Saturday 30 August 2014

Ukraine, Russian Truck Convoys and Russian Doctrine: It Helps To Know

Pontificating from my retired officer's 'strategy' armchair, having dusted down my fading memory of Soviet military doctrine (studied professionally and in earnest some decades ago), I have a feeling it offers a handy pointer as to what may be expected in the weeks to come.

Recap: at the highest level, the GSFG was geared for a lightning strike across the whole front from the Baltic to Austria, aiming to gain as much westerly mileage as possible before NATO could mount a serious blocking action (assumed to be dependent on massive US reinforcements arriving even further to the west).  It was always recognised by the Russians that at some point NATO's position might become so poor that recourse to nuclear weapons could ensue, buggering the whole thing - a good reason why they never gave it a crack.  This said, they also reckoned that another plausible scenario would be that NATO would hold back on this provided Warsaw pact forces halted in their tracks at some point and offered to parlay.

At the next level down, Soviet doctrine for a lightning attack entailed by-passing awkward things like towns and also points of strong resistance, a very real contingency given that Soviet kit was light and easily brewed up by the well-positioned Leopard tanks and Milan missiles that existed in large numbers (manned by some very well-trained, well-led and highly motivated West Germans).  Doctrinally, strongpoints were to be fixed, enveloped and passed by, to be mopped up at leisure by second-echelon forces and/or artillery.  This enabled the first-echelon columns to make maximum forward mileage, scavenging supplies as they advanced (quite easy in W.Germany for everything except ammunition).  In order to do the by-passing, all Soviet units were very well-equipped in the field-engineeering and bridge-building departments.

The consequence of this would be that at a given moment after firing the starting-gun, the 'front line' would be a very jagged affair - a long string of irregular salients (some of them potentially very deep) broken up by the by-passed NATO strong-points and isolated towns.  If at a point in time everything was stopped in its tracks pending 'peace talks', the Russians would stop fighting, and rapidly consolidate whatever of the newly-occupied 'shape' was most easily held - some really isolated forward gains might be abandoned - with the expectation that a dazed NATO could be be satisfied with nothing more than just cessation of hostilities, i.e. no relinquishing of any consolidated new gains.

Then wait for another 20 years and try the whole thing again. 

(This doctrine was sometimes likened to attacking something with a very heavy club studded with long sharp nails.  You smash it into the target with maximum force, and it becomes embedded - very difficult subsequently to get it withdrawn.)

Now to 2014.   Such maps as we see of what's going on in Eastern Ukraine show a very amorphous 'front line' studded with all sorts of salients and embedded bits and pieces.  Nothing would be easier than for the Russians quickly to pour across the border, go as far west as they could manage in (say) 24 or maybe 48 hours (Labor Day - 1st Sept! - or Thanksgiving would be obvious dates to choose), call a halt, and declare: what we have, we hold.

Oh, and how did the Soviets prepare for their lightning attacks?  By sending tank commanders, disguised as truck drivers, on recce missions across West Germany.  They knew the lie of the land almost as well as their enemy.

Truck drivers ?  Ring any bells ?  Let's hope little Volodya is ultimately as circumspect as his Soviet predecessors.


Thursday 28 August 2014

Douglas Carswell's honourable error

UKIP have an MP. Well, almost. There is still the matter of a by-election in a safe Tory stronghold and trying to prevent the understandably upset former UKIP candidate having a hissy and disrupting the program. Carswell is popular and reportedly a very good operations man. But he has made a mistake.

By doing the honourable thing and defecting and then immediately calling an election, he has avoided the charge that he lacks candour and is an unprincipled bounder of the Shaun Woodward type. Woodward left the Tory party, having been elected in a safe Tory seat, and joined Labour, who welcomed him with open arms. 
 Despite all sorts of protests from constituents and party Woody refused to hold a by-election and served out the remaining two years until the election, when new Labour parachuted the multi-multi millionaire, butler employing, 7 homes, Sainsbury husband into a safe Northern Labour seat, to the disgust of that local Labour party, and to the further erosion of voters faith in the electoral system.

So Douglas has done the right thing and declared he won't be just taking his previous voters for mugs, and will pit himself and his new beliefs against those of his former colleagues at the ballot box.
There are lots of good reasons for doing this. his integrity. The views of his constituents. Detoxifying his defection. Shutting down the very negative betrayal aspect of the story. Its a very Kippy thing to do. To be seen to be doing what loacal residents would wish, and not what Westminster masters would want.
And best of all, holding a by-election keeps him, and nigel and UKIP, in the news for months.

