Capitalism Under Persecution

Although banks are not exclusively to blame for the financial meltdown and subsequent recession, it has become popular practice in both media and government to ascribe all of today’s economic woes to supposed greed and irrationality on Wall Street. The chairman of the American Federal Reserve, Ben Bernanke was only the latest in a series of officials to call for greater supervision and regulation of the banking sector. Indeed, it has become one of the outspoken goals of the Obama Administration as well as recent G20 summits.

As rumors persist that the White House is to propose legislation that will impose a fee on international transactions, echoing a suggestion offered by the European Union last December, banks worry.

Goldman Sachs recently came under fire as it turned out bonuses to its employeed once again. How dared they, journalists and politicians cried alike, though the company had repaid the United States Treasury’s $10 billion TARP investment in June of last year already — with 23 percent interest.

Nevertheless, Goldman Sachs is now considering to force its executives and top managers to give up part of their earnings each year — to charity. As The New York Times reports, the details of the charity initiative are still under discussion while the firm is “trying to understand whether such gestures would damp public anger over pay.”

Whatever one may think of demanding that employees donate part of their income possibly against their choice, the mere fact that Goldman Sachs is contemplating such a policy is telling of the economic climate in which it has to operate.

Things may be even worse across the Atlantic. In the United Kingdom, the Labour government is bashing the rich with an extra tax on bonuses while in France, President Nicolas Sarkozy explicitly distanced himself from what he called the “excesses of financial capitalism.” Although his government can’t seem to solve a 8.5 percent deficit on its budget, Sarkozy relishes in “the victory of the European model.”

Increasingly, in the popular press and in the words of lawmakers, it is not quite capitalism itself that is condemned. Rather its “excesses” are blamed for all of today’s trouble. Although capitalism brought immense prosperity to the West, it is “too much” of it that is stopping the rest from catching up. Although capitalism is the only socioeconomic system that guarantees individual rights to life and liberty (because it cannot properly exist without them), it is for the sake of “society” that it must be tempered. Capitalism is justified as a necessary evil. It is justified on altruistic and utilitarian grounds — because, it is grudgingly admitted, capitalism satisfies “the common good.”

Capitalism is a practical system. It does bring the greatest good to the greatest number of people. But that is of secondary concern. Primarily, capitalism is a moral system because it is only under capitalism that man can reap the rewards of his own labor. It is only under capitalism that man is free to choose his line of work, free to specialize in it, free to trade his products and services for those of others on a free market. It is only capitalism that ensures man’s unalienable rights to life, liberty and property and its ruling principle is: justice.

Twenty years after the Cold War ended, capitalism is in recession, to be compromised on at the first sign of trouble. Moreover, its greatest practitioners, the traders, the bankers, the industrialists, the businessmen have become a persecuted minority, carrying a burden of blame for a crisis that was beyond their control, subject to public scrutiny and special laws and penalized, not for their failures, but for their virtues; not for their incompetence, but for their ability; not for their errors, but for their accomplishments.

Businessmen have in part themselves to blame. Amid accusations of greed and selfishness, they appease, apologize and they compromise. They attempt to appease the loudest of their opponents who will never relinquish the struggle. They apologize for their very existence, denouncing “inhuman capitalism” as much as the most collectivist of commentators. And they compromise on capitalism, relying on lobbying, on private manipulation and on pull in order to extract momentary favors from government.

Businessmen have allowed themselves to be persecuted because they never stood up to defend capitalism. Rather they chose to undermine the system and let it take the fall for faults that were not its own. There are few capitalists today who ever bother to defend the philosophy they live by, if even they do so consciously. In their absence, capitalism can be vilified and destroyed almost soundlessly, at least until some remember the source of progress and prosperity again.

Europe’s Egg Shortage

It’s difficult to get about some eggs in the eastern parts of the Netherlands these days. Supermarkets are experiencing serious shortages there because large supplies of eggs have been bought up by German wholesalers. The Netherlands has always been one of the world’s greatest exportors of eggs but usually not at a disadvantage to the country’s own market. So many more eggs are finding their way to Germany now because that country is set to ban battery hen cages next January 1 which has severaly damaged its own production already.

The European Parliament voted to ban battery cages in 1999 when so much as 93 percent of eggs in what was then the European Community came from battery hens. By 2012 all member states must have the battery system abolished but Germany has chosen to take the lead by outlawing the practice in 2010 already.

