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Must This Argy-Bargy Continue?

Saturday, March 3, 2012

We get it. You don’t like it. We don’t care. Get over it. The constant whinging from the Argentine government over the Falkland Islands is, after a while, rather annoying. Like when dealing with a screaming child, you ignore it, hopeful it will just shut up. But, after awhile, it gets to the point where you could throttle it and top yourself.

The Telegraph has reported that Morrissey, a member of the band The Smiths, has denounced Britain in the Falkland Islands sovereignty dispute. Until reading the article, I had no idea who Morrissey is and, having done a little searching, have discovered that he’s a man that brings a new meaning to that (literally) colourful American term ‘pinco’. However, he’s not the only fading celebrity at it, and joins a list of people like Roger Waters and the Hollywood actor Sean Penn. Morrissey goes so far to say that ‘We [the British] know the islands belong to you’. I know I haven’t been keeping up with the news so much of late, but I’d have thought I’d have heard that this man was recruited by Her Majesty’s Diplomatic Service.

The truth is that the British public are still supportive of the Falkland Islanders and that, whatever some jumped-up quasi-celebrities say, the Falkland Islands are a British Overseas Territory for which the Crown is sovereign. Argentina’s claim to the islands rests on very shoddy ground indeed. The British first set foot on the islands in 1690 when Capt. John Strong landed at Bold Cove and it is from this date that we claim de jure sovereignty. The first settlement was by the French, however, in 1694, but this was abandoned three years later in favour of the Spanish. The British had an intermittent presence on the Falkland Islands from 1765 and has exercised uninterrupted de facto sovereignty since 1834, with the little exception of the occupation of the islands by Argentina for two months during 1982. The Argentinians, on the other hand, have had little to do with the islands. The only time that Argentina, in its present form, has occupied the islands was during the Falklands Crisis. The United Provinces had control briefly – though over fifty years after the British had erected a plaque clearly stating its sovereignty over the islands. The Argentine Confederation that succeeded the United Provinces had control for two months until the British, tired of protesting diplomatically at the lack of respect for its sovereignty of the islands, expelled the Argentinian military. Those few colonists who had been settled by the Argentinians in the brief period they controlled the islands were allowed to stay. Argentina’s claim to the islands is ludicrous. If anyone other than the British has a legitimate claim to the islands, it is the French who had first settled them. However, the French (perhaps rather surprisingly) have consistently supported Britain in the dispute over the Falklands.

Argentina ignores this, however, and asserts it is sovereign by right. But on what ground is it sovereign? We have all ready seen that Argentina has no claim to the territories that is supported by history. It alleges that these territories are Argentine by their proximity. Yet this is nonsense. International treaties mean that most nations recognise territorial waters to extend only as far as 12nm from a country’s coast. Even its economic exclusion zone (which does not confer the sovereignty over the territory) ends at 200nm out. The Falkland Islands are over 250nm from the coast of South America. Indeed, if proximity legitimises an immediate claim of sovereignty, then the flag of the US should fly over Cuba, Tibet really is nothing more than a region of China and Russia should start rolling the tanks into Georgia (again).

Maybe the Argentine argument should rest on the idea of the nation – that the Falkland Islanders’ nationality is Argentine. But the Falkland Islanders do not share a common descent, language, culture, history or shared territory with the Argentinians. They share that with the British. Over 60% of the islanders are descended from those original settlers (mostly of British origin). Nearly a third are British. 2.6% are Spanish. The Argentinians on the island (if truly there are any at all) consist of a small and insignificant amount. Indeed, more islanders are Japanese at 0.6% of the population than are Argentine. And the islanders consistently and overwhelmingly vote to remain a British Overseas Territory. Whilst the “right to self-determination” can be overstated, how can the Argentines claim, as they do, that the British are exercising ‘crude colonial’ rule over the islands? It is ironic that a country that came into existence from a struggle with a colonial power should be so willing to ignore the wishes of those that they lay claim to.

