The EU’s peacebuilding

Since 2001 the European Commission has spent €7.7 billion on conflict prevention and peacebuilding, more than any government or other international organisation and about 10 per cent of its total spending on external aid.

A recent evaluation concluded the money has been well spent overall, albeit with room for improvement – the sort of balanced conclusion you expect from a review like that. The report finds that the EC has undertaken and supported some pretty good work in places as different as the western Balkans, the DRC, Nepal and Central Asia. Not everything works, but nothing has been done that is actually harmful, much that is distinctly beneficial to the common good, and important lessons have been learned.

That was then

The Gothenburg decision was taken at a different time. The Euro and the big enlargement had been decided. Confidence, expansiveness and optimism were in the air. If confidence was shaken by 9/11, the beginning of “the war on terror” and the start of the build-up to invasion of Iraq, nonetheless it was an era of growth and of projecting the EU’s core mission of enlarging the zone of peace to far flung corners of the world.

But in 2007 came the sub-prime crisis in the US and the start of the international credit crunch. In September 2008 Lehman Brothers went down and the world started to be very, very different.

Tragedy and reflection

In fact, for my own organisation, International Alert, things had already started to change. In 2005, the day after London was awarded the Olympic Games of 2012, the city was visited by the worst terrorism it has experienced, far more lethal than anything inflicted in 25 years of war by the Provisional IRA – in four bomb attacks (one on a bus and three on underground trains), 52 people were killed (plus the four bombers) and over 700 severely injured. The city was quiet for the next few days and people worried about whether it was safe to use the bus and tube and go to work.  Two weeks later four more bombs were discovered before they detonated.

In that over-heated atmosphere, on the next day, a policeman shot and killed a young Brazilian, Jean Charles de Menezes. It has since been proven that he had no connection with terror groups of any kind. It has been proven that the police had no basis in fact for following him. They panicked and a young man lost his life. I reflected on this and its implications in a post on the day a permanent memorial was dedicated to his memory.

For me and for colleagues at Alert, this awful incident was very immediate: our office happens to be five minutes’ walk from the station where Menezes was shot. Like many others we reflected on these events and we wondered whether skills we have learned in trying to build peace in Africa, Eurasia and Asia since we started up in 1986 might be useful in Britain. We made contact with groups working on community conflict and cohesion and compared notes. Might what we do in Beirut, Monrovia or Kathmandu have some bearing, some relevance in Bradford, south London or Bristol?

The answer was yes (and we now have a programme of activities in the UK), not because we have a magic technique but because we start with a dispassionate analysis of the context of conflict and use a vision-based approach. We don’t only start with ‘what’s the problem and how do we handle it?’ – but with ‘where do we want to be in x years’ time?

This is now

In the summer of 2011, England had its riots. We look around Europe and we see different sorts of disaffection and action: the anger in the anti-austerity, anti-government riots in Greece, the thin patina that people tell me stands between order and a similarly angry chaos in Ireland, the youth movements in Spain, the simmering anger in Italy. Even in a country self-proclaimed by an opinion survey to be among the 2two or three happiest in the world* – Denmark’s capital has been scarred by school-burning and gang warfare in the last couple of years. And at the psychotic and extreme end,  Breivik’s monstrous massacre on the island of Utoya in July 2011 and the discovery of a series of murders of immigrants by right-wing extremists in Germany;

I am not equating these events. This atmosphere of dissatisfaction and violence does not arise everywhere from the same source, the same social groups or the same politics.

But they are nonetheless connected, not by motive or participants, but by the political and social landscape in which they occur.

It is a landscape where people’s sense of social belonging and engagement in the common good is challenged as never before. It is challenged by economics as job opportunities and the belief in a better future diminish before our eyes. Politics is professionalized and in most countries is ever more distant from growing segments of the population, especially among the poor and among the young. Ordinary people feel they are paying the price for mistakes they did not make while those who had the biggest part in the errors in politics and finance are paying a much smaller price.

Some people direct their anger about the injustices at the political establishment, some at the finance world and some – in their confusion at this diminished sense of belonging – against immigrants. But even when the anger is mis-targeted and even when the accusations are false, the feelings that lie behind are real. And sometimes lethal.

Bringing peacebuilding home

How might a peacebuilding approach look? Standard procedure for working in fragile states – rule number one – is to start with context. Which means starting with questions and an open mind.

This makes it very difficult for politicians to bring a peacebuilding approach to their own home patch. At home, they are supposed to know the answers. That’s what we have politicians for – and then we get to choose which answers we like best. Or who answers best, which is not always the same thing.

A peacebuilding approach would not look necessarily at the numbers involved in each action, even the riots. It is a staple of peacebuilding to acknowledge that in countries with a population of tens of millions, it only takes a few hundred unemployed young men, some leaders ready to act, and access to weapons – and you have a war. The IRA’s active forces probably numbered well below 1,000 throughout three decades of war in and over Northern Ireland.

No, rather than the numbers, it’s the background that counts, the social, political and economic context in which this occurs. And the question is whether that background fosters peaceful relations or not.

Last year the UK government brought out its Building Stability Overseas Strategy to guide its approach to peacebuilding in developing countries. Here is some of its analysis, full of resonance for Europe’s current social and political challenges. I have already drawn on it for clues for its resonance for the English riots. But its clues about what questions to ask are so useful it’s worth repeating them (but hurdle over the bullet points if you remember them) (and also get a life – come on).

• ‘The stability we are seeking to support … is built on the consent of the population, is resilient and flexible in the face of shocks, and can evolve over time as the context changes…
• ‘Effective local politics and strong mechanisms which weave people into the fabric of decision-making – such as civil society, the media, the unions, and business associations – also have a crucial role to play.
• ‘All sections of the population need to feel they are part of the warp and weft of society, including women, young people and different ethnic and religious groups.
• ‘Jobs, economic opportunity and wealth creation are critical to stability. Lack of economic opportunity is cited by citizens as a cause of conflict, and is often the most significant reason why young people join gangs…
• ‘Without growth and employment, it is impossible to meet the basic needs of the population, and people’s aspirations for a better life for themselves and their children…
• ‘While an inclusive and legitimate political system is a requisite for stability, confidence in the future comes when people see that their needs and expectations are being met on the ground.’

On the basis of this kind of analysis, you would look at social inclusion/exclusion and marginalisation; at the degree of hope and confidence in the future – or their opposites; at our political institutions – both national and local; at the condition of the economy and whether economic policies are creating opportunities; and at the space for civil society and for bodies such as business associations and trades unions to represent people, articulate concerns and influence politics.

How peacebuilding at home would look

Peacebuilding looks different from one country to the next. But the golden thread that connects it all, expressed in abstract terms, is mobilising social energy for building peace. We work out what form this will take based on need, opportunity and ability in the country where we’re working: police reform, starting new institutions to promote transparency, cultural peace festivals, women’s forums, joint  micro-investment projects involving genocide victims and perpetrators in Rwanda, getting multinationals and community organisations round the table together, communications across the conflict lines, getting conflict-divided communities to cooperate on adaptation to climate change – and much more. Consistently, the theme is people coming together, their energy becoming synergy.

In our atomised societies, bringing people together, asking questions, listening carefully for answers, and shaping common actions: never in the past 60 years has there been such a shortage of this, never has it been more needed.

Growing youth unemployment is causing hurt and anger that a return to economic growth will not be enough to calm. Something else is needed too. It really does seem time to expand the mandate of peacebuilding to include the EU countries themselves.

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* Denmark was ranked top in 2010 in a Gallup poll reported by Forbes in 2010 but more recently may have been shaded out by Norway.

It’s a policy area in which the UK is a major player. Not only is the Department for International Development a major bilateral funder, it has also offered significant intellectual leadership role over the last decade.  And it is a field that matters. Looked at moderately broadly, international development includes, touches on or is partly determined by climate change, the risk of pandemics, trade, peacebuilding and international security. And while the UK government is not ultimately a paragon of joined-up and consistent approaches across the development board, it has made some progress in linking up the different parts of government and government policy that have an impact on developing countries.

