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In the magazine this week | The austerity war

In the magazine this week.

The Austerity War
10-16 July 2015 issue

 

Featuring

Shiraz Maher: A decade after 7/7, our anti-terror efforts have stopped attacks but lost the battle for hearts and minds.

Felix Martin: What the Greek financial crisis means for the world.

Jason Cowley on BBC imperialism and Rihanna's Atrocity Exhibition.

Slavoj Žižek on Greece: This is a chance for Europe to awaken.

George Eaton: George Osborne may yet fall to earth, but he has already reshaped the state in his own image.

 

Shiraz Maher: A decade after 7/7, our anti-terror efforts have stopped attacks but lost the battle for hearts and minds

Shiraz Maher writes of the impact of our anti-terror efforts ten years on from the 7/7 bombings:

On Friday 3 July, a day before he was killed in a drone strike on the Islamic State (IS) stronghold of Raqqa, Syria, I spoke with the British fighter Abu Rahin Aziz. We discussed the London bombings, nearing their tenth anniversary, and the government's subsequent counterterrorism strategy. He was in bullish mood, celebrating the attacks and warning of more in the future.

"7/7 was a big blow to the UK," said Aziz, a credit controller who stabbed a football fan in the head with a pencil in May 2013 before skipping bail to join IS last year. "They [the government] have failed: in fact, extremism has increased."

It is hard to dispute Aziz's bleak assessment, given the number of British citizens who have joined the militants. It is believed that roughly 700 Britons have relocated to Syria, joining 3,500 people from across Europe. What they see in the self-proclaimed caliphate is the birth of a new history, the revival of an ancient Islamic power offering sanctuary, salvation and puritanical truth.

He writes that "the focus on achieving security at home left jihadist campaigns abroad largely unaddressed". Consequently, government programmes such as Prevent, which seek to stop British Mulsims from supporting terrorist attacks against the UK, have failed to stem the flow of militants leaving for Syria.

Maher concludes:

The Prevent programme has had some successes. One of its aims was to foster new voices from within Muslim society, breaking the influence of conventional gatekeeper organisations such as the Muslim Council of Britain, and today ideas that would have been inconceivable before 7/7 proliferate across the liberal spectrum.

Herein lies the crucial dynamic at play in the UK. As these fresh viewpoints and spokespeople have gained prominence, Britain's Muslims have become more polarised. Those on the extreme fringes have become more alienated and have retreated further into the security of their reactionary redoubts. Finding ways to reach them has never been more difficult, or urgent.

 

Felix Martin: What the Greek crisis means for the world

Felix Martin writes that while all eyes remain fixed on the eurozone, cracks are appearing across the international financial system as a whole:

The fundamental issue at hand is of relevance far beyond Greece. Since the financial crisis of 2008, the developed world has opted to sweat off excessive public debt over time, rather than confront it by negotiating a one-off relief. The result has been sloth-like economic growth and a chronic dent in confidence over the future. Whether preserving the sanctity of contract law or promoting economic dynamism is the better way to ensure that creditors ultimately get a better deal is the question of the age.

He writes that questions of Greece's debt and its banks are far less important than they recently appeared:

The immediate reaction in the financial markets has been muted. The euro has not collapsed and there has been no panic selling of shares. However, even if Greece's banks reopen and its debt is resolved, there is another respect in which the long-term impact of the Greek crisis on the international financial system threatens to be profound. This is that it has accelerated, probably beyond the point of no return, the decline of the system of global economic governance that lasted from the end of the Second World War to the mid-2000s.

At its centre is the IMF - a global finance equivalent of the UN Security Council - an institution with a reputation for inflexibility but one that in reality underwent three significant transformations in the 1990s and 2000s on the back of three existential crises. The first came out of the east Asian crisis of 1997-98, when the IMF learned that imposing conditionality on crisis-hit countries was neither practically effective nor politically wise. As a result, it rewrote the design rules for international bailouts; henceforth, conditions should be limited to a small number of high-level monetary and fiscal targets and the detailed policies required to hit them should be left to the discretion of the domestic political authorities.

