Britain’s political class did not distinguish itself in its immediate response to the Crimean crisis. A zoom lens outside Downing Street which captured Cabinet Office papers in the hands of an unguarded official seemed to reveal yet more evidence that the protection of the City trumps any other strategic instincts for this government. Labour, meanwhile, appeared to be more rattled by Tory Twitter jibes than by Vladimir Putin’s machinations. But the challenge posed by Moscow’s intervention in Ukraine will outlast any initial inclinations to see it through the prism of the Square Mile or the Westminster bubble. From the future of the European Union to UK defence priorities, Russia now presents a number of long-term dilemmas for progressives, regardless of how the events of the next few months play out.
The IMF has attracted plenty of favourable attention from unfamiliar places with two ‘staff papers’ (we’re enjoined to consider them as the personal opinions of the authors, not the IMF itself, an injunction that we all merrily ignore). The first argues that inequality reduces growth, while redistribution is an effective tool for reducing it; the second explains how governments should use taxes and public expenditure to achieve this goal.
Inequality campaigners are over-the-moon to have the IMF on their side. Oxfam International hails the IMF for “mashing myths and debunking dogma in economic policy,” while the Oxfam inequality guru, Nick Galasso, is fulsome in his praise of an “ideological sea change” at the Fund (“if If it sounds like I have a crush on the IMF’s Managing Director, Christian Lagarde…”).
— Oxfam International (@Oxfam) March 16, 2014
But what tools does the IMF think we should use to shrink inequality? Oxfam’s tweet leads to a Reuters article covering a speech by IMF deputy managing director, David Lipton. The speech is definitely worth reading in full – it’s a digestible summary of emerging IMF thinking, while the table on page 43 of the IMF report provides an overview of its suite of policy prescriptions.
Key recommendations for developed countries include substituting means-tested benefits for universal ones; raising the retirement age and making the rich work longer than the poor; charging more for university education in order to spend more on schools; and making income tax more progressive, while eliminating tax breaks.
Many of these are good policies, but let’s not pretend they’re all politically palatable. Take the last one as an example. In the United States, President Obama and the Republicans are locked into fruitless combat on eliminating a few of the most egregious pro-rich tax breaks. A recent revenue-neutral tax reform plan from a Republican has provoked a blizzard of protest from Wall Street and has been roundly condemned by his colleagues.
But the IMF is not interested in these small-bore controversies, it has the big one in its sights: the 37 million Americans who benefit to the tune of $70bn or so from tax relief on their mortgages. And that’s a political live wire. I’d speculate that any presidential candidate – Republican or Democrat – who ran for 2016 on a “tax the homeowners” platform would have as much chance of winning the nomination as I do.
This is not just an American problem. Look at the IMF’s core policy prescription for the United Kingdom – one good enough that it makes it into Lipton’s speech as well as into the report. The UK should move to a flat rate of VAT on all goods and services, Lipton argues, and use the money to increase benefits.
That would mean imposing a 20% tax on food (raising £16bn or so), and on rent and house construction (another £13bn), while increasing tax on household electricity and gas from 5% to 20% (£5bn). Tax would also go up on books, children’s clothing, tampons, condoms, stamps, charities like Oxfam, and… funerals. Yep – the IMF is proposing a burial tax.
All in all, this would give George Osborne £60bn to play with (table 4), more if he axes universal benefits in favour of greater means-testing (goodbye child benefit, winter fuel allowance etc). This would be enough to double benefits for working-age low earners and the unemployed (table 8.2).
Good news for inequality, maybe, but an act of political insanity. In the UK, we once had a manifesto that was derided as ‘the longest suicide note in history’. Flat rate VAT (for all its merits) would be the shortest. VAT on food? On books? On coffins? Just look at the disaster that befell the British government when it tried to tax Cornish pasties to see how badly this would go wrong.
There are equally obvious political bear traps when you look at the problem from the point of view of low and middle income countries. And the task ahead of them is daunting, given that inequality levels are higher in Asia and the Middle East than in the West, and much higher again in Africa and Latin America. A European minister told me that he was hoping for a post-2015 goal that would inspire the whole world to be as equal as his country by 2030. I shudder to think of the collective apoplexy this prospect would cause in the G77.
No-one is pretending that IMF-branded policies represent the final word on inequality. Oxfam issued a media brief this week, which proposes the UK tackles inequality by cracking down on tax dodgers, implementing a Tobin tax and a tax on land, and increasing the minimum wage.
But what the Fund’s excellent report does is underline the importance of going from high-level aspirations to detailed scrutiny of the policies we want governments to implement to bring inequality down. Only then can we understand how today’s high level debate on inequality will play out in the bruising world of retail politics. It would be good to see Oxfam’s proposals costed and their likely impact on inequality audited, so we can see what they’ll deliver and who’d foot the bill. Without that the politics remain hard to read.
A greater focus on policies and implementation, and the politics of both, is especially important for those arguing that we should stop being “belligerent” about the “unrealistic goal” of ending sub-$1.25 a day poverty and instead build a post-2015 agenda on the the more sustainable political foundations that inequality offers.
Sure, we have an ‘emerging consensus’ that something needs to be done to bring inequality down. But will that consensus hold when publics around the world, and assorted lobbyists, get a better sense of what that something looks like?