Of course, when parliament forced farmers to turn back the clock half a century it provided adequate protection against the import of cheap eggs from abroad by imposing extensive border and subsidy measures. To control imports and boost exports, the European Union uses sluice-gate prices, basic and variable import levies and export refunds on all shell eggs and products.

The sluice-gate price is a theoretical, calculated price at which poultry imports to Europe should be priced given world grain costs. The import levy is fixed at a level to protect European egg producers against imports from countries that benefit from market cereal prices considerably below the European average. The simple purpose of the measure is to prevent the import of eggs that are priced lower than their European counterparts.

A safeguard clause allows Brussels to suspend imports if the European market is threatened with serious disturbances such as a flood of low priced imports. Refunds are paid to European exporters from the Common Agricultural Policy budget to help them compete outside Europe where producer costs can be lower due to lower feed grain prices, for example.

Understandably, this is upsetting developing countries which are currently stalling negotiations within the World Trade Organization for one thing, precisely because the West, the European Union in particular, is increasingly protecting its own market, making it near impossible for Third World farmer to compete. Yet, with subsidies, European producers are able to penetrate their markets. (So next time you hear someone denounce “free trade” for destroying Third World agriculture, you know better than to nod in approval.)

The only ones not complaining right now are Dutch poultry farmers who are able to sell their eggs in Germany at prices unprecedented in recent history. Within the next two years however, they too will be forced to give up their battery cages. Inevitably, the supply of eggs will shrink throughout Europe, driving prices up only further.

Gateway to the West

Turkey, or in the past the Ottoman Empire, has always been something of a bridge between Europe and the Near East. In recent years, it increasingly turned its attention westward, joining NATO and hoping, some day, to become part of the European Union. Decades of promises and negotiations have left the country frustrated with Europe however so now, according to The Economist, the Turks are back in the Middle East, “in the benign guise of traders and diplomats.” Read more “Gateway to the West”

HMS Queen Elizabeth and the Future of the Royal Navy

This is the first part in a series of reports on the current state of the Royal Navy. This part focuses on the expeditionary tool of the Royal Navy’s future force; the aircraft carrier. The second entry discusses the Future Surface Combatant and the effectiveness of modular versus “hardwired” vessels.

Earlier this year, public interest in the reforming of the Royal Navy was highlighted by the order for two aircraft carriers to be constructed by the “Carrier Alliances” of BAES/VT planned Joint Venture, Thales, Babcock and BAES. The news was controversial. Many wondered why aircraft carriers were needed at all, let alone two each displacing some 65,000 tons and approaching the size of the US Navy’s Nimitz class carriers. The carriers would be bigger than the current largest in European waters; the French Charles De Gaul and considerably larger and more capable than the RN’s current Invincible class carrier.

Arguments were abound; the money could be spent on civilian infrastructure or dealing with the financial crisis. Were carriers even needed now that the threat of the Soviet Union had disappeared and Russia was perceived as “no threat”? How could huge surface vessels help solve problems in places like Iraq and the landlocked Afghanistan? Now the intent of this article is not to defend the carrier par se, but I shall maintain that the decision for carrier capability (the ultimate modern expression of modern military power, and the finest expeditionary tool for foreign policy in the new security climate) was not only a good one but somewhat essential for both Britain and the Royal Navy.

However, the construction of the vessels themselves brought forth new problems. The main weapon of the carrier is the air flight. The aircraft. Since the Battle of Midway in the Second World War, the carrier has been the supreme naval instrument. Its air flight can obtain air superiority over land and sea, deciding large conflicts, but also they can protect a fleet on the move, project force inland over vast ranges, and assist in all manner of operations short of war. However, for the “Lilly-bet” class this was a problem from the start. The scandalous conduct of the Royal Air Force/Farce in procuring the splendid Eurofighter Typhoon jet fighter has caused some consternation. The plane cannot be converted to be capable of carrier-born operations and since the Fleet Air Arm lost its proper fighter capability to the RAF, it is the only fighter plane the RAF wants to fly. The unholy trinity of Royal Air Force, Ministry of Defense and British Aerospace have successfully grafted the Eurofighter to British defense. Very well, it is an exceptional air superiority fighter, but it cannot be put on board a carrier. This means it cannot fill the now long-empty boots of the RN’s old warhorse the Sea Harrier or for that matter the RAF Harrier (Which weren’t fighters anyway). The F-35 Lightning II was chosen to be the aircraft of choice for the air flights. However the road was far from clear.