But its a mistake.

UKIP have no MPs. The defection is great news for Nigel.  But is Douglas Carswell fails to win the seat its a disaster. Quite possibly a catastrophic one that would irrevocably damage UKIP so soon before the big election. 
Carswell could quite easily have remained in place. Citing the sound precedent of every MP that has ever gone before him. A few nasty remarks from Labour quashed by the Woodward story. The liberals silenced by Emma Nicholson, who pretty much did for John Major. The Tories themselves have serial floor crosser Winston Churchill to point to. Carswell could have ridden out the taunts with ease.

But by taking this course, Doug has made it much less likely that other defectors will follow. 
An MP who has to immediately stand for re-election is taking a large risk. And others who are wavering won't have Carswell's fortune to be standing in the seat considered to have the most UKIP profile in the land. So only those very sure of a win, or those so sure that they will lose in the 2015 election that it makes the gamble worthwhile, will even consider a defection.

In february the UKIP Treasurer said he had had talks with seven disaffected Tories, who he was hoping to persuade to jump ship. 

Once those waverers see just how awesome the funding, manpower and resources the Tories are going to put into winning Carswell's Clacton seat, they may well decide not to open the box, but keep the money.

Carswell will probably win anyway and become a UKIP MP.
But his honourable stance on the by-election might well mean he is the only one.

Wednesday 27 August 2014

Mr Boris Farage & Nigel Johnson

 "These are my principles and if you don't like them, well I have others" Grouch Marx

Having been away for a couple of weeks - thanks to ND for manning the ship though a long, and err, wet, summer - it has come to my attention that after an enormous amount of fumbling about two of the 3 great demagogues of our time have finally got round to finding seats to stand for at the next election for the Westminster parliament.

With Labour having won the demagogue leadership game with Tony Blair for 13 years it has been a long time coming for the right wing of British politics. Alex Salmond, peddler of sweet nothings (in a literal sense) to the Scots I doubt will be seen much in Westminster in future.

So that leaves us with Mssr's Johnson and Farage. Both claim to be disciples of Thatcher and her 80's reforms. Both claim to be anti-Europe and both lay claim to be libertarians. However, as any even slight analysis shows, Boris can be both pro- and anti Europe at the same time. His vision of libertarianism is mainly confined to reducing taxes over which he has no control and shows little light when faced with tough decisions like tackling London air pollution. Such is the power of his rhetoric though, that when matched with the short attention span of voters, he comes across well.

Farage too has the happy knack of being a man of the people whilst being no such thing. A well made City man from Kent, he has styled himself with some success the people's champion. Farage is probably more posh in strict terms than even Boris. Farage too claims to be libertarian but is against gay marriage and is for much that is socially conservative. At least he is committed to something in wanting to leave the EU which it is unlikely even Nigel will renege on.

Yet here we are with both likely to be elected to Parliament and if they are then it will be with a weak Labour PM and a vacancy to lead the right win in British Politics. If Scotland has voted fro Independence, then they will have a real struggle to sort out the future of England between them. Oh what a lovely war to watch.

It's odd though that two men with much in common and the same skills in may ways will be fighting it out in 2015 in such a manner. In fact odd enough that if Labour could find a real John Major type man of the people they would be well placed to capitalise on their already lucky fortune of the current electoral cycle.

 "These are my principles and if you don't like them, well I have others"

Tuesday 26 August 2014

Privatisation Revisited

A wet Bank Holiday weekend encouraged a goodly take-up of the 'privatisation paper' challenge in the post below, yielding lots of important challenges to the Gruaniad writer's attack on private ownership of what he considers to be essentially public assets.  His provocation will stir me to write a few posts on his themes, and a good starting-point is this para from part-way through the piece. 
There's no doubt that since privatisation the old nationalised industries have sacked colossal numbers of workers and brought in new technology. If efficiency is doing the same job or better with fewer workers, many of the privatised firms are more efficient. But this simply suggests some or all of the nationalised industries should have been commercialised – that is, had their subsidies shrunk and been removed from direct government control, obliging them to borrow money at commercial rates and operate in a world of market prices without making a loss.
 The first operative word is colossal, acknowledging as it does that there was massive inefficiency in play, in some of the very largest industries of all.  This is no trivial matter and, given that many of them including the biggest were monopolies, his flippant 'solution' - should have been commercialised - is laughable.  No economy can be sanguine about monstrous systemic waste in vital sectors unless (as, say, the French sometimes claim) it is a conscious part of employment policy.  Even then, quantified justification in terms of a proper cost-benefit analysis would be a major challenge: and we capitalists already know what we reckon the outcome would be.