The common ground

Last year I did fairly detailed reviews of the development policies of Labour and the Conservatives. There are many ways in which they are aligned with each other. The approach of the Liberal-Democrats fits broadly into the same territory. The ground of discernible consensus in 2009′s policy statements covered at least the following high ground:

• Morality and self-interest unite to construct an overwhelming case in favour of providing assistance to international development in poor countries;
• The level of spending on development should rise to 0.7% of Gross National Income by 2013;
• The UN’s Millennium Development Goals set the framework and targets of international development efforts;
• Though not mentioned among the MDGs, peace and security issues and the political dimension of development have to be engaged with if development efforts are to succeed;
• Crafting a comprehensive response to climate change that both gets the problem under control over time and helps poorer countries to adapt to the effects of climate change have become a key component of development strategy.

Despite those broad areas of agreement, there are differences below the headlines and there are also some issues of nuance and emphasis that may presage important differences if not in declared policy then in its implementation.

In the new government the Cabinet position of Secretary of State (Andrew Mitchell) and the non-Cabinet posts of Minister of State (Alan Duncan) and Parliamentary Under Secretary of State (Stephen O’Brien) are all held by Conservatives. Now the two coalition partners stress that they have a joint programme for government, so the Liberal Democrats are accountable even for areas of policy where they have no ministers, and the Lib-Dems did secure some important points in development policy during the negotiation of the coalition agreement. It’s nonetheless inevitable that the key questions about how development policy will unfold under the new government are primarily about the Conservatives’ preferences.

Q1. Spending

The government is not only committing itself to spend 0.7% of GNI on overseas development assistance (ODA) by 2013 but, following a practice of legal self-binding that Labour set, intends to introduce a law to ensure it meets the target. This is a Lib-Dem win: the Conservatives were against the idea of a legally binding target until now even though they supported the target itself.

This commitment may provide the answer to the question in pretty short order but it is nonetheless worth asking the question: is the 0.7% commitment durable?

During the past year and a half, with the Conservatives committing themselves to the internationally agreed target of 0.7% and the economic crisis unfolding, there was a steady background drumbeat from some party circles along the lines that, whatever got said in opposition, in government it would be different. As the cuts in other areas of public spending started to bite, would it be possible, they sceptically wondered, to keep on sending large sums of taxpayers’ money ‘over there’?

Is it likely that this summer we will both see an emergency budget with the first of the promised cuts and a bill being laid before parliament to keep increasing ODA?

If that’s an unlikely pairing, we can suppose the bill will be delayed. The coalition agreement says on the outside of the back cover, “The deficit reduction programme takes precedence over any of the other measures in this agreement, and the speed of implementation of any measures that have a cost to the public finances will depend on decisions to be made in the Comprehensive Spending Review.”

The question is not about the arithmetic of the budget but rather the political signals and symbolism. Does the government think that Britons can tighten their belts at home without also tightening the purse strings abroad? If these things are possible at the same time, they can go ahead; if it’s difficult to get to get the symbolic timing right at the outset, then time passing won’t make it any easier.

The big spending review will report in the autumn – probably not a good time to bring the bill on 0.7% forward. But if it’s delayed till next year, as bigger cuts loom, circumstances will be even less propitious – and less favourable again as the cuts bite into public sector services and jobs. It might not be until economic recovery is well established that it feels straightforward to bring the bill in; that might be a couple of years hence, not far short of the target date of 2013 – and then what would be the point?

In short, the coalition government stands rather close to the top of the slippery slope down to Sometimenever Land where good political intentions go to fall asleep.

It needs to be emphasised that the government has already answered this question with great clarity in the coalition agreement, which, alas, is not enough to lay the question to rest. That will happen only when the bill is actually brought before parliament.

Q2: Conflict and security

Over the past four or five years the case that it is necessary to address conflict and security issues in order for development to go forward has moved from the margins to the mainstream. Many of the bigger development NGOs have resisted this – and some still do – on the rather odd grounds that it ‘securitises’ development. The truth is that development and the issues of conflict and security are inseparable from the outset. This is clear if you look at it as an historical process (as traced in Violence and Social Orders by North, Wallis and Weingast, or with different emphases by Charles Tilly  in Coercion, capital and European states, or with greater differences in  studies such as Liah Greenfeld’s Nationalism: Five Roads to Modernity).* It is equally clear if you look through the lens of human security and consider the way in which development and security are preconditions for each other, as encapsulated in the formulation of the parallel freedoms from want and from fear by the UN Panel on Threats, Challenges and Change that was established by Kofi Annan.

The increasing depth and breadth of the recognition that how a country is governed and whether it is stable and peaceful are core determinants of whether its people will find prosperity and the society will develop has been a welcome feature of the last half decade. The last government’s 2009 development white paper was a major milestone in setting out the importance of engaging with politics and addressing conflict in order to assist development.

The Conservative opposition embraced the same argument but there was a difference.

When their green paper was published shortly after Labour’s white paper, I pointed out in my review of it (24 October 2009) that while there was material in it about the relationship between security and development, most of it focused on the situations in Iraq and Afghanistan. These are wholly un-typical of the kind of insecurity that haunts and undermines development prospects in many developing countries. I also noted that when I had had the opportunity to query Andrew Mitchell – then the shadow minister for development – about this, he had insisted that the importance of the peace and conflict issues were not confined to the high profile, high octane cases of Afghanistan and Iraq where British forces were or had been directly engaged in combat. The issues were, he said, just as pressing albeit in different forms in a range of developing countries afflicted by conflict, insecurity and poor governance.

But the full coalition agreement published today contains only two reference to conflict and security issues in the international development section: one is to announce support for an international treaty “to limit the sale of arms to dangerous regimes” and the other is to promise “a more integrated approach to post-conflict reconstruction where the British military is involved.”

This is not the broad concept of insecurity and conflict that Mitchell talked about in opposition. The coalition agreement’s version is narrow both in that it is confined to places where British armed forces are involved, which is not many, and in its focus on post-conflict reconstruction. No mention of preventing the initial slide into violent conflict. Now “post-conflict reconstruction” can be treated in a relatively broad way, but it also provides a license for narrowness. It is possible and even normal to focus it only onto physical and economic rebuilding without looking at broader peacebuilding needs. And the very word “reconstruction” tends to distract attention from the need not just to reconstruct what was there before, which took the country into war, but actually to build something new. Nor is there any mention here of the problem of development in circumstances of bad governance and fragile states.

I am very readily aware that the coalition programme is a document dealing in headlines and broad categories. But the challenge of assisting development in fragile and conflict-affected circumstances, where the people are assailed not only by poverty but also by arbitrary governance and rampant insecurity – this is not a detail in international development policy, it is a central challenge.

So the second question on development policy is, what happened to the conflict analysis and the governance agenda?

Q3: A sustainable justification

And that brings us to the third question. Re-reading last year’s Conservative green paper on development, I was struck again that there is a genuine enthusiasm for development assistance in these pages and for getting it right and equally that the examples that are taken to show how development assistance can work are projects.

The problem, to be blunt, is that countries do not develop on the basis of development projects.

Development projects can be delivered on time and have the expected impact in terms of literacy or numbers of people immunised – yet development does not happen because the overall patterns of power do not change and a small elite continues to thrive while (and sometimes by) holding the mass of the population back. In these circumstances, these projects can be extremely important but that importance lies in human terms – in the prevention of disease, the alleviation of misery or the expansion of opportunity for those individuals and groups lucky enough to be beneficiaries. If there is a theory of change connected to these projects it is simply that if there were enough such projects, everybody would benefit and then…

And then, unless the distribution of power altered, the country’s development would still be held back.

To make this point a little too bluntly, 0.7% of UK GNI’s worth of projects plus an integrated approach to post-conflict reconstruction in Afghanistan do not add up to a persuasive justification for the government’s commitment to continue spending generously on ODA.

And as I have argued in previous posts, a new and sustainable justification for continued ODA is badly needed. The need arises partly for reasons I outlined above in discussing the juxtaposition of domestic spending cuts with ODA increases. Partly, it’s because the MDGs are not going to be met and in some places the shortfall compared to the goals is going to be extreme. And partly it’s because new challenges are unfolding – the combination of the consequences of climate change and growing population is already generating stresses that many states are simply unable to cope with.

