The European elections are a victory for proportional representation

They look like a colossal waste of effort. Elections to the European Parliament take place every five years, and turnout in Britain, as in much of the rest of Europe, is dismal. Few understand what the European Parliament is for. But last night’s debate between Liberal Democrat leader Nick Clegg and Ukip’s Nigel Farage shows that things are going in an interesting direction. These elections are contributing more and more to the wider process of politics in this country.

The most important thing about theses elections is that they are held using proportional representation (PR). Parties in practice need to get over 10% of the vote in a particular region to get represented – but that still gives parties with a broad but thinly spread appeal a much better chance than parliamentary and even local council elections. The vote share won by the two parties that dominate conventional elections, the Conservatives and Labour, is dismal. This is adding a new dimension to the political debate because it offers voters a greater choice.

The conventional way of politics in the UK is to tell the voters that the real choice is between just two parties. Which two varies depending on where the election is being held, but mostly it is between Labour and the Conservatives (though Scotland is a big outlier here). This serves to close down political debate to a few carefully chosen swing issues that appeal to marginal voters in marginal constituencies. Minority views are dismissed as being irrelevant. But this line of campaigning does not work with PR. And the European elections are the only ones held under PR for most English electors (Scottish, Welsh, Northern Ireland and London Parliament/Assembly elections are held under PR).

The most obvious beneficiaries of this have been to the Lib Dems, the Greens, and, above all, Ukip. Ukip is a right wing insurgent party that represent political views that are as far away from mine as you can get while still being a respectable political party (unlike the openly racist BNP, for example). But it speaks for an important minority of mainly English voters who feel oppressed by the current political system, and ignored by the main parties. The EU is an important focus of that discontent, as is what is seen as excessive immigration. As an aside it often draws its strongest support from areas that are relatively unaffected by immigration – but that does not stop it being a popular scapegoat. The issues are linked: free movement of people is a vital plank of the EU project.

The Conservative and Labour parties would rather these issues were suppressed. They represent inconvenient divisions within their own ranks and put their internal cohesion under stress. And that led to last night’s debate. Ukip and the Lib Dems take clear sides, and are quite happy to slug it out in public. And the public gets to hear a proper debate. That is a very important part of the democratic process. Floating voters may not have learnt much from the verbal slugging match, which I judged to be a score draw (with plenty to please both sides), but it at least would have drawn them into the issues.

Where is this heading? In the great scheme of things I don’t think the direct European Parliament elections are a great success in closing Europe’s democratic deficit. I think its original configuration as a forum for delegations from national parliaments was a better one. But for as long as it is the only national election held under PR, it is serving a useful purpose. The right answer is to use PR for national parliamentary elections, but alas that aim remains very distant. PR for local elections may be a more realistic intermediate step.

Meanwhile it will be very interesting to see if the interest stirred by these debates will affect turnout at the elections. But even if they do not (I will only believe it when I see it) they are doing something to close Britain’s democratic deficit.

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French lessons for British social democrats

Opposition has brought a certain coherence to the British left. There is nothing like a hate-figure being in power to bring about a sense of unity. And the idea that runs through the left’s thinking on the state is social democracy. But last weekend’s electoral disaster for the French Socialists, and the rise of Marine Le Pen’s National Front should give them pause. The left is becoming is becoming disenfranchised from the working class.

What do I mean by social democracy? It is the coming together of several elements. The first is the conventional understanding of western democracy and the rule of law – in contrast to a more radical revolutionary style. The second is a grudging acceptance that the private sector is the primary motor of the economy – but heavily managed to prevent its excesses damaging society, including strong protection for employees’ job security. Next is strong, national government, setting standards that apply across the whole country, rather than the chaotic and inconsistent approaches that come from bottom-up policy. Then there is a faith in large public services, covering health, education, railways and much more.  A strong social, state-funded safety net is added to it. And it is all funded by high levels of taxation, with a strong progressive element.