For this first riposte, and particularly for those too young to know these things from first-hand experience, harken to one of Old Drew's tales ...

Back in the early 1990s, the opening-up of the gas market had only just got properly started.  (The 1986 privatisation per se had been an empty gesture because ther old British Gas Corp was sold off as a de facto monopoly, a privilege it guarded and enforced with commercial brutality.)  But things were gradually changing for the better, and one day an experienced US gas company obtained regulatory approval to do something that had never been done before: an independent company was going to build an entry-point for gas going into the BG grid system.  (Previously, BG built them all.)  Obviously the new entry-point needed to be compatible with BG's existing infrastructure, so the newcomer was given BG's technical specifications, one of which was for provision of metering, a very necessary aspect.

The metering spec was for three densitometers be installed (for measuring gas density - one for use and two for back-up), and likewise three gas chromatographs.  For those who don't know, a GC analyses the molecular composition of the gas very accurately, and simple A-level chemistry allows things like calorific value - and density - to be calculated quite precisely from the results.  

Now both these pieces of equipment are standard, robust, and very reliable.  It is entirely reasonable to provide for a back-up (which will probably never be used) because continuous accurate metering is vital: but a single back-up meter is universally considered to be adequate - universally, that is, excepting for BG in 1990.  So the US interloper - a company well-recognised for its expertise in such matters - refused to install the third meter.

It gets funnier.  BG's operating procedure was for the GC density calculations to be compared with the densitometer readings at all times: and in the event of discrepancy, the GC calculation would always prevail.  In other words, no densitometers were required at all ! 

So the newcomer refused to install any.  BG resolutely insisted on 3 of each: the regulator was invoked, and wisely ruled in favour of just two GCs and of course no densitometers at all.

But here's the sting.  Obliged to accept that the newcomer needn't install a third GC, or any densitometers, BG itself installed the utterly redundant 4 pieces of kit ! - 'at its own cost', which needless to say meant at the cost of all gas users everywhere.  We may be 100% certain this accurately reflected gross inefficiency the length and breadth of BG's extensive systems.

And lest we forget, that ladies and gentlemen is why monopolies must be resisted everywhere: and, when they are found to be inevitable (as occasionally they are), they must be watched over night and day.  It is to the various attempts to resolve this problem that we will turn in later pieces.


Saturday 23 August 2014

"Privatisation Scam" - Your Weekend Reading

A great essay question:  read this Grauniad piece - & discuss. 

Sale of the century: the privatisation scam.  Privatisation promised to turn the UK into an island of small shareholders. It failed: the faceless state bureaucrats have been replaced by faceless (better-paid) private bureaucrats – and big foreign corporations. How did we get to this point? 

Your papers will be marked next week. (Leniency will be shown to candidates too young to remember what nationalised industries were like in the 1970s.)


Friday 22 August 2014

Illegal to Slag Off Bercow?

Is it still legal to hurl vulgar abuse at Bercow ?  I'm inclined to get in before he somehow makes it treasonable.  When he was first appointed I called him a bumptious git and the years haven't mellowed him, have they ?  What a disgrace to our Parliament.
The knives are out at Westminster Palace 
Bercow's behaviour is full of Malice 
Malice is aimed at Bercow too 
"His friends in the world are terribly few"
Says Malice 


Thursday 21 August 2014

Domestic Abuse a Crime?

If politcos start bidding each other up on policies like criminalising "nonviolent control in an intimate relationship" then the 2015 manifestos are going to make for pretty weird reading.

Let's see if we can get them started with some new criminal offences with genuine voter appeal.
  • sarcasm in a crowded kitchen
  • wilful withholding of the TV remote
  • assertion of headache without reasonable evidence
  • persistent failure to observe the washing-up rota
  • unlawful distortion of toothpaste tube
  • possession of withering glare
  • going equipped for golf 
I'm sure C@W readers can provide enough material for a substantial new Act of Parliament.  It had better include provision for ten million new prison bunks.