The Eurofighter was ordered on an allied project with three other European nations sometime back before your correspondent went to school. Due to various problems with working with a host of other companies and BAE’s usual problems, it only arrived in service in 2004, officially. It has been so long in development that its questionably if it can stand up to the test of modern combat. Due to its expected deployment the Sea Harrier (the only British aircraft to shoot anything down in living memory) was pulled from service, and along with it the capable but aging Jaguar “bomber” jet which was a fine ground attack vehicle. The Eurofighter propaganda says that it’s a multirole fighter capable of ground-attack but the software apparently doesn’t allow it. The F-35 was designed and built in a sensible amount of time for a professional air-force (we’ll say nothing of the “Air National Guard”), it is a highly capable and deadly system perhaps the best in air-to-air operations (though it must be said that the Eurofighter has given it a run for its money) and it can hit things on the ground as a superb ground-attack vehicle.

So, the F-35 was decided as the fighter of choice to chuck off the carriers but this decision has been gone forward and back on since the beginning and its getting to the point where the MOD are even turning on their chums the RAF and BAE. Further foolishness is apparent when one considers even how this brilliant craft was going to be “adapted” for British use. There are three variants of the F-35 planned/in production/service: The US Air Force version which is a highly capable air superiority platform in its own right and will keep Ivan at bay; the American carrier version, which takes off using a catapult and a straight runway from American craft, a very sensible design of deck configuration; and the third version, machinated perhaps by BAE’s presence on the project, which is somewhat tailored to small carrier requirements.

However, after previous projects “altered” for British use, the Americans are reluctant to hand over anything to Rolls Royce as they’re one of the only British defense companies who know what they’re doing and can stick an RR engine in an F-35 which would put even the American versions to shame and could then be mass produced and sold to anyone who wants a carrier-born aircraft but hasn’t got a big enough ship. This is due to the design of the carrier’s deck; a ski-jump system with no catapult or arrestor wires like on an American ship. This means that the British version of the F-35 would require something of a STOVL (short takeoff Vertical Landing) capability, not a big deal, as there’s three variants in at design level. The aircraft would take off from a short ski-jump runway and then would be able to “hover” down onto the deck much like the famous Harrier. This decision is very much an inheritance from the days of Harrier. Despite the size of the Queen Elizabeth class allowing a straight runway to be built, some slack jobsworths couldn’t decide at the time what plane was likely to be put on it so they stuck with what they knew and fortunately for them, it seems BAE has chummed up to the American industry to be a principle partner on the subject. If BAE can use their position to get the RR engines into the STOVL F-35B — the only engines which will work on this version it must be pointed out — then perhaps some loose ends can be roughly tied up.

The expenses mount though as one considers that all that would be required is a reconfiguration of the Queen Elizabeth class deck (a provision already well catered for) and the adoption of the American carrier variant capable of using catapult and arrestor wires. Whilst the F-35B and current deck configuration will do, it seems to be a lot of horsing around making new problems when there was simple solution: Copy the yanks, it’d be cheaper.

Things worsened. In October the Times reported that the second carrier was to be converted to a rotary-wing carrier, a sort of assault ship similar to the current HMS Ocean. The paper said that this was due to the cost of maintaining two wings of F-35 fighters, one for each carrier. HMS Ocean needs replacement urgently. There have been times when this civilian-quality half-measure was flooded with fuel in the engine rooms. However, does this mean that the second carrier would be converted to replace the Ocean or provide something like it? It’s unlikely. The necessary alterations would rack up an astronomical bill. Corridors would need to be widened, dockits for assault boats put in place, perhaps even larger docks, command and control facilities for over four separate commands, larger aircraft lifts for troop transport helicopters, and this is just the beginning. The costs to convert the vessel would end up more than building and running the original. What is more, the plan was to have two ships. One to be in refit while the other was on service with the one air-flight. This rules out conversion based on the cost of two wings. What’s more likely is that in an emergency the second carrier deploying from refit in the emergency, would field a force of F-35s either on loan or “spares” for the first carrier. Worrying, but better than the expected alternative. What is more, reliable sources inform your correspondent that it would be too expensive to cancel the second ship anyway, even now, before her hull has been laid.

Just last month The Guardian reported that India is expressing an interest in purchasing the second ship which may be sold off under government sale.

Either selling it off or converting it still leaves the Royal Navy with one carrier and what is worse President Sarkozy of France offered the prime minister the option of working with the French navy to maintain a ship at sea between the two states. In other words, the French carrier would be in refit while the Queen Elizabeth would be at sea, and vice versa so that the other could be “borrowed” in an emergency.