The answer to this question lies deep, not in foreign policy or international diplomacy, but in Argentina’s domestic politics. Argentina’s economy, despite being one of the G20, is experiencing high inflation. Official figures state around 11%, but it is widely known that the Argentine statistics office has been made a mere extension of the government and The Economist reported last month that inflation was more like double the official figures. It is domestic trouble that is driving Argentina’s sabre-rattling, just as it was growing unrest (and an apparent lack of interest by the British) that galvanised the Argentine military junta to invade in 1982. Acting tough on the world stage diverts the attention of the populous from growing domestic issues bubbling more violently under the surface. The recent discovery and drilling of significant oil reserves around the Falklands can only help to intensify the posturing.

In reality, Argentina has no legitimate claim to the islands and its aggressive behaviour is rightly met with quiet but significant defiance by the Government. Just as over the years people have ignored Morrissey’s remarks that the Chinese are ‘a subspecies’ and that fast food chains are worse than the Norwegian killer Anders Breivik, we can safely dismiss his most recent effort to launch himself in to the papers and gratify his diminishing fan base. For it is a sorry day that a nation abandons its fellow countrymen to the jaws of a foreign aggressor.

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Greek Tragedy

Saturday, February 11, 2012

We have reached a new stage in the Greek debt debacle. After the €110bn bailout in 2010, Greece is, once again, finding itself short of cash after failing to reduce its deficit and is desperately in need of another Troika bailout. In exchange for cutting government spending equivalent to 1.5% of GDP, reducing pensions and laying off more civil servants, all on top of the current austerity plans, the EU, ECB and IMF will agree to hand over another €130bn bailout to Greece. If it is not received by the 20th of March, the Greek nation will formally default as it will not be able to pay private creditors whose loans are due to be serviced on that date.

However, there is already talk that the bailout offer will not be sufficient. Calls for an extra €15bn to the planned package are being made. This is assuming that the Greek parliament will agree to Troika demands for extra austerity. Six government ministers have already resigned and there is severe civil unrest on the streets of Athens. Unemployment is at 20.9% of the population, with youth unemployment at a whopping 48%. Worryingly, this bears many similarities with the thirties in Germany. Indeed, current polls in Greece show extreme left and right parties possess almost as much support as the more moderate parties that compose the coalition government.

The biggest problem, however, is that it is pointless. Greece’s membership of the Eurozone is economically foolish, just as it is for many of the peripheral members. The Euro is fundamentally too strong a currency for these smaller, weaker economies. For the past eleven years, ever since Greece surrendered its drachma to join the single currency, it has undergone a steady loss of economic activity to the northern states like Germany and the Low Countries. Greece is, in essence, overpriced and it is doing untold damage to its economy.

Due to its lack of control over monetary policy, Greece is implementing a very significant austerity package (or packages if you consider the extent to which there have been additions to the original package over time). This has, not surprisingly, caused much public resentment and the rioting in Greece makes the political scene look very precarious. Members of the government resigning does not help, but perhaps far more worrying is that not so long ago several military chiefs were very quietly and quickly replaced by the Greek government with little to no explanation. Many Greeks still remember the military junta that existed in the late sixties and early seventies that was, to the say the least, oppressive and de facto responsible for deposing the King and monarchy.

Greece has been heading this way for a long time. It engaged in some very interesting practices in order that it could hide its debts and deficit and qualify to join the Eurozone. Whereas before the Euro, the Greeks were used to borrowing large amounts and devaluing their currency and setting interest rates to compensate, post-drachma they had to pretend to the EU that they were complying with its (unofficial) rules on deficits and debt and did this by paying firms like Goldman Sachs to do creative accounting. This is not surprising – the Greeks have always liked to live beyond their means and throughout the past decade they’ve racked up a pretty debt to prove it (see the chart below). Nonetheless, it has caused the current loss of confidence in their economy that has spawned this terrible mess.