Wednesday 20 August 2014

Air War in the Iraqi Desert

It's been a few years since the RAF first took command of British Forces in Mesopotamia.  That was back in 1921, and there followed a few 'policing' actions by Iraq Command, such as this one from the annals on Xmas Day 1923:
Sheikh Mahmud proclaims himself King of Kurdistan; the RAF bombs his house in Sulaymaniyah.
That'll have learned him.  All a bit imprecise though, in those days: but times have changed.  Precision from the skies above 98% of northern Iraq is pretty straightforward nowadays, and I write as someone who spent many hours gazing down on that part of the world in 1990-91.  Saddam, who had the entire country at his disposal until the closing days of February '91, had the greatest difficulty in hiding his Scuds from aerial view: underneath motorway bridges was a favourite, but most of the needles were found in that very large haystack in only a few days.  

There aren't many motorway bridges that I'm aware of in ISIL's territories, and although small vehicles can scrim up fairly easily in towns, there's nowhere to hide when they come out to fight.  So the scene is nicely set for a very effective deployment of air power.  If ISIL proposes to give battle it will be a very one-sided affair if the USA so decides.  They didn't even manage to sabotage the dam.

Perhaps they are hell-bent on the 72 virgins thing and will give it a crack anyway.  Otherwise, it's no more sweeping territorial gains for them (again, if Uncle Sam says not); just falling back to nasty deeds in the towns it already holds, pending gradual re-investment by various other forces in the land.  And maybe some hit-and-run against oil installations.

Equally likely, though, is surely a strategic melting away, with the leadership consolidating somewhere out of sight with its apparently large sums of money, waiting for an opportunty to spend it on something else unpleasant.  If so, the rank-and-file could soon be returning to their native lands en masse.  A scary prospect: and do we imagine the Border Agency is up to the job ..?


Footnote:  that oil price is inching ever closer to $100 ...

Tuesday 19 August 2014

China Getting Its Act Together

A laughably arrogant heading ?  Writing here about China my refrain has generally been - the 21st century may ulimately belong to them but, right now,  how very far they are from being a confident actor on the world stage.   Constantly wrong-footed by events from Libya to MH370, barely able to restrain Fat Boy's appalling North Korean excesses, clumsy in their dealings with neighbours around the seas they share, yet in serious need of raw materials from beyond their borders: no, China hasn't cracked the Top Nation thing - yet.

But as a good empiricist I need to keep my assessment up-to-date, and here's an interesting marker, from the Peoples Daily Online (English version, natch).  They've translated the headline: Is China Wrong To benefit From Iraq?, but I stuck the original into google translate, and it came up with the rather more revealing: China on the issue of Iraq "free rider" wrong?  which neatly captures the concern - as ever, a tad defensive about how they are perceived.  Is China just letting the USA et al do the heavy lifting for them in Iraq ?   At which point, under his banner of every nation for its own self-interest, our friend Budgie will no doubt say: why not ?  But clearly the Chinese see the need to cover the statesmanlike angle.

Here are some salient gobbets. 
Taking advantage of stability in Iraq and the Middle East as a whole, China makes substantial profits from the petroleum trade*, which further promote the healthy development of relationships between China and Iraq ... Responding to Obama's announcement of airstrikes against extremists in Iraq, a spokesperson from the Ministry of Foreign Affairs said that Beijing "has an open mind towards any actions that help to ensure security and stability in Iraq" ...
China hopes that the U.S. will make a further contribution to Iraq's reconstruction and development, and deal rationally with China's contributions to Iraq in trade, investments and infrastructure. As China's political and economic interests sharply expand in the world, it is increasingly necessary for U.S. to cooperate with China when it comes to vital global issues. In view of this changing situation, even if Obama does not request China's participation, China will pay close attention to international affairs.
To my ear, the contrast between this and Putin's typical pronouncements is noticeable.  I know who's the more likely to get a constructive 'phonecall from Washington.

* an interesting statement, n'est-ce pas ?

Friday 15 August 2014

Working with famous people

Weekend Fun.

Well, not really the actual famous people. Here at BQ Towers we have a Mega Famous pop Star , a 70s sitcom icon and a Ronnie Corbett character from the 80s. 
Long service account manager Michael Jackson. Processor, Penelope Keith. And driver Timothy Lumsden.
{Mike, Penny and Tim as they prefer to be known.}
Leslie Phillips left a while back. {he was called Desmond, for reasons I can no longer remember, but might have been that barber sitcom.}

But, new recruit Michael Caine starts Monday. BQ Industries only employ world class talent.

Thinking back I have worked with a Terri Christian, Diana Spencer and a Paul Young.
Mrs Q knows a Philip Green and a Daisy Cheyne.

