PLAN B OR ABANDONING AUSTERITY?

The latest GDP figures don’t make pleasant reading, showing that GDP fell by 0.3% in the last quarter of 2012, this should give further confirmation to most people (including economists) that the Con Dem Coalition Government’s questionable austerity experiment (Plan A) is clearly failing. This has prompted a flurry of calls for a change of approach (Plan B) from all quarters, including the chief economist of the International Monetary Fund (IMF). It’s time for the Chancellor to change course and announce radical growth measures in the Budget which takes place on 20th March.

Austerity is not just not working, it’s actually smothering any prospects of sustained recovery and economic growth. It’s time for some balanced well thought out investment in infrastructure and green energy which will help to create  jobs and provide the key to getting the economy back on track. Plaid Cymru has long advocated a progressive alternative to drastic public sector cuts (and their consequences) in order to stop the UK sliding back into recession and to avoid a whole decade of economic decline.

Plaid Cymru's Treasury spokesperson, Jonathan Edwards MP, said:

"These latest GDP figures signal the latest disaster for a Chancellor whose ideologically-motivated policies make him deaf to all warnings and cautions.

"Tackling the Government deficit and debt should only be done when the economy is growing and confidence is high. Current austerity is strangling any sustained recovery. 

"It looks increasingly likely that the cherished AAA credit rating is in jeopardy making the pain of the Government debt pointless. There is now a real threat of a triple-dip recession and the Chancellor has no choice but to change course.

"We must invest in infrastructure and focus on creating meaningful jobs if we are to get the economy back on track - this is what Plaid Cymru outline in our plans for a Bank of Wales to support SMEs and what we achieved in our recent Budget deal with the Welsh Government.

"Wales is suffering disproportionately as a result of the Coalition's austerity experiment. The Bevan Foundation recently announced that welfare cuts would wipe £100m from the Welsh economy. Real terms cut to benefits will suck demand out of local economies as ordinary families are forced to tighten the purse-strings even more.

"As the Chancellor announces his Budget in March, we in Plaid Cymru will present our alternative economic vision that would generate growth, tackle unemployment, and equip Wales with the powers necessary to have meaningful control over its own economy."

TAX EVASION: LEARNING FROM GREECE

Costas Vaxevanis, a Greek journalist has been acquitted of breaching privacy for publishing the names of 2,000 suspected tax evaders. He published a list of Greeks with Swiss bank accounts, including a government minister and other prominent figures in public life, in Hot Doc, the weekly magazine that he edits. In court, his lawyers argued that the charges were outrageous and said no-one on the list had actually complained of a breach of privacy. After a trial lasting one day, an Athens court found Mr Vaxevanis innocent.

Costas Vaxevanis

The court ruling comes at a time when Greece is being urged by international lenders to crack down on tax evasion as part of far-reaching reforms demanded in exchange for billions of euros of bailout money. The list of suspected evaders was reportedly leaked by an HSBC employee and passed to IMF chief Christine Lagarde when she was French finance minister in 2010. She apparently handed the list to the Greek authorities, but they sat on it, taking no action.

At least two of Greece's former finance ministers have admitted seeing copies of the list. The current Greek finance minister, Yannis Stournaras, (in office from in June), has told parliament he has not seen the list. The heavy handed prosecution has left lots of egg on the faces of current Greek Government. The Athens court took little time to acquit the journalist, and observers (according to the AFP news agency) in the courtroom broke out in applause. Greece may have given us democracy, but, perhaps there are some other things we can learn from them when it comes to exposing tax evaders.

THE PEOPLE SPEAK

The Lithuanians, given a chance to express their approval or disapproval of the austerity programme, appear to have voted out their Conservative Government. With some results still to come in yesterday, the two leftist parties, Labour and the Social Democrats, appear to have finished first and second, and their leaders have met to discuss terms of a coalition. Lithuanian PM Andrius Kubilius' government has been punished for cutting pensions and public wages.