Line graph illustrating Greek debt

What Greece needs is the restoration of the drachma. Instead, its government just offers more austerity and Germanic-style reforms. But this is hopeless. The Greeks are not Germans; however hard they try they aren’t suddenly going to learn the benefits of thrift, long hours, hard work and an industrial export economy. The Greeks want a laid-back life with an economy based on fishing, agriculture and tourism. By returning to a national currency and monetary policy, they can devalue, helping to inflate themselves out of the crisis – a practical default. Their currency will be cheap, encouraging exports and enticing tourists. This cheaper currency will also allow a return to more suitable wage levels in the Greek labour markets. This is not to say that an orderly exit from the Eurozone will be easy and it does incur risks, particularly of hyperinflation. But, in the long run, Greece has no other option and all they are managing to do at the moment is to put it off, at the expense of more debt. Greece’s only reasonable, practical chance of encouraging competition is not going to come from Berlin-imposed economic reforms, but from a return to Greece’s old currency – the drachma. For now, it looks as if Greece will carry on the drama but, at some point, the curtain must fall.

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In defence of the Coalition’s spending cuts

Saturday, January 28, 2012

There is much criticism of the Coalition government’s spending cuts and deficit reduction plan. The anti-cuts brigade argue that the cuts are immoral, that they’re economically unsound and that, instead, we should be spending our way out of this predicament. The chief amongst these opponents of the Government’s economic policy is Labour. What the Treasury is doing, claim Balls and Miliband, is reckless, irresponsible and unfair. Miliband even accuses the Prime Minister of ‘sacrificing everything at the altar of deficit reduction’. But is this true? Has the Government really done something terribly damning to the economy or have they really been at the heart of putting the economy on a balanced footing? This week’s latest news that the economy contracted by 0.2% is certainly a cause for concern and will undoubtedly give the Chancellor a headache. Nonetheless, as I will argue, the Government’s deficit reduction plan is, within the scope permitted by the political situation, basically sound and, far from being immoral or unjust, is all-round a moral and fair effort to right the economy.

Let us first consider the economic arguments against the Coalition’s deficit reduction programme. Labour contend that the solution to the current economic crisis is to use the machinery of government to borrow money and to use this money on infrastructure projects and also as a means to avoid tightening fiscal policy (i.e. cutting government spending or raising taxes) which is the only alternative to deal with the difference in the Government’s spending commitments vis-à-vis the money it raises in tax revenue. Labour says that if you reduce government spending in the economy and raise taxes then you will destroy the recovery by allowing aggregate demand to fall below its optimal level. In order to eliminate the government deficit, so they claim, you must grow the economy. This all seems rather fair and, indeed, occupied significant weight at one time in the economic community. However, for reasons I am about to expound, such theory lost much of its credibility in the 70s and 80s and what remains is used as a weak attempt at an intellectual underpinning for the Left’s policies.

The first issue with such an economic policy is that it is really compounding the problem, not solving it. The economic crisises, both the financial crisis in 2008-09 and the ongoing crisis in Europe and the US, are really about debt. It is the pile-up of debt and the burden that comes with it that is at the heart of this catastrophe. And how do the anti-cuts brigade, particularly Labour, want to solve this? That’s right – more borrowing. This in itself should cause even the most economically illiterate to scratch their heads. If the UK continues to borrow at the colossal rate it is and was (at the height of borrowing, the deficit was 12.9% of GDP) then it will put its credit rating under severe pressure, until eventually it is downgraded. This will raise the cost of borrowing on gilts (UK government bonds or IOUs) as investors see the UK as a greater risk and shy away from placing their money in the hands of the Treasury without a bigger incentive – a bigger yield. This increase in the cost of borrowing will have a terrible impact on the UK. We will spend £50bn this year on debt interest payments. To put that into perspective, we will spend less on transport as well as housing and the environment, law and order and defence. Servicing our debt will cost more than half of the entire amount we will spend on education. Clearly then, increases in the costs of borrowing will severely impact on state spending either forcing deeper and harsh cuts or even more borrowing and, so, a vicious cycle ensues. The results are also obvious: unpaid state workers, a plunge in the value of the currency, inflation and severe social unrest. And yet Labour cry ‘too far and too fast’ despite the Coalition’s reduction of spending in nominal terms to only 2007 levels. As it is, the Coalition government has presided over the lowest costs of borrowing since the late 19th century. Indeed, when one takes into account inflation, investors are paying us.