Martin concludes:

All eyes are now on the eurozone but larger troubles are brewing elsewhere. The Chinese economy is slowing, more quickly than anyone expected. Japan is going for broke, printing money with deliberate abandon. Meanwhile, the most powerful central bank in the world, the US Federal Reserve, has begun to reel back in what once seemed like a limitless supply of dollars that has underwritten global finance for the past seven years.

Cracks are beginning to appear - strange portents in the economic heavens. The Japanese yen has lost a third of its value over the past two and a half years. The Swiss franc gained the same amount in a single day in January. The latest shock comes from China, where on 12 June the Shanghai index commenced a crash that has so far wiped off almost a third of its value. That is more than ???1.5trn destroyed: as if Greece's debt had been written off five times over.

So there are crises aplenty to come for the international economy - and change, as [Jean] Monnet argued, there will undoubtedly be. But for the first time in 70 years, we will confront it with an international system that has been severely weakened - not least by the debacle in Greece.

 

Jason Cowley: BBC imperialism, the enigma of John Freeman, and Rihanna's Atrocity Exhibition 

The NS editor, Jason Cowley, criticises the "imperialism" of the BBC and its use of licence-fee-payers' money: 

George Osborne is correct to question the "imperial" ambitions of the BBC and demand that it spend the licence fee with more care. The BBC - especially the excellence of its foreign news and Radio 4 - remains one of the reasons to live in Britain, but overall as an institution it is complacent and excessively bureaucratic, tries to do too much and is obsessed with America. Much has been written denouncing the high pay of senior management. But what about the high pay of the BBC's so-called talent, the multimillion-pound salaries that have been paid to Jonathan Ross, Jeremy Clarkson and many others? 

Why is the "talent" so highly rewarded when so many excellent support staff - editors, producers, researchers, sound engineers - have insecure freelance contracts or no contracts at all? Why, in addition to his lavish pension, expenses and management salary, does Alan Yentob, who is 68, receive an additional six-figure fee to present the arts programme Imagine, which often burnishes the reputation of his friends? Why does the BBC website operate as if it is in competition with national newspapers and magazines, which are subject to the cold realities of the market? I value the BBC but it is only right that it be forced to justify its purpose and overhaul its practices. It ought to do much less, and to do what it does better. 

Cowley also condemns the violence of Rihanna's latest music video: 

The video is a work of grotesque misogyny, as my colleague Helen Lewis wrote in a blog on our website. It features an attractive white woman - tall, tanned, blonde cascading hair, obligatory silicone-enhanced breasts - who is kidnapped, stripped naked and tortured by "Rihanna" and two female associates. There is seemingly no limit to the indignities inflicted upon her. 

The kidnapping is an act of revenge. The blonde is the partner of a rich white guy who has swindled "Rihanna" out of some money - hence the title. During the torture scenes, the women smoke, swig alcohol and get high on crystal meth. It ends with a murder: a naked, blood-spattered "Rihanna" coolly carves up the swindler with a butcher's knife. Its influences include hardcore pornography, gangsta rap and the NBC television series Hannibal.

 

George Eaton: George Osborne may yet fall to earth, but he has already reshaped the state in his own image

For his column this week, the NS political editor, George Eaton, writes that, as in 2010, George Osborne's budget this week has the potential to define the economic debate for years to come:

His planned Budget surplus law (barring government borrowing in normal economic times) will force Labour to choose between supporting it - and splitting the party - and opposing it at the risk of confirming its profligate reputation. The tighter household benefit cap (cut from £26,000 to £23,000 in London and £20,000 elsewhere) was similarly crafted with the "welfare party" in mind. The speed with which Labour endorsed the measure reflected how Osborne has moved the political centre of gravity to the right. Shadow cabinet ministers told me that they had moral objections to the policy but believe they cannot allow themselves to be outflanked by the Tories again on such an emotive issue.

