Donald, Part Deux

I had thought that early March could be crucial from a political economic point of view. On March 4^th Donald Trump goes on trial for trying to overturn the results of the 2020 presidential election, and on the 5^th the republican party holds its primary elections for the 2024 presidency. The scene would be set for Trump the martyr to march to power.

It seems that the sense of drama is now largely redundant, Trump is well ahead of his nearest rival Nikki Haley, and he has started to control the policy agenda on the republican side. His very obvious weak point is that beyond the most steadfast ‘right wing’ republicans, he seems to have few votes to garner. This may ensure that some donors help Haley to stay in the race longer than many think.

Yet, a second Trump presidency is now a high probability, and in the US, activists, lawyers and the policy community are preparing for this scenario and the likely cleaving of public life in the US (it can get worse than it is). Beyond the US, the knee-jerk assumption is that Europe is unprepared for a second Trump presidency, and that Europe will ‘fold’ in a world where the leader of the ‘free’ world is an aspiring dictator. I am not sure that this assumption is a good one.

Much of the debate around the impact of a second Trump presidency on Europe, centres around defence, the assumption being that the US would pull out of NATO, leaving Europe at the mercy of Russia. Indeed, in recent days a chorus of European policy makers have sounded off on this.

For example, last week the defence ministers of the UK and Germany, Norwegian and Swedish generals, as well as the head of NATO’s military committee, have made pointed warnings of a war between NATO and Russia. There have also been calls for an EU army (‘European pillar of defence’) and for the EU to have its own nuclear deterrent (the only independent European nuclear capability is that of France), and a public musing by a British general on the virtues of conscription.

If Europe is serious about preparing the political and security ground for a Trump II world in which Russia becomes more belligerent (I am not sure), then it can do a number of things, which in themselves become tests of intent.

First, to repeat a point I have made in this note many times, it needs to make member states like Slovakia and especially Hungary (as well as prospective member Serbia) choose sides. Trump is the only political figure in the western world who lauds Viktor Orban (Putin simply controls him), and Orban in return pushes the case for Trump’s re-election. Orban’s corruption and Russo-philia are becoming institutionalised in Hungary.

Matters might come to a head at an EU leaders summit late next week, where the aim is to sign-off a funding package for Ukraine. Hungary has obstructed this and there is now a sizable group in the European parliament and a smaller group amongst European leaders in favour of using Article 7 to deprive Hungary of its voting rights. Beyond Hungary, there is much the EU can do to prepare for a more hostile approach from Russia – aggressively bolster support for Belarus’ opposition, credible trade and financial sanctions against Russia, aggressive sanctions against banks in and on the old periphery of the EU (i.e. UK and Switzerland) who hold the assets of Russian individuals, and very severe controls on the movement of Russians into and in the EU.

Before I get too carried away with preparations for war, let’s return to the impact of a second Trump presidency for Europe. My view is that beyond the grotesqueness of Trump as a character, the real concern is that his second term in office would be marked by the abandonment of the rule of law and the ethos of democracy by a majority of Americans, to a degree never seen in America’s long history as a democracy and not even fully anticipated in the Federalist Papers.

If this is the view that Americans and the rest of the world draw, then it will have significant implications for the role of American companies in the world economy, the perceived safety of US assets and the role America as both a superpower and a benign ‘godfather’ to world institutions. In this scenario, where there is less respect, confidence in and fear of America, Europe has an obligation and an opportunity to bolster the international order.

Indeed, one could imagine that the role of Europe in the world (as the liberal, democratic and cultural pole) could become clearer – should Europe’s leaders rise to the challenge in framing this, and in investing in it. Here, one opportunity that has gone begging is capital markets union – perhaps there are no votes in such a project for European politicians – but Europe has failed to follow through on one of the implications of the euro-zone crisis. As a financial system it needs more ‘safe assets’ and risk capital. If Europe had deeper, more joined up capital markets it would be in a much stronger place geopolitically, and in terms of funding its ‘strategic autonomy’.

As a final point (I suspect I will be returning to this topic) Europe’s politicians, and I would argue its voters, need to examine the reasons behind Trump’s persistent popularity and ensure that Europe does not make the same mistake (particularly bearing in mind the current controversy over the AfD in Germany, where senior party members hosted an offsite led by a small, Austrian fascist that touched on topics such as mass deportation). In particular, the sense that politics is disconnected from people and run by an ‘elite’, the high cost of living, the poisoning of political systems by social media and the need for greater education specifically around democracy, are just some of the things that spring to mind.