Voters passing judgement on austerity in Lithuania (Associated Press)

In a seperate referendum, the Lithuanians have voted against plans for a new nuclear power station, which the government had previously said the plant would cut dependence on imported Russian energy. Environmentalists and other political parties had questioned its affordability. The result from Sunday's referendum is non-binding, but surely leaves a vast question mark hanging over the future of the proposed plant.

The former government enforced a harsh austerity programme, to stave off national bankruptcy. Lithuania’s economic output dropped by 15%, unemployment soared and thousands of young people emigrated in search of work. Of late the Lithuanian budget deficit has largely been dealt with and GDP reached growth of 5.8%.

Lithuania's harsh approach won praise from other governments and the International Monetary Fund. Yet the price paid by ordinary Lithuanians’ came far too late to be translated into a political revival for the conservative government, who have paid the price at the polls. The opposition had promised to raise the minimum wage, make the rich pay more tax and put back euro entry until 2015.

In the Lithuanian general election, with election counting complete in three-quarters of voting districts, the Labour party are on 21%, the Social Democrats on 19%. The former Prime Minister Kubilius' Homeland Union Party is on 13%. The bottom line may well be that if you give the people a change to express their option on austerity and you may get a decisive answer...this scenario may increasingly play on David Cameron's mind over the next few years.

TIME FOR SOME CONSEQUENCES?

Back in March I noted with interest that the trial of Iceland's former Prime Minister Geir Haarde, who was accused of negligence in his handling of the 2008 financial crisis that severely undermined the Icelandic economy, had begun in the capital, Reykjavik. A sizeable part of me thinks that it is quite refreshing for elected politicians to face real consequences for their actions? I mention this again because of the ongoing consequences of the embarrassing childlike spat between Osborne and Balls, which has served to provide a degree of distraction from New Labour and the Conservative party’s cosy relationship with the bankers and the City.

Now as most people know Iceland fell into recession when the country's major banks, including on-line bank Icesave's parent company Landsbanki, crashed in the autumn of 2008. Icelanders awoke to find that they owed six times the island's total gross domestic product (GDP), the world's credit markets promptly dried up, they were left high and dry unable to refinance loans. Iceland’s big three banks, who's business web stretched across Europe (with customers that included Welsh local authorities), collapsed under billions of dollars of debt.

Iceland’s economy had largely been based on and around fishing, but in the 1990s, the banks boomed and expanded abroad and Icelanders got cheap credit (just like the rest of us) with next to no regulation. After the crash, the unemployment rate and inflation sky-rocketed, and on the domestic political front all hell broke loose. A huge wave of angry public protests followed and the then Prime Minister Geir Haarde’s government fell in 2009.

The ex Prime Minster was accused of negligence because he had not ensured financial safeguards were in place. He has denied the accusation, saying he was only doing what he thought was best for the country at the time. The ex PM could face up to two years in the slammer if convicted. Ironically he was one of four politicians blamed in a 2010 parliament-commissioned report for contributing to the country's financial collapse, yet is the only one on trial.

In September 2010, the Icelandic Parliament decided that only the ex Pm should be tried on charges relating to the financial crisis, the trial began in March (2012) and ended with a guilty verdict (in April 2012). From here it certainly looks like the former PM was left carrying the can as two current ministers (Prime Minister Johanna Sigurdardottir and Foreign Minister Ossur Skarphedinsson) were not referred to the court, along with some of his former colleagues including the former foreign, finance and business ministers.

In the March 2010, Icelandic voters rejected overwhelmingly via a referendum the proposal to pay the UK and the Netherlands 4 billion euros (£3.4 billion) they lost when the Icesave bank collapsed. The Icelandic citizens view was that they should not be made to pay so much for their banks' bad decisions. Now this is a feeling that I suspect is shared by most of us, save for our elite who are busy making the rest of us pay off their mistakes and the mistakes of their friends at length.