Anyone else have any colleague, school or family 'famous' names they have lived/worked with?

Wednesday 13 August 2014

Keep Watching That Oil Price

In case you haven't been allowing the financial data to intrude on your holiday (& quite right too): it's fallen still further, to $103, a one-year low.

As that Russian 'aid convoy' edges towards the border, bear in mind little Volodya's plight.  Anything below $100 and - as we've said many times - he really is in Big Trouble.  (A good job he's more-or-less onside in Iraq: but then again, look at all that Kurdish oil ...)


Tuesday 12 August 2014

Hammond a Safe Pair of Hands?

There's a category of grey, seemingly competent ministers that is exactly what every Prime Minister wants most of: the Safe Pair of Hands.  Can be allowed on Newsnight without dropping a bollock; will take any job and make a fair fist of it; won't be blatantly briefing the Sundays in damaging ways or making inconvenient waves.

Some of these anodyne chaps have ambition though; and some of them  rise almost imperceptably, near to the very top - our old friend Badger Darling being a case in point.  What happens next, once in a blue moon, is those safe hands getting a grip on the Big Prize: but more often an honourable flop of a leadership attempt, followed by further gainful employment in the court of the eventual winner.  And so on, until death or a seat in the Lords.

Another case in point would appear to be Philip Hammond.  Foreign Secretary !  Who'd have thought it, back when his job was running little Colin Moynihan's consultancy vehicle for making money after the latter lost elected office in 1992.   Getting into Parliament himself in '97, Hammond did the rounds of a succession of Shadow posts until victory in 2010: then Transport, then Defence - and now one of the Big 3.

But then we see the Foreign Office losing ministers left and right, and Hammond making tetchy and strident speeches on various foreign and military matters.  And military.  OK, he's senior to Defence now and the issues of the hour once again involve the prospect of military engagement.  But Michael Fallon, now at Defence, is the possessor of an even more renowned Safe Pair, and could probably speak quite adequately for himself.

The Big Prize is in sight for a chap that far up the Pole: and he's taken care (e.g.) to distance himself from things like gay marriage - a modest but certain sign.  But I'm not so sure quite how safe his hands look now.  

You need good hands on those last few yards up the Pole ...


Monday 11 August 2014

A Mere Scottish Pounder: Salmond Has an Attack of Piles

It is often said that Napoleon was distinctly below par at Waterloo because he was suffering from piles at the time.  Alex Salmond gives every appearance of being a man in the same predicament and it couldn't happen to a nicer chap - a mere Scottish pounder after all, as the Duke might have said.

How else to explain his tetchy and unconvincing replies to the really obvious and inevitable question he's getting on the subject of the currency ?  He has had many months to see this one coming, it's a straight delivery (to switch idioms), yet it has caught him lbw and the the finger is raised.

Time was when Salmond held up Iceland, Ireland and the Scandinavian countries as exemplars of what a successful independent nation Scotland could be.  Now it's, errr, Panama and Montenegro for the Scottish Pounder.  

Perhaps, as we wait for the next televised debate, he could put on a one-man silly-season show at the Edinburgh festival to keep us all amused.


Friday 8 August 2014

Always a Pleasure to Disagree with Noam Chomsky

Ah, Chomsky, one of those really clever people who somehow always leave their brains at the door when it comes to politics.

It's the 69th anniversary of Hiroshima and Nagasaki and here he is, opining that it has been the merest good fortune we haven't been plunged into atomic war.  Somehow we have dodged the bullet every day, every hour, every second for 69 years of foam-at-the-mouth nuclear madness - particularly American madness, you'll not be amazed to learn.

Here's an alternative view.  Actually (and even if a little surprisingly), politicians in all countries who have a nuclear briefcase at their disposal find this very sobering, and act fairly responsibly when push comes to shove.

Perhaps we'd expect that of, well, the Brits ?  France ?  the USA ?  But how about Russia, China, India, Pakistan, South Africa, Israel ...  No shortage of political extremists in the list, and yet somehow no-one has pressed any buttons.  This ain't chance, Mr Chomsky - this speaks well for all concerned. 

[As it happens I have a little theory about the Communist nuke-owners:  as good Marxists they have - in the past -  been sufficiently gripped by the inevitability of their ultimate victory, they never saw much advantage in pushing their luck and hazarding it all.  But hey, that all ended in 1989, and still they've stayed sober.]