There is another flaw in Labour’s plan. They were pinning their hopes on reducing the government deficit via growth. We have already discounted that as a credible plan due to the loss of confidence financial markets would have suffered in the ability of Britain to continue to pay its way. But even if this wasn’t the case, how reasonable is Labour’s plan? Not particularly. Labour claims that it’s the Coalition’s cuts that are responsible for our sudden reverse in the economy. But this is nonsense. The economy’s sudden burst in growth immediately after the financial crisis is not atypical of a quick but short-lived post-recession recovery. Indeed, the economy took a dip as soon as Labour had left office, but far too soon for the Coalition to have affected the economy. Despite this, the economy grew in the next quarter and, a year later, not the last quarter but the one before, it grew at the same rate. The contraction of 0.2% in GDP during the last quarter was not unexpected but had been estimated for sometime, not least by the Coalition-created Office for Budget Responsibility. The contraction was not a result of spending cuts, which have yet to even really get started, but as a result of cost-push inflation and the worsening situation in the Eurozone. Crude oil alone is $40 more expensive per barrel than it had been under Labour. This is no fault of either government but it does have significant ramifications on an economy – particularly a fragile one. The costs of transportation alone – passenger and freight flights, passenger and freight trains, ships and cars all rely on the commodity – will have risen significantly. Then there are the costs of energy generation, production of plastics, etc. These have a major impact on prices and are part of the cause in the dampening of the recovery. They would have hit regardless of who was in government. In fairness to the Government, they have attempted to counteract this by reducing the fuel duty, but they can do only so much and their priority, as has been said, must lie with getting public finances under control. When one has also factored in the Eurozone, with whom our trade deficit has widened, it is not difficult to see why the economy has contracted by, it must be said, a very small amount. Labour’s case is a poor one and even if, by some miracle, they had managed to keep our prized crediting rating and managed to employ a magic wand to insulate us from the rest of the world (which would also be bad as we desperately need exports to help drive our recovery), how would they have grown us out of the current crisis? The deficit was at 12.9% of GDP and they managed, under those conditions, 1.9% growth. The road to just balancing the books would have been a long and arduous one, if even assuming successful. This even the old Labour government admitted with some, although rather sketchy and poor, plan for cutting spending.

It must be said, however, that the Government is not beyond absolute criticism. Their efforts, whilst certainly commendable and working in the right direction, could be a little better in some areas. They also have utilised certain headlines to try and indicate successes they do not necessarily support. This is understandable – after all, they are in government doing something incredibly difficult – but it could come back to bite them. The first issue is the increase in VAT. This undoubtedly will have impacted on consumption spending. As an indirect tax, it also has a disproportionate effect on those with lower incomes. However, the VAT increase was an attempt to avoid further cuts and, as lower income families would be spending less in any event and certain essential goods were protected, it was in the circumstances an unavoidable compromise. Another problem is a lack of supply-side measures. They need to do more to reduce regulation, red-tape and mandatory bureaucracy that affects the costs to business and their ability to hire employees. In their defence, the Government has reduced corporation tax and introduced enterprise zones. They’d like to do much more, but their hands are tied – particularly by legislation that has its origins in the European Union. Finally, it must be admitted that whilst the Government’s cuts are helping to keep borrowing costs low by showing to markets real determination to tackle the problem of public debt, the Bank of England has significantly helped through quantitative easing and also the traditional purchasers of government bonds, the UK non-bank investors like pension funds and insurance firms, have actually reduced their holdings of gilts. On the other hand, the holdings by overseas investors have increased – especially amongst those who wish to flee the Eurozone but do not yet want to leave Europe. We are also not in quite the same situation as certain Eurozone countries like Italy or Greece. Saying that we too were on the precipice like these countries was being a little liberal with the truth. We still have, unlike our Eurozone neighbours, our own currency and control over monetary policy which is not dictated from Brussels. This has afforded us more breathing space than a country like Greece has, which is important to remember. Still, Britain is not invincible from the financial markets and the situation it faces is very real and very serious. Whilst we are not quite in the same league as a Greek tragedy or the drama of an Italian opera, these analogies represent a potential threat in the longer term.