Now where, save in Iceland have the ordinary people had a direct opportunity to pass judgement on any of the deals done to bail out the banks. Back in December 2010, Iceland the UK and the Netherlands agreed a new repayment deal. Iceland's parliament (in February 2011) voted yes to a plan to repay the UK and the Netherlands for reimbursing 400,000 citizens who lost their savings in the collapse of Icesave's parent bank, Landsbanki. Iceland's president, Olafur Grimsson, then put the deal to a public vote. In April 2011, the voters of Iceland once again rejected the repayment deal in a referendum. I wonder how the voters would have voted if we had been given a choice on bailing out the banks?

Anyway while Iceland fell into one of the most severe recessions anywhere in the world when the markets crashed in 2008 and economic output fell by around 12 per cent in two years. Yet despite this Iceland did not fall, an International Monetary Fund reports show that growth has resumed. GDP is expected to increase by a relatively healthy 2.5 per cent in 2011. The Icelandic public finances are on a sustainable path too with government debt projected to fall to 80 per cent of GDP in 2016.

Iceland's output is still more than 10 per cent down when compared to pre-crisis levels. The country's unemployment level is around 6.7 per cent, this is considerably higher than it was pre 2007. The Icelandic standard of living is also well down and there is limited access to foreign currency. The risks to recovery still remain and Icelandic Central bank interest rates are currently going up in order to curb inflation, something that could have an impact on growth. Yet despite all of this the outlook for the Icelandic economy looks much healthier than some other distressed economies in Greece, Ireland and Portugal.

Plaid Cymru believes that only a full public inquiry can offer an adequate response to a scandal on such a scale. A parliamentary inquiry could bring senior figures from the last New Labour administration to the dock under oath. Surely Gordon Brown and Alistair Darling, and Ed Balls and Ed Miliband, their former economic advisers, would relish a chance to clear their names by being called to account for their actions.

Both New Labour and the Conservatives have been (and still are) entirely fixated with putting the market before people regardless of the cost. A parliamentary inquiry could at least shine a light on the City’s murky dealings. Sadly both New Labour and the Conservatives are still entirely hooked on high finance and dazzled by the City’s dodgy money men, so we may have a long wait before we start to see politicians giving evidence in the dock.

UNFORESEEN CONSEQUENCES...

Its no secret, but, I have never been one for elites, whether they be elective, self-selective, cultural, social or sporting (something which may explain a slight dislike of Manchester United on my part). I noted with interest that the trial of Iceland's former Prime Minister Geir Haarde, who is accused of negligence in his handling of the 2008 financial crisis that severely undermined the Icelandic economy, has begun in the capital, Reykjavik. How refreshing for an elected politician to face real consequences for his actions?

Iceland fell into recession when the country's major banks, including on-line bank Icesave's parent company Landsbanki, crashed in the autumn of 2008. The Icelanders woke up to find that they owed six times the island's total gross domestic product (GDP), the world's credit markets promptly dried up, they were left high and dry unable to refinance loans. The county’s three big banks, who's business web stretched across Europe (with customers that included some of our local authorities), collapsed under billions of dollars of debt.

The country's economy had largely been based on and around fishing, but through the 1990s, the country's banks boomed and expanded abroad and Icelanders benefited from cheap credit just like the rest of us. In the immediate aftermath of the crash, the country's unemployment rate and inflation in Iceland sky-rocketed, and on the domestic political front all hell broke loose. A huge wave of angry public protests followed and the then Prime Minister Geir Haarde’s government fell in 2009.

The ex Prime Minster has been accused of negligence because he had not ensured financial safeguards were in place. He has denied the accusation, saying he was only doing what he thought was best for the country at the time. The ex PM could face up to two years in the slammer if convicted. Ironically he was one of four politicians blamed in a 2010 parliament-commissioned report for contributing to the country's financial collapse, yet is the only one on trial.