I'm not complacent.  Iran is a proper country (measured by the standards of the above), but North Korea ain't.  ISIS (if it ever gets a stable base) is in Pol Pot territory: capable of anything and with a broader 'vision' than ever a Cambodian nutter could manage.  

And we may be putting little Volodya to the test in Ukraine quite shortly.  But he'll pass.  At the end of the day, for all his angry nationalism there are some very venal, very pratical men looking over his shoulder at all times.  They all want to retire to spend more time with their money.

Ordinarily it's conservatives that hold pessemistic views on human nature, and radicals the hopeless optimism.  But on this issue ?  No Mr Chomsky, it's not luck.  It's that human nature is a bit better than you think. 


Thursday 7 August 2014

Tranmission interrrupted

Dear Readers,

Whilst Mr Drew is ever available for posting and insightful pontificating, Mr Quango and myself are shortly to take a break from blogging for a couple of weeks. We simply lack the stamina and fortitude of Mr Drew.

Oddly, it is not really a quiet summer, what with the Islamic State over-running Iraq and Israel/Gaza as well as Russia/Ukraine altogether making the world a dangerous place. Moreover, even the Indian Finance minister is now warning of another Financial Crash due to the excessive credit pumped into global markets by US, UK and Japan.

Perhaps then after the right time to seek a break to re-charge batteries - there will be the odd post no doubt from us, but normal service will be resumed towards the end of August.

In the meantime, hope all the readers are enjoying the summer too!


Wednesday 6 August 2014

Salmond, Boris: Neither To Be Trusted

It will be gratifying indeed if our old friend Badger Darling sees off the ghastly Salmond, or is at least presiding when the caledonian charlatan self-destructs.  Gordon Brown aparently hates the idea of his ex-Chancellor getting the credit both for this and 'resolving the banking crisis' (sic) , which is even better.

It's an odd set of circumstances that sees me having any truck with George Galloway, but his 'just say naw' line captures the matter nicely.  A poond's a poond fer aw that also seems pretty apt, and I'm guessing (from 500 miles away) that most Scots see it the same way.  I expect you'll have had yur tea fits in somewhere, too, in that conservative land. 

Yes, Salmond is as untrustworthy as he looks.  And so, I'm sorry to say, is Boris Johnson, who is clearly on manoeuvres yet again, and with the most inappropriate timing.  On the eve of a Union debate, the outcome of which is pretty critical for Cameron, who wants to hear BoJo announcing that we'd better get our minds around leaving the EU?  There are of course easy answers to that question, but none of them very edifying.

If Boris had been a consistent EU-skeptic there might be a scintilla of excuse.  However, he hasn't.  Quite the reverse, he's been a consistently opportunistic sniper at whatever has been Cameron's position, and in the past hasn't scrupled to let us know that contemplation of leaving the EU is the very essence of madness, and that the City of London would thereby be destroyed.

Much as we love these larger-than-life political rogues, at the end of the day we can do nicely without them.


Monday 4 August 2014

Seems everyone is going over the top about WW1.
Naval review Spithead 1911.

The media seem to have been going over the top about WW1 today.
Except where I have been in Italy where there seemed to be no real celebrations planned.
Probably because World War One doesn't start for another year for the Italians.

 Awoke this morning back in the UK to hear on the radio that "England is now at war with Germany".
I thought "What? Again?" 

Anyway if everyone else is at it ..C@W should chip in some economics. Media today correctly saying that WW1 marks the beginning of the modern age. WW1 transformed Europe. Ended imperial monarchies and ushered in the beginnings of modern democracy. As well as fascism and communism of course. Every aspect of society was affected. So lots of discussion about this today.

Less seems to be being heard about the British Empire's already declining status. No one would really know this yet. British Empire was still number one in the Great powers Top trumps. 
Except it wasn't.

In 1890 Britain was the number one producer of steel in the world. Germany's steel production was half that of Britain. By 1913 it was double. And Germany wasn't even first. The USA was producing double Germany. Fueled by railroad expansion. city construction. Skyscrapers. Shipbuilding and urban transport. US Steel had 65% of the world steel market by 1918. British steel was inferior too. The armoured belt steel for the Jutland battleships was coming from abroad.

And in other areas Great Britain's pre-WW1 decade of economic performance, at the height of empire, looks poor. Especially compared to the growth achieved by the 'New powers' of America and Germany.