In Britain I have noticed that a historical narrative has built up around this idea. Social democracy’s breakthrough moment was the Labour government of 1945 (after the perceived success of the country’s state directed war effort). Something like a consensus built up around it, as economic growth allowed the scope the social democratic system to be extended. Then disaster struck in 1979, when a new breed of politicians, the “Neoliberals” were allowed to take over. Mrs Thatcher’s government started to dismantle the social democratic apparatus. Tony Blair’s Labour government wasn’t much better. But at least Mr Blair’s public sector “reforms” were balanced by Gordon Brown’s creeping extension of the scope of public services. In 2010 the Tory-led coalition of Tories and the neoliberal wing of the Liberal Democrats has continued the dismantling process. But the neoliberal ideology is a demonstrable failure – leading to the financial crisis and escalating inequality. The new Labour leadership, under Ed Miliband, has shown interest in reviving the old social democratic system, but it is being urged to be more radical. Social democrats within the Lib Dems hope that the party’s current leadership will be up-ended and the party will never again be associated with Tory government.

My aim here is not to challenge this flawed narrative, though I choke when I’m told that privatised industries like energy, telecoms, water and even the railways all better run when under public ownership. I want to draw parallels between this social democratic vision of society and France. For surely the country where these ideas have been carried through most thoroughly is France. Of course the Left would rather talk about the Scandinavian countries, Denmark and Sweden especially. But these are small, homogenous countries which do not make good parallels – and never mind the often rose-tinted spectacles.

But France is a big, diverse country like Britain. It’s anti-capitalist attitudes are deeply embedded. It combines a very efficient private sector with a strong central government run by a very well-educated and brainy elite. More than half the national income is paid in tax. And in 2012 the Socialists were swept back into power in a landslide. But now the economy is sliding and the Socialists are deeply unpopular. The working classes are defecting en-masse to the anti-establishment, anti-immigrant, anti EU National Front. What are the lessons?

But first a word of caution. It is commonplace for Anglo-Saxon commentators to write the French economy off as a basket case. It is not. Slow growth is probably an affliction that all developed economies will have to deal with. It was no accident that France weathered the 2007/09 crisis better than most developed economies – and just how secure is the new growth in Britain and the USA? Still, it has some big problems.

There are important lessons for the left in both strategy and tactics. Strategically the toughest lesson is than not all neoliberal inspired ideas are rubbish. The world economy is changing, thanks to trade and, above all, to technology. National economies must adapt to this. Developed economies are already highly dependant on global trading – shutting it off would mean a step backwards and reduced living standards. Accepting it means that industry has to reshape, causing job losses in obsolete industries. The neoliberal approach of letting market forces shape the change, by allowing struggling business to go bust and not getting in the way of new industries to take their place, is the quickest and cleanest way of adapting to this change. Fighting it means declining tax revenues, which means putting pressure on the public services and the social safety net. By pretending that there is an alternative to the globalised market economy, all the left does is build up false expectations about what can be achieved. That is the first cause of the Socialist failure in France. Too many on the British left don’t understand this basic, strategic problem.

The tactics are just as important. In France the Socialists have become part of a distant elite, remote from struggling working-class communities. They are full of clever intellectual answers, but they don’t feel the pain. Hence the appeal of the National Front. The British left too is too attached to its own intellectual sphere, sustained by Westminster think-tanks, and various left-wing publications – as well as intellectual cells in universities and (to a lesser extent) insulated public services like schools and hospitals. Strategy is set by using opinion polls and focus groups, not by politicians in the hard grind of finding solutions for hard-pressed local communities.

There is a tactical blind alley here. The focus group approach is telling politicians to respond to working class (and much middle class) anger by taking a tougher line on immigration, the EU and so on. To be fair on the left, they are resisting this temptation. But it isn’t just the pollsters and focus groups that are pulling politicians in that direction: any politician who spends serious time with the public understands that the pollsters aren’t making this up. The problem is that pandering to this anger also leads to false expectations; for very good reasons the politicians can’t deliver, and if they did the public would not like the result.

How to win back working-class communities while staying true to liberal instincts? Well you won’t find the answer in grand reforms and new laws promulgated in London or Paris. It isn’t about crafting the right sort of attack material to wound the right. It is about politicians winning trust by getting out into their local communities, meeting people and facilitating solutions that people can see. The choice of the word “facilitating” is important. It is about helping people to help themselves, not creating new government schemes (though these have a place). It is about mediating between different interest groups, not stoking up fights. People are much more realistic than many give them credit for. They appreciate honest facilitators and mediators more than people who just stoke up anger. But they are suspicious of elites that would rather talk to focus groups than their local electors, or who want to make their name with some new national reform – rather than helping to sort out a local housing estate, or bring together local ethnic groups.