So, it turns out that all those hard-right National Rifle Association libertarians preparing for guerrilla warfare against Obama’s socialist seizure of America need to get their ammo from… Vladimir Putin.
American gun owners are gobbling up cheap Russian ammunition in huge quantities, worried that President Obama’s tussle with Vladimir Putin over Moscow’s grab for Crimea will result in new trade sanctions cutting off imports of bullets.
“We’ve seen an ammo-hoarding effect,” said Larry Hyatt, owner of Hyatt Gun Shop in Charlotte, N.C., one of the nation’s biggest gun stores. “It’s almost like milk and bread when it gets ready to snow: It’s just a mass of people running out and buying some of it, probably more than they need,” he told Secrets.
Driving the ammo binge are gun blogs warning that the supply of surplus AK-47 ammo and other cheaper bullets manufactured by Russian makers like Wolf and TulAmmo will be cut off if sanctions are expanded by the president. The two companies make the 7.62×39 ammunition used in the popular AK-47 and variations for the AR-15. They sell it for $3-$4 a box, versus the $9 charged by U.S. manufacturers.
Some websites are also warning that Putin is considering retaliating against the U.S. by cutting off the supplies. So far, none of the rumors appear true.
Like that matters.
Much western commentary about the Ukraine crisis has asserted that Russian intervention in Crimea has undermined the post-Cold War order based on the inviolability of borders and respect for the rules-based international system developed after the world wars of the last century and founded on respect for the United Nations’ Charter and other international agreements.
But if this order is being undermined, critics would argue the rot set in some years ago and the hypocrisy of both the western powers and Russia, which has been on full display in recent days, has played a role in its decline.
Since the occupation of Crimea by thinly disguised Russian forces began, the American Secretary of State, John Kerry, has declared publicly on several occasions that in the 21st century countries should not invade others for trumped up reasons and dictate what should happen from the barrel of a gun. In late 2002, John Kerry was a senior United States’ Senator and he voted for the invasion of Iraq, which after the failure to find any chemical, biological or nuclear weapons, was justified post-facto by the US administration as a war to bring democracy to the country.
In another critique of Russia’s actions, President Obama, echoing comments by leading European Union politicians, said countries should not be dismembered over the heads of their elected leaders. Yet, in 2008, in a choreographed sequence of events, the US, Germany, Britain, France and Italy first encouraged Kosovo to unilaterally secede from a Serbia, which had been democratic since the overthrow of Slobodan Milosevic in 2000, and then recognised its independence. Of course, the context is different from what is happening in Ukraine today, but the principles of the inviolability of borders in Europe agreed between the West and the old Soviet Union at Helsinki in 1975, part of the rules based international order, was breached.
Russia refused to recognise Kosovo’s independence. At the time, Moscow argued it was a violation of Serbia’s territorial integrity, which it clearly was, and that other states should not recognise a secession that was not mutually agreed – as for example the split between the Slovaks and Czechs in 1993 had been. The Russians also argued it would open Pandora’s Box by setting a precedent that other separatists would follow. The western countries that recognised Kosovo – and not all did – argued Kosovo was unique, sui generis.
Since then, Russia has changed its tune and ensured the precedent it warned of then was followed – by Moscow.
Crimea is internationally recognised as part of Ukraine and Russia specifically guaranteed Ukraine’s territorial integrity in the 1994 Budapest Memorandum, but Foreign Minister Lavrov is now indicating that if Crimea wants to secede from Ukraine and even become part of Russia that is fine, showing Moscow’s commitment to its publicly stated principles can be as elastic as that of its western critics.
Russia had already shown its less than firm commitment to the principle it stood by over Kosovo when it recognised the declarations of independence by South Ossetia and Abkhazia from Georgia, after the short military conflict between Tbilisi and Moscow which broke out when Georgia took military action against separatist Ossetians in August 2008.
Some commentators shrug this off. They say what do you expect? Might is right and ‘twas ever thus with the way great powers behave.
But if the world’s leading states, some of which have permanent seats on the UN Security Council, which is the body meant to ensure global peace and stability, come to be widely perceived as cynically using and discarding the principles of a rules-based international system when it suits them, then that system, which is intended to protect both the strong and the weak, will be eroded further, and that is not in anybody’s interest in an increasingly contested and unstable world.
It may be that Russia would have intervened in Ukraine anyway given what it sees as its key national interest there, but the shifting standards of those western powers opposing its actions means diplomatic efforts to contain the crisis have been made more difficult and the case against Moscow in the court of global public opinion weakened.
What universal standards does the UN stand for? Human rights, justice, peace… and high quality tailoring. That at least is the message from the UN Department of Peacekeeping Operations’ Michael Heller Chu, an expert on civilian protection now also modeling suits for Bergdorf Goodman. Has multilateralism ever looked sharper?
In our development dilemmas piece we consider what progressives should do now the split between foreign and development policy no longer exists:
Should aid be used as an instrument of foreign policy? If so, how? If not, why not? If policy coherence’ really means ‘foreign policy first’, how should DFID prioritise if the countries which are the breeding grounds for terror are not the same ones with the greatest incidence of poverty? Should a combustible Nigeria, at 153 in the UN Human Development Index, command more attention than stable Sierra Leone, languishing at 177? Should aid money be spent, as it is by the United States, more in the powder keg of the Middle East than the desperation zones of sub-Saharan Africa?