Britain was never going to be able to remain the coal capital of the world as a small island when up against the USA's continent wide resources. The 1914 figure of 292 million tons mined in the UK compared favourably with Imperial Germany's 277 million. except in the previous 10 years Germany had increased annual coal production by 156 million tons to the UK's 40 million. {USA was mining some 500 million tons a year. Tsarist Russia around 36 million.}

In the first decade of the twentieth century Great Britain lost it's number one spot in modern industry. 
Chemicals became the industry of the Germans. Electricity too. German electrical industry was twice the size of Britain's in 1914. When the UK wanted to build a public power station in 1881 it asked Siemens.  Railroads had already been lost to the USA.

France was the largest vehicle exporter in the world until 1904 when the USA got going. The French Citroen and Renault cars were still the most produced vehicles in Europe until the 1920s.
German's made about three times the number of phone calls as Britons, suggesting a larger telecoms industry. Sweden was top for Europe.

But overall the UK still had the largest GDP in Europe. Though increasingly this was away from manufacturing and into the service sector. Britain was still top but the gap had narrowed very rapidly and very significantly. Even in Britain's stronghold of textiles, Britain was finding itself exclude from markets as its cost price was too high.

What occurred was the London Stock exchange and London banking was funding entrepreneurs to set up abroad. Capital and Labour were moving overseas to the colonies of the empire or the USA where, as in textiles for instance,  

 As U.C. David economist Gregory Clark puts it, 
by 1910 you could combine British labor and British capital in the textile city of Fall River,
Massachusetts, and obtain 50 percent more output per worker hour and 20
percent more output per machine hour than back in the textile city of
Manchester, in England.
British investors had a strong dislike of domestic investment and preferred the riskier, but higher yielding colonial  infrastructure opportunities. ironically many of these failed and investors would seem to have done much better if they had bought shares in domestic, especially the new modern, industries.
The modern world needed engineers and technicians and scientists. In 1914, whilst Germany was collecting a third of all the ever awarded Nobel prizes for physics and chemistry, most children in the UK left school at fourteen and those elite that stayed on were taught classics, law or philosophy. The early industrial revolution used unskilled labour from the countryside and rural Ireland on simple machines designed by nontechnical men.

The second industrial revolution was a high tech, high skilled, research and design led revolution. Britain's neglect of education had left the nation poorly placed to ride it. Technical training was the job of private firms. Private firms were reluctant to do so as they feared their workers leaving to work for a rival firm, or trade's union's demanding extra pay for a higher skilled worker.

WW1 cost the British Empire its financial as well as its human resources. 

By 1916, Britain was funding most of the Empire's war expenditures, all of Italy's and two thirds of the war costs of France and Russia, plus smaller nations as well. The gold reserves, overseas investments and private credit then ran out forcing Britain to borrow $4 billion from the U.S. Treasury in 1917–18

In 1932 a Britain, in the grip of a world wide recession, defaulted on those loans to America. They were never repaid. This caused the Johnson Act of 1934 which forbade American citizens to lend money to foreign countries that had not paid their past war debts, and caused the UK all sorts of problems when WW1 kicked off again in 1939.

However, on the bright side, between 1914 and 1919 the UK economy (in terms of GDP) grew about 14%; by contrast the German economy shrank 27%... and then collapsed completely with the hyperinflation.

So, WW1, despite the enormous cost, may in  fact have prolonged the place of the British Empire as the number {2} power in the world.

Tim Yeo & Gas: Onto Something, Not What He Thinks

We have often had cause here to refer to the central role played by the natural gas market in the UK energy sector, beyond the fact that it provides a very large share of our primary energy, particularly for heating and (sometimes) for electricity.

The additional, crucial factor is that the wholesale price of gas can be (and in the past, often has been) price-setting for wholesale electricity prices: and in the UK the electricity sector is twice the size (by £££ gross) of the gas.  Since the dreadful days of Mili-Ed as energy secretary, UK energy policy has been predicated on the price of gas rising indefinitely, which is how DECC justifies the otherwise quite unbelievable prices - and index-linked to boot! - it is offering to nuclear, wind, solar, biomass etc etc.  We've already recorded here how wholesale gas prices are falling across Europe and the Far East: one glance at how those guaranteed 'low-carbon' electricty prices will look if gas stays soft for the next decade, and you realise what a gamble, a potentially suicidal gamble, this is.  (And all in the name of 'no-regret' policies !)