It’s a hard road, but it is one the left must embrace if they are to avoid the fate of the Socialists in France.

 

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Pensions, savings: sensible steps forward

This week’s UK Budget has revealed the usual muddle amongst politicians, journalists and the public over the whole issue of pensions and savings – with opinion strongly favouring several flavours of having your cake and eating it. This masks some profound and sensible reforms carried out by the coalition government.

First version of the cake. We like people to save. But we want them to spend to promote economic growth. We worry that a large part of the population will become dependent on the state and taxes because they save too little. But when they do, as in the early part of the 2008/09 crisis, we bemoan that fact that people aren’t spending and so causing economic slump. So interest rates crash to the floor in an attempt to reduce savings and increase consumption (alongside the vain hope that companies will be encouraged to invest more).

Next version. We want people to save more to not be dependent on the taxpayer, but we also want target state spending on the less well off, and tax the rich to pay for it. So we encourage people to save, and then confiscate the proceeds.

Another version of this is that we love the idea of exempting pension saving from tax but think that people who have accumulated sufficient savings for a reasonable pension (a million pounds for a pension of £35,000, for example) are part of a rich elite whose broad backs should carry the largest burden.

There is a genuine dilemma at the heart of this of course. For that reason a lot of hope resides in get-out-of- jail-free cards. One of these is strong economic growth. But that requires lots of people to work – which means retiring later and allowing immigration. We are clearly entering an era of low growth, thanks to demographics, personal preferences (i.e. people choosing unpaid leisure over work) and the changing nature of technological advance and the global economy. Remarkably few people have tried facing up to the consequences of this. Even some intelligent economists think that “trend growth” is a law of nature. Another get-out-of-jail-free card is that rising property values will compensate for lack of saving. Collectively this cannot make sense, but it has worked for many individuals, who therefore don’t engage with wider worries about the future.

Now let’s consider some difficult facts. I have already mentioned that economic growth is likely to be much lower in future. The next difficult fact is that private pension saving has collapsed in the last 25 years. Generous final salary schemes have been replaced by inadequate money-purchase schemes. It is now use just blaming Gordon Brown’s tax raid on pension schemes in the later 1990s for this (or Mrs Thatcher’s ill advised liberalisation of pension selling before that) and some are prone to do when you mention this. This at worst mildly accelerated a growing trend. The economics of businesses supporting these pension schemes became toxic even without the tax changes. This means that, as a generality, most people will not now have adequate private sector pensions. Instead as they approach retirement they will have accumulated a few tens of thousands of pounds in probably several schemes.

The next difficult fact is that the economics of long-term saving are toxic for all but the very well off (liquid assets of over £0.5m, say). The poor face the prospect of losing entitlements to state benefits if they accumulate wealth. Everybody will see any savings eaten away by costs which, even without a host of rip-offs, will always weigh most heavily on those with smaller savings. It becomes perfectly rational for a lot of people to not to bother with pensions savings – unless you count trying to own your own home.

When you consider all this, the attraction of tax funded state pensions become clear. That is why the current government has been right to make it reasonably generous, notwithstanding criticism form the right that we can’t afford it. It was also right to make this pension independent of private saving.

Now, what about the tax treatment of savings? To simplify, there are three groups of tax privileged savings. The first is domestic property. To buy your own home you pay out of taxed income and stamp duty on the purchase price, but the gain is exempt from tax. The second is Individual Savings Accounts (ISAs), which, like property, are paid for out of taxed funds (subject to an annual limit) but income and capital gains are tax free. And third are pension plans, for which contributions are exempt from income tax, but it is taxable on drawdown.

The first and last of these are problematic. Domestic property because its tax exempt status has made it a highly attractive investment – but instead of this fuelling much in the way of building new, efficient property, it has simply driven prices up, making ownership out of reach for many younger people and driving a wedge between families with property and those without. Pensions are a problem because that particular route for providing tax exemption makes for maximum complexity. In fact they have become so hedged about in rules that most people don’t understand them.

ISAs, on the other hand, have an elegant administrative design which makes them easier to own than even taxed assets. They also have more chance of channelling investment into more productive parts of the economy.