In September 2010, the Icelandic Parliament decided that only the ex Pm should be tried on charges relating to the financial crisis, the trial is expected to last until 15th March. The former PM was left carrying the can as two current ministers (Prime Minister Johanna Sigurdardottir and Foreign Minister Ossur Skarphedinsson) were not referred to the court, along with some of his former colleagues including the former foreign, finance and business ministers.

In the March 2010, Icelandic voters rejected overwhelmingly via a referendum the proposal to pay the UK and the Netherlands 4 billion euros (£3.4 billion) they lost when the Icesave bank collapsed. The Icelandic citizens view was that they should not be made to pay so much for their banks' bad decisions. Now this is a feeling that I suspect is shared by most of us, save for our elite who are busy making the rest of us pay off their mistakes and the mistakes of their friends.

Back in December 2010, Iceland the UK and the Netherlands agreed a new repayment deal. The country's parliament (in February 2011) voted yes to a new plan to repay the UK and the Netherlands for reimbursing 400,000 citizens who lost their savings in the collapse of Icesave's parent bank, Landsbanki. Iceland's president, Olafur Grimsson, put the deal to a public vote. Back in April 2011, the voters of Iceland once again rejected the repayment deal in a referendum.

Now Iceland has been through one of the most severe recessions anywhere in the world when the markets crashed in 2008. The country's economic output fell by about 12 per cent in two years. Yet the latest report on Iceland by the International Monetary Fund shows that growth is resuming. GDP is expected to increase by a relatively healthy 2.5 per cent in 2011. The Icelandic public finances are on a sustainable path too with government debt projected to fall to 80 per cent of GDP in 2016.

Iceland's output is still more than 10 per cent down when compared to pre-crisis levels. The country's unemployment level is around 6.7 per cent, this is considerably higher than it was pre 2007. The Icelandic standard of living is also well down and there is limited access to foreign currency. The risks to recovery still remain and Icelandic Central bank interest rates are currently going up in order to curb inflation, something that could have an impact on growth. Yet despite all of this the outlook for the Icelandic economy looks much healthier than other distressed economies across the water in Greece, Ireland and Portugal.

Closer to home, there are plenty of people across the Celtic Sea who are less than happy with the choices made by the Irish elite and the fact that they have largely got away without punishment for their crimes, misdemeanour's and bad decisions. Some have called for a fresh start and new republic literally writing off the past (and the debt). In recent history in Ireland (and elsewhere on the European mainland) referenda have produced the wrong result, at least as far as the elite are concerned.

Peadar Kirby and Mary Murphy exposed the winners and losers from the current Irish model of development and related the distributional outcomes of the use of power by Irish elites, in their book Towards a Second Republic. The authors analysis of Ireland's economics, politics and society, and draws some important lessons from its cycles of boom and bust. They also look at the role of the EU and compare Ireland's crisis and responses to those of other states. The book includes a proposal to construct new and more effective institutions for the economy and society, I suspect that it won't be on the summer reading list of any elite near here any-time soon.

Even closer to home there have been no real consequences (or punishments for that matter) for the banking crash for the inhabitants of the Westminster village or the bankers (other than the loss of the odd bonus). The Royal Bank of Scotland (RBS) intended to reward its chief executive Stephen Hester a bonus of £1.4 million despite a fall in share prices. The announcement came days after RBS effectively pulled the plug on profit-making fashion retailer Peacocks who went into administration leaving thousands of livelihoods at risk, only serious public criticism led to the rejection of the bonus.

RBS was bailed out with billions of pounds of taxpayers' money during the financial crisis, but showed a marked reluctance to lend to a profitable business during its time of need. The UK financial sector, on the back of Thatcher's plundering of state assets, created a culture of rewarding failure and neglecting responsibility, encouraged by the hands off approach of New Labour. The Conservative dominated Westminster government, shows a marked reluctance to regulate the excesses of the banking sector, perhaps it might cause a few awkward moments in the club...

