November 17th, 2009

Ben Chu: It's the incentives, stupid

Steve Randy Waldman, who writes the blog interfluidity, has produced a brilliantly compelling analysis of how and why the US financial regulatory system failed - and why it is likely to fail again under the present reform proposals. He's writing about the American system, but the lessons apply equally to Britain.

It’s an analysis which explains a great deal about what has happened in recent years, from the failure of regulators to rein in banks during the credit boom, to the authorities' decision to bail them out without imposing meaningful reform.

It also contains another strong argument for splitting up the giant banks (regulators are more likely to take "prompt corrective action" against smaller banks with diminished lobbying power).

You cannot hope to understand how this financial crisis occurred without understanding the incentives throughout the system - and the incentives acting on regulators just as much as bankers. Waldman nails them.

Amol Rajan: Where the internet lives

I asked a tekkie friend the other day where the rather large amount of information available on the internet resides. It must be somewhere, I figured, beyond just roaming around in the air in cloud computing, or somesuch.

My friend didn't have a satisfactory answer. In fact he didn't have any answer. I have since extended the question to several friends of mine, assuming they would know, but they didn't.

An excellent piece by Maija Palmer in this morning's FT has begun to relieve me of my ignorance, by explaining just where the internet lives. It lives in massive data centres, dotted around the globe. Massive data centres that, "for competitive and security" reasons, are kept secret.

It's a fascinating little insight into our future. I have to say I couldn't help but read the piece and think how vulnerable such centres must be to technological failure and - dare I say it - terrorist impulses, given how much we depend on them. Which is a negative way of looking at rather wonderful enterprises.

John Rentoul: Do the polls flatter Labour?

An ICM poll in The Guardian this morning gives the Conservatives a 13-point lead, roughly the same as the 14-point lead in our ComRes poll for The Independent on Sunday at the weekend, and another 14-point lead from YouGov in The Sunday Times. ICM actually shows a narrowing of the gap from 17 points last month, although The Guardian's report emphasises evidence from other questions that David Cameron is "closing the deal" with the voters.

Despite the big mid-year shift from Conservative and Labour to "Others" at the time of the MPs' expenses hoo-ha and the European elections, the average gap between the two main parties has been around 14 points all year. It is enough for the Tories to win, but does not leave them much margin of error, as they need to be 10-11 points ahead in share of the voteto win a majority in the House of Commons.

Just as Nick Robinson's list of reasons for Labour MPs to fight on under Gordon Brown could just as well be read as reasons to get rid of him, because they are so much more likely to be able to exploit them under David Miliband, the apparent "closeness" of the opinion polls is another reason for changing leader.

But how close is the horse race?

There used to be a good rule, now named the Smithson Rule after Mike Smithson at Political Betting, that the poll that gave Labour the lowest share of the vote was most likely to be right. But the pollsters have spent a lot of time tweaking their numbers to reduce the Labour figure, and now we do not know whether the process has gone too far. In the last election campaign, the average of all the polls overestimated the Labour lead by 2.2 points - but this was down from a 7.8 point error in 2001.

The evidence of other elections is scant. The European and local elections are so different from general elections that their predictive power is weak. In the Scottish parliament election in 2007, System Three polls on average underestimated Labour's share of seats by about five points - see page 36 of this Scottish Parliament briefing. But Scotland is another country, and System Three is another pollster.

The most competitive recent English election was the London mayoral contest in May 2008. YouGov got the margin of Boris Johnson's victory exactly right at six points, while MORI gave Ken Livingstone a four-point lead. The only other polling company in the field, ICM, gave Johnson a two-point lead a month before polling day. (YouGov's average of five polls during the campaign was an eight-point Johnson lead; MORI's average of three was a one-point Livingstone lead.)

London was, of course, a two-horse race under a preferential voting system but, taking all three polling companies together, it suggests that if there is still an overall bias, it flatters Labour slightly.