He continues:

Before Osborne declared an "age of austerity", the political consensus was that public spending must rise. The Tories repeatedly lost elections on this issue (prompting them to pledge in 2007 to match Labour's plans). Between 1950 and 2010, there were just two periods during which expenditure was cut for two years in a row. Osborne has now reduced spending for seven. Because of his decision to allow the automatic stabilisers to operate, which results in higher welfare spending during a downturn, he missed his original deficit reduction targets. However, the cuts to public services were larger than first planned. The number of public-sector workers has fallen to its lowest level since records began in 1999, reversing the entire increase under the last Labour government. 

Austerity was originally presented as a crash diet to reduce fiscal bloating. Osborne and David Cameron now speak of it as the precursor to a permanent lifestyle change. To facilitate the Chancellor's quest for an "affordable state" and continual surpluses, spending is intended to remain close to just 36 per cent of GDP (a figure regarded as utopian during the New Labour era). Yet it does not follow that merely because the cuts have not yet resulted in mass outrage, or a critical deterioration in services, this will remain so. Giles Wilkes, Vince Cable's former special adviser, uses the analogy of a patient who is unharmed by losing 10 per cent of his blood but gradually declines in condition and dies.

He concludes:

Osborne is busily reshaping the state in his own image: fiscally conservative and economically liberal. Local councils will win the freedom to repeal Sunday trading laws; social housing tenants on above-average incomes will be forced to pay the market rate; the government will no longer pay for free TV licences for the over-75s; Gordon Brown's beloved redistributive tax credits system is being unravelled.

Osborne may yet fall to earth - but his swagger reflects his belief that, as with Margaret Thatcher's privatisations, the Labour Party will only return to power by accepting his reforms as part of the common sense of the age.

 

Plus

Michael Prodger meets the artist Marc Quinn, erstwhile darling of the YBAs.

Chris Power on the Yugoslavian master fabulist Danilo Ki??.

Will Self: As I tried to get to my seat at the Who concert, I felt bad about making all the old people stand up.

A new poem by Anthony Thwaite.

Simon Winchester punctures old myths about India's Second World War.

Suzanne Moore: My Irish lover thought that sex was the ultimate sin. I like that in a man.

Peter Wilby on the nine lives of John Freeman.

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Former Irish premier John Bruton on Brexit: "Britain should pay for our border checks"

The former Taoiseach says Brexit has been interpreted as "a profoundly unfriendly act"

At Kapıkule, on the Turkish border with Bulgaria, the queue of lorries awaiting clearance to enter European Union territory can extend as long as 17km. Despite Turkey’s customs union for goods with the bloc, hauliers can spend up to 30 hours clearing a series of demanding administrative hoops. This is the nightmare keeping former Irish premier John Bruton up at night. Only this time, it's the post-Brexit border between Northern Ireland and the Republic, and it's much, much worse.   

Bruton (pictured below), Taoiseach between 1994 and 1997, is an ardent pro-European and was historically so sympathetic to Britain that, while in office, he was pilloried as "John Unionist" by his rivals. But he believes, should she continue her push for a hard Brexit, that Theresa May's promise for a “seamless, frictionless border” is unattainable. 

"A good example of the sort of thing that might arise is what’s happening on the Turkish-Bulgarian border," the former leader of Ireland's centre-right Fine Gael party told me. “The situation would be more severe in Ireland, because the UK proposes to leave the customs union as well."

The outlook for Ireland looks grim – and a world away from the dynamism of the Celtic Tiger days Bruton’s coalition government helped usher in. “There will be all sorts of problems," he said. "Separate permits for truck drivers operating across two jurisdictions, people having to pay for the right to use foreign roads, and a whole range of other issues.” 