So the third question is about the need to identify a new explanation, a new narrative of development that sustains a new argument for supporting it through ODA and in other ways. The answer would be easier if the new government were to revisit the conflict and security issues in development, re-focus on them, broaden them from the artificially narrow terms of the published coalition programme and put them higher up the development agenda again. And this reformulated narrative of development and of assisting development would itself make the arguments for a law to spend 0.7% of GNI on ODA more credible.

* Douglass C North, John Joseph Wallis & Barry Weingast, Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (Cmbridge University Press, 2009); Charles Tilly, Coercion, capital and European states: 990-1992 (Cambridge Ma & Oxford, UK: Blackwell, 1992); Liah Greenfeld, Nationalism: Five Roads to Modernity (Cambridge Ma: Harvard University Press, 1992).

The basic idea is a tax on each international financial transaction. James Tobin’s original notion was to use the tax as one way to moderate financial speculation after the value of the US dollar was de-linked from gold in 1971. He first proposed a 1 per cent tax. After a time he modified his suggestion to a level of between 0.1 and 0.25 per cent. Today, in some treatments (such as by the UK Trades Union Congress and in a study by the Austrian government) the level is put at 0.05 per cent - i.e., one two-thousandth of the value of the transaction.

To begin with, the aim was to slow down the pace of transactions in the international financial system. It would do that by deterring quick speculative trades. But that’s not on the horizon at 0.5 per cent; nowadays, the key attraction is that it will raise money.

Since unimaginably large sums of money are changing hands in currency speculation each hour, even a tiny fraction of the annual total is very big. A 0.05% tax on UK financial transactions would raise between £30 billion and £100 billion a year. The higher number is from the Austrian study and is the estimated revenue even if the overall value of transactions fell by two-thirds from pre-crunch levels.

So there goes the budget deficit and here comes money to cover the bill for adaptation to climate change in developing countries. A 50-50 split? – why not?

Arguments against are pretty weedy. The knee-jerk reaction from the City – omigod it’ll destroy London – is so over the top , it makes you weep. A tax of 0.05 per cent is not going to destroy London. If the banks are that worried, they could reduce the very high commission fees they charge by one two-thousandth of total transaction costs. They wouldn’t notice the difference.

And the banking world should probably be a bit careful exactly how they make the argument. Except for bankers themselves, nobody thinks they are so very wonderful any more.  Many bankers seem to have shrugged off any sense of responsibility for the crash of their sector and the consequences, and are happily greeting the return of good times and big bonuses. The rest of the world has not so easily forgotten. Today, the proposition that if some banking activities were to leave London, that would be good for the country and, indeed, good for the City itself is a notion that many people would find worthy of further discussion.

In case the idea of a 0.05% tax ushering in disaster fails to convince, the next objection is that taxing per transaction is not technically feasible. Rubbish – all transactions are logged electronically; the tax can be levied per transaction, or per hour, or per day. It wouldn’t be hard to deduct 0.05% of the value automatically as soon as (in the same few seconds as) the transaction is finalised.

So having tried to have it both ways by claiming that the Tobin tax is either damaging or impossible, the last objection is a bit more serious. The argument is that the tax is not practicable unless everybody does it everywhere.

A bit more serious – but far from convincing. The first question is whether everybody really does have to do it in order for it work? I think not. Were the EU to agree to do it, that would probably be enough for a critical mass. Yes, some companies might shift operations out of the EU’s jurisdiction, such as to Switzerland where some hedge funds are already re-locating some parts of their staffs previously based in London, or to the US or Asia. But the EU is so big in world trade that there would still be masses of money to be made even with a 1/2000 tax. Bankers would moan but governments outside the EU would soon be looking enviously at the revenues rolling in. They would be much more likely to follow suit than not.

So then, might the EU take the tax up? France and Germany already back it as does Austria. Elsewhere support is not uniform but the UK could offer to allocate, say, 0.005% (one twenty-thousandth) to the EU regional development funds as a sweetener and the other financial centres could follow suit.

So that about wraps up the objections. Another one (sort of) came from the Canadian finance minister who said that in his country they want to lower tax not raise it. Yes but most of that discussion is about direct tax on incomes or indirect tax on sales. This is neither. And in many governments, while raising taxes is not the only way to increase revenue, increased revenue is indeed needed in a big way so as to pay down debt and reduce budget deficits. And though the US administration was reported by the Brown-hating UK press as having slapped the proposal down, that is not actually what was said and not what has happened so far.

Arguments for are pretty obvious. With a barely noticeable effect on the level of activity in the financial marketplace, the revenue rolls in. The more governments that do it the better. There is money to pay off the effects of the recession, invest in adaptation to climate change in developing countries, use on other good purposes, and some to lay aside for a future rainy day so the next time the banking sector does a crash and burn spectacular, the emergency rescue doesn’t impose a heavy burden on national finances and tax-paying citizens.

There are three particularly attractive elements here – and a fourth element that I am sure is attractive to Gordon Brown and his advisers.

1. This is bonus revenue: it will not affect economic activity throughout a country in the way that sales, income, payroll, property or corporate taxes do. So it can be used for things that haven’t previously been understood to be necessary.

2. It is therefore ideal as a way of paying for climate change: I have blogged before on the ill-understood enormity of the bill for adaptation to climate change. One thing I have never understood in the debate about how to finance adaptation has been the emphasis on using carbon trading or other proposals such as a tax on airline and shipping fuels. It’s as if the climate question is a system and you want revenue and expenditure to be all within the system – like a road tax or toll charges that are only used to pay for upkeep of the roads. I see no reason to limit the sources of revenue in that way because I very much doubt that carbon trading will ever raise enough to meet the bills. The one visible attraction of keeping the financing mechanism within the climate system is that it is then cost neutral for taxpayers – but that’s hardly a decisive argument if it doesn’t produce enough money.

And now here with the Tobin tax is an alternative – no burden on the ordinary tax-payer and able to raise more money, more transparently and more efficiently than carbon trading. (That doesn’t mean there is no advantage in carbon trading; we should do it and use the revenue from it but we don’t have to depend on it as the prime source of financing for adaptation.)

3. And it will reconstruct the relationship between the banking sector and citizens because we will at last all see some real social utility in the sector.

And the fourth specifically Gordon Brown type reason is that he has come up with it before the Conservatives. It’s a neat bit of intra-UK politics. If the Conservatives oppose this tax, they will be vulnerable to the charge that they are cosying up to their friends in the City; on the other hand, agreeing to the tax will mean the Conservatives following Labour’s lead on an important economic question. There will be a way out of this conundrum; in politics there always is. But for the moment, this easily understood tax could let Brown put the Conservatives on the back foot on a couple of big issues.

But it is not all benefit; there are hidden costs. Exactly the feature of the tax that is so appealing is also a downside: it’s easy money. When governments are not accountable to taxpayers for their state income (e.g., when there are huge oil royalties), they are very often not accountable to their citizens for anything. It wouldn’t go that far in the UK but the very ease of securing the additional revenue might lead to irresponsible behaviour.

The most likely form of irresponsibility in a democracy is to spend too much too quickly. Watch how Norway uses its oil revenue. Very little is used for current spending; when I was living there I remember a newspaper reporting that oil’s contribution to current expenditure in that year’s budget (2002) was equivalent to one hour’s pumping time. But successive governments have had quite difficult case to make that oil money should not be used for today but rather hoarded for tomorrow. Plenty of voters can accept the argument that it would be OK to spend just a bit. But they are Norwegians and very responsible and sober so they don’t ultimately vote on the basis of that temptation. In other countries, voters might not be so social-democratic in their approach or so Lutheran.

It is easy to foresee the Tobin tax being regarded as a cornucopia by every good cause and special interest.

• The political cost of the Tobin tax could be the ultimate market-isation of the political process. Forget values and ideology; the whole thing will be about dishing out the money. 
• Meanwhile the social cost could be felt in the deepening inertia of social movements; why bother volunteering to help with anything when the government can crank out another Tobillion or two to address any problem. And wait for the backlash from those social groups that lose out in the shell-out because they lack the networks and articulacy with which to get their point across.
• And the economic cost could  be stagflation – inflation from spending too much too quickly on too many projects, or from a populist reduction in personal taxation, and stagnation out of what used to be called ‘Dutch disease’ because of the deadening impact of natural gas revenues on the Dutch economy in the 1970s and 1980s.