Have a great week ahead,

Mike

Labouring on

Last Sunday’s lunch was made up of a pint (or two) of ale and a packet of pork scratchings, in the inimitable Peveril in the Peak, in Manchester. It was the start of a week-long tour of the United Kingdom, taking in Manchester, London, the Cotswolds and Belfast, from where I am sending this note.

In the Peveril we soon got chatting to a couple from the Wirral, and after a discussion on football and rugby, the conversation soon turned to politics, and specifically the question of why British people are not more visibly upset at the state of their country. Growth lags all European rivals, multiple corruption scandals are bubbling to the surface of political life, public services (i.e. NHS) have been degraded, and in particular the regions outside London are suffering.

Opinion polls suggest British people are ready for a change of government – Labour is eighteen points ahead of the Tories, far more so when it comes to younger voters. Indeed, a recent poll by YouGov (commissioned by a group of Brexiteers, allegedly) pointed to a 120 seat landslide for Labour. Yet, if British people are upset, they are nonetheless ‘keeping calm and carrying on’.

They may soon get their day at the polls. In a recent interview, prime minister Rishi Sunak suggested that the next UK general election (which must happen by next January) would likely occur in the second half of 2024. This has set commentators guessing the date of the election.

An important date to watch is the Tory party conference which will be held in the first week of October (1st, 2nd), and could thus point to an election just before or more likely after the US election (potentially around Nov 14th). At the same time, the risk of ‘noise’ from the US election might even push the UK election to earlier in the Autumn.

My sense is that Sunak will wait as long as possible given how far behind the Tories are in the polls and may try to engineer a low turnout (every UK general election going back to 1931 has been held on a Thursday, but Sunak could aim for a Friday election, hoping that low turnout could rob Labour of younger voters). Other factors and dates to bear in mind are the UK budget on March 6th and local elections on the 2nd May.

We might also bear in mind that Sunak may no longer be master of his own destiny. The Tories’ promise to send asylum seekers to Rwanda, which has become the organising idea within the party, was nearly ‘sunk’ by a rebellion by the very right wing of the party (reportedly prompting one MP to declare ‘my party has gone mad’). Sunak survived, but is at best a fledgling leader.

The Tories face two more by-elections – in Kingswood and Wellingborough – in coming months, and these will provide a good benchmark of how they are faring (there is a low probability that someone may try to unseat Sunak as leader if the by-elections go badly).

In that context, the election is now Labour’s to lose.

Labour have on several occasions performed less well than polls suggest, notably when the Tories under John Major snatched a victory in 1992 having been behind in the polls. The Blair led ‘New’ Labour (1997) was much better at campaigning and there are signs that Blairites are making a comeback in the ranks of the party now, and that their sense of discipline is holding.

While it is generally accepted that this Labour frontbench is neither as dazzling nor potentially transformative as that of the first Blair government (Starmer is less charismatic and less ’bullish’ than Blair), they are starting to behave in a Blairite manner.

So far, Labour’s strategy has been to allow the Tories to make mistakes. The Labour policy manifesto is, publicly, very dull, and does not give away much. I expect that they will launch more specific policy options in the immediate run-up to the election. This steady, cautious approach belies the fact that Labour has had only six prime ministers in its modern history – while the Tories have had five in just the last eight years.

With regard to the election and its aftermath, several issues will matter.

First, similar to Donald Tusk’s first months in power in Poland, Labour will emphasise a return to the ‘rule of law’ and the rooting out of corruption. Institutional reform (i.e the abolish the Lords, with electoral reform a wild card) and tougher policing of the behaviour of politicians and their associates will be prominent, and we expect there will be further inquiries into the behaviour of Tories/Tory donors.

Labour cannot (immediately) reverse or renegotiate Brexit. But there is scope for the EU and the UK to adopt a less antagonistic and more pragmatic stance with each other on trade oversight, financial services and the regulation of new technologies. Military and security cooperation might well grow even closer. In foreign policy, the UK should be easier to deal with (there is an outside chance that one of the Miliband brothers returns), and the most difficult issues for Keir Starmer will be Israel/Palestine, China and relations with the US (if Trump is elected).

Labour will inherit a difficult legacy in terms of the damage to the UK economy and the rising deprivation in the regions. The biggest task facing Labour is to rebuild the UK economy, re-equip and re-engineer social services and to achieve a sense amongst British people of a sense of ‘fairness’ (equality) across British society. Whether this will imply higher taxes (the Tories will likely cut taxes to low levels, trapping Labour) on individuals and companies, or even the introduction of a wealth tax, is not yet fully clear. Tax breaks, such as ‘non dom status’ would likely be phased out under Labour.