It is now clear that the economic case in favour of cuts is sound and that to pursue what Labour advocates is folly. That should be enough. Regardless of other objections, one cannot ignore the requirements placed upon us by economic reality. Nonetheless, a moral objection is also raised which is a thorn in the side of those rooted in proper economics and common sense. The argument runs that the spending cuts are unjust, that they are disproportionately affecting the poor and that the right thing to do is to continue spending money in the economy to help us all. This is complete rubbish. It was at one time regarded as quite the reverse. The moral thing to do was to live within your means, that only those who were reckless and greedy spent more than they had. The cuts, as already mentioned, are quite a moderate package to reverse the tidal wave of borrowing. Those who disagree would be well advised to take a look at countries like Italy, Greece, Spain or Portugal which are undertaking their own (or in some cases, EU-enforced) cuts. They are, on a comparative scale, far more wide-reaching. Most people would recognise that the greatest immorality is to pass on the major implications of your actions to your own children. And yet it is the anti-cuts brigade that wants to do exactly that. Rather than recognising our serious situation and curbing what we spend now, they want to carry on with our heavy borrowing, passing on the costs to future generations. By failing to cut spending, you are forcing people yet to be born to make even greater cuts than we have to now. You are forcing them to pay for our extravagance. By not reducing welfare payments and reforming the welfare system, you are giving more to those who use the system than those who actually contribute to it have. How is this moral? The answer is it is not. The Government, instead, have distributed the cuts fairly, protecting those on the lowest incomes. Welfare payments, like child tax credits, have been reduced for the middle classes but not the poor. The disabled, ill and mentally unstable have been protected from welfare reforms. Whilst the Government have recognised the ridiculous nature of the 50p income tax rate, they have delayed its removal and have prioritised the raising of the income tax allowance to £10,000 as soon as they can, taking millions of low income households out of tax altogether and reducing payments by an average £700 for others. Despite increasing the cap on university tuition fees – which better reflects that whilst there are substantial benefits for society from university education there are also great benefits for the individual and these should be reflected in the private costs – they have increased the point at which one starts to repay loans from an income of £15,000 per year to £21,000. Many forget that it was Labour who first introduced university tuition fees and initiated the Browne Report that recommended the changes the Government introduced. Were they immoral then? Would they have ignored the advice of their own report now? All Labour have shown is they have no understanding of morality, nor any sense of hypocrisy.

The anti-cuts brigade continues the rhetoric of ‘unfair’, ‘unjust’, ‘too far and too fast’, ‘savage cuts’ and ‘austerity’. The Government, meanwhile, is providing the country’s public finances with much needed stability and ensuring that the UK maintains the confidence of world markets. Whether the plan is entirely successful will depend upon what happens in Europe, the US and around the world. But what the Coalition is doing is, on the whole, economically and morally the right thing. Unfortunately for the Coalition, that cannot be proved beyond absolute doubt without Labour in office to make things even worse. Fortunately for us, they left.