The prospect of some or all of these negative consequences of adopting the Tobin tax is, to my mind, a significant risk and the most serious objection to it. Fortunately, I think there is – at least for the EU – a fairly straightforward solution.

Simply lock agreed spending priorities in place through legislation. In the EU, legislation once agreed and absorbed in the acquis communautaire is not easily changed. A multi-national, multi-actor, multi-government agreement is by definition harder to shift than the decision one parliament took last year. This would lead to a good, solid debate about what the priorities should be; then they get carved in stone.

For individual governments it may be harder to have this degree of confidence that a Tobin tax could provide its benefits of increased efficient revenues without serious side-effects. For that reason, it might be best for the whole package to be locked in through international agreement.

The G20 could take the lead in putting it together. Thus, despite their surprise on 7 November, Gordon Brown chose exactly right in putting the idea to the meeting of G20 finance ministers that weekend. Shame the ground wasn’t prepared better but that’s Brown’s way and once the idea is out there, it’s out there and we can all have a think about it.

So, what do we reckon for spending priorities? Given the extraordinary costs of the banking bail-out, and the urgent need to get big money into funding adaptation I go for three:

• One-third of revenue to bring down budget deficits and pay off national debt;
• one-third to put aside in a special fund in case the banking sector crashes again;
• and one-third to contribute to meeting the costs of adaptation to climate change in developing countries.

One last point: If there is extra insurance for future failure by the banking sector, that needs to be matched by increased monitoring and control of the sector’s performance. It is often said that when car safety belts became mandatory in the UK, drivers felt safer and enough drove faster so the number of deaths in motor accidents remained about the same. Insurance to cover banks’ failures could perversely release more irresponsibility by the banking sector. Thus the need for more monitoring and control, which could also be paid for out of the one-third of Tobin revenues devoted to protecting ordinary people from banking failure.

The shape of recovery

As The Economist asked on 20 August, is it “U, V or W for recovery”? At a global level, the recession seems to have ended but what will recovery look like:

• V-shaped with an upturn that is as sharp and fast as the original descent?
• U-shaped with a period spent bouncing along the bottom and a slower longer upturn?
• W-shaped with a mini-recovery giving way to a second fall in output before the real recovery finally kicks in? Also known as a ’double dip’ recession.

The answer in the DFID White paper is firmly V-shaped (see page 23). In a thoughtful chapter about the need to sustain aid through the recession and linking economic recovery to green growth, the basic assumption is of a rapid return to global economic growth. 

The shape of recovery is an exogenous factor for DFID in the sense that its actions alone are not going to affect the overall figures one way or another, so this is an assumption about its operating environment, not a claim about the success its policies will have. And since the UK government is both forecasting a V-shape for the UK economy and claiming credit for contributing to a timely (and implicitly, V-shaped) recovery from world recession, it is hardly surprising that DFID follows the same basic thinking.

But of course the assumption is highly vulnerable. The Economist‘s 20 August editorial argued that a U-shape is the most likely. But if you think that the economic stimulus policies may be ended soon, the big worry would be a W-shape. This is the concern of both the UK government and US administration. As a warning against an early end to large scale economic stimulus policies, reference is often made to the way Japan’s economy dipped back into recession after a 1997 tax increase, just when it seemed to be recovering from the ill effects of its banking crisis.

And there are further possibilities. Robert Reich  has deftly argued that neither V, U nor W describe the shape of what will happen. He prefers the letter X, on the basis that there will not be a recovery back into a shape that is about the same as pre-crash but, he argues, instead a new development into a fundamentally differently shaped economy.  Less visionary is the OECD’s projection of what, to keep the alphabetical theme going, we could call a Z-shaped recovery, meaning it is wiggly and uneven. Most notably from a UK perspective, the OECD’s Interim Economic Assessment, published yesterday, forecasts that only the UK and Japan among the richest economies will still be in recession through the rest of this year. UK Chancellor Alistair Darling has robustly rejected the OECD’s estimates as you would expect; fairly enough, he points out that the OECD has been wrong before. But OECD economists are not total knuckleheads – they may be wrong or right this time around but it is a serious view that they put forward.

At the least, this all adds up to suggesting that policy on international development and overseas aid ought to think about a variety of global economic scenarios and not be restrictively predicated on just one - and on the most optimistic set of estimates at that. personally, I hope confidence in a V-shaped recovery is well founded but wishing don’t make it so.

Successful peacemaking

My attention was grabbed by the following statement on page 69 at the start of Chapter 4, Building Peaceful States and Societies: “We know we can make a difference. The number of conflicts is declining. International action has been successful in stopping wars. Since 1946 fewer than 6% of conflicts ending in a peace agreement have returned to conflict within five years.”

Since the figures normally used put the failure rate in the vicinity of of 40-50%, this is striking. So I nerdishly followed the reference to the Human Security Report Project in Vancouver, which uses data generated by the Department of Peace and Conflict Research at Uppsala University in Sweden. The first part of the explanation is that this statistic refers to conflict dyads rather than conflicts.

Bear with me: conflicts are often made up of multiple rivalries between pairs of parties (e.g., the UK government against the IRA, and against the UVLF, and the IRA and the UVLF against each other, and so on). The two parties in a dyad may resolve differences and sign an agreement while other dyads in the conflict fight on. That is why armed conflicts sometimes end only after multiple agreements between a multiplicity of parties. Think Burundi, for example, or DRC. It only takes one dyad agreement to break down for the conflict to be back on again; thus it is almost a matter of definition that the failure rate of agreements to end conflicts is greater than the failure rate of the dyad agreements.

The second part of the explanation is that part of the aim of the Uppsala researchers was to see how many serious peace agreements broke down, so they only counted agreements that have already last for a year after being signed.

In short, by taking a double short-cut through the academic nuances, DFID over-interpreted the data. So don’t quote that bit of the white paper, but it doesn’t affect the strength of that chapter or of the white paper as a whole – see my 21 August post on that – I remain an enthusiast.

Low carbon: time to do it

The UK has to follow not only EU directives on reducing carbon emissions but also its own law that requires an 80% cut in carbon emissions by 2050 compared to 1990 levels. In the carbon “budget” this translates to a 34% cut against 1990 levels by 2020. This is a pioneering piece of legislation that sets very standards for UK environmental policy. But as has been pointed out time and again, fine words and bold targets are laudable but now it is time to get a move and actually do it. That is what Wednesday’s policy statement is all about. Highlights include

• Electricity generation: 40% from low-carbon sources by 2020, 30% from renewable energy sources and 10% from nuclear and “clean coal”;
• Wind power: 6,000 onshore generators, 3-4,000 offshore;
• All new coal-fired power stations must be fitted with Carbon Capture & Storage technology;
• Government will take control of national electricity grid to force these changes through;
• £600 million to invest in green energy technology;
• Financial incentives for energy saving in industry, offices and at home;
• Low carbon transport: new government vehicles will have 40% lower carbon emissions by 2011, 4 years ahead of the EU target date;
• Low carbon housing: from 2016 all new houses will be zero carbon;
• 400,000 new green jobs.

This is not simply a positive set of initiatives and the white paper is more than simply a policy – a statement of principle and intention. These highlights are key points within a strategy for achieving the goals established by the Climate Change Act. These specific measures more than meet EU goals and future standards and although that is noteworthy and the government can rightly stress its role in being among the first and most ambitious on the low carbon economic pathway, that is not what is most impressive about them. It is the systematic, all-round nature of the white paper proposals that impresses most. They have been a long time coming – too long for many commentators and critics – but their quality indicates it is realistic to surmise that for perhaps a couple of years there has been a careful, detailed and comprehensive discussion within government to work out how to move from principle to practice.

But…

So far, so good – but there are many reasons to pause, many buts. Fine words, but in moving from principle to practice is the practice feasible? And contrariwise, if practice is feasible, has principle been lost?

Because New Labour has since 1997 been so full of fine words and demanding targets about so many things, there is in many quarters to dismiss anything that the government now says as mere spin and posture. It’s an unfair and often mean-minded reaction that Labour understandably resents but cane only blame itself for. If in its time of weakness it finds it hard to get a fair hearing, that is the reaction it unwittingly courted with its arrogance and often outrageous spin during its years of pomp (cf Iraq to begin with but the charge list is longer than that – it is in fact very, very long).

