Author: Damian Merciar

The Economist’s long form online magazine, 1843, has a profile piece this week on Andrey Melnichenko. Really very interesting indeed – and what an astonishing character…!

To have been able to navigate the end of the Soviet Union and the secession of States into independent countries, and essentially to come up smelling of roses, whilst astonishing levels of corruption, nepotism, and place vying went on, amongst the new emerging class of Oligarchs, surely shows some of the most natural brilliance – in the entire world! The fact that he constantly converted the roubles he was making (largely as their banker), into dollars, such that he was protected when the great rouble crash happened, just shows astonishing foresight… and the diplomatic and personal skills to import huge physical amounts of dollars.

As to his political ideals – I haven’t yet read his essay in the main magazine, but I saw the summary of it…. I’m not so sure. His approach appears to be cosmopolitan, democratic, and ideal – all of the things that modern Russia has not been, and has become quite effectively self-reinforcing as a Security State. Beating such vociferously well entrenched vested interests, literally supported by arms, is a different category of fight… But, certainly one of the main things that I took away from this piece was, here is a man that it’s not wise to bet against…

#Russia #TheEconomist #AfterUkraine #Melnichenko

To lose one of the most reliable Cabinet Secretaries, in the form of John Healey – over an additional £1.5Bn, seems unfortunate. Although more is generally better than less, at least in terms of potential investment spending – what hasn’t been formally reminded to the nation is the scale of cuts in military spending over broadly 20 years… The UK was spending approximately £50Bn over 15 years ago. Had that been increased by an average inflation figure of 3.1%, spending would currently be at £80Bn – let alone accounting for the cumulative shortfall in the interim. Yes so much of the world has benefited from a peace dividend, yet look how quickly things turn…

DIP is actually an astutely political document because it doesn’t give important things that it would previously have given, such as an, “ORBAT”, or Order of Battle, the structured, hierarchical organization of a military force—detailing the specific units, command structures, and equipment assigned to a formation. This is for the critical reason that these formations are changing before our very eyes. Instead of replacing Type 45 Destroyers with the intended Type 83’s, this investment will now go towards six new Common Combat Vessels, which the MoD said would be capable of “coordinating uncrewed systems in the air, on the surface and under the sea to deliver more resilient air defence”.

Admiral Lord West reminded us that during the Falklands War, the UK deployed a carrier battle group, an amphibious fighting force and a mass of Destroyers and frigates in 4 days… During the recent Iran escalation, we struggled to deploy one Type 45 Destroyer, HMS Dragon, in 2 weeks, which actually was then returned back to port with technical issues 🤦🏻

Nearly half of this anticipated £300Bn spend over the next 5 years will be spent simply on personnel costs; nearly a quarter will be spent on enhancement and maintenance of our nuclear capability – an essential component, leaving the rest to be spent on novel technological investment, that of course UK forces have not had time to train upon, nor know how to integrate successfully. But then again, Ukraine didn’t know either and they haven’t done too badly…

However this does not detract from the fiscal reality of arriving at 2.7% of GDP spend by 2030, with a chasm approximating nearly 1% (£30Bn) to get to 3.5% NATO commitment by 2035. Backloaded, and two Parliamentary cycles away. At a time of portent, this will require a new democratic consensus as to what our priorities are…

#DIP #Defence #UKForces #RoyalNavy

What is the role of the humanities and social sciences in an AI future? Where does literature fit in? Smart money amongst the intelligentsia say that it has never been more important – and I am very much with them. But I fear this is a more difficult argument to make to the investors, looking at the the ROI needed on the vast data centres’ spend requirements…

Information is not knowledge. Knowledge is the bedrock of wisdom. Wisdom, and some time, is what we need to contemplate our way through to a sustainable future, one where we’re not melting to death…Kemi Badenoch is an Engineer; Andy Burnham is a career politician, but importantly, one who studied English. Of course we need scientists and engineers – without doubt – but surely we need thinkers and dreamers. And social scientists and philosophers, and the wise folk who can stitch all of this together.

As an Economist, I have seen my discipline, in its race for perceived legitimacy, becoming entirely lost in the application of sometimes spurious statistical analysis – and lost more often in the even more removed and extreme mathematicisation of the subject. I didn’t do my MSc Economics until I was in my 40s, and whilst everybody could wax lyrical about the role of the second differential, very few people out of a class of 100 could explain the profundity of Keynes’s ideas – or who knew who Hayek was…

Literature was my own grounding and I remember well that it took me three attempts to finish Solzhenitsyn’s “August 1914″… I may well have battled through the history of the East Prussian war 🤦🏻, but much more than this… It introduced me soon after, to the Gulags, and Stalin, and the simple reality of man’s inhumanity to man, even today – not in the history books… I’m blessed to have three children, and a thousand books, and despite my banging on about it, they hardly read!…. They are lost to the 30 second videos of Tik tok, seeing the entirety of the world – and yet understanding less and less of it…🌹

Let’s never stop celebrating ideas, and figure out a way of reintegrating humanities and social sciences into the reason why we are doing things… And more importantly, for whom…

#ideas #socialscience #humanities #AI

Economics x.0: the debate continues

Now the speculation has finally ended and Andy Burnham is Prime Minister presumptive, we ask,what is the Political Economy of Manchesterism??

“Business friendly socialism”, has been touted numerous times. We feel this is oxymoronic. Any business-friendly policy can’t be socialistic, and any form of socialism in practise can’t be business friendly. Andy Burnham has already stated that he will stick to the Fiscal Rules, one of which is no borrowing for day-to-day expenditure. With the scale of our National Debt, and the reactivity of bond markets when they smell blood in the water, or unsustainable borrowing – and given the scale of bond holdings that are index linked – any persistent inflationary rise will directly accentuate this debt..