Labour’s economic policy will likely be more state driven – and privately financed, such as the issue of ‘green gilts’ to fund new green energy infrastructure. Rachel Reeves, the shadow chancellor is close to the Biden team and an admirer of ‘Bidenomics’. Also, like Gordon Brown, he is keen to emphasise fiscal discipline and as a potential chancellor will be keen to avoid a Truss style bond market wobble.

Labour are being very careful to guard their lead in the polls, and to not allow themselves to be held hostage to specific policies. They had best save their energy for the lengthy challenge ahead.

Have a great week ahead,

Mike

The Pitts

There are several interesting rankings of British prime ministers, notably from the BBC and the University of Leeds. They mostly relate to prime ministers of the modern era. Several other rankings (by the BBC and journalists in the politics field – notably Matthew Parris, Iain Dale and Peter Riddell) go back further in time to Robert Walpole, effectively prime minister in 1721. These rankings suggest that one of the greatest prime ministers was William Pitt the Younger (his father William Pitt the Elder was also prime minister).

As a character, Pitt was considered aloof, unsociable, and allegedly, didn’t like girls. Of the main issues to cross his desk (he served as prime minister for nearly nineteen years) were the reaping of commercial fruits of the post-Independence relationship with America, the rebuilding of Britain’s financial strength and the sapping of India’s economy through the East India Company. Today, India is on the rise, the US might have peaked, and Britain’s finances again need remaking.

The reason that Pitt the Younger should be of interest to us today is that he is acclaimed for the way he navigated Britain through a series of geopolitical events emanating from France (the Revolution and the Napoleonic Wars), and that he first became prime minister at the tender age of 24 (for those readers who wish to learn more William Hague has written a good book on Pitt).

It was one of a number of sources I leapt to on hearing that Emmanuel Macron had appointed 34-year-old Gabriel Attal as prime minister. Attal, like several other appointees to the new cabinet, has effectively no experience of government, or indeed of much else. Macron himself had relatively little experience of government when he made the daring decision to run for President, as did Sanna Marin, elevated to prime minister of Finland at the age of 34 also.

However, France usually likes its politicians to be (too) clever, experienced and capable, and in this sense the new government is a break with the past, and not necessarily one for the better. Whether, like Pitt the Younger, Attal has a long distinguished career and vanquishes France’s adversaries I do not know, but his appointment highlights several trends.

The first is that Macron is a risk taker. I don’t feel that this aspect of his behaviour receives enough commentary, but he is one of very few political leaders (populists don’t count here because they don’t care about the consequences of their actions) to take big risks. Pension reform is one, which didn’t quite pay off, and the result is that he has decided that a more political, activist and showy government is the answer.

Attal will be more the impresario of the government, and less the ‘driver of the bus’ in the sense of Jean Castex, or the near-presidential term in office of Edouard Philippe. His cabinet will be a difficult one to manage. Several of the political heavyweights (Le Maire, Darmanin) were against Attal’s appointment, as were other influential figures (Francois Bayrou, Philippe and Alexis Kohler the top civil servant at the Elysée). Some ministers have little experience in government, and the joker in the pack – the appointment of Rachida Dati as culture minister, will likely prove an ongoing distraction (she is hard to describe).

I am lucky to know many of the different corners of France well, and if I was to judge the reshuffle from the point of view of people in for example Charente-Maritime, it all looks like the Parisien elite (of which Attal is the archetype) carving up political roles for themselves, with little radical change in terms of what this means for the lives of French people. Indeed, the reality of France’s perilous fiscal situation makes it very difficult to do so.

My suspicion is that the Attal government will look and sound less like previous French administrations, and more like the recent Tory cabinets (and that is not a good thing). What I mean here is that the personality, private life and ‘showbiz’ allure of the Attal and ministers like Dati could take precedence over policy. French politics will also become more combative, like Westminster. The team that Macron is sending out is crafted to take on the far-right, to be more vocal and aggressive in parliament.

The great error here is that (I believe) French people do not want politics to become like day-time tv, but rather want politicians to trust and understand them better, and to reshape the political machine so that people (regions, departments for example) have more access to power. That is the message of ‘L’Accord du Peuple’, which will be published next week. It might be the only beneficiary of this new government.