Leaving to one side that reflexive dismissal of anything the government  says, there are nonetheless serious reasons for wondering about the feasibility of the low-carbon energy policy it announced on Wednesday. I have two questions:

1. Can this government do it? There are two reasons why this is a good question to ask.

1.A First, there will be elections by mid-2010 at the latest and the widespread expectation is that Labour will lose. Things can change, of course, not least if the economy shows enough signs of bouncing back for enough people that they decide to opt for the devil they know. It’s also possible that some of the bolder policy initiatives Labour is unrolling now and may well bring out before the end of the year will keep enough of the left of centre vote loyal that, despite Iraq and bankers’ bonuses, that constituency holds its nose and decides to try and keep out the Conservatives who, after al, also supported the invasion of Iraq and big bonuses for bankers.

That said, most observers still believe the government is on its last legs. So any new policies and strategies launched now risk being non-credible. At best, it might be said they can only have a relatively short life. At worst, the government’s unpopularity and low general credibility must undermine the effectiveness of any initiative it launches, especially one that requires large-scale private investment along with change in the behaviour of (in principle) all individual citizens (see the 2nd question below as well).

1.B There are more detailed grounds for doubt and discussion in the terms of the strategy itself. Can the UK reduce emissions adequately while expanding its major international airport, Heathrow, with a third runway? Can the reduced emissions be achieved with as little pain as the white paper states and can the increase in household energy bills really be kept at bay until 2015 and then held to a mere 6% – an average of about £75-90 per household per year? Is enough money being put into investment in green energy and is a stable enough energy market being established so the big energy producing companies can plan their own strategic investment properly?

Each of these issues and others has doubtless been argued through in the preparation of the white paper. It is right and proper that they are argued through again in public political debate. If the government has done its sums and made its investment calculations and assumptions properly, the public scrutiny will only reinforce the government’s approach. But if flaws and dubious assumptions emerge, then we are back to underlying issue of government credibility.

2. Can any government do it? Of course, the issues under question 1B will be real for the next government, whatever its make-up, as well as the current one. Under David Cameron, the Conservatives have tried to make the environment ‘their’ issue and reacting to the white paper were reduced to the usual opposition complaint that the government has ‘stolen’ their policies. That’s not entirely true but it is not entirely untrue either. I always think that in the sentence, ‘The government has stolen our ideas,’ it would be much more effective as well as dignified politics to replace the word ‘stolen’ by ‘has been persuaded by’ – best said with a smile. But that’s by the by: the main point is that the accusation of policy theft reveals that there is broad consensus in this whole area, and the Liberal Democrats are broadly supportive as well. While a new government might well adjust some of the goals, targets and means, the big picture would probably not be much affected.

And here we come to the key question: do the British people really want it? And at what price do we want it? If household energy prices rise 6% and while the increase for industry is 17%, and if the latter figure means British industry loses out in various export markets, which costs jobs, will we accept that as the price of doing the right thing before others do it? It’s the unsettling nature of these questions that persuade the government to make the price sound as low and painless as possible. Because the policy is only going to get traction in public life and in the economy if majority opinion actively supports it and takes part in implementing it in the home and at the workplace and on the streets.

Leadership and consensus

This is where we require one of two things from our government and preferably both. On the one hand, there has to be political leadership. Opinion polls suggest that most people in Britain believe climate change is real and something must be done about it, and polls also suggest that there is very little willingness to pay a very high price. Furthermore, it is likely that the higher the price, the more urgent and sharp the scrutiny of policy effectiveness will be. As the Financial Times quoted an official from the Confederation of British Industry as saying, the increased cost of green energy for industry is acceptable on condition that carbon cuts are delivered in the most cost-effective way. In these circumstances a government has to set out its stall, win the battle of ideas and deliver the results.

On the other hand (and ideally, at the same time), there is a need for consensus. By this I don’t mean unanimity on every detail, but broad agreement on the main goals, clearly and consistently expressed. And when a government shows signs of metal fatigue like this one, perhaps the need for consensus is all the greater.

Media reaction

And this is what raised the biggest doubts in my mind when the policy came out. I have to interject here that I am on leave at the moment (which is why posts are coming more slowly than is my habit) so am only able to read reports and media coverage on-line. So I am not seeing the actual newspapers from the UK but only their web-sites. With that reservation what struck me was the difference in coverage and what concerns me is that there is a political colour to the difference.

While the Guardian led with the white paper and carried several news, analysis and opinion pieces, the Independent had it as a 2nd level story, though with strong, detailed reporting and the Financial Times had a heavyweight piece of analysis buried way off the front page. Times coverage was also buried – a hard-to-find article that headlined a £249 rise in domestic energy bills. The article seemed to find it hard to understand that this is the government’s calculation of the extra energy costs before accounting for the effects of improved home insulation. All in all, the Times article was a shoddy piece of attack journalism that omitted to report the main points of the white paper. While it’s OK to show the government no respect, the issue deserves more serious treatment than that. Not surprisingly the Mail likewise focused on the rise in household bills, introducing the idea of a “green stealth tax”.

The Telegraph also focused its headline on a 3rd level story on cost, but this time not the money but the invasion of the countryside by wind turbines was the issue. And the meat of the story did do more justice to the actual policy than the Times story managed. Oh, and so far as I could see, the Express didn’t cover the story at all.

The political pattern here is not hard to see. The most enthusiastic coverage from the most liberal papers, the most critical from the right.

Tellingly (and perhaps optimistically) the critical response from the right wing press is not on issues of principle but on the cost – it is a carping, sniping critique.

It may turn out to be an interesting test for David Cameron’s greening of the Conservatives to see how he reacts. In the meantime, however, more effort is clearly still needed to get across the argument that the challenge of climate change requires alteration in much of our default behaviour – in the economy, in the home, in travel, in politics and, I found out today, in the news media.

The pattern

As the IMF economists’ projections of economic performance in 2009 begin to settle down, partly just because of the passage of time, it is tempting to adhere to the emerging consensus. Pass your eye across and down the overview table of economic projections and a clear pattern emerges:

• the world economy as a whole is projected to shrink this year, then grow weakly in 2010;
• the advanced economies as a whole (a.k .a. rich countries) are expected to shrink by more in 2009 (3.8% down compared to the world.s 1.4) and grow even more weakly (0.6% growth while the world as a whole is expected to see 2.5);
• in emerging and developing economies, economic growth is projected to fall from 8.3% in 2007 and 6% in 2008 to 1.5% this year and 4.7% next;
• within this, growth in Africa is seen as falling 6.5% in 2007 and 5.2% in 2008, to just 1.8% this year and 4.1% next year.
• China’s growth is expected to drop from 13% in 2007 and 9% in 2008 to just 7.5 in 2009, inching up to 8 in 2010, and the projections for India show a similar pattern: down from 9.4% and 7.3 in 2007 and 2008 respectively to 5.4 this year and 6.5 next.

In emerging and developing economies, reduced growth is at least as serious in its human and social impact as actual economic contraction in richer countries and in most cases its effects are far, far worse both because the starting point is so much lower and closer to bare survival levels, and because the population is growing.

With variations, the projections for richer countries indicate a U-shaped slump rather than V-shaped. That is, the sharpness of the decline is generally not expected to be matched by a sharp recovery.  Among the major economies, the US looks like a relatively strong performer, projected to be shrinking by 2.6% in this year compared to the Euro-zone’s anticipated 4.8% shrinkage, and recovering in 2010 with growth of 0.8% while all the IMF expects for the Eurozone is slower decline with a continuing shrinkage of 0.3%. Inside the Eurozone Germany comes out weakly with 6.2% contraction this year and 0.6 next, while outside the UK limps along at a projected 4.2% shrinkage this year and a barely visible growth of 0.2% in 2010.

This pattern is reflected by business surveys in the UK that indicate that the recession has bitten extremely deeply but the worst of it is over,(see last week’s Economist).

Too neat?

