Reaching for the stars – House of Lords reform

The Houses of Parliament, by:  Rajan Manickavasagam

“If a second chamber dissents from the first, it is mischievous, if it agrees, it is superfluous.” Thus spoke the Abbé Sieyès on the essentially contested topic of bicameralism. Looking at the debate that has been raging (at least within the walls of Westminster) for the past hundred years over reform of Britain’s upper chamber, the House of Lords, and the various stunted attempts to reform this anachronistic appendage of British democracy, an outsider would be shocked at how complicated and politically toxic the issue has become. 

Having held together surprisingly well in the tough economic and political conditions, Britain’s coalition government stumbled earlier this month over a rather esoteric piece of legislation which rouses the tempers only of politicians and academics, leaving the general population pleasantly indifferent. Nick Clegg, the Lib Dem leader, is eager to push through reform of the upper chamber as part of his project of constitutional reform (which suffered a major setback with the AV referendum) so as to be able to point to an achievement when the time comes for the next general election. David Cameron, the Prime Minister, was happy to let Nick Clegg have his prize until it proved a major contention point with his own MPs, 91 of whom threatened to vote against the programme motion on July 10th which would have set a timetable for debate on the bill, thus stalling the whole process. As ever, the issue of House of Lords reform has not failed to get the blood boiling.

The bill that has caused cracks in the coalition would render the House of Lords predominantly elected, with 360 members elected in three staggered elections and the remaining 90 appointed. On the face of it the rationale for reforming the membership of a second chamber which currently consists of about 825 peers, 700 of whom are appointed through a process which gives the Prime Minister huge powers of patronage, is clear: the people who shape the laws of a democracy should be elected. The fact that 92 hereditary peers still sit on the plush red benches of the second chamber is a blemish on British democracy. Furthermore, Britain sits alongside countries such as Antigua, Lesotho, Yemen, Jordan and Russia in having an appointed chamber. It is hardly dignifying company. Supporters of its present composition retort that its appointed nature enables it to have a higher level of expertise and a less partisan nature, fostering a more edifying debate. However, very often its most eminent members do not attend, or in any case do not vote, as the Crossbenchers’ low voting record shows.

But is it really as simple as that? Members are elected, ergo they have the necessary legitimacy to make laws. As Shami Chakrabarti rightly pointed out, “if it is just about having elections every few years, the people of Burma and Zimbabwe need be very relieved indeed that they too live in thriving democracies.” After all, an independent (and unelected) judiciary is considered legitimate enough to protect our rights and freedoms. The House of Lords, with its rather archaic present membership, is still considered fairly legitimate by the public. Less than half the respondents in a survey conducted in 2007 thought that having some members elected by the public was very important for its legitimacy. On the other hand, making decisions in accordance with public opinion, detailed legislative scrutiny and having a trustworthy appointments process ranked higher. Thus it is time we questioned the exclusive and automatic relationship between legitimacy and popular election. It is undoubted that democratic election confers some form of legitimacy, but that does not mean that an unelected body is a priori illegitimate.

This is not an exercise in slinging mud on democracy and elected upper house members, rather it is intended to foster a more informed debate on the nature reform should take. The argument that those who shape the laws should be elected is too simplistic to be the driving force behind major constitutional change. The House of Lords has worked very well thus far, often acting as a ballast against unpopular legislation (such as control orders in the Prevention of Terrorism Bill in 2005) and acting in accordance with public opinion despite being in no way accountable to the public. Reform should be entirely contingent on the kind of upper chamber Britain wants to see. If it is to remain predominantly a revising and scrutinising chamber, as it has been hitherto, then an appointed membership (without prime ministerial patronage) that limits partisan bickering and favours expertise would be more appropriate. Its public legitimacy would be bolstered by the removal of the hereditaries and the expanded role for the independent Appointments Commission.

