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Romney’s vulture capitalism, the Balls backlash and more downgrades

David Blanchflower looks at US unemployment, the France downgrade, and why Labour has not reversed i

It has been a strange winter in New England because there has been scarcely any snow, which means that my two snowmobiles sadly remain in the barn. Even so, just recently, and like the Republican candidates (minus Jon Huntsman, who quit the contest on 16 January), I headed south for warmer weather. In my case, I went to Florida for a little fishing and reflection, while in theirs it was on to South Carolina, the Palmetto State - named for the sabal palmetto or cabbage palm, which is the state tree - for more silliness.

South Carolina is very different from New Hampshire. It has a right-to-work law that prohibits agreements between labour unions and employers which make membership, payment of union dues or fees a condition of employment, either before or after hiring, and which would require the workplace to be a closed shop. In 2010, only 4.6 per cent of workers in South Carolina were union members; today, the state's unemployment rate - 9.9 per cent - is well above the national average of 8.3 per cent. In contrast, 10.2 per cent of workers in New Hampshire were union members and its current unemployment rate of 5.2 per cent is well below the national average. Incidentally, the Republicans in my state tried to pass a right-to-work law in 2011 but it was vetoed by the Democratic governor, John Lynch.

Jobs are a huge issue of contention in the Republican primary that takes place in South Carolina on 21 January and, according to a recent American Research Group poll, Mitt Romney and Newt Gingrich are in a statistical dead heat.

Capitalist punishment

My man Newt has stepped up his attacks on Romney, calling him a heartless capitalist, a "corporate raider" who made his money from other people's misfortunes. Rick Perry, governor of Texas, also went on the attack, calling Romney a "vulture capitalist" who used to feed on the carcasses of American workers.

Romney has claimed that he created 100,000 jobs during his time at Bain Capital, the private equity company he co-founded. The three successful companies he claims to have helped to start or grow are Staples (a gain of 89,000 jobs), Sports Authority (15,000 jobs) and Domino's (7,900 jobs). This tally does not include job losses from the other companies with which Romney was involved while at Bain Capital. And what is less well known is that his record on job creation as governor of Massachusetts, between 2003 and 2007, which is perhaps most relevant to his bid for the presidency, was relatively poor.

Accentuate the negative

President Nicolas Sarkozy is reeling from the decision by Standard & Poor's (S&P) - which surprised no one - to downgrade France's AAA rating to AA+. This will make it even more difficult for him to get re-elected as president in the spring. In addition, S&P downgraded a further eight countries. Austria, Malta, Slovakia and Slovenia were downgraded one notch while Cyprus, Italy, Portugal and Spain were downgraded two notches. All except Slovakia were also put on negative outlook, which suggests more downgrades will probably follow.

The first casualty was the European Financial Stability Facility (EFSF), backstopped by France. S&P downgraded it by one notch from AAA. The consequence of this is that the EFSF will be forced either to pay higher premiums or to operate with more meagre funds at its disposal. The euro area is in a terrible mess.

I was much amused by the ridiculous comments by Michael Fuchs, deputy leader of the Christian Democratic Group in the German Bundestag, who said: "This step is out of order. S&P must stop playing politics . . . Why doesn't it act on the highly indebted United States or highly indebted Britain? . . . If the agency downgrades France, it should also downgrade Britain in order to be consistent."

The reason why this has not happened is simple. Like our own dear Chancellor, George Osborne, Angela Merkel and Sarkozy may not have a growth plan, but neither do they have a sensible monetary policy, as the UK does. It is their incompetence and dithering that is res­ponsible for the downgrades.

The failure of the EU-wide negotiations over the restructuring of Greek debt has raised even further the probability of a definitive Greek default in the next three months - and worse will flow from there.

The brave and the bold

What should we make of the important but rather defensive speech by the shadow chancellor, Ed Balls, to the Fabian Society on 14 January, in which he sought to persuade the public that Labour has a credible economic plan and deficit-reduction programme? Certainly the speech has enraged Labour's paymasters, the unions.

The crucial phrase that caused so much consternation in the media was this: "[We] cannot make any commitments now that the next Labour government will reverse tax rises or spending cuts."

However, Balls made a useful clarification a couple of sentences later: ". . . because we don't know how bad things will be on jobs, growth and the deficit".

This is not a policy reversal, as some have claimed; it simply provides greater flexibility. How could Balls make spending promises when there are so many risks to the downside for the public finances, and also risk a downgrade for the UK when the banks are still not lending? According to both the Ernst & Young Item Club and the Centre for Economics and Business Research forecasts published on 16 January, the UK economy has already entered recession, with little or no growth at all expected in 2012.

Yet what Balls should have been more clear and robust about is what can be done to spur growth, beyond slowing public spending cuts and his rather timid five-point plan. The UK government can borrow 30-year money at roughly 3 per cent, which represents a once-in-a-generation opportunity to borrow long at negative real interest rates and to use the money to invest in our crumbling infrastructure, with a powerful emphasis on job creation. Now that would be a bold plan.

