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Douglas Carswell's Blog

29 SEP 2016

Sarkozy is wrong about Brexit - and French voters know it

Nicolas Sarkozy, who couldn't convince French voters he'd be a better president than Francois Hollande, believes he can persuade us to reconsider Brexit. Based on the way his compatriots now feel about the EU, he might be better off doing some rethinking of his own.

Part of Sarkozy's pitch for a presidential comeback is a new EU Treaty. He wants to negotiate a "new Europe". Where have we heard that before?

Every British prime minister for decades has assured us the European project could be reformed. Their broken promises are what made many people realise the only way out was to vote Leave.

Perhaps more interesting is how Sarkozy's plan will play at home. According to recent research by Pew, only 38% of French voters have a favourable view of the EU today, compared to 69% in 2004. It's no coincidence support for the Front National has surged at the same time.

Even in Germany, Euroscepticism is on the rise. The anti-EU AfD party recently beat Angela Merkel's CDU into third place in a regional election.

While the European centre right is still committed to the European project, the peoples of Europe are increasingly Eurosceptic.

It's hardly surprising. From the Greek debt disaster to the migrant crisis to the terror attacks coordinated from Brussels itself, Euro elites have presided over one mess after another. Yet many are so detached from the people they rule they can't even understand why they are resented.

And this is the point: if centre-right leaders keep backing a failed, federalist Europe come what may, they will drive more and more voters into the arms of radical – in some cases, extremist – alternatives.

So, with respect Monsieur Sarkozy, it isn't Britain that needs to think again about its relationship with the EU. It's politicians like you.


28 SEP 2016

Labour doesn't like Essex? The feeling's mutual

Shami Chakrabarti has been pleading with Jewish Labour party members - who might feel let down by her report into anti-Semitism - not to quit the party. Her pitch? "Don't leave me locked in a room with Essex Man." Is there anyone Labour doesn't have a problem with?

It may come as news to the noble lady, but Labour isn't exactly flavour of the month in Essex.

Over the eleven years I've represented Clacton, Labour has lost a lot of its support base locally. Many of my constituents abandoned Labour because they felt Labour had abandoned them. It seems they were right.

What's extraordinary is how narrow Labour's target demographic now seems to be. Leave voters? Not welcome. Centrists? No admission. Jews? Only if they're prepared to put up with what looks increasingly like institutional anti-Semitism.

Labour's growing disconnect from most of the country isn't just a party matter. It's a problem with our political system.

It's no coincidence that the big corporate parties have kept their monopoly on politics despite no longer representing the people. On the contrary, it's by design.

More than a century of legislation has increased the power of party machines, created safe seats, shut out competition – and marginalised the views of voters. (I've written about this at more length in the New Criterion.)

Politics is a cartel. But the cartel can be broken.

How do I know?

Because we did it in Clacton. Twice.

Perhaps I ought to invite Baroness Chakrabarti to come to Clacton to meet some Essex folk. She'll discover they're as decent as anyone she sits next to in the House of Lords.


27 SEP 2016

Deutsche Bank is the tip of the iceberg

Deutsche Bank's shares hit record lows yesterday. Its market cap has fallen by 75% since the start of 2014. Is this Lehman Brothers all over again? There's no doubt the rest of the Too-Big-to-Fail banks are still dominoes waiting to fall.

It's no surprise that Deutsche is in so much trouble – at least not to UKIP in Parliament.

Our study on Europe's financial sector, published late last year, found Deutsche to be the least capitalised of any major European bank, with the lowest leverage ratio, and the worst performance under a hypothetical stress test.

But Europe's other big banks – including the UK's – are scarcely any better capitalised, or less vulnerable. So if Deutsche goes down, it's taking the rest of the financial sector with it. As the IMF – in a rare moment of lucidity – warned three months ago.

The question is: why is this happening at all?

After the financial crisis, billions of pounds have been pumped into the world's biggest banks to keep them afloat. New regulations – from Dodd-Frank to Basel III – are supposed to have made sure they couldn't collapse again. The global financial sector is meant to be fixed.