If, on the other hand, we want a much stronger chamber that keeps the government in check then an elected membership would indeed be suitable. This is because, with its present composition, the House of Lords has often refrained from challenging the government as much as its powers (which are significant) allow for fear of being reprimanded for obstructing the will of the people’s chamber. An elected second chamber would fundamentally change the balance of power between the two chambers and strengthen Parliament as a whole against the government. Given the largely untrammelled control of the executive over the Commons, this is something to be welcomed. The Parliament Acts, which enshrine in law the supremacy of the Commons, will not necessarily become obsolete should the Lords become elected as they can be amended and possibly strengthened. The fact that the government is still drawn from the lower chamber will continue to ensure it ultimately gets the final word. As Roger Hazell has said, the experience of the United States with gridlock has unduly coloured the debate in Britain.

Coming back to the indefatigable Abbé Sieyès, it is time Britain decided what kind of second chamber it really needs, rather than continually accusing the House of Lords of either being superfluous or mischievous. The scaremongering on the dangers of gridlock is unfounded, as is sanctimonious talk of those who seem to believe that elected representatives are all ignoramuses. Reform has waited a century already; it can wait a little longer so that a mature debate can be instigated.

The market value of our clicks: Google is not a "free" service!

That Google (or any other search engine) values the information we spontaneously give whenever we perform a search is something that is pretty obvious. But how much is this information really worth? Well, today I found out what the market value is of each and every "click" we make when we are online. 

Today I received an "invitation" via Facebook to open an account on "blurum", an internet-based company that gives you points for letting them know every internet search that you make, every web page that you visit, what your favorite web sites are etc. Basically they collect information about our interests and habits and create a sellable profile of people. In return, you get points, and after collecting a certain amount of points you can spend them on prizes that get sent to you for free. Each prize costs a certain amount of points.

For every web page visited, for every search made or for every favorite web site added to your profile you get 1 point. 

Therefore by dividing the cost of the prizes (they range from an Apple macbook air to Omega watch to household goods) by the number of points necessary to win them one can determine the market value of our clicks. The result: about 0,02 Euros per click! 

... But that's not actually what our clicks are worth.... 0,02 Euros is only what we, as users of blurum, get for them. In fact that company is obviously still making a profit, even after paying the users 2 cents a click. A realistic guess is that the clicks are worth about 4/5 cents each!

By going in "history" on my web browser I can see that I visit every day in average 216 web pages, which makes my daily activity on the net worth about 9.7 Euros!

So as a result one could say that we are paying to use google ~9 Euros a day!

The stolen jobs no one wants. Redefining expectations

As I write, a 54 year old Romanian lady is cleaning my garden (a tiny piece of dry earth where no grass grows and only fallen leaves lay). She came to Italy 18 years ago, alongside the italian man she had fallen in love with, full of hope to find a good employment with her Ph.D. in engineering. As it happened the man died before they managed to put together the necessary paperwork to get married.
At the time Romania was not part of the EU and her possibilities for any type of legal work where slim to say the least.
I met her back in 1998, when she started being our housekeeper and eventually became my beloved nanny. Since then she has regularly worked in different Italian households with a wage of about 7/8 euros/hour, with which she had to pay her own pension, taxes, etc. (she had become legal after starting to work for us).
The point of this article, though, is not the sad story of a remarkably honest, sweet, hardworking and humble woman, but rather our (wealthy, western-society people) tendency to identify part of the labor market crisis with the extensive presence of an immigrant and/or illegal workforce in our countries. So the question that I think we should honestly address to ourselves is: would we really be willing to take up the jobs of these immigrant/illegal workers, or are we only using them as scapegoats?