Here’s why this week’s proposed reforms make sense. Currently money purchase pensions are forced to buy annuities, except in some carefully crafted circumstances, which tend only to apply to the better off savers. The original fear behind this annuity rule was the worry than pensioners would blow their savings quickly and then throw themselves into the arms of the state. But the state of private pensions is such that most people will rely on the state anyway, and most pension pots are so small that the amount of income that would be derived from an annuity would be derisory (and, presumably, a lot of value would be lost in administration costs). And those with larger pots are likely to be prudent with their wealth. If done properly, this will simplify the pension system, and make private pensions more attractive.

Extending the ISA allowance is more controversial. Many simply view this as benefiting the wealthy, as nobody else can save up to the £15,000 a year limit. There is some truth to this, but it will help level the playing field between financial investments and owning your own property. Since it is unthinkable to tax capital gains on homes, it may help to make other assets comparable in their tax status.

A lot of nonsense has been uttered as commentary: fears over people blowing money on cruises and fast cars – or rushing into buying property. My main worry is that the reforms will make it easier for better off people to save for their children, to pass on at death. This could reinforce the effect of inherited wealth, which is already growing. There may be mounting pressure to reduce Inheritance Tax.

But overall this looks a sensible step forward – and actually quite brave. It is surely no accident that unlike its predecessors the current government’s Pensions Minister, Steve Webb, really knows his stuff, and has been kept in post for the whole period. Liberal Democrats can take pride that he is one of theirs. There is strong political consensus in his reforms, and no party political benefit. But it is nice to feel that our party has contributed something useful to the process of government.

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Economics is in denial. A new crisis builds

When the financial meltdown of 2008 to 2009 occurred, most people said that the science of economics was in state of collapse. And yet conventional economics ploughed on with barely a wobble. To see this you only have to listen to the commentary around central banks, which uses language from old text books, with only slight adjustments to modern jargon, such as “forward guidance” and “quantitative easing”. And this in spite of the fact that monetary economics was at the heart of the failure of economics in 2008. This is leading to false optimism about the prospects for the world economy. It is the economics of denial.

The story so far. The collapse in 2008  exposed gaping holes in textbook economics. Standard microeconomics, with people regarded as welfare-maximising, rational agents, had long been a laughing stock, unless you had to use it to pass exams or get academic papers published. But the crisis showed that macroeconomists were not paying much attention to the financial system – and yet the crisis that unfolded had finance at its heart.  And the question of how wealth and income was distributed was treated as an afterthought, with the real attention being on how aggregated statistics (like GDP and inflation) behaved. For these reasons, most economists failed to see the crisis coming, and they failed to understand how long-lasting the following recession would be.

To be fair, many at the fringes of economics are asking deeper questions. I get a glimpse of these through The Economist’s Buttonwood column (written by Philip Coggan). In this week’s print edition he reviews a book by fund manager George Cooper which tries to rethink economics. Mr Cooper sees the world in terms of social competition – which has the virtue of putting wealth distribution at the heart of the narrative. I am debating as to whether to buy this book- but I have been disappointed in this genre of writing on economics – long on criticism of conventional wisdom, short on substantive new ideas.

But on Monday Mr Coggan looked at another book, Capital in the  21st Century by the French economist Thomas Piketty.  This book, published in French last year, with an English version about to be released, is in a different league. It has the weight of data behind it, and some serious thinking. It could conceivably change the direction that conventional economics takes. It puts distributional issues at the heart of economics – which is surely where it should be. Mr Piketty suggests that if economic growth slows down, the elites who own productive assets accrue a disproportionate share of the wealth. We are in just such a slow growth era now in the developed world, mainly because of demographics, but also because technological advance does not seem to be translating into higher economic productivity in the way that it used to. I am rather afraid that I will have to buy Mr Piketty’s book, even though I already have a substantial backlog of reading.

But none of this stops the incessant chatter around monetary policy and growth statistics. The narrative is now that growth in the developed economies has returned, so that we can get back to familiar old track of steady economic growth (about 2% a year). Asset prices have jumped. And yet the fundamental problems that led to the last financial crisis have not been fixed.

Now let me develop my personal take on the world economy, building on some of the ideas that these authors have raised.