I find myself wondering whether this pattern is all a little too neat. Everywhere, it seems, we go down albeit at different speeds, and everywhere next year we start to go up again or, at least, go down much more slowly. Of course, it’s a globalised world but are national economies really that integrated with each other? I start to wonder whether this isn’t simply a commonsense assumption – economic recession will not last forever and recovery will start some time – turned into figures. I begin to wonder whether rich countries like Japan, the UK and the US that most actively embraced stimulus packages are being favoured in these estimates because they express and implement the current consensus, which is that active policy measures that include radically reducing interest rates and aggressively stimulating the economy are the right way to go. Since these figures are projections rather than factual data, how much do they owe to ideology.

Now, let me stress one thing: to my transparently limited understanding of economics, cutting interest rates and investing in the economic future through state-funded investment and spending programmes (i.e., stimulus packages) are the right way to go. Faced with the catastrophic collapse in credit availability, consumer confidence, commerce and manufacturing in the last three months of 2008, it seemed and seems to me that tight monetary policy and cutting public spending in order to balance the books would turn catastrophe into whatever is worse than that. So, make no mistake, I go along with the pro-stimulus consensus and accordingly I would like to think that events will bear out the merit of that policy.

But I recognise that this is a big and important area of debate and even if I hold trenchant views I think it’s important that the debate is based on evidence as completely as possible. And I can’t help it: when the figures give patterns that are that neat, and when the key figures are all projections, I start to think there might be a smell and it might be a tad fishy.

Disturbing the consensus

Right on time, to disturb the stimulus consensus, take a look at the argument in the US about whether the Obama administration’s $787 billion stimulus package: whether it’s worked (unemployment has continued to rise), whether it’s been used (almost 90% of the money has not been spent yet), and thus whether it will work if given time, and whether a second stimulus package might be needed (Warren Buffet thinks so and Paul Krugman seems to think so too). The CBS news blog recently carried a good summary of issues and arguments.

It’s worth going into these arguments because, over and above everything else, what they show is that we still do not know when and how this recession ends. Uncertainty still prevails and the IMF projections, for all that they are worked over carefully by highly qualified economists, remain a reflection of a way of seeing things, and not necessarily a straightforward presentation of the way things are and will be.

And just in case that is not enough uncertainty, a brief article by President Clinton’s Labor Secretary Robert Reich argues that we should stop talking about recovery because the old economy, based on credit, cannot recover. What will happen instead, he argues, is that a new economy will be built.

1. Global economy: i) Mitigating the effects of downturn

A lot of the coverage of the economic crisis has become a discussion about whether there are early signs of recovery. Attention has been distracted from the effects of the downturn including social tension in rich countries and rising conflict risk in the world’s poorer countries. Both at home and abroad, this is an issue that Parliament could and should take up.

2. Global economy: ii) Harmonising recovery

When it comes recovery will not necessarily happen smoothly. There will be plenty of starting and stopping and it will unfold at uneven speeds for different countries and different social groups and classes. Unemployment will probably keep rising even after economic growth begins again because crisis is a moment for a great sorting out of thriving and failing businesses, with the latter going to the wall. Even whole industries can go down. So the big stimulus packages that governments have implemented are not the end of the story either for government intervention of international agreement. Work is needed to try as much as possible to get a shared benefit out of recovery, rather than one country or region profiting at others’ cost.

3. The low carbon economy

The UK has a great law that says carbon emissions must reduce by 80 per cent by 2050. And under that law we have a national committee that has produced a carbon budget showing how this can be done. But the green content of the government’s stimulus packages has been minimal and well below that of most other countries. Parliament should be pushing and pressing to get the green talk translated into actually doing it.

4. Banking as a public service

A few months ago it seemed most sentient beings agreed that banks should never again be allowed to use the smoke of complex financial instruments and the mirrors of paper wealth to build up pyramids of debt. One of line argument says banks should be regulated more. Another says that the banking service of storing and lending money should be systematically split from the flashy investment fund activities that banks took on in the past 20 years. Banking should become safe and boring again because that is how it will best serve the public. Indeed, it should be seen as a public service from which it is OK to make a profit, rather than as essentially a profit-making activity. This is not just about stricter regulation, it is about restructuring the banking sector; without any need for nationalising banks, it is a move that would be as radical as creating a national health service was in so many countries. But the parliamentary discussion of this has been derailed in the UK and neds to get back on track.

5. Freedoms & safety

The debate has recently renewed in the UK about the balance of freedoms and safety in the terrorism context. Justice Minister Jack Straw, to do him credit, has at a very difficult time signalled that some of the security legislation clamps down too hard on too many freedoms. Glory be – at last it’s getting said. Parliament is a much less effective protector of freedoms than the more pompous MPs often claim it to be, especially when the government has a big majority of in the House of Commons. But these days the government loses votes all over the place so it’s past time for MPs to rise to their duty and get the issues properly discussed.

6. Afghanistan

In case our MPs have forgotten, Britain is currently at war in Afghanistan. While Parliament occasionally voices strictures against the government because of poor equipment or over-stretch of UK forces, and while there is coverage of UK casualties, the aims of the war don’t get discussed. As the Obama administration has recognised, Afghanistan is a combination of a series of very local issues and problems, a quasi-national issue (it’s never been a state or a country in the sense in which we normally use those terms), and a regional issue. The dimensions of the problem are very large and they penetrate not simply into Central Asia and Pakistan but also, merging with other problems and issues , into India, the Middle East and Europe including Britain. So it would be good to know what the UK’s war aims are. Do we have any? Do we have a policy, other than the old one of supporting the Americans? It is Parliament task, duty and right to find out and to subject the country’s war aims to effective and thoughtful scrutiny.

7. International peacebuilding

New international peacebuilding architecture was established three years ago in the UN – the Peacebuilding Commission, Peacebuilding Fund and Peacebuilding Support Office. In the next 8-10 weeks there will be revisions to some significant components of it. Most of what will be done is not headline stuff but it’s nonetheless important. The UK is the biggest single financial contributor to making the architecture work and has been one of the main governments involved in the process of review and re-think. Parliament really ought to show a bit of interest.

8. Managing the global commons

Major natural resource issues are rising to the top of the international agenda again with claims for ownership of large slabs of all the world’s continental shelves being lodged under the UN Convention on the Law of the Sea (deadline day for claims was 13 May). This highlights issues such as exploitation of the Arctic and of the resources (minerals, oil and gas) to be found by drilling in the deep sea bed. But as soon as you start thinking about this, you open the door to thinking also about the food provided by the sea, and from there onto thinking about other issues that affect food security. In 2007-8 soaring food prices and consequent shortages resulted, as the President of the World Bank reported in July last year, in riots over 30 countries. The issue has been lost to sight because of the economic downturn but it has not been resolved and will resurface, possibly explosively. It is not only the UK’s legislative body that should pay attention to the global commons and it is not only this one that is failing.

9. The Copenhagen climate summit

And of course, this is the year of the Copenhagen climate summit – formally speaking, the 15th Conference of Parties of the UN Framework Convention on Climate Change – which was designated two years ago as the meeting when a new treaty on mitigating global warming would be agreed. Parliamentary discussion is sorely needed to review the government’s negotiating positions and ensure they are consistent and creative.

*   *   *

So here are nine world issues on which the UK Parliament really ought to get its act together and do the job for which it is there – highlighting issues, pushing government, demanding answers, making suggestions, tossing ideas around. And then there’s a tenth issue that is distinctly not a world issue

10. Reforming politics

We don’t need a new political system in this country but we do need a proper two chamber parliament, with both chambers elected, so that elected governments can both be supported and held accountable. And a small, small detail of what we need for democracy to function is a sensible system of remuneration and expenses. But in order to get this, we probably need a huge chucking out of MPs who are past their public service use-by dates. Venality has gone unchecked for too long, and according to several reliable accounts has been actively encouraged.

Roll on the next election.

I’m troubled by this question partly because I am, like everybody else, a consumer of the warnings and the screaming headlines, but partly because I also write about serious subjects that involve extreme risks for large numbers of people – subjects such as violent conflict, the global economy, climate change and the dangerous links between them. The reason I write about these issues is because I am hopeful that people will think about them and begin to work out and to support constructive ways of responding to the risks so that the worst never comes to pass. For this, it seems to me, we need calmly to confront the worst possibilities and calmly figure out how to go about managing and mitigating the risks.