[Before anyone says, aha, but what about security of supply!? the answer is: it's the same thing.   If the supplies can't be secured well, the demand ain't going away so the prices will rise accordingly.  But actually, the supplies can be secured, provided we diversify intelligently.  It's called trade, and we've always been quite good at it.]

Of course, the fact of wholesale gas prices falling while retail prices stay the same has resulted in the retail sector being referred for a CMA enquiry - as well it might, because the issues are complex.  Now, up steps the disgraced Yeo: the enquiry will be “compromised from the outset” if it does not look at the wholesale gas market, says he, and currently the CMA is not minded to do this.

What's the answer?  Yeo is right to draw attention to the pivotal role of the gas market (see above): but that's as far as we need to agree with him, and the CMA is well-justified in taking the wholesale gas market as a given (see here, para 62-64).

That's because it is, and has been for several years, as close to being an open, competitive, international market as you'll find in most commodities.  Price formation is very well-behaved analytically which is always a good sign.  It is clearly based on the fundamentals of international supply, demand and logistics.  It arbitrages tightly (another good sign), has decent liquidity in Europe (& excellent liquidity in N.America), and has blown away Gazprom's very determined efforts over many years to have gas prices indexed to the price of oil - no small matter when the dominance of Gazprom as a producer is considered.  There are some subtleties:  what, for example, if UK power prices entirely cease to be set by gas price at any time, but are instead set by (e.g.) renewables and/or coal, as is mostly the case now in Germany?  However, the gas market remains a given in examining such possibilities.

In fact, the 'independence' of the international gas market is the one saving grace when DECC is busily trying to rig every aspect of our electricity sector (to call it a 'market' any more is to do violence to the term).  With every decision, regulation and diktat they prove just what unreconstructed interventionists they are at heart in a sector they control via the sweeping powers of the baleful 2013 Energy Act.  But, much as they would dearly love to, their ability to control the gas market is almost as limited as their ability to control oil.

As gas (and oil) price sink slowly in the West, and in the East, Praise the Lord for that.


Friday 1 August 2014

Friday Fun: How Lefties Do Torture Themselves

Here's a belly-laugh on which to end a sombre week: 
Green groups too white and too male compared to other sectors – Survey of 300 US environmental groups show lower percentage of jobs held by ethnic minorities than in science and engineering
Who'd have guessed, eh ?  You'd need to have a heart of stone, etc etc.  And for more laughs, scroll on down to the CiF comments below the article, like this one from dear little 'SteB1', beginning: "This has long been of serious concern to me ..." (and no, he's not being sarcastic).  Select your own favourites in the comments!

On a serious note, some of the most unsmiling and ruthless businessmen I have encountered head up 'green sector' companies.  You can't hide those piggy eyes: and pretending to be a hippy is a thin disguise.


Baking results - when is a one-off provision not a one-off?

Interesting to see the most of the UK bank's half year results this week;

Pick of the bunch is RBS, whose underlying profits came in much higher than expected. The Bank has over a long period done a good job of selling down its Real Estate debts. However, in the long-term the more of less closing of its investment bank make it a much less appealing business. It's grip on UK SME business and personal business is strong and will remain so, enabling it to retain a core income. This maybe under-threat as its new CEO is very keen on retail banking and credit cards - but still, no one in the Treasury can argue it is a risky bank anymore. Shame the resulting value of the bank is about 50% of what was paid to bail it out. Somehow I doubt future Chancellor's are going to want to put that write down into the books - making it tricky to see the end of state aid.

Barclays has many similarities to RBS, for a longtime the bank was far superior in coping with the crisis, but the last two years have seen the end of that. It's new CEO also is looking at closing down the investment bank and pushing up retail banking - if all the Banks have the same strategy this may prove good for customers, but not for shareholders. It's results are underwhelming, but provisions are low suggesting little systemic risk.

Lloyds is the average of the bunch. Like the other banks it is keen to show off underlying profits, less keen to highlight the one-offs' that drag its profit down. The PPI mis-selling provisions keeps going up, there are huge fines for various pieces of LIBOR fixing and market abuse. All in all over £1 billion.

All the banks play the standard accounting trick of including these items as one-off. But there they are, year after year, going up and up and up. PPI Provisions have increased for over 2 years, they are hardly one-off's.

No wonder the shareprices lag the markets and are at 50% of where they were in 2007/8. One day perhaps all the bad news will be in the public domain, but the various CEO's have been saying the end of the road is in sight for seven years - I think there will still be two or three to run and then we will be into the next recession in any event!