As a service to readers, I have updated my calculations of the averages reported by each polling company this year:

Con Lab LD Con lead
Ipsos MORI 41.2 25.2 18.8 +16.0
ComRes 39.2 24.9 18.8 +14.3
ICM 41.0 27.0 20.1 +14.0
YouGov 40.8 27.5 17.3 +13.3
Populus 40.2 27.2 18.1 +13.0

(Average, last poll each month, February to November 2009.)

An adapted Smithson Rule, which focused on the gap between the two main parties rather than just the Labour share, would choose Ipsos MORI as the most likely to be accurate, although I am happy with ComRes's position as the second-least flattering to Labour.

Even if the Tory lead is really 16 points, it is worth Labour fighting to close the gap by five points to secure a hung parliament. But, as I argued on Sunday, it would take a new leader to do it.

Amol Rajan: A British politics of national greatness

David Brooks argues that Americans have lost some of the optimism for which they were famed. He says the rise of China accentuates their sense that they have largely abandoned an enterprising spirit and energising culture that marked them out from competitors.

He is basically right. Americans are feeling down. And, six months from an election, there are lessons in that for us.

Every time a recession comes round, politicians vie to offer the best programme for recovery and, further, renewal. (It's in this context, incidentally, that one of Khrushchev's best lines should be seen: "Politicians are the same all over. They promise to build a bridge where there is no river").

English and American culture are very different, of course. Crudely speaking, the English are in awe of customs, and Americans are in awe of creeds. We don't have the same intrinsic futurism, what Brooks calls an "eschatological faith in the future".

Similarly, it would be preposterous to say of the English that they "probably postponed gratification because they thought the future was a big rock-candy mountain, and if they were stealing from that, they were robbing themselves of something stupendous". But coming from Brooks, talking about America, that seems reasonable.

And yet, despite these massive cultural differences, the national mood in Britain unites us with the US in three ways. First, we think of ourselves as part of the West; second, we feel our government is not bankrupt but certainly broke; and third, these two factors combine to create a sense of national decline. We all expect that this will be the Asian century, a time of geopolitical rebalancing. And both the American and British public expect their domestic economic recoveries to be slow and fragile.

One of the reasons Americans elected Barack Obama is because he made them feel good about their country. That is no bad thing for a leader seeking office to generate. What Obama did, broadly speaking, was resurrect a politics of national greatness, originally mooted by conservatives disgruntled with Newt Gingrich and Bob Dole, which seemed to inspire resistance to the narrative of American decline.

Funnily enough, it was Brooks and Bill Kristol who gave an outline of what a politics of national greatness might look like, in an article for the Wall Street Journal in 1997. George Packer explained it intelligently in the New Yorker.

A British politics of national greatness would sit uncomfortably with some sections of the electorate, and might lead to accusations that parties were trying to steal a march on the BNP. But what the British people are aching for is a bit of inspiration, someone to come along and explain what Britain has to look forward to. That alone, in my view, makes the demand for 'change' at the next election irresistible.

A politics of national greatness is probably not the sort of phrase you'd see on briefing papers put around by the any of the main parties, even the Tories. But what Brooks identifies as the problem in America - a sense of terminal decay, in need of reversal - is precisely the sentiment in Britain. What we need here is a political force that can convince us the 2010s will be a decade of British renewal. It will be hard for a man elected to parliament in 1983 to do that.

John Rentoul: The worst thing about Zanulab

The worst thing about the Zanulab government that has stolen our aynshunt liberteez (copyright Sadie Smith, now sadly no longer with us)? Definitely, ignoring parliament and turning MPs into automatons who vote meekly as instructed by the evil whips for laws that would make a self-respecting police state blush.

Or not.

Philip Cowley and Mark Stuart, Dissension amongst the Parliamentary Labour Party, 2008-2009:

The 2005 Parliament has already seen more revolts against the whip by members of the governing party than any other post-war parliament.

Denis MacShane: What Dispatches didn't say about the Israel lobby

Last night’s Channel 4 Dispatches Programme on Jews and their influence in Britain failed to ask or answer one question. (So, too, did the fuller report by James Jones and Peter Oborne). Why, if Jews are held to have such occult lobbying power, are they so spectacularly unsuccessful?