But it's all a sham.

Public subsidies for banks – whether QE, low interest rates, deposit insurance, or direct state bailouts – have only encouraged them to take more risks, in the sure knowledge taxpayers will pick up the tab.

New capitalisation rules haven't raised banks' leverage ratios (core capital vs. liabilities) any higher than they were before. The margin of error is still far too thin. In fact, the biggest banks are the most exposed to risk.

Official stress tests, meanwhile, invariably overstate the big banks' strength. But then why wouldn't they? They're carried out by the same central bankers who are supposed to have reformed the system. Regulators can't admit there's a problem without confessing their own negligence.

The left tends to blame financial instability on corporate greed. Unfortunately, it's much worse than that. The real problem is systemic: fractional reserve banking.

Banks that lend against deposits dozens of times over are inevitably unstable. They're bound to be vulnerable to shocks and bank runs because they never had the capital to cover all their liabilities in the first place.

In a free market, bad banks would fail. Fractional reserve banking would be unsustainable in the long term. Why? Because the only thing sustaining it now is state subsidy.

Overleveraged banks like Deutsche are too big to survive. Fixing them requires tackling the excesses of fractional reserve banking. How? I proposed one way to do it in After Osbrown.


26 SEP 2016

What's progressive about the Labour party?

62% of Labour members voted for Jeremy Corbyn. 38% voted for Owen Smith. What percentage of the country still cares?

The Labour leadership election pitted 1990s Blair/Brown nostalgics against 1970s CND throwbacks.

People who, three months on, still haven't come to terms with the referendum result against people who, thirty years on, still haven't come to terms with Thatcher.

South Islington against North Islington.

If Labour is lagging in the polls, it's because its whole internal debate takes place within a tiny inner London bubble. The party has become hermetically sealed off from the rest of the country

Just consider: those parts of the party most in tune with the public mood – Labour Brexiteers like Gisela Stuart and John Mann – didn't have a dog in the fight.

So when Jeremy Corbyn talks about his party as the "engine of progress", it's hard to tell if he's being serious. Britain has progressed a lot faster than Labour.

What's retrograde about Labour isn't just Jezza. It's socialism.

Since the Second World War, no system of government has perpetuated suffering for more people than socialism. Whereas no system of government has lifted more people out of subsistence than free-market capitalism.

From Mao's China to Castro's Cuba to Chavez's Venezuela, socialist statism has done nothing but perpetuate poverty for hundreds of millions of people.

Yet these are the leaders Corbyn and his Comrades seem to admire. Chavez's successor, Nicolas Maduro, even tweeted the Labour leader his congratulations.

The Corbynistas can't shake the fantasy that government is better at running people's lives than people themselves. That's why they're relics of the past: they infantilise the electorate.

In the referendum, the majority voted for control. It's a choice we should have more often.

We should be able to vote for control over how our individual shares of education and health budgets are spent. Control over local planning decisions. Control over how we live – without the taxman punishing people for their lifestyle choices.

Labour's implosion presents UKIP with a huge opportunity at the next election. Control is the real progressive alternative we can offer.


23 SEP 2016

Is Theresa May prepared to fight corporatism?

City AM reports that Theresa May is scrapping David Cameron's Business Advisory Group – a forum for the PM to be lobbied by corporate cronies. I hope it's true. Less corporatism can only be a good thing.

Britain may not have a corporate lobbying industry on the scale of K Street in the United States, but it's still pretty extensive.

Whitehall is never short of corporate affairs executives seeking official audiences. Ex-ministers are routinely recruited to lucrative "advisory roles" in big corporations.

Those bidding for government contracts or patronage aren't even shy about currying favour. It's no coincidence Westminster station is plastered with adverts for defence contractors and runway-hungry airports.

The influence of vested interests creates conflicts of interest. MPs – including ministers – are there to stand up for their constituents. It's impossible to represent Big Business simultaneously. Lobbying directly undermines democracy.

"But what's the alternative?" You might say. "Surely businesses would be stupid not to lobby government."

That's true. But only because government makes lobbying profitable.