At a time of high unemployment, many Americans are convinced that these aliens take American jobs. As a test, in the summer of 2010 the United Farm Workers (UFW), launched a campaign called "Take Our Jobs" (http://www.takeourjobs.org/) inviting willing Americans to work in the fields. In the following three months 3m people visited takeourjob.org, but 40% of the responses were hate mail, says Maria Machuca, UFW's spokesperson (as reported by "The Economist").
Only 8,600 people expressed an interest in working in the fields, says Ms Machuca. But they made demands that seem bizarre to farmworkers, such as high pay, health and pension benefits, relocation allowances and other things associated with normal American jobs. In late September only seven (I MEAN 7!!!!) American applicants in the "Take Our Jobs" campaign were actually picking crops.
So the point was proven: most Americans did not want those jobs!
Coming back to my Romanian lady: my friends and I often are worried about our employment perspectives but it never occurs to us to actually "downsize" and contemplate a "regular" job. The type of job that is commonplace for the vast majority of people in the planet whilst we, by some type of "natural birth right" seem to be exempted from them.
How many of us complain about the labor market crisis and still pay people to clean our homes, iron our clothes, baby-sit our siblings or relatives, take care of our elderly?
So are "our" jobs (which is difficult to define anyway in this time of mobility) really getting stolen? Is there really a crisis in the labor market or is it mainly that our expectations about what a professional position should be like are not realistic?
Why is it that a Romanian women, with a Ph.D. can clean homes for 20 years without needing therapy or attempting suicide and our young generation cannot even contemplate the idea?

Where is the growth?

Prime Minister Manmohan Singh

In the debt-ridden eurozone, an annual growth rate of 5.3% would be a cherished prize for politicians. Not so for the Bric giant India, as it is the lowest rate in seven years and is symptomatic of a deeper malaise affecting Indian politics. Add to this high inflation, growing fiscal and trade deficits and negative investment sentiments and India’s economy no longer appears so rosy.

India’s economic situation came to the fore after the ratings agency Standard and Poor’s (S&P) warned it that it may strip the country of its investment grade status, unprecedented among the Bric group which also includes China, Brazil and Russia. The report, entitled “Will India Be The First Bric Fallen Angel?” blamed the division of roles between the “powerful” Congress party president Sonia Gandhi and the “unelected” Prime Minister Manmohan Singh as the principal reason for the sickly state of the economy. The deficient political system leads to “political roadblocks to economic policymaking” which have stalled the necessary reforms, such as the Goods and Services Tax and one facilitating foreign direct investment (FDI). The agency continued saying that the outlook would not be so bleak for the Asian giant if it cut energy subsidies, which eat at its budget deficit, and raised petroleum prices.

"If things remain the way they are, in terms of policy decisions, investments and sentiments, I would go to the extent that the [growth] figure may be 3%," said a senior economist with a leading business association, echoing the doubts of Indian economists over S&P’s estimate of 5% growth for 2012-13. The low growth is worsened by high inflation, with food inflation at double-digit levels and wholesale price inflation at 7%. Furthermore, the government has systematically failed to tame the fiscal deficit it ran up in order to cushion the effects of the global financial crisis, fuelling irresponsible spending. The fiscal deficit, which stood at 5.9% of GDP in 2011-12, could rise further because of the sluggish growth, lower-than-estimated government revenues and higher expenditure on welfare schemes and energy subsidies. Just as worryingly, the trade deficit went up by $185 billion in 2011-12, as imports rose more than exports. The ailing economy and dithering politicians have thus led to a drop in the business confidence in India. Many firms in the domestic private sector delayed or postponed plans to invest in expansion, further contributing to the sluggish recovery. Certain tax provisions in the 2012 Budget have also put a dampener on FDI inflows.

One government official, giving his explanation of the slowdown, claims that the state machine reached a paralysis from mid-2010, when the public revelations of graft left the government in “an effective state of siege”, such that it was unable to pass reforms or tackle problems such as the shortage of electricity. Reforms are further stymied by the lacklustre performance of the government, which only tends to pursue reforms that are acceptable to its partners and which do not require it to bang heads together. As such it has gone ahead with the easier bits of infrastructure development, such as roads, whilst sidelining more contentious projects such as the power sector, which presents problems throughout the supply chain.