But the way that most of the news media handle questions in which great risks and important degrees of uncertainty are combined is consistently counter-productive for calm reflection and decision. Reports go for impact, drama, shock and imminent catastrophe; people with points to make play to those demands and spin their prognoses towards the most dramatic and awful end of a range of possibilities; interviewers demand to know why the problem hasn’t been solved instantly; opposition politicians attack governments for leaving people in uncertainty; and governments deal in fake certainties and all too often take hasty, ill-thought decisions.

A recent headline on one of London’s free newspapers carried an expert’s assessment that 94,000 Londoners could die from swine flu. Schools closed when there was a suspected case of the illness, British holidaymakers in Cancun, Mexico cut short their stay and came home (risking who knows what infections on the flight home), the World Health Organisation upped its crisis rating and the “global pandemic” headlines rolled out. On the TV, ads warned us not to shake hands with strangers while programmes discussed which was the best mask to buy (NB if the idea is to stop yourself being infected, the answer was that none of them was the best one – they’re all useless for self-protection, though some might well make it less likely you would pass the infection on). There were calmer voices offering more reassuring advice about simply maintaining regular standards of hygiene but they tended to get drowned out.

Then came this weekend, when it all seems to have stopped. Apparently the virus is a fairly mild strain. It does not seem at the moment as if the virulence or lethality of swine flu marks it out as worse than other types of flu that assail us every winter. A 12 year old girl who came down with it remarked afterwards that it felt a bit like a cold and she was glad she took a day off school. And now it seems there is pretty much silence on the topic. Panic over, then what? – sneeze complacently over each other to our hearts’ content?

Taken as a whole, the mass media’s concerned audience has seen its newspapers, radio and TV programmes behaving like Corporal Jones from the BBC comedy series Dad’s Army, set in wartime Britain among the Home Guard of evening and weekend soldiers. Corporal Jones was a veteran of wars long gone who responded to the slightest sign of trouble by shouting to everybody, “Don’t Panic! Don’t panic!”

He was a figure of fun, of course but how many more times do we watch the media bounce up and down issuing instructions to all and sundry about how to fend off some awful disaster before we conclude that every such warning is rubbish? Bird flu turned out to be way less of a threat than it was first painted, now it looks as if swine flu might be the same: what happens next time? And not just over possible pandemics but over other serious risks as well?

It seems that the lurch from panic-stricken headlines to complacent silence makes these two poles dominate possible modes of reacting to major problems. Between them, there is much less space than is necessary for considered reflection.

The strange thing is that panic and complacency are opposites yet are both related and mutually reinforcing. Both can push a person into inaction in the face of danger – in the one case because the danger is not seen till it is too late, and in the other because its dimensions and terror are exaggerated. If you find that panic is not justified, you are likely to swing to complacency and if you discover you have been complacent too long, panic is a likely response. And both of them are sneaky: if I say we have to guard against complacency (in an election, for example), you know I’m pretty confident about our chances, and if I tell you not to panic, you’re quite likely to think there must be something to be pretty worried about.

It is increasingly clear that we are very ill-served by the way our news and media culture emphases swift certainty both in news reports and in what is assumed to be the appropriate response of governments and international authorities to major problems. It’s an approach that sounds so hard-nosed but it is deeply unrealistic in a world in which much is uncertain and unclear.

As I have argued in several recent posts, nobody knows how long or deep the economic downturn is going to be. It depends on a large number of inter-acting factors, including the response of governments and the mood of investors, consumers and financiers worldwide. Similarly, while the science of global warming and climate change is clarifying and gaining certainty year by year, there is still much that is unknown and almost certainly much that is unknowable in advance about the detailed effects and impacts.

In these circumstances, the mature reaction does not include shrieking at governments to solve the problem. Nor, from politicians, does a mature response consist either of scoring points off each other or of over-claiming for the success of the policy initiatives they are just about to introduce. We need to recognise that when working amid uncertainty, what is needed is the flexibility to adjust policy as we go along. At the moment we demand too much certainty and decisiveness from those we elect to power. The more we recognise complexity, the better we will able to discuss risk, and the less we will lurch from complacency to panic. And the more achieve that calm and that capacity to reflect, the more mature our political culture will be.

Ryanair’s CEO Michael O’Leary has given two reasons to welcome the recession. On the one hand, Ryanair “would welcome a good, deep bloody recession for 12 to 18 months. We need one if we are going to see off some of this environmental nonsense.” On the other: “A recession gets rid of crappy loss-making airlines and it means we can buy aircraft more cheaply.”

O’Leary is on the record acknowledging he is obnoxious and worse. He has cultivated a reputation for outspoken comment, aiming his often foul-mouthed attacks at targets ranging from governments, to competitors, travel agents and environmentalists. He is also self-evidently a high-powered businessman with much of the responsibility for Ryanair’s extraordinary success. O’Leary is almost certainly right that Ryanair is well placed to ride out the recession in good shape, expanding its market share during it and piling its profits yet higher as recovery kicks in. 

It is the success of the airline that is the problem.

I started thinking about this after a recent return trip on Ryanair. On the flight home, I saw that the aircraft’s seats had no seatback pockets, which means, I suppose, that it is among the batch of 70 Boeing 737s ordered in 2005 (with an option for a further 70). This saves Ryanair money. Apparently, added to other economies like doing away with the seats being able to recline and getting rid of window shades, savings are some hundreds of thousands of dollars per aircraft. 

Ryanair has been relentless in its pursuit of cost-cutting so this is no surprise. The biggest innovation O’Leary brought in during the 1990s was to cut the turn round time on the ground, on the obvious principle that the more time the planes are in the air, the more money they make. Ryanair also led the way in on-line booking – and you cannot now buy tickets through travel agents – and is well on the way to getting rid of airport check-in desks.*

But of course, cost-cutting has implications. Take away the seat back pocket and you take away the sick bag. We already knew from a Channel 4 report in 2006 that Ryanair cabin crew spray perfume around to hide the smell rather than clean up any stray vomit, which is quite understandable given the very short turn round times they have. But back then at least virtually all planes had sick bags.

Has Ryanair thought about what it will be like for other passengers if that 12-year-old who is eating chocolate and is over excited does actually upchuck when the plane hits some turbulence? Has Ryanair thought about the feelings of humiliation that a passenger of any age will likely will go through of s/he has to throw up uncontrollably?

More to the point, does Ryanair care?

The Economist magazine once said Ryanair had “a deserved reputation for nastiness.” There is plenty of negative comment to be found on the internet. The airline refused to provide wheelchairs at Stansted, saying it was the airport’s responsibility; when instructed to share responsibility with the airport, Ryanair responded by adding 50 pence to ticket prices.

In February this year, Michael O’Leary suggested the airline was considering charging for the use of the lavatory on board the plane. He later claimed that while it was a possible future option, today it was just a way to get cheap PR. But if it was a joke it backfired because it is entirely believable that Ryanair would do that. Extra costs are Ryanair’s stock-in-trade.

Last year the consumer value magazine Holiday Which identified Ryanair as the worst airline when it came to hidden costs. They catch a lot of people out with their lower than average baggage allowance – 15 kilos instead of 20, -and an iron-clad policy on refusing to turn a blind eye to the odd half kilo. They get a lot more people with a web-site which, compared to all competitors, is a confusing mess. If you don’t figure it out, watch out: there will be an extra twenty pounds if you didn’t check in on-line, plus twenty pounds for each bag that you didn’t check in. And then when you come to get on the plane, there’s an inconsistently applied policy of one bag per person; if you can’t get everything into one bag, the extra one will have to be checked – for another twenty pounds. O’Leary complained bitterly about the extra security restrictions that came in during 2006, but now he has found a way to add to the bottom line, Ryanair has left the one-bag restriction in place while other airlines have lifted it. Again, they catch out unwitting passengers on the difference between the norm and their more restrictive policy – and they make money out of it. With all of this, for many travellers, Ryanair stops being a cheap option – the fare itself is low but the add-ons are brutal.

And then  there’s the staff. Plenty of negative comment circulates about them too. One on round trip I saw and heard the following:

• a passenger reduced to tears, while being threatened with denial of passage if they do not cram everything into one carry-on bag, while other passengers with two carry-ons walk past
• a passenger already on the plane stopped by the senior cabin crew and told his bag is too big and it must be either emptied or off-loaded, when to my eyes the bag seemed smaller than ones already pushed into the overhead; the problem was not the size of the bag but that the passenger was one of the last few to get on and all the space was used up
• the tone of self-righteousness with which staff charge passengers for checking in at the airport or for being slightly over the 15 kilo limit for hold check-in luggage.