The fundamental problem of the developed world economy is that a disproportionate share of the wealth is accruing to a small elite. This may be because of globalisation and newer technology. It may just be a fundamental law of economics that was concealed by temporary factors in the 60 years after 1945 (as Mr Piketty seems to be suggesting).

Many would consider this to be problem in its own right. But it also creates a wider problem. The rich elite does not spend all that it earns. This, as going back to the circularity of economic flows that forms the basis of macroeconomics, will cause the economy as a whole to shrink. The textbook way in which that shrinkage is prevented is if the surplus earnings (aka savings) are channelled into investments; indeed basic economics holds that savings equal investment as a law of nature (with the dread qualification of “in equilibrium”). But this investment involves giving people jobs to do real things – like building ships or factories or even just houses. It does not work if the investment is simply a financial merry-go-round chasing speculative profits – or bidding up the prices of pre-existing assets such as land. But this is exactly what is happening, and a burgeoning industry has been created to support it.

But there are two other ways to stop surplus savings from causing the economy to shrink. The first is to lend money to the not-so-well-off to support a lifestyle beyond their financial means. We have witnessed this, strikingly in the USA, since the 1990s. The second is for the government to make up the shortfall in demand by running large deficits. This is what took over after the crisis. The trouble is that neither path is ultimately sustainable. Both cause the build-up of debt that cannot be repaid, and onto a crisis of default, involving the mass destruction of financial assets. That process of default comes in quite a few guises: hyperinflation, revolution, depression – with war often associated. This is what the developed world experienced between 1914 and 1945. The wealth of the elite is destroyed, with substantial collateral damage on the poor. And then we start the process all over again.

Is disaster inevitable? No. A conventional economist would offer two ways out. First we could switch those savings from the merry-go-round to real, productive investment. Second we could generate economic growth through increased productivity and further globalisation, and with new wealth generated outside the property-owning elite.

But I’m afraid there is a fairy-tale quality to these ideas. There is only a limited amount of potential commercially-worthwhile investment out there. It is difficult to understand how rapid productivity growth can happen in developed economies. This leaves us with the need for tough political action, to pre-empt disaster by forced redistribution of the elite’s income and assets.

Once conventional economists start recommending these sorts of strategy, rather than treating them as suicidal, we will know that they are making the transition. This is happening only at the fringes at the moment. Meanwhile we are sailing serenely into the next financial crisis.

It will probably take this next crisis to shake things up, and finally break the world of denial that most politicians and financial professionals currently inhabit.

 

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Liberal Democrats: pragmatic policies – small steps to a liberal future

We ended the Liberal Democrat conference today on a high note. Ni2014-03-09 12.45.53-2ck Clegg gave one of his best conference speeches, in confident form. We are now learning what this “centre ground” strategy means in practice. Mr Clegg did not utter the dread words in his speech at all. Instead he talked freely about Britishness and liberal, inclusive values. He painted an optimistic, happy picture, to contrast with the sour, pessimistic one that dominates so much of politics now. This went down predictably well with the faithful, but it is a sensible strategy in the wider political debate too. It answers the question “What is the point of the Liberal Democrats”.

The centre ground bit came in the policy programme. In yesterday’s immigration debate, the party talked inclusive, but toned down official policy – for example dropping the idea of a path to legality for illegal immigrants. On the constitution we talked about the Single Transferable Vote, and job shares for MPs. Sweeping reform, including top-down devolution to the English regions, was dropped. The party no doubt still believes in the bigger ideas, but it realises they have to be achieved in small steps. We don’t call it centrist – we call it small steps to more liberal future. But centrist is what it actually is.

So the party’s rhetoric is firmly liberal and optimistic. It helps that Ukip has come on the scene to help define what the party is not. The idea that the real political battle in Britain (well, England) is between the liberal, optimistic Lib Dems and the fearful, pessimistic Ukip is, of course, fanciful – though not on the critical issue of Britain’s place in the wider world. But it helps give the party definition. The majority of Britons may not be liberals, but neither do they feel threatened by them; they are a good second choice. And since democratic politics is largely about compromise and coalition, second choice often comes out on top.

It is a long, long road to return to electoral success for the party. In May in reality it more a question of trying to stave off disaster. The party’s previous tendency to protest, and being all things to all people has lost it a lot of credibility, especially amongst working class voters. The media remains dominated by Labour and Conservative allies. But it is a start, and party activists left york in good heart.