Last week, an anti-Brexit protest on the border in Killeen, County Louth, saw mock customs checks bring traffic to a near standstill. But, so far, the discussion around what the future looks like for the 260 border crossings has focused predominantly on its potential effects on Ulster’s fragile peace. Last week Bruton’s successor as Taoiseach, Bertie Ahern, warned “any sort of physical border” would be “bad for the peace process”. 

Bruton does not disagree, and is concerned by what the UK’s withdrawal from the European Convention on Human Rights might mean for the Good Friday Agreement. But he believes the preoccupation with the legacy of violence has distracted British policymakers from the potentially devastating economic impact of Brexit. “I don’t believe that any serious thought was given to the wider impact on the economy of the two islands as a whole," he said. 

The collapse in the pound has already hit Irish exporters, for whom British sales are worth £15bn. Businesses that work across the border could yet face the crippling expense of duplicating their operations after the UK leaves the customs union and single market. This, he says, will “radically disturb” Ireland’s agriculture and food-processing industries – 55 per cent of whose products are sold to the UK. A transitional deal will "anaesthetise" people to the real impact, he says, but when it comes, it will be a more seismic change than many in London are expecting. He even believes it would be “logical” for the UK to cover the Irish government’s costs as it builds new infrastructure and employs new customs officials to deal with the new reality.

Despite his past support for Britain, the government's push for a hard Brexit has clearly tested Bruton's patience. “We’re attempting to unravel more than 40 years of joint work, joint rule-making, to create the largest multinational market in the world," he said. It is not just Bruton who is frustrated. The British decision to "tear that up", he said, "is regarded, particularly by people in Ireland, as a profoundly unfriendly act towards neighbours".

Nor does he think Leave campaigners, among them the former Northern Ireland secretary Theresa Villiers, gave due attention to the issue during the campaign. “The assurances that were given were of the nature of: ‘Well, it’ll be alright on the night!’," he said. "As if the Brexit advocates were in a position to give any assurances on that point.” 

Indeed, some of the more blimpish elements of the British right believe Ireland, wedded to its low corporate tax rates and east-west trade, would sooner follow its neighbour out of the EU than endure the disruption. Recent polling shows they are likely mistaken: some 80 per cent of Irish voters say they would vote to remain in an EU referendum.

Irexit remains a fringe cause and Bruton believes, post-Brexit, Dublin will have no choice but to align itself more closely with the EU27. “The UK is walking away,” he said. “This shift has been imposed upon us by our neighbour. Ireland will have to do the best it can: any EU without Britain is a more difficult EU for Ireland.” 

May, he says, has exacerbated those difficulties. Her appointment of her ally James Brokenshire as secretary of state for Northern Ireland was interpreted as a sign she understood the role’s strategic importance. But Bruton doubts Ireland has figured much in her biggest decisions on Brexit: “I don’t think serious thought was given to this before her conference speech, which insisted on immigration controls and on no jurisdiction for the European Court of Justice. Those two decisions essentially removed the possibility for Ireland and Britain to work together as part of the EEA or customs union – and were not even necessitated by the referendum decision.”

There are several avenues for Britain if it wants to avert the “voluntary injury” it looks set to inflict to Ireland’s economy and its own. One, which Bruton concedes is unlikely, is staying in the single market. He dismisses as “fanciful” the suggestions that Northern Ireland alone could negotiate European Economic Area membership, while a poll on Irish reunification is "only marginally" more likely. 

The other is a variation on the Remoaners’ favourite - a second referendum should Britain look set to crash out on World Trade Organisation terms without a satisfactory deal. “I don’t think a second referendum is going to be accepted by anybody at this stage. It is going to take a number of years,” he said. “I would like to see the negotiation proceed and for the European Union to keep the option of UK membership on 2015 terms on the table. It would be the best available alternative to an agreed outcome.” 

As things stand, however, Bruton is unambiguous. Brexit means the Northern Irish border will change for the worse. “That’s just inherent in the decision the UK electorate was invited to take, and took – or rather, the UK government took in interpreting the referendum.”