LAND AND POWER

As multi nationals and the People's Republic of China (PRC) continue to chase to attempt to secure control of the worlds resources one thing they are both seeking to secure control of (for different reasons) is food and the land it grows upon. With purchasable governments in certain quarters of the world it's the small farmer who's felling the pinch, losing both his land, the ability to feed his family not to mention the ability to feed other people. Planet-wide it has been estimated that there are some 500 million small farms (less than two hectares in size) which feed around one third of the planets population.

Half of the planet's undernourished citizens are dependent on small farms for their food. Some 80% of food consumed in Asia and sub-Saharan Africa is produced by small farms. As our planet's population continues to increase (it's estimated to reach around 9.2 billion people by 2050) there will be a corresponding rise of around 70% in demand for food (UN). So with the PRC chasing food as well as minerals to feed it's population and it's economy and the multi nationals chasing a fast buck no doubt at the expense of local indigenous inhabitants who won't be able or willing to pay top dollar or euro for foodstuffs that are destined for distant foreign markets.

Local people will be driven into dire poverty, they lose their land in the process along with the ability to feed themselves and other peoples. Oxfam's recent  report 'Land and Power' makes interesting and alarming reading. One of the great ironies is that many of the developers are working with local governments who are being helped out by the world Bank and the International Monetary Fund - this surely is the kind of alleged 'free market' development much of Asia and sub-Saharan Africa can well do without.

WATER RESOURCES

On a hot day (in Wales, even in early in October) when thirsty I simply turn the tap and get cool drinkable water to quench my thirst. It is very easy to forget that no everyone on this planet has that simple luxury. The fact that it's warm at the moment is down to weather rather than global warming. However, that said, it's worth noting that with global warming will come drought, which is the real silent killer.

The International Institute of Tropical Agricultural (in Nigeria) estimated in 2008 that by 2010 some 300 million people in sub-Saharan Africa (nearly a third of the region's population) would be suffering from malnutrition because of the on-going drought. By a strange quirk of fate most people don’t die of hunger during a drought, they die from dysentery and other disease which are spread by poor living conditions and a lack of sanitation. It has been estimated that around 1.6 million children per year die from a lack of access to clean drinking water and adequate sanitation.

The Hadley Centre for Climate Change has noted that there has been a 25% increase in worldwide drought through the 1990’s. It has been estimated that around 3% of the planets surface area is affected by extreme drought conditions. This figure could rise to around 30% if the climatic effects of global warming kick in big time and this excludes those areas affected by moderate drought conditions.

Now according to UNESCO, our planet has plenty of fresh water, the problem is a combination of uneven distribution, combined with mismanagement of limited resources and the fact that we harvest water on an industrial scale. UNESCO estimates that around 1.1 billion people do not have drinking water supplies and around 2.6 billion lack basic sanitation. Of this figure over half live in India and China not to mention the millions in sub-Saharan and tropical Africa.

By 2030, UNESCO has estimated that we will need approximately 55 percent more food, hence a need for more water for irrigation, something that already takes around 70 percent of all the water currently consumed by humanity. Factor in rapid urbanisation in developing and developed countries (UNESCO research projects that 2/3rds of the population of the planet will live in urban areas by 2030 – many in slums and squatter camps), and you begin to see the potential (if not the actual) scale of the problem and how access to fresh water and sanitation will be an ongoing problem.

When it comes to developing our nations water resources we need much more than short –term thinking and fast-buck solutions, we need sustainable long-term solutions. There is a distinct possibility that drought and major water shortages and other related crisis's may be a regular feature of life in the 21st century, pretending that it won't happen (here or elsewhere) is not an option. What's also not an option is for multi-national companies to move in and run (for a fat profit) state water resources in the developing world (or the developed world) for the benefit of distant shareholders (and the local elite be they elected or merely local tyrants) at the behest of the World Bank and the IMF.