When I queried a handful of staff about this kind of behaviour I was told quite simply that their jobs were at stake. And it didn’t take any pressing for more than one to say how unhappy they were with it and how much they disliked coming into work.

It’s certainly possible to sympathise with them. And the airline should be concerned about a demoralised, disloyal staff who are busy alienating passengers on company instructions. At the end of that flight I took, the cabin crew had the nerve to ask passengers to help them clean the plane. And it was just plain laughable when a 40-minute late landing, which is not a problem in itself, was greeted with fanfare (literally) as yet another on time arrival. 

None of this is incidental. All this unpleasantness and money-gouging, from the lack of sick bags to the staff’s attitude, is integral to a business model that is based on the constant hunt for new ways to cut costs and augment profits from the add-ons.

There is no question that this model is successful. Michael O’Leary is spot on when he indicates that the recession will put weak airlines to the wall while the strong survive and thrive; other things being equal, Ryanair is likely to be more successful in the future. And as for the treatment of passengers, well, regular users of air travel know all too well how much like cattle the economy class passengers of other airlines are treated for much of the time. Whoever said it was more blessed to travel than to arrive never got to spend much time in economy class or on the low fare airlines.

But in the end the question is whether that’s the world we want to build. Michael O’Leary was Forbes magazine’s “European Businessman of the Year” in 2001 and the rest of the decade has proved the magazine right. Ryanair has succeeded by pursuing the bottom line beyond any other consideration as long as the people pay up, which we carry on doing because we want cheap air travel.

So, three comments on that:

First, chasing the profit regardless of other considerations such as welfare is part of what led the finance sector into the credit crunch, out of which the global economic downturn came. The point was to make loans, regardless of whether the individual could pay back, and thus we got the sub-prime crisis. Now the argument is not that the same fate awaits Ryanair; rather, the argument is that this is the business approach that got us into our current mess, so it would be well to have another think about it. 

Second, Ryanair’s business model puts pressure on its staff and on the passengers and subjects us all to increased stress. That is a cost. It is not simply an issue that the costs of flying Ryanair are likely to be higher than they first seem because of the add-ons; rather, there are other costs – non-monetary but real costs in terms of happiness and health - and these should surely be brought into the frame of the discussion. And however much we do want and use cheaper air travel, the issue of climate change cannot be left to one side in this discussion of the other costs of doing business.

Third, it does not have to be the case that low fares mean rude staff and money-gouging. Not all of the surplus operating income has be devoted to profit, after all; some could be used on staff training and welfare and on passengers’ well-being. Michael O’Leary would still have become a very rich man. 

On a different mode of transport, for hints of an alternative, take a look at an independent railway line in Britain – the Wrexham and Shropshire, neatly described, including the dilemmas of how to get quality service at low prices in a competitive environment, in an Observer article a few weeks back.

* UPDATE 15 May 2009: As of 20 May, Ryanair is abolishing check-in at the airport. You do it online. If you arrive at the airport without a boarding card printed out from the online check-in, you will have to pay £40 to have a boarding card issued to you. So the emphasis on getting extra money out of their put-upon passengers continues.

Britain’s economic figures are dire: the highest unemployment since the early 1990s and jobs disappearing at unprecedented speed, the highest national debt ever, now projected to rise to 79 per cent of annual economic output  in four years time, and a fall in economic output this year of 3.5 per cent, rebounding next year with growth of 1.5 per cent. On these last two figures, Alistair Darling has been hammered for being ridiculously optimistic. And just in case you doubted, along came the authoritative IMF with a forecast of a 4.1 per cent decline in output this year, with no rebound next year since output is expected to fall marginally by a further 0.4 per cent.

Oh heavens, how could the British government be so naive and get its forecasting so wrong? It’s important too, because if the UK shrinks by more and grows by less, then the national debt  will be even higher and pushing towards 90 per cent of annual output in a few years.

Except, hang on, the IMF figure is also only a forecast so we don’t yet know if it’s right or wrong, and indeed when it last aired some forecasts three months ago it had UK output falling by 2.8 per cent in 2009 and rising by a tiny 0.2 per cent in 2010. Not good but visibly and significantly different.

Now, perhaps one is right, perhaps another is right, perhaps they are all wrong. But what happened in the last three months to get the IMF to change its mind about British economic performance?

Oh, now I see: it changed its mind about pretty much everybody’s economic performance. US economic output is now expected to fall by 3.8 per cent in 2009 and show zero growth in 2010, whereas only three months ago it was expected to fall by 1.6 per cent this year and rise by the same 1.6 per cent in 2010. In January, the IMF thought world output would grow 0.5 per cent this year and 3 per cent next, but now it thinks the world economy will be down 1.3 per cent this year then up by 1.9 in 2010.

And changing its mind and rejecting its previous estimates is nothing new for the IMF. Last November, it thought world output in 2009 would grow by what now looks like a relatively healthy 2.2 per cent (though that would actually still be pretty sick because it’s a figure that means the economy grows slower than population in most countries, thus the average person would be worse off).

And back to the UK economy: only half a year ago the IMF thought that in 2009 the fall in British output would be 1.3 per cent – a serious downturn, an economic catastrophe even, but not anything like as bad as we know it today.

Scanning the rest of the key tables, every other IMF projection changes just about as much, just about as often. So nothing is authoritative. A few points emerge out of this.

The first thing is that if you are going to use the IMF as the authoritative hammer to batter the Labour government over its tired head, you should acknowledge that the title of the new World Economic Outlook is ‘Crisis and Recovery’; whether the UK Treasury’s projection of 1.5 per cent growth in 2010 turns out to be accurate in detail or well wide of the mark, the basic pattern of recovery at the end of this year and growth next year, on which the budget’s assumptions are based, seems to be fairly widely accepted. Could be right could be wrong, but it’s not a fringe opinion, wacky, or just plain British spin, the product of delusions clung to by Labour alone.

The second point is that in the last three months of 2008, the economic output of the world’s advanced economies fell by an unprecedented 7.5 per cent – and the key word here is unprecedented.

The uncomfortable truth is that economic forecasters are discombobulated . Nobody knows what is going to happen because nobody has previously experienced what has just happened. But they keep on trotting out their projections, even if they have to change them every few months.

There was a time when UK Treasury projections of UK economic performance had a track record of being considerably more accurate than those from the OECD and IMF. That’s hardly surprising since the Treasury is concentrating on one economy while the international bodies are looking at many.

Today, however, there is no real reason to regard any one projection more highly than any other. No economic forecasting institution has established credibility for its estimates and projections in the present period. None of them foresaw an overall 7.5 per cent decline among the rich countries and until they establish a series of two or three accurate projections in a row it is hard to see why anybody should take any of them seriously.

But the third point is that we the people seem to crave authoritative information on our plight . In Britain the government is unpopular for many reasons and its projections are distrusted on general principle. So an alternative – and especially a worse – projection is quickly given credence. But it is not only negativism about the government that is in play here: it is also a basic need for certainty, for security, for an authority in which we can trust.

This is what ensures that there remains a market on the TV news for economic estimates and projections from that otherwise discredited species – the finance sector. And economists of all stripes and persuasions pander to this need for authoritative views of what is around the corner, stroking our insecurities all the time, ensuring they thrive, feeding the need even while, every few months in the IMF’s case, they frustrate it by contradicting what they said before.

The truth is that nobody yet knows – or, to be more precise, nobody has shown they know – what is happening or going to happen in this worldwide economic downturn. Its depth, breadth and length are equally unknown. Accordingly, policies for addressing it entail considerable risk and uncertainty.

I guess I am dreaming, but I cannot be alone in thinking it would be really helpful if our political discussions were mature enough to be able to accept uncertainty calmly and to start figuring out the best ways to narrow the terms of uncertainty and minimise the risks inherent in any given policy direction. Simply batting around ever changing economic forecasts doesn’t help anybody.

In July, instead of rejecting its previous estimates again, the IMF could try just shutting up. Now that might have a real impact on our economic debates.