The move will leave the navy without a carrier when the Queen Elizabeth goes into refit, leaving open the possibility that it might have to borrow one from the French navy. In a meeting with Brown last year, Nicolas Sarkozy, the French president, had suggested that refits of French and British aircraft carriers should be coordinate.

While it’s a bit depressing and yet comical that the Royal Navy and French Navy, perhaps the world’s oldest service enemies, would have to coordinate their carrier options, it also makes little sense. The Guardian article above said that the French did not want to purchase any more carriers, which seems strange as they had ordered a third carrier of the Queen Elizabeth class. This would leave them with just the Charles De Gaul, which is nuclear powered and a danger to be on. British crews would have to have a lot of retraining to use the propulsion system and features on board the French carrier and likewise for the French who would not be used to the large fuel turbines on the Queen Elizabeth.

The upcoming Strategic Defense Review, will give us some clearer understanding of what the future has in store for the troubled project. What is certain is that a Conservative government would be under the same constraints as a Labour one and from where the Navy must be standing the rock and hard place analogy is applicable concerning the two parties. Controversy continues around public spending, particularly on defense with the tired refrain of “helicopters and body armour” is still echoed in the broadsheets and the tabloids on the Afghan campaign.

Europe’s Uneven Recovery

Europe’s massive deficit spending is finally catching up with it. As Stefan Theil writes for Newsweek, markets reacted sharply this week “after rating agencies downgraded the public debt of Greece and warned about the outlook for several others.” With a deficit running at over 12 percent of GDP, Greece runs a serious risk of becoming the first developed country since the end of World War II to default on its debt.

Another South European country, Spain, is not much better off. We previously warned that its stubborn socialist policies are in fact hampering all of Europe; last week, Standard and Poor’s slapped a negative outlook on the country. Read more “Europe’s Uneven Recovery”

Merkel Government Under Pressure

Pressure is building on German chancellor Angela Merkel and her defense minister, Karl-Theodor zu Guttenberg, to account for the German-ordered NATO attack in Afghanistan last September that killed 142 people, many of them civilians.

Guttenberg, formerly minister for economics, took charge of the Defense Department last October as member of Chancellor Merkel’s second cabinet. The rising star of the German conservative party, Guttenberg outranked Merkel as the country’s most popular politician but he has come under siege from the Social Democrats, the former coalition partners, for changing his position on the Afghanistan attack.

Initially, Guttenberg called the bombings “appropriate” but three weeks ago, he claimed the opposite after assessing the incident in greater detail.

Germany’s previous defense minister already resigned over the affair and Guttenberg himself has discharged a top defense official and a state secretary for supposedly withholding information. Now, a parliamentary inquiry has been produced to study the bombings all the more thoroughly.

Although all but one of Germany’s political parties support the Afghan mission, there exists something of an obsession to wage a “clean” war there regardless of the changed circumstances. While the Taliban has gained ground, parliament’s mandate remains unchanged: German soldiers are to aid in the reconstruction of Afghanistan, not to be involved in any fighting.

The Social Democrats are leading the charge that seems specifically aimed at Karl-Theodor zu Guttenberg. He and the chancellor are to appear before committee next January. Yet the Social Democrats were the ones in power when the country decided to contribute to ISAF and they were still in power when the bombings occurred. Holding the man who has been defense minister for barely two months responsible seems utterly hypocritical and largely a political move before anything else.

Brown Bashing the Rich

It’s not good to be rich in Britain. One is properly punished there for making too much money as becomes a welfare state. From every Briton that earns over £150,000 (or $243,000) a year, the government takes half of that in income tax. The well-off now face a further cut to tax relief on their pension contributions. An announced increase in the inheritance tax threshold has been put on hold but the taxman is still going after those with offshore bank accounts for it seems that in Britain today no crime is worse than the outrageous practice of tax evasion.

Even The Economist is upset and it calls Gordon Brown’s bashing of the rich “bad politics and rotten economics.” With elections arriving in a little over six months, Labour is doing everything it can to prove that it is still the “party of the many” whereas the Conservatives are branded as the “protectors of privilege and gleeful spending slashers.”

An extra tax on bankers’ bonuses this year is meant to smooth over voters but it does little to aid Britain’s ailing economy. The last of the G20 countries to be mired in recession, all the Labour government can think of doing is spending more money in the hope that such Keynesian methods will save Britain from further stagnation.