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Lib Dem Spring Conference: finding a cause worth fighting for

According to tonight’s BBC news, the big thing on our minds at the Lib Dem Spring Conference was the Income Tax threshold. In fact almost nobody here in York was talking about it. Uppermost in our minds were the European Parliament and local elections due in May this year, and broader manifesto issues for the general election in 2015.

The BBC headline came from a speech by Danny Alexander, the Treasury Secretary. It got a dutiful standing ovation, but was pretty uninspiring stuff. Much more interesting was the party’s stance on the European Parliament elections, which was showcased the night before at the conference rally. This is to shamelesslessly advertise the party as being in favour of the EU and set itself up as being in contrast to Ukip, with the Tories and Labour as fence sitting irrelevance. Defence of the EU being is cast in terms of the risks presented by leaving it, especially to jobs. Thinking Liberal hardly not approve of this. It is exactly the strategy I advocated in the wake of the disastrous 2012 elections. It is a core vote strategy that is at long last getting professional execution. Until now the professionals have preferred a floating voter strategy aimed at the middle ground. They seemed constitutionally unable to execute a core vote strategy, which showcases the party’s core beliefs. We will have to see how this strategy works out, but if nothing else it is inspiring for activists.

Personally I think this could be a bit of a turning point for the party. Nick Clegg ushered in a new era when he took up the party’s leadership in 2009 (I think). The old guard, epitomised by the chief executive Chris Rennard were swept away. This needed doing, but a lot of wisdom was swept away in the process. The party’s campaigning has been flawed under Mr Clegg. There was a brief moment of triumph in the 2010 General Election campaign, but the end result was disappointing. And entering into coalition government exposed flaws in the party’s strategy in a very painful way – even though the process of entering government was something that few had dared to imagine beforehand. Dismal electoral results in local and London elections followed.

But at last the party has come out fighting. It is discovering a sense of purpose. This was evident in a policy motion on immigration this morning, where the party has failed to succumb to tide of anti immigration rhetoric that is otherwise overwhelming the political landscape. Other policy motions, on planning and constitutional reform were less convincing. Though in the former case party activists are at least starting to engage with the clear need for more housing in the south of the country.

If nothing else this proves the need for three party politics. Labour and the Conservatives would rather duck and weave around the issues of Europe and immigration, appealing to voters on both sides of the argument, while suppressing proper debate. The Lib Dems increase the costs to them of doing so.

Will it work? It may not. But increasingly Lib Dem activists relish the prospect of going down fighting. And who knows, perhaps rewards beyond the imagination of the average political commentator?

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Putin is no Hitler, but we have to draw a line

For those of us who take an interest in history, it has been a scary few days, as Russia flexes its muscles over Ukraine. It is the sort of behaviour that can lead to war, if not now, then the next time they try it. It’s worth trying to unpack these historical parallels a bit.

First there is a reminder of the lead up to the First World War, now very much in the public consciousness as the centenary approaches. There are some striking parallels here. First is complacency. In 1914 there had been 43 years of peace in Europe, and an era of rapid growth and international trade. It was widely assumed that economic interconnections were such that a major war was unthinkable – one side or other would always back down before it was too late. That assumption is widespread now.

Next we can see a “Great Power” mentality in Russian policy. Before 1914 politicians tended to see the world dominated by the interests of Great Powers (Britain, France, Germany, Russia, the USA, etc.), who had spheres of interest. Each great power pursued its own national interest, treating each other with circumspection and respect, but trampling over other countries at will, provided they were in there own sphere. Russia seems to consider the Ukraine as part of its own sphere – as with all countries within the boundaries of the old Soviet Union. China seems to think this way too, but the Western powers have a more enlightened view of the world, and like to see things in ethical terms. Of course the Russians and Chinese think this ethical view is just a cynical cover for extending the Western (or rather the U.S.) sphere.

And finally there is militarism. The most toxic element of the pre-1914 political cocktail was German militarism. The German ruling elite was dominated by the military, and barely constrained by democratic processes. They had developed a philosophy that world politics was a life and death struggle between nations, of which war was the only arbiter. Their military analysis of the European situation in 1914 – that they could win a general European war, especially if Britain stayed neutral – meant that they egged the Austrians on. The military play an important part in the Russian political elite, and they feel an acute humiliation from their decline of prestige since the Cold War, and a sense of satisfaction from their intervention in Georgia. The Russians will not want a full-scale war with the West, but they are probably happy to contemplate unequal confrontations with their immediate neighbours.

