Stop Press: Blair could implode

Tony Blair is showing real signs of stress.  As he is a professional orator, that stress is evident in his oratory, in the style of his delivery.  His hands are being used more and more to supplement the ineffectiveness of his words – he needs the comfort and reassurance of exaggerated hand movements - he needs to act out the assertions that he makes, without relying on the sheer force of his words.  Those are all telltale signs of inner uncertainty.  He is clearly not at ease with himself, because his confidence has been undermined by the Iraq experience, and public reaction to his performance.  He is putting a brave face on it, and acting out the part of conviction statesman, with great stubbornness. 

But he knows the problem.  He knows that he has become trapped in an abusive relationship with George Bush, in which his personal credibility is being hollowed out with every passing week.  Blair is the fall-guy, the mug, the subservient “friend” to the playground bully.  The deceits of Bush’s warmongering have left Blair seeming credulous, if not gullible, weak... Unless he escapes, he will be sucked dry by the cynical and ambitious American Neo-Cons, and mercilessly spat out.  He does not have long to find some way of changing course, and re-joining the European community of values.

If he fails to escape, he will be no good to Labour. For the moment, he remains, for the Party, a quite remarkable electoral asset, it would be madness to abandon him. But at any time he could just cave in from within, as Harold Wilson did.  The extraordinary allegations of Secret Service duplicity are unsettling. The Party "suits" must be ready for him to jump ship, albeit skilfully and elegantly. 

• I believe the Party must prepare itself for a short-notice change-of-tack, and the election of a new leader.

This is based only on the evidence of my own eyes, my own logic - am I fantasising?  What do you think?  Drop me a line

 < Back to Home Page

• Let me explain what I mean.

There was once a time when a "currency" was thought of in legal and institutional terms. My dear father (born 1887) was both a banker and a lawyer by professional training, and he was firmly convinced that national currencies derived their distinctive position from their legal status.  He waxed eloquent on the precise definition of "legal tender" i.e. the coins and notes with which citizens are constrained by law to deal, by way of the discharge of monetary obligations.  Equally, the management of the currency was for him (as it was still for Margaret Thatcher) the high-water mark of state sovereignty: it was the key mark of a sovereign Government that it could effectively manage its own currency, in terms of the mintage and destruction of currency in circulation.

We now know, however, that this was all nation-state clap-trap, mumbo-jumbo.  Currency, both as a store of value and as a medium of exchange, merely derives its force from its popular acceptability as a day-to-day commodity.  Russia in the early 1990s was a currency entrepot of bewildering complexity, even when paying for a taxi.  Currencies are themselves now bought and sold in many market-places, as objects of trade.  True, the populace still ascribes to nation-states the power to influence the fate of their currencies, and commonly prefer to use the currency of strong and competent states - the popularity of the $-currency, £-Sterling and the Swiss Franc are all tributes to these market factors, and they do indeed form part of the popular psyche.  It is also true that Governments still control the prices (= interest-rates) at which they are prepared to borrow from the public for government purposes - in whichever currency they are borrowing.

But what power does a Government enjoy, as a result of having its own currency?  Its Central Bank can no longer determine the interest-rates which prevail throughout "its" economy - those rates follow global markets and supply-demand pressures, changing only gradually.  Nor does the precise "price of money" influence any major business investment decision - if £10m is to be invested, it matters not whether the annual interest payment is to be £250,000 (2.5%) or £300,000 (3%)- to justify such investment, the profit margins will in any event have to be far, far higher, and nothing could possibly turn on a difference of £50,000.  Minor tweakings of the Bank Rate (such as are now common) are of no investment significance.

Too many people are still in the grip of outmoded monetarist games.  Currencies do of course have some relative significance - any business would prefer to receive payment in a strong currency than in a weak one, which might destroy its profit-margins before it could collect them.  But as between two or three strong currencies, there is nothing to choose.  It does not matter.

Governments cannot now manage their economies through administrative interest-rate manipulation - even if they ever could (which I doubt). Central Banks are rapidly declining in their significance. The Governor of the Bank of England will end up with the same political ranking as the Archbishop of Canterbury - monetarism is indeed an outmoded state religion.  Gordon Brown only gave the Bank of England "freedom" to determine "official" interest-rates because he knew the game was up.  It really did not matter any more!  He knew that the "Official Rate" would be effectively contained by the global currency markets.

Just consider the wider picture.  The Japanese economy is not weak because it does not control its own interest-rates!  Because it does. The problem is that no Central Bank can manage the economy through the monetary system - those days are past, and the Bank of Japan cannot escape the iron rule of globalisation.   Japan even has its own, very strong, currency the Yen - yet its economy is floundering because of the weakness of domestic demand.  Japan is a rigid, uninventive, conservative, inward-looking, xenophobic society, seemingly without the capacity to get itself out of the mess it finds itself in.  And currency manipulation is powerless to tackle such deep-rooted systemic dysfunction.

The German economy is floundering for socio-psychological, legal and structural reasons which have nothing to do with the Euro!  Those rigidities (which Brown is right to criticise) have been there for years and years - under DM and Euro.   In America, Alan Greenspan, the US' favourite central banker, can do nothing to arrest the slide of the American economy, because his power has gone.  What determines the health of the US economy (as for all of us, in the "advanced economies") is domestic demand, popular confidence.  And Americans are getting more and more worried about the consequences, for themselves and their own families, of the expensive belligerence of George Bush.  The US Government is now one of the primary sources of global anxiety, and Bush constitutes a real obstacle to the mergence of a peaceful, wealthy world, with nation-states at ease with themselves. Bush will win the next election, in declining economic circumstances, only if he now becomes a peacemaker, and restores the propensity - the confidence - to consume, both in America and throughout the world.  Business needs peace.

Finally, the strengths and weaknesses of the UK economy, the class system, regional mal-distribution, low tax-base will all remain with us - whichever currency we use.  Whether it is £-Sterling or the Euro is a matter of supreme indifference - except that there would certainly be short-term advantages of our switching now, because it would strengthen the UK economy, by marginally reducing interest-rates.