coalition. The election did not deliver any one party as a decisive victor. Moreover, for the benefit of non British readers, the Liberal Democratic party has- in recent years- been seen as even more willing to ‘tax and spend’ then the former Labour Government. In addition, the shadow chancellor in the UK is Ed Balls, a man widely seen as the architect behind Labour’s failed economic policies which lead to the UK’s public finances looking as weak as, say Italy’s.

 If we put these ingredients together, it’s not hard to envisage a nightmare scenario where a failing coalition Government causes the market to start pricing in the return of Ed Balls. Frankly, I think it is a disgrace that Balls has been appointed the shadow chancellor and, I regard him as the most dangerous man in Britain. I suspect that the slightest notion of Ed Balls in Dowing Streeet would cause a significant hike in market yields for UK debt. You could call this event a ‘Balls Up’.

Let’s Hear it For Nick Clegg

So what of Nick Clegg? Frankly, I think Clegg has behaved admirably. He is a sitting duck for criticism from his own party, yet he has supported Cameron in his efforts at selling the austerity program. Unlike so many others, he has rarely played Party political games which act as a detriment to his country. I’m not so naïve as to not understand that towing the Cameron line is the best way for the Liberal Democrats to exert some influence (at the cost of devaluing some of the principles of some in his Party) but in his support for Cameron, he has displayed a willingness to do the right thing for his country even at his own expense. A quality which Berlusconi, Samaras et al would do well to emulate.

The Errors at the Heart of the EU?

Essentially what we are seeing in Europe now, is a retesting of three contentious ideas which are at the core of the Euro zone project. The first of these philosophical underpinnings is the idea (from Hegel) that the ultimate reality of an individual can be supplanted by the state. The second is that the primary motive behind an individual’s behaviour (Marx) is economic. The third is that the state and political policy can, and should, be used to alter culture. The latter idea is at the heart of much of Neo-conservative thinking. You set a raft of metrics (deficit ratios, debt/GDP etc) and suddenly the Greeks becoming inflation avoiding, fiscally responsible, austerity accepting Germans.  

In other words putting, these three ideas together, monetary and fiscal union are seen as possible because individuals and countries interests can be subsumed to a ‘European’ super state. Furthermore, since the salient motivations are economic, any issues can be resolved by monetary support. These ideas are particularly attractive because they are imbued in the scientific rationalist tradition of European enlightenment thought. In addition, they allow a continent that had been at war for centuries to pretend that cultural or military conflicts can be easily resolved by closer political integration.

Unfortunately, these ideas have largely been proved not to work over the last century or so. The irony of the creation of the Euro just as the Soviet Union was breaking up into its regional constituencies should not be lost.  Nor indeed, should criticism be limited to the EU. In the UK, the central Government takes revenues from London/South East and creates a weird kind of ‘dependency culture’ by distributing it elsewhere in the UK. This unproductive and damaging (to all) type of Government only works as long as there is enough social and cultural cohesion to keep it going.

Unfortunately, there really isn’t this type of cohesion between the average Greek and German. The EU ‘state’ has certainly not supplanted the ultimate reality or cultural perspective of these respective populations. Nor has the transfer of economic wealth proved particularly productive in changing population’s primary motives. Greeks still think of themselves as, err, Greeks and Germans as Germans. Lastly, since when did adherence to ‘scientific’ EU metrics on deficit reduction and debt/GDP ratios change the political framework of Europe.

It strikes me that political unions are usually made organically or through violence, rather than through the application of discredited philosophy. If we get fiscal union with the creation of a 'Eurobond', than I suspect the campaign for the Deutschmark will follow in a few years.