Ron Paul is done, almost

The idea of liberty with a capital "L" is animating young Americans in a way not seen since Obama's

Ron Paul isn't really quitting the race for the Republican Party's presidential nomination, but he isn't really campaigning for it anymore either.

That's the kind of hairsplitting you have to do when you run out of campaign cash but you have enormous support among young libertarians seeking political alternatives to partisanship-as-usual. So much, in fact, that the Ron Paul Revolution could end up barrelling on to the party's national convention in August even without its popular septuagenarian namesake.

Then again, maybe this isn't hairsplitting at all. Maybe Paul's announcement this week that he won't be campaigning in states that haven't held primaries yet is yet another kind of decoy. We've seen this before and it was scary!

While everyone else last month turned his attention to the general election after Mitt Romney's closest rivals dropped out, news broke that Paulites (or Paulbots, depending on one's point of view) were securing state and national delegates in caucus states. This terrified mainstream Republicans, who fear most the appearance of a unified front at the convention that's kind of squishy in the unified department.

Indeed, before making his partially-quitting-partially-not announcement on Monday, Paulites in Oklahoma heckled Romney surrogate and former Minnesota Governor Tim Pawlenty. They failed to place delegates but not before a Paul backer reported being struck in the back of the head by a Romney backer. Paulites had been shouting complaints that the convention wasn't following the convention's rules. And in Arizona, they booed Romney's son, Josh, off the stage during that state's convention. Paulites had reportedly said that his dad was just "a white Obama."

This is the sort of chaos the Republican Party hopes to avoid at the convention and that's probably why Paul spokesman Jesse Benton urged supporters to show decorum and respect in Tampa. Benton even said Romney is probably going to the nominee. "We recognize that Gov. Romney has what is very likely to be an insurmountable delegate lead," he said. He also said Paul is unlikely to endorse Romney and that Paulites would continue to bird-dog delegates in the run-up to the national convention.

So if Paul isn't campaigning (as much) and if he concedes that Romney is the party's de facto nominee, what are all the Paulites shouting so much about? And why are they bothering to stack up delegates. The math suggests there's no way he can win. The math also suggests Paulites are a relatively small contingent. Loud but small. Even if Paul were to force a floor vote at the convention, it would be soundly crushed. If Romney wins in November, Paul would be 84 by the time he had a chance to run for president again. What is the revolution's practical value?

Maybe I'm asking the wrong question (as are many others scratching their heads over the Ron Paul Question). Maybe there is no practical value. Not yet anyway. Ron Paul is, after all, more idea than man. That idea is liberty with an capital "L" (which is Paulian code for hardcore state's rights libertarianism.) And that idea is animating young Americans in ways not seen since Barack Obama's historic election.

I've said before that maybe Paul hopes to force a floor vote to create a backlash that would push him into a third-party position to take on Romney and the president. But that seems almost too myopic for a visionary like Paul. He's not running for president as much as he is running for the way he believes the US should be. Americans love winners but they love losers, too, when their loss is really a lost cause.
 

Ron Paul supporters at the University of Maryland. March 2012. Photograph: Getty Images

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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