Now, with what will probably turn out to be a dreadful election ahead, Gordon Brown and his party are throwing themselves up as defenders of the common man again. Bashing the rich isn’t all about class politics though. As The Economist points out, the government needs the additional funds badly to keep its social services running, the imperfectly reformed National Health Service first among them. These are “disproportionately used by the poor” while “their employees tend to vote Labour.” By looking after the state, the party is looking after its core vote. The paper doesn’t like it one bit:

Britain has much experience of class politics, and none of it has been good. Class politics makes for bad economics: the state swells, public money gets wasted and entrepreneurs grow nervous. And it makes for a sad country, too: divisions deepen, suspicion flourishes and the social contract frays. When the time comes to judge the parties’ electoral strategies, voters should remember that.

Obama Last Transatlanticist?

Will Barack Obama turn out to be the last transatlantic American president? Nicholas Kitchen wonders in The Washington Note. Although his wind of change met the approval of nearly all of Europe, a series of diplomatic gaffes and mishaps has strained relations, he claims.

The Obama Administration supposedly downgraded ties with Britain from a “special relationship” to a “special partnership” — whatever the difference there might be. As James Pritchett has argued, such a downgrading is not unnatural: Britain simply isn’t the global power it used to be, not in economic nor in military terms and the United States have little reason to pretend otherwise. Kitchen seems to consider it a failure nonetheless.

And it’s not just Britain that Obama managed to upset. No, Angela Merkel and Nicolas Sarkozy expressed their “annoyance” with his administration’s “attitude toward sensitive historical anniversaries” apparently. According to Kitchen these “diplomatic contretemps” were the products of a serious divide:

[O]ver the best response to the financial crisis and in particular the issue of regulation of complex financial services instruments, with Mirek Topolanek using the Czech Republic’s presidency of the European Union to describe American bailouts and stimulus policies as “the road to hell”.

And what does Obama do? He goes to Asia and declares himself the “Pacific president”.

Outrageous? Not really. Kitchen is fair to note that it’s mostly the Europeans themselves who are to blame:

[T]he truth remains that if Europe wants to be a major player on the world stage it needs to think of its role more strategically and systemically if the United States is not to regard the relationship with China as its most important bilateral tie.

There is probably little that will prevent the Americans from considering the latter relationship of greater significance, however, and for good reason: the Sino-American relationship is bound to define the twenty-first century, one way or another.

At the New Atlanticist, James Joyner defends the Obama Administration’s Pacific orientation. That is not to say Washington has forgotten about Europe, he writes. “Just because other countries now get more attention doesn’t mean the transatlantic relationship isn’t the most important one.”

[I]t’s difficult to imagine an evolution of the international system that would have China — or any other rising power — coming to have more similar values and interests than exists between the United States and Western Europe.

If not for the military and political alliance, that is still strong no matter how little attention President Obama were to pay to it; the cultural and economic ties between both sides of the North Atlantic would suffice to ensure mutual dependence for decades to come. The Obama Administration isn’t neglecting Europe. It simply realizes that there are more partners out there.

The Potential of European Might

War, said Clausewitz is nothing but a continuation of political intercourse, with the mixture of other means. If your politics or those of some other propel you to military action, then that is what must be done.

The recent appointment (not election) of a European president unifies the European Union, politically more than has been seen before, with the addition of a “High Representative of the Union for Foreign Affairs and Security Policy” providing the bloc with a mouthpiece on strategic affairs which one presumes will include out of area operations of a military nature and a unified approach to the strategic defense of the EU as a whole. Read more “The Potential of European Might”

The New Atlantic Order

The financial collapse of 2008 and the subsequent global economic downturn have left American prestige badly damaged. For years its free-trade rhetoric dominated debate within fora like the World Trade Organization and urged second-rate powers to privatize and reduce tariffs. Whatever its political course, American economic leadership seemed unchallenged. It was the era of the Washington Consensus.

Today, the American economy lies in shambles and eight years of George W. Bush have obliterated a great amount of the international leverage and respect that the country could previously count on. American management of globalization is contested as is American predominance on the world stage. Rising powers as Brazil, China and India and old world players as Europe and Russia all demand a place in the Obama Administration’s “multilateral” game.

Serious attempts are made in that direction. The G20 is a fine example of what Henry Kissinger called for last January in “The chance for a new world order“: “creating an international political regulatory system with the same reach as that of the economic world.” A promise that the United Nations has never been able to fulfill, the G20 now revives by shaping the political and financial framework of the future. Read more “The New Atlantic Order”