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L.A. Noire: More real life than virtual

Wednesday, October 26, 2011

It’s been five months since the release of Rockstar Games’ L.A. Noire in Europe, but only now have I got round to playing it. Noire lives up to what one would expect from Rockstar and provides a really enjoyable gaming experience. Set in Los Angeles in 1947, the player is introduced to Cole Phelps – an LAPD police officer (later, detective) and ex-US Marine who served in Okinawa during the War. Phelps is an ambitious policeman who wants to work his way up to the top and, as the game progresses, he is promoted through different desks – from walking the beat, to traffic, homicide and later vice. The game, unsurprisingly given its title, makes heavy use of film noire elements and jazz and blues music so typically associated with late 40s, post-War America.

Much of the gameplay revolves around investigating crime scenes and interviewing witnesses and suspects. The player must watch the character’s facial expressions and eye movements, as well as cross-referencing statements against collected evidence, to determine if the character is telling the truth, lying or if Cole should doubt what they’re saying. To make this possible, let alone believable, the developers had to make use of a new motion capture technology – MotionScan – which uses 32 HD cameras to capture the facial expressions of actors. This worked brilliantly and really adds to the game’s feel. With the inclusion of some famous Hollywood actors lending their faces (quite literally) and voices to the main characters, the game plays more like an interactive film. It must also be mentioned, however, that the game does enjoy several fast-paced action elements at points throughout the story, although some people have complained that there weren’t enough of these shoot-ups or car chases. I disagree, partly because I think it would have spoiled the investigative side – the main element – of the game.

The game engine does justice to all the other organs of the game. The graphics engine provides a stunning and wonderfully convincing LA to explore and NPC’s exhibit a comprehensive AI. The Havok Physics engine also provides a very responsive environment, if not sometimes a little exaggerated as is often the case with Havok. However, the ragdoll physics is not as over the top as one finds in many games and I don’t remember a single model flying through the air as a result of being shot or getting caught in an explosion.

The thing that really makes the game, however, is not the wonderful use of innovative technology or the beauty of the game’s graphical environment. It is the game’s story. This game was a masterpiece of story-telling, both in individual cases (where an entire mystery had to be created) but also in the way that they wove elements of the story together to form the final set of cases. The characterisation is excellent and the player really feels attached to certain characters throughout – particularly Phelps. The game is ‘more real life than virtual’ because the characters are complex and rich – just like real humans. Phelps, for example, is an upstanding as well as outstanding policeman who, unlike some of his colleagues and many of his superiors, is not corrupt but believes in upholding the law. He pursues a case vehemently, like a dog with a bone, regardless of who is implicated in the crime – something that later brings about his fall from grace in the LAPD. He is kind and compassionate and also strongly believes in withholding judgement on a suspect until he has collected sufficient evidence – something his colleagues find irritating on occasion. And yet, for all that Phelps is the protagonist, he harbours deeper secrets. He is, in himself, ambitious. But he is also desperate to prove himself – a result of his experience from the War where he displayed cowardice and yet, through confusion of events, was awarded a medal for gallantry behaviour. He was not popular with the men he led, partly for displaying a sympathetic trait towards the Japanese. Yet this does not stop him from, it has to be said rather unintentionally, ordering the massacre (by flamethrower) of Japanese women and children held up in a make-shift hospital cave.  And, later on during the events of the game, he falls in love with a German singer whom he has an affair with, ultimately resulting in his separation from his wife and two children. Phelps is a good man and yet, like all men, he has temptations and traits which are not so attractive. And this is why he is so appealing to the player. He is not the comic-book super hero – he is a real man. This is also why his death at the end of the game is all the more difficult to accept, especially as it was the result of saving someone else. His funeral was one at which many of the corrupt people he was trying to expose spoke of him favourably whilst really they were heavily involved in his downfall. It is so like reality – the good guy, no matter what he does, doesn’t always win. And, whilst we play videogames, read books and watch films, to escape from reality, just like Shakespeare’s Romeo and Juliet, it doesn’t hurt to have the odd one bring us back down to Earth again.

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