Israel has the worst press of any UN member state in the British media. The Commons is far more likely to hear a denunciation of Israel than any criticism of a neighbouring Arab country, let alone the openly anti-Semitic Hamas. This summer a rigorous, accurate report showed a doubling of anti-Semitic attacks in Britain – cemeteries desecrated, rabbis punched, Jewish kids jostled or spat at. Not a single national paper, let alone the BBC, covered it.

Other British citizens with links to Kashmir or Kurds or Sikhs or Cyprus are allowed to promote their cause. But British Jews cannot express support or affinity for Israel without being accused of forming a secret, money-rich cabal. This is 1930s style prejudice dressed up as modern TV journalism.

But it is part of a European-wide trend to lower the old barriers against depicting Jews negatively. Take Hungary. The main opposition party there is Fidesz, whose MP Oszkar Molnar had this to say about Jews recently: “I give primacy to Hungarian interests over those of global capital, Jewish capital, if you like – which wants to devour the entire world, especially Hungary.” This age-old image of Jewish capital attacking national interests comes straight for the pre-war politics of Nazism.

This willingness to excuse language that only yesterday would have been considered as anti-Semitic is now normal. In Poland, Felip Stanilko works for the policy think tank of Poland’s PiS Party, whose controversial alliance with Britain’s Conservative Party has stirred up passions. Mr Stanilko thinks that Jews control the main left-liberal Polish daily, Gazeta Wyborcza, Poland’s equivalent of the Independent or Guardian. In an interview with Canada’s Globe and Mail recently, the PiS analyst, speaking English, linked communism and Jews. “The faction of this society were predominately Jew, from Jew origins. You’ve got a Zionist path, you know, the people who created Israel, and you’ve got a communist path, because of the influential model of Marxism as a model of Talmudic thinking. And these people emigrated to the Soviet Union, they returned, they were very well educated by postwar standards, and biographically they are the crucial part of Gazeta Wyborcza.”

Far from being a creature of Moscow, Gazeta Wyborcza was created by anti-Soviet journalists from the Catholic Solidarity union. But the PiS statement is further evidence of the re-entry into European politics of anti-Semitic tropes.

On the eve of the 71st anniversary of Kristallnacht, last week, swastikas were sprayed on a Jewish cemetery in Dresden. Last month the Jewish cemetery in Ottawa was similarly daubed. We should not be surprised. As anti-Jewish remarks and discourses make their re-entry into European politics we can expect a gradual lowering of our guard. Far from “Never Again” the time has come to admit that anti-Semitic politics is back.

Denis MacShane MP is a former Europe Minister. His book, Globalising Hatred: The New Anti-Semitism, is out in paperback (Phoenix, £8.99)

John Rentoul: Are we heading for a repeat of 1992?

Meanwhile, a new Question to Which the Answer is No. Number 172, asked by Rod Liddle in this week's Spectator.

Liddle's thesis seems to be that an uncharismatic leader that took over from a three times election winner might pull off an unexpected narrow victory in defiance of the opinion polls.

Yes. That's a No.

(And Mike Smithson at Political Betting has already pointed out the difference between numbers that you can look up on the internet and numbers that you make up. The second kind save you 0.31 seconds of Google search time, but you get the number wrong.)

John Rentoul: A parcel

You do not need to read much of the long parcel of piffle by Peter Oborne and James Jones about the "pro-Israel lobby in Britain" to know that it is bad. I lit on this paragraph at random:

We can reveal that Jeremy Bowen had an article “Israel still bears a disastrous legacy” (31 May 2007) published a week earlier than his BBC piece (4 June 2007) in The Jewish Chronicle containing most of the contentious sentences.

In other words, "we can reveal" something that was not only in the public domain but that even my dim memory recalls was discussed at the time of the Bowen fuss, when the BBC journalist was rightly reprimanded for anti-Israel bias.

But you do not even need to read any of it. As Denis MacShane says here, you just have to ask yourself: if the pro-Israel lobby is so powerful, how come Israel is so poorly regarded in the British media?