Professor David Blanchflower is economics editor of the New Statesman

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

This article first appeared in the 23 January 2012 issue of the New Statesman, Has the Arab Spring been hijacked?

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The proposed cuts to junior doctors’ pay will make medicine a profession for the privileged

Jeremy Hunt is an intelligent man with a first-class education. This makes his ill-fated proposed contract appear even more callous rather than ill-judged.

The emblem of the British Medical Association (BMA), the trade union for doctors in the UK, symbolises Asclepius, who was believed to be the founder of western medicine. Asclepius was killed by Zeus with a thunderbolt for resurrecting the dead. In the same way, the proposed government-led contracts to be imposed on doctors from August 2016 may well be the thunderbolt that kills British medical recruitment for a generation and that kills any chance of resurrecting an over-burdened National Health Service.

The BMA voted to ballot their junior doctor members for industrial action for the first time in 40 years against these contracts. What this government has achieved is no small feat. They have managed, in the last few weeks, to instil within a normally passive profession a kindled spirit of self-awareness and political mobilisation.

Jeremy Hunt is an intelligent man with a first-class education. This makes his ill-fated proposed contract appear even more callous rather than ill-judged. Attacking the medical profession has come to define his tenure as health secretary, including the misinformed reprisals on hospital consultants which were met not only with ridicule but initiated a breakdown in respect between government and the medical profession that may take years to reconcile. The government did not learn from this mistake and resighted their guns on the medical profession’s junior members.

“Junior doctor” can be a misleading term, as we are a spectrum of qualified doctors training to become hospital consultants or General Practioners. To become a consultant cardiac surgeon or consultant gastroenterologist does not happen overnight after graduating from medical school: such postgraduate training can take anywhere between 10 to 15 years. This spectrum of highly skilled professionals, therefore, forms the backbone of the medical service within the hospital and is at the forefront of delivering patient care from admission to discharge.

Central to the opposition to the current proposed contract outlined in the Review Body on Doctors' and Dentists' Remuneration is the removal of safeguards to prevent trusts physically overworking and financially exploiting these junior doctors. We believe that this is detrimental not only to our human rights in a civilised society but also detrimental to the care we provide to our patients in the short term and long-term.

David Cameron recently stated that “I think the right thing to do is to be paid the rate for the job”. This is an astute observation. While contract proponents are adamant that the new contract is “pay neutral”, it is anything but as they have tactfully redefined “sociable hours” as between 7am and 10pm Mondays to Saturdays resulting in hardest working speciality doctors seeing their already falling inflation-adjusted pay slashed by up to further 30 per cent while facing potentially unprotected longer working hours.

We acknowledge that we did not enter medicine for the pay perks. If we wanted to do that, we would have become bankers or MPs. Medicine is a vocation and we are prepared to sacrifice many aspects of our lives to provide the duty of care to our patients that they deserve. The joy we experience from saving a person’s life or improving the quality of their life and the sadness, frustration, and anger we feel when a patient dies is what drives us on, more than any pay cheque could.

However, overworked and unprotected doctors are, in the short-term, unsafe to patients. This is why the presidents of eleven of the Royal Colleges responsible for medical training and safeguarding standards of practice in patient care have publically stated their opposition to the contracts. It is, therefore, a mystery as to who exactly from the senior medical profession was directly involved the formation of the current proposals, raising serious questions with regard to its legitimacy. More damaging for the government’s defence are the latest revelations by a former Tory minister and doctor involved in the first negotiations between the BMA and government, Dan Poulter, implying that the original proposals with regard to safeguarding against unsafe hours were rejected by Mr Hunt.  

The long-term effects of the contract are equally disheartening. Already, hundreds of doctors have applied to the General Medical Council to work abroad where the market price for a highly trained medical profession is still dictated by reason. With medical school debts as great as £70,000, this new contract makes it difficult for intelligent youngsters from low-income backgrounds to pay back such debts on the modest starting salary (£11-12 per hour) and proposed cuts. Is medicine therefore reserved only for students from privileged backgrounds rather than the brightest? Furthermore, the contracts discourage women from taking time out to start a family. Female doctors form the majority of undergraduate medical students – we should be encouraging talented women to achieve their full potential to improve healthcare, not making them choose unfairly between work and family at such an early and critical stage of their career.

Postgraduate recruitment will therefore become an embarrassing problem, with many trusts already spending millions on hiring locum doctors. Most hospitals are not ready for Hunt’s radical reforms as the infrastructure to supply seven-day working weeks is simply not available. With a long-term recruitment problem, this would also be a toxic asset for potential private investors, should the health secretary venture down that path.

Jeremy Hunt has an opportunity to re-enter negotiations with the BMA to achieve a common goal of improving the efficiency and recruitment to the health service while protecting patient care. Although the decision for industrial action should never be taken lightly, as future leaders of clinical care in the UK, we will do everything in our power to defend against such thunderbolt attacks, by men playing god, the integrity and dignity of our profession and on the quality of care it delivers to our patients.