Our supposedly free-market economy is really a permission-based system. Unless you have official approval – whether from regulators, local authorities, Whitehall, or Brussels – you can't sell your product.

Markets depend less on what buyers want than what mandarins permit.

For big corporations, that creates a huge opportunity. The reason they put so much money into lobbying isn't just to get their products permitted. It's to get their competitors' products prohibited.

Which is why, when leftists say the way to constrain corporatism is more regulation, they're playing right into the hands of the CEOs. Regulation isn't a threat to the biggest players. It's what keeps them in business.

Our permissions-based economy is what allows big corporations to rig the market against upstart rivals, and shut out wealth-creating disruptive innovation. Maybe that's why productivity is stagnating.

To end lobbying culture, we'd need to get rid of the gains lobbying generates. That requires less government intervention, and more regulatory competition.

Closing one cosy corporatist club won't reform our economy. But it's good to see this government might be less beholden to vested interests than the last.


22 SEP 2016

Brexit pessimism is based on dogma, not data

The OECD has backtracked on its prediction of a post-referendum UK slowdown in 2016 – revising its growth forecast up. The ONS says there is no evidence that the vote has had a major effect on the economy. Does this mean Project Fear is finally over? Don't get your hopes up.

The economic data since the referendum has been remarkably positive. Exports, employment, and markets are up. Deficits – both trade and budgetary – are down.

But the doomsayers haven't given up yet. Maybe growth won't slow this year, but it will next year, the OECD now claims. The economy will stall without more monetary stimulus, says the Bank of England.

It's not clear what hypothetical piece of information could convince them that their predictions are wrong.

People in major financial institutions are employed to draw sound conclusions from data. Instead they seem to interpret the data to fit their predetermined conclusions.

Too often, what is sold to us as informed analysis is really a reflection of groupthink and dogma. That's why – from the launch of the euro to the financial crisis to the referendum – global economic forecasters have been so wrong so often.

Instead of trying to prophesy the future, maybe they should look at the past. Nothing in the EU's recent history suggests it's found the elixir for economic success. Where are Europe's Apples, Googles, and Facebooks? Where's the growth? Where are the jobs?

The reason so many of us are confident Brexit will make Britain better off is that the EU is fundamentally broken.

Are the 'experts' so detached from reality that they can't see that?


21 SEP 2016

Why Britain needs to leave the single market

So much of the media debate about Brexit seems to focus on whether the EU will give Britain permission to keep trading with it. Isn't it just as important that, after we leave, we won't need the EU's permission for the rest of our trade?

Of course we want to keep trading with the EU – and, like so many other non-EU countries around the world, we will. Britain doesn't need to be a member of the single market to have access to the single market.

Take EU passporting rights for financial services, for instance. Pundits tell us our banks can't trade in the EU without them, so we mustn't leave the single market.

But that's simply not true.

New EU financial rules (MiFID II and MiFIR) will allow firms in foreign jurisdictions with equivalent financial regulations to the EU to trade in the single market.

The UK's financial regulations aren't just equivalent to the EU's. They're identical. So there's no reason why British banks should lose their trading rights (as Moody's and DLA Piper agree).

In any case, as the Bank of England acknowledges, more EU firms use the current passporting system to trade in the UK than British firms use it to trade in Europe. Is the EU going to hurt its own banks just to spite us?

Surely, though, there's a bigger point here than just our trade with the EU. Yes, British firms that want to export to the EU will still have to abide by its rules post-Brexit. But they make up only 6% of all the companies in the UK.

What about the rest?

Brexit allows us to set the other 94% free from single-market rules. Rules that, according to Open Europe's estimates, cost British industry £600 million a week. Rules like the Clinical Trials Directive, which has kneecapped a whole industry.

Instead of worrying about how to comply with Brussels' burdensome bureaucracy, shouldn't we be looking forward to taking back control of our laws?


20 SEP 2016

The SNP's Brexit claims are bogus

Three months since the referendum, Project Fear's economic warnings have already proven false. But none are more bogus than those of Remain's most recalcitrant rearguard: the SNP.