But I find the parallels between Russia and Hitler’s Germany before the Second World War the more alarming. Hitler had developed a doctrine that it was right for Germany to intervene to protect German populations outside its borders. This led successively to the occupations of Rhineland (which had been occupied by the French under the Versailles Treaty, but which was recognised as German territory), Austria, Sudetenland, the rest of Czechoslovakia, and finally Poland. In each case, until Poland, the other European powers failed to react, which emboldened Hitler to move to the next challenge. The parallels with Russia’s interventions in Georgia and Ukraine are rather striking. First there is the doctrine of intervening at the request, or in the interest of, people considered part of a wider ethnic identity. Second is the kind fig-leaf legal pretexts that are used to justify these interventions (in Crimea the letter from ex-president Viktor Yanukovych) without any real regard to ethical merit. Third there is the failure to stand up to each provocation by the rest of the world community – justified in the name of avoiding war. There is a rather chilling parallel with some of the dissembling I read amongst some comments by some on the internet: Ukraine has a complicated history; there is no clear right and wrong; Crimea should really be part of Russia anyway. This is strikingly reminiscent of the supporters of Appeasement in the 1930s. In that case a firm intervention by Britain and France could have caused Hitler’s downfall and prevented war – or at least led to Germany’s early defeat in a war, and millions of lives saved.

We can overdo the parallel between Putin’s Russia and Hitler’s Germany. True, Putin’s rule has a lot of elements characteristic of fascism: contempt for the rule of law, suppression of dissent, and appeal to a highly nationalistic view of history. But there is little of Hitler’s sense of a national mission. Russia is a much more cynical place than Germany was in Hitler’s time. Russia may despise the West, but it also envies it and craves recognition by it. Hitler sought more than prestige: he sought something much more like domination.

But there are risks. Russia feels that it has “interests” not just in Ukraine and Georgia, but in Byelorussia, Moldova and the Baltic states (to say nothing of the Asian former republics of the Soviet Union). It might be tempted to use military means to extend its influence in each of these countries if it gets away with a painless annexation of the Crimea. This is not only bad for the people living in these places, but could cause war, and in any case sets an awful precedent for other countries.

To combat this the West needs to be clear and united on a number of things. First is that our view of democracy is that it comprises a system of moral principles that go way beyond the holding of elections. That includes respect for legal processes, honesty by ruling elites and protection of the interests of minorities. Mr Yanukovych lost his legitimacy through his theft of public assets and through his excessive deployment of lethal force against protestors. These are things that go beyond the pale of democratic rule. We need to be quite consistent in holding the new Ukrainian government to the same standards, condemning any oppression of the Russian minority. Secondly, we accept that borders can change, but that it must be done through a democratic and legal process, with full protection of minority rights. One day Byelorussia might join up with Russia. Perhaps even there is a way for Crimea to become independent or join Russia too. But military means is unacceptable. Military intervention is only allowed where something like genocide is starting to take place, and preferably with UN backing. Third is that military intervention against a NATO country really does mean war.

So, when Russia breaches these principles, what to do? There do need to be consequences, and the West much accept damage to its short-term economic interests. A number of sanctions have been talked about, against Russia and against Russian elites. These have justification, but we need to leave enough tools in the box in case Russia ups the ante. The legal pretext for Russia’s intervention in Crimea could equally be used for a full-scale invasion of the rest of the Ukraine. If this happens, what will we do?

Longer term, we need to do two things. First is to take concrete steps to speed the import of shale gas from the US to Europe, and other measures to reduce the dependence on Russian gas. Second it to make a number of gestures to strengthen NATO’s eastern defences. This is the sort of thing that gets noticed by the Russian elites – and will lead them to ask whether all this military adventurism is worthwhile.

Ultimately, though, we would like Russia to take its place amongst the community of civilised nations. This means rolling back the cynicism that is engulfing that society. If it does so, then it will become a more appealing place to live, and its soft power will be enhanced. Byelorussia would no doubt rejoin it. Meanwhile, though, the West must show some spine or things will just get worse.

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