As the former governor of India’s central bank, Bimal Jalan, said, “you can import as much oil as you want, you can pay for it because your reserves are high, and your exports are doing reasonably well even though they may not have done so well in one or two quarters. Your current account deficit is higher than you expected, but still we can afford it, there is no great problem. So what is it that's lacking and that we don't have?” Once again the arrow points towards politics, as India lacks a mature, bipartisan political consensus on the future of its economy. This lack of a political vision is compounded by the marginalisation of India’s main political parties, the ruling Congress and the opposition Bharatiya Janata Party (BJP), who are losing support to regional parties. Mr Singh’s strategy of reforming by stealth has had the harmful effect of not fostering a popular consensus around the need for reform, such that the government faces endless protests when trying to proceed with its program. Congress’s hands are further tied by the electoral timetable before the general elections in 2014, which make it even more loath to take risks.

Global economic crisis aside, India’s recent slowdown seems firmly rooted in its broken politics. Unless it can usher in change at the top, which for too long has seen the beleaguered Mr Singh fudging along, or garner the necessary public support for reform which would propel it to tackle the red tape and widespread graft, India seems set on a path of sluggish growth for years to come. Perhaps not a Bric Fallen Angel, but not a rising Asian giant either.

Biting the bullet

Spain's Prime Minister: Mariano Rajoy
By: European People's Party - EPP

“You have the Greek model, or the Irish model. You can either go kicking or screaming, or you can bite the bullet, like people have done in Ireland”. Thus Gayle Allard, an economist from Spain’s IE Business School. Judging by Spain’s latest budget, it seems the centre-right government headed by Mariano Rajoy is firmly determined to follow the Irish model.

On March 30^th the Spanish government announced what was the most austere budget since Franco’s death in 1975. In an attempt to save €27bn this year, public sector salaries will be frozen, ministries will face budget cuts of up to 17%, income tax will rise by 1.9% and electricity and gas bills will rise by 7% and 5%, respectively. Unemployment benefit will be frozen and pensions will be indexed to inflation. As a palliative for consumers, VAT will stay at its current 18%. Following massive protests across Spain, which turned violent in Barcelona, the budget minister Cristobal Montoro was careful to ensure that most of the savings would come from higher corporate taxes, a fiscal amnesty in return for a 10% fee and public sector cuts.

The draconian budget follows negotiations with the European Union last month during which Spain agreed to reduce its deficit from 8.5% to 5.3% of GDP in 2012. This figure was a compromise on Spain’s earlier announcement in March that it would reduce the deficit to 5.8%, a long way from the 4.4% previously agreed with the EU. Blaming the previous Socialist government, the current administration justified this unilateral announcement with its discovery that the country’s finances were more rickety than it had expected.

A lot of commentators have expressed doubts about the feasibility of the budget cuts. One worry is that Spain might fall into a downward spiral of spending cuts, recession, unemployment and falling tax revenues, given that the economy is already in recession and predicted to shrink by 2% this year before any savings are made. Moreover, unemployment already stands at 23%, rising to over 50% for young people. Given that the troublesome regional governments were largely responsible for Spain overshooting its deficit target of 6% last year by 2.5 percentage points, the latest budget is at risk if they fail to cut down on their spending.

On the other hand Spain is anxious to step out of limelight and quash any concerns about it needing a bailout, especially as bond yields rose almost a full percentage point since the start of March. Should Spain prove incapable of reining in its spending and raising revenue, interest rates could well rise to unsustainable levels. Mr Rajoy has a brief window of opportunity to push through his programme as exports in January were 3.9% higher than a year earlier and a weaker recession in Europe ought to buoy the upward trend. Spain’s public debt is also small by European standards, something that ought to give it some respite.

Spain’s budget is thus a gamble between self-perpetuating recession and slow growth. One can only hope that it pays off.