Have a great week ahead,

Mike

Restoring Democracy

A happy new year to all readers, where the start to 2024 has been marked by numerous articles in policy journals and the press about the importance of 2024 from the point of view of politics and democracy, never mind that some of these newspapers have in recent years done their best to promote the vandalization of democracy and the rule of law.

Regular readers will know that the ‘democratic recession’ is a major preoccupation of mine. In this respect, I intend to leap, feet first, into the debate on democracy. In a week’s time L’Accord du Peuple (Calmann Levy) which I have co-authored with the great Pierre-Charles Pradier, will be released in France.

While the book should, I hope, resonate across Europe, our target is France and our aim is to find practical ways of bringing democracy closer to French people. One pragmatic idea is to deploy citizens assemblies at the regional or departmental level, where they have more relevance and where they are perhaps less of a threat to national politicians, who it seems have deplorably little trust in the opinions of French citizens.

Then on January 20^th I have the privilege of a TEDx Talk on the topic of ‘restoring the credibility of democracy’. The Talk takes place in Stormont (Belfast), a symbolic location in so many respects for democracy, and where the ‘lights of democracy’ are currently ‘turned off’.

While it is remarkable that nearly half of the world’s population will vote in elections this year (Bangladesh today 7^th January, Taiwan next week, and then in order of importance the US, UK (September now likely), India, South Africa, the EU parliament, Mexico, Indonesia and Russia (but we already know the result there)), there are two new elements that are not discussed enough.

One is the fact electoral outcomes in different countries are correlated – for example, what happens in Taiwan next week can impact the US presidential campaign and might even alter the ways in which elections in India and Indonesia are held.

In addition, there are now common global issues (inflation, climate damage) as well as two polarising wars that are colouring political debates in individual countries. The other factor that is common across many of the aforementioned countries is the tug of war between the sanctity of democracy and the belief in ‘strongmanism’. India, South Africa and Russia are in the latter camp. Yet, Indonesia is exceptional here in that Joko Widodo will leave the political stage (he was first elected in October 2014) with exceptionally high approval ratings and broad respect (though his son is involved in the race to succeed him).

There other factor worth emphasising is the industrial-level interference in elections across the world. In this context, Richard Daley’s ‘vote-stuffing’ in favour of John Kennedy’s 1960 presidential campaign or even the Tammany Hall tactic of plying voters with alcohol and then leading them to the voting booth, appear quaint. It will be a busy year ahead for the team at ‘Fancy Bear’ the Russian hacking group alleged to have interfered in elections in the Netherlands, Germany, the UK, US and France amongst other countries.

There are signs that democracies are responding to this interference. For example, yet more evidence has been uncovered of Russia’s support for Marine Le Pen. In addition, the EU has deployed its Digital Services Act for the first time to launch multiple investigations into X (Twitter) specifically that X has been spreading misinformation and diffusing hate content. Indeed, under Musk’s stewardship X has tried hard not to live up to the requirements of the Act – in May it disengaged from the EU Code of Practice on Disinformation and has scaled back resources for monitoring of content.

In the year ahead, I suspect that EU policymakers and national governments will take a tougher line on social media and will be more demanding on the social media giants’ willingness to police content.

However, there is a need for democratic governments to be even more muscular. In Europe two thorns in the democratic side are Hungary and Serbia. An EU leaders’ summit at the start of February, whose goal is to sign off aid to Ukraine, may be the final straw in terms of their patience with Hungary, a country that enables attacks on European democracy and the rule of law. There is now talk of suspending Hungary’s voting rights.

Another bad ‘democratic’ actor is Serbia, a potential EU member state. Serbia recently held general and local elections, the latter were marred by apparently very obvious vote rigging. This has triggered large protests in Belgrade against Alek Vucic’s government. Recently there occurred a brutal, sinister assault on the leader of the opposition leader Nikola Sandulovic. In my view, in the light of the ambivalence of Serbia’s relationship with Russia, the EU should suspend its passage towards EU membership.

In short, until the leaders of the democratic world adopt a more aggressive approach to those who attack democracy, they will continue to be mugged by autocrats. There is plenty they can do if they use cyber, social media and economic warfare to push back on attacks on democracy. One initiative that helped to bring down the Iron Curtain was the mass purchase and distribution of photocopiers into Eastern Europe by George Soros. This provided the mechanism by which ideas and information could travel around countries like Poland, Hungary and Romania. It is time for the West to think like this again.

Have a great week ahead,

Mike