So, what is Manchesterism? Subsidised energy bills; rent control; greater public control of utilities and other public services… Burnham recently said utility companies could be controlled through regulation rather than public ownership – though it’s understood Thames Water will be taken into public hands (without as yet an indication as to how to write down their astonishing corporate debt). I fear it is concerning that Government seeks greater control of private sector services’ in an attempt to bring down prices – as the cost of living is the main concern repeatedly raised across the country, since Covid. Many of these sectors are already regulated heavily, and the margins are deceptive, not least in protracted real term rises in labour costs, post the 2024 election.

Burnham states there’s excessive profit in the social care sector, though they would no doubt dispute this –  yet this is not the same as the private rented sector, where though rents have increased dramatically, property costs, mortgage rates, renter’s rights and meeting minimum safety standards have already resulted in fewer private sector landlords, reducing housing stock available for rent and consolidating remaining stock among fewer, now stronger, property conglomerates. None of these sectors will be particularly receptive to a denial of the price signal, through rent controls. Surely an answer here is to increase supply by easing planning restrictions.

Remaining ways to raise tax revenue might include taxing investment income in the same way as income from work, for instance landlords don’t pay national insurance on investment income from housing – and this might glean an additional 10 to 20 Billion pound, or roughly 1.5% of Gov expenditure on Public Services. Hardly enough to move the dial.

So – we feel the question really comes down to, will the medicine kill the patient? According to data from the Institute for Fiscal Studies, the tax-to-GDP ratio—the gold standard for comparing the total tax take across different periods—is historically high, post WW2. Burnham hasn’t yet taken office, but on this diagnosis, I’m not convinced Manchesterism will translate across the UK.

#AndyBurnham #Manchesterism #PM #Publiccontrol #tax

Defence Secretary John Healey resigns over inability of Keir Starmer to allocate resources to the long awaited Defence Investment Plan (DIP).

It also further undermines Keir Starmer, who is determined to hold on to his sobriquet as “Most Beleaguered Prime Minister”.

The UK is currently faced with riots in Belfast, resulting from dissatisfaction with the speed and method of integration, of immigrant communities, particularly in poorer regions of the country. In a week’s time, Starmer may well find he has a new MP in the form of Andy Burnham, whose very presence is an intent to replace him.

As Healey notes in his resignation letter, despite extensive consultation and an understanding between the two, the Prime Minister is backtracking from the intention of raising Defence spending to 3% of GDP by 2030. Healey cites that according to the financial breakdown given to him on Monday 8th June, the commitment to increase only takes spending to 2.68% of GDP. Healey then goes on to say, on existing spending implementation, this is already set to rise to 2.6% next year, 2027. This means less than a 10th of a percentage point increase in Defence spending as a proportion of GDP in a 3 year period – at a time of operational commitment involving a monitoring and management role in the Straits of Hormuz; a security and monitoring role in the High North arena, (an Arctic presence, after provocations from Russian air and sea activity), and notably, a leading advocacy role for the promotion and consolidation of a European projection of strength within NATO.

2.68% of GDP by the end of the Parliament – when it was understood this would be 3%, with an active movement towards 3.5%, is insufficient and leaves the UK overexposed and under-resourced.

Defence consolidation, integration and stability is not meant to be a legacy. It’s an operational tool, needing constant management and the financial reassurance of investment. The DIP was meant to deliver this. With the resignation of the Secretary of State for Defence, it is clear this will not be the case.

#Defence #UKPolitics #DIP #Healey

Cheng Li-wun, the head of Taiwan’s opposition Kuomintang begins a two-week “peace mission” to Washington, with talking points that echo Beijing’s approach to the island.

So to jump right in, we simply believe a traditional invasion is increasingly unlikely… Most previous views of invasion have been based on a historical and traditional use of naval power. Modern warfare is a step change different to this and indeed China holds so many cards that despite the “porcupine policy” (a prickly opponent that you don’t particularly want to engage with – or “swallow”) of Taiwan, on so very many fronts China is able to overwhelm them. Physical trade blockades, cyber warfare, aerial incursions, strategic bombing. Underwater drones, in mass, that can dominate against possible US or external (should Japan get involved) submarine interference of any naval crossing. Sheer volume of materiel, and the ability for resupply, allowing for and accounting for losses – and a continuation of the drive.

Despite the decades-long US Policy of “strategic ambiguity”, Trump appears distinctly “strategically nonchalant”. Post Iran, It is even more unlikely that the US would seek to involve itself in a war on the other side of the world, that offered, as it sees it, little gain. Post Iran, The US is likely to consolidate towards two spheres of influence in the world. US hegemony in the West and Chinese, in the East.

Much is made of the lack of military experience on the part of China – it’s untested military capacity. Yet surely if any insight is to be gained from recent US excursions into Afghanistan and now Iran – it is the truism of, “everyone has a plan until first contact”, resulting in quite a different outcome than that anticipated. With a society built on truly the long game, this inexperience should not be relied upon.

However, increasingly, all of this is essentially irrelevant – as China, above the fact that it is becoming a great military power – politically it has played a fairly astonishing hand in the last couple of years. Not involving itself on the side of Ukraine, despite tacit disapproval of the invasion from the outset – whilst simultaneously not allowing Russia to leverage its energy strength against China; by the decade long build up of strategic oil reserves etc etc. By promoting reunification through use of political opposition in Taiwan, we believe the reality is that no invasion will be necessary.

#Taiwan #strategicambiguity #ChengLiwun #AfterIran