Deep South gives Santorum hope

Rick Santorum’s victories in Alabama and Mississippi might spell the end for Newt Gingrich.

Mitt Romney didn't stay in the Deep South after the results of Tuesday's primary vote came in. Perhaps it was because Alabama and Mississippi were his "away game", as he said. Or maybe it's because, even if he lost, he'd still be ahead of the others in number of delegates.

Indeed, he expected to run third, behind Rick Santorum and Newt Gingrich, and even so, he'd gain a third of the delegates, give or take. That's enough, as he said, to inch closer to 1,144 needed to win.

Indeed, events unfolded pretty much like that. Santorum bested the field in both states. In Alabama, with 98 per cent of the vote counted, the former US senator from Pennsylvania had 34.5 per cent of ballots compared to Gingrich's 29.3 and Romney's 29.

The race was much closer in Mississippi, where for much of the evening, it was a statistical dead heat, with Santorum taking only a slight lead. But around 11pm EST, the TV networks projected Santorum as the winner. He took 32.9 per cent of the votes while Gingrich took 31.3 and Romney 30.3.

"We did it again," Santorum told supporters.

True grit

The media narrative in the run-up to Tuesday was by now familiar. Can Romney win the conservative stronghold of the Deep South where he must woo evangelical Christians and white, working-class voters? The answer is going to be no for most political observers. He is a rejected suitor. Yet again.

But as I say, that may not matter. Though he didn't do himself any favours talking about eating grits and saying "ya'll," he did come in to Tuesday's primaries with more delegates than Santorum, Gingrich and Ron Paul combined. Leaving with a third of the delegates (both states are proportional, not winner-takes-all) gets him just a little bit closer to the "magic number", as Romney put it.

What about the general election? If he struggles in the Land of Dixie, can Romney beat President Barack Obama? Even if, as some have said, a Romney nomination means conservatives stay home in November, there is no way Obama will take Alabama or Mississippi (or most likely any of the states in the American South). According to a survey by Public Policy Polling, more than half (52 per cent) of voters in Mississippi erroneously believe that Obama is a Muslim.

Meanwhile, Santorum and Gingrich have been making themselves completely unelectable by competing for the title of Mr Most Conservative. Both have pandered to evangelicals by railing against "anti-Christian bigotry" and the like. Gingrich used similar dog-whistle rhetoric as we saw in South Carolina – that Obama favours infanticide and that the US genuflects to the United Nations. He even promised to bring gasoline down to $2.50 a gallon with more domestic drilling.

Keep things in proportion

This might be the end for Gingrich. He's said he will carry on, but his main backer, Shelton Adelson, a billionaire casino magnate, has already hinted that he's as likely to put money in Romney's super-PAC as he is into Gingrich's. Without Adelson's support (for Gingrich, he's written cheques of roughly $10m), Gingrich would have quit long ago. But now, with only South Carolina and Georgia in his pockets and an ascendent Santorum, there's little reason to keep pushing, unless you count the practical get-out-the-vote value of making this nomination process appear to be exciting. Politics is sleight of hand, after all.

As for Santorum, if the rules didn't allot delegates proportionally, his wins on Tuesday would be more significant. As it is, he would have to crush Romney by wide margins in big states like such as New York and Illinois to make up ground, but that's unlikely, given Romney's lead and the amount of money flowing into his super-PAC, which has the luxury of attacking Santorum every chance it gets.

The best Santorum can do is to keep pushing ahead and making the case for a run in 2016 or 2020.

John Stoehr is a lecturer in English at Yale University.

John Stoehr teaches writing at Yale. His essays and journalism have appeared in The American Prospect, Reuters Opinion, the Guardian, and Dissent, among other publications. He is a political blogger for The Washington Spectator and a frequent contributor to Al Jazeera English.

 

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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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