Nicola Sturgeon makes out that, compared to the rest of the UK, Scotland's economy will be particularly badly hit by Brexit.

But what's the basis for this idea?

As Moneyweek's Matthew Lynn writes, the numbers don't support the SNP's case. Because, compared to the UK as a whole, Scotland does a much lower proportion of its trade with the European single market.

Excluding oil and gas, Scotland's exports to the EU are worth £11.6 billion per year, compared to £15.2 billion for those to the rest of the world, and £48 billion to the rest of the UK. So, if Scotland left the UK post-Brexit, just 18% of its total exports would go to the EU.

Moreover, its exports to the EU fell by 16% last year – the fastest of any of the four nations in the UK.

Plus, businesses in Scotland already use much less cheap EU labour than those elsewhere in the UK. Just 7% of Scotland's workers are born abroad, compared to 13% for the country as a whole.

Then there are the opportunities. New free-trade deals could, for example, cut massive tariffs on exports of Scotch to developing countries, like India.

The SNP's goal of an independent Scotland is fundamentally political, not economic – as Nicola Sturgeon admits. What political union Scotland should be part of is up to the Scottish people. But it's got nothing to do with the economics of Brexit.


19 SEP 2016

UKIP can break the political cartel

Congratulations to UKIP's new leader, Diane James! As I said in my speech at conference, I will be giving her my 100% support. The party now needs to rally behind her. If we do, UKIP can go on to break the political cartel.

Last summer, we didn't just beat the Remain campaign. We beat the political establishment. We beat the cosy Commons cartel who, for decades, told us leaving the EU was not an option.

Westminster groupthink doesn't stop there.

It's the coalition of the comfortable, who back benefit cuts for ordinary people but never challenge corporate welfare for banks or government-to-government handouts masquerading as overseas aid.

It's the class of professional politicians who reflect each other's prejudices more than the views of the electorate.

The big parties don't just collude to maintain an unfair electoral system, which means UKIP can get 4 million votes but only one MP. Their contrived consensus means voters never get a real choice at the ballot box.

Groupthink has run Britain for far too long. And it's running us into the ground.

UKIP needs to be the party that offers an alternative. The party of change.

That's why, working with Mark Reckless in the House of Commons, I've been producing policy papers setting out a real radical alternative on everything from energy, to banking, to the family courts.

This summer, we showed the political cartel can be defeated. UKIP can be the force that breaks it. Our party's biggest victories are yet to come.


16 SEP 2016

Can anything convince our central bank to stop printing money?

The Bank of England has come as close at it's going to get to admitting Project Fear was wrong. "Indicators of near-term economic activity have been somewhat stronger than expected," it now says. So why is it still printing more money?

The predictions of post-referendum economic catastrophe have fallen flat. From the markets to employment to exports to construction, every metric has shown growth. Even the fall in the relative value of sterling looks beneficial, as Britain's gaping trade deficit has shrunk.

Which makes the behaviour of the Bank of England perplexing. Its August stimulus package was ostensibly premised on economic contraction. But, with almost two months of data now available rather than one at the time, it's clear that isn't the case.

Yet, instead of changing their policy, the Bank has merely changed its justification. Now the argument is that the good economic data just reflects the impact of the Bank's actions.

When you think about it, that's an unfalsifiable hypothesis. The economy's expanding? Monetary stimulus is sustaining growth. The economy's shrinking? We need monetary stimulus to stop a recession.

It seems like there is no question, in Threadneedle Street, to which expanding the money supply isn't the answer. Even a surge in inflation won't necessarily provoke a rise in interest rates – as Mark Carney has alluded.

In reality, printing money isn't the solution to economic problems, but their cause. Currency debasement and cheap credit have channelled resources into vast unsustainable asset bubbles instead of productive investment.

Constant monetary stimulus will at some point lead to either serious inflation or an almighty correction. The question – as Steve Baker said in his brilliant Commons speech on QE yesterday – is whether people will recognise that the centralised mismanagement of our money is responsible when it happens.


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The End of Politics and the Birth of iDemocracy

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