Smart Thinking on Gold

My son Shayne McGuire has a new book on gold out this month. Watch him talk - very prudently - to the Financial Times on gold here.

And Cameron Is Listening...

My article in Newsweek this week:

No one looks more like a loser in Britain these days than Tony Blair. Since the Labour Party he once led lost the election last May and turned 10 Downing Street over to a Conservative–Liberal Democrat coalition, senior Labour figures have turned their backs on him. The latest and most far-reaching of several inquiries into the circumstances surrounding Britain’s entry into the Iraq War seems certain to question his probity and judgment when it reports around the end of the year. The only bright spot for this fallen idol is his memoir, A Journey, which remains at or near the top of bestseller lists.

But guess who’s buying the book? In a recent interview with The Guardian, Michael Gove, the new education secretary and a leading member of Conservative Prime Minister David Cameron’s brain trust, jumped out of his chair, ran to his desk and grabbed a copy. “I love A Journey,” he gushed. He then recited with admiration a section in which Blair maintains that opposition to public-service reform can be overcome. And Gove is far from alone in his appreciation for the Tory’s old nemesis. Blair’s narrative has become a key part of the Cameron narrative, political philosophy and policy program. Many of Blair’s old reforms that were stymied by his ideological enemies within his own party are now being adopted, adapted, and promoted by the Conservatives.

Needless to say, there are important differences between the modernized Conservative and Labour parties, in particular when it comes to the role and size of the central government. But even Cameron used to refer to himself as the “heir to Blair,” and there’s a distinct Blairite hue to his core program, from giving state schools a measure of autonomy to forcing competition upon hospitals and local medical practices. The same is true in defense: in his final years before leaving office in 2007, Blair’s closeness to America caused him major political problems; still, last week the Tories vowed against great pressure and at great expense to maintain Britain’s nuclear-defense capability, a key pillar of the U.S.-U.K. relationship.

So it was hardly a shock last week at the party conference in Birmingham to see Steve Hilton, one of Cameron’s closest policy advisers, chatting animatedly with Will Hutton, an influential New Labour economic theorist. Hutton has been asked by the new government to head a review of public-sector pay—a critical issue at a time of deep budget cuts. Just as 15 years ago Hutton’s The State We’re In helped to shape New Labour thinking, his new book, Them and Us: Greed and Inequality—Why We Need a Fair Society, is coloring the thinking of Cameron’s inner circle.

Indeed, Blair would have smiled approvingly at many of the policies Tory ministers paraded before the party faithful at the Birmingham conference. Perversely, he may feel less welcome at his own party’s conferences. The extent of Blair’s pariah status in Labour was on full display during Labour’s post-election leadership battle. The main contenders may have owed their political careers to Blair, who led the party to victory in three elections, but they spent much of their time distancing themselves from him. Partly this was because of Iraq and partly because, given Britain’s deficit crisis, they needed to break from a past of which Blair is such a towering symbol. Two brothers, David and Ed Miliband, ended up fighting each other for the prize. David, 45, was foreign secretary under Blair’s successor, Gordon Brown, but nonetheless closely tied to Blair, having been an architect of much New Labour thinking. Ed, 40 and arguably to the left of his brother politically, was more closely linked to Brown, for whom he last served as energy and climate-change secretary. “Red Ed” won, and David, declining a shadow cabinet post proffered by his brother, retreated to the parliamentary backbenches.

Cast out by your own party, embraced by your enemy—it’s the story not only of Blair but also of Margaret Thatcher, whose economic reforms found a home in New Labour’s pro-business, union-skeptic agenda. Thatcher, who turned 85 this week, once recalled that, after notifying the queen of her resignation in 1990, she decided to return to her office at 10 Downing Street “to make sure that I’d left nothing and left it tidy.” Then she discovered that her key “had been taken away. So I couldn’t go back in.” Her great consolation was that in some ways, with Blair at No. 10, she had never left. And with Cameron there today, so it is for Blair.

Gaza='Prison Camp'

We're not used to this kind of language from America's staunchest ally. This is British Prime Minister David Cameron speaking on a visit to Turkey:

“Turkey's relationships in the [Middle East] region, both with Israel and with the Arab world, are of incalculable value. No other country has the same potential to build understanding between Israel and the Arab world. I know that Gaza has led to real strains in Turkey's relationship with Israel. But Turkey is a friend of Israel. And I urge Turkey, and Israel, not to give up on that friendship. Let me be clear. The Israeli attack on the Gaza flotilla was completely unacceptable. And I have told PM Netanyahu, we will expect the Israeli inquiry to be swift, transparent and rigorous. Let me also be clear that the situation in Gaza has to change. Humanitarian goods and people must flow in both directions. Gaza cannot and must not be allowed to remain a prison camp. But as, hopefully, we move in the coming weeks to direct talks between Israel and the Palestinians so it's Turkey that can make the case for peace and Turkey that can help to press the parties to come together, and point the way to a just and viable solution.“

'Special Relationship': R.I.P.

My piece in the Daily Mirror today following David Cameron's article in the Wall Street Journal, asserting that "I am hard-headed and realistic about US-UK relations. I understand that we are the junior partner—just as we were in the 1940s and, indeed, in the 1980s":

Finally! Why did it take a Tory prime minister to put in its place the so-called special relationship between the United States and the United Kingdom? The short answer is the Iraq war - but I'll get to that later.

The fact is that the special relationship has been a crumbling anachronism for two decades. The long goodbye began at the end of the Cold War, when, amid Britain's slow economic and geopolitical decline, Washington cast its gaze across the Pacific toward Asia.

Having lived here since 1996 and been a dual citizen since 2004, I've been both sentimental and uneasy about the bittersweet relationship.

Sentimental? After 9/11, a handwritten note was slipped through my family's Victorian letter box in London as we tried to come to grips with what had happened back in New York.

The note, which was so lovely and, I think, British in its kindness, was from our neigh-bours. "I can see the lights on in your house, but I don't want to disturb you. Be assured you are surrounded by friends." It was signed, "With love, Sandy and David."

Uneasy? Tony Blair tarnished the special relationship for me and, more importantly, for the United Kingdom. He was truly close to Bill Clinton, with w h o m he shared a modernising, centre-left ideology; Blair had tears in his eyes at Warwick University in December 2000, when Clinton came to Britain to speak one last time as President.

But for Blair the relationship with America was much more than personal. He saw it as a way of magnifying post-imperial Britain's role in the world. Then along came President George W Bush and Iraq. Blair's star fell from the sky. The special relationship became a joke.

If you know only one thing about the relationship it is this: its importance depends upon which end of the telescope you view it through. It's a big deal viewed from Britain. But from the US, for better or worse, it's a speck on the horizon.

A caricature Cameron - an anti-European Eton toff slavishly beholden to the American behemoth - might well have wallowed in the familiar territory as the heir to Margaret Thatcher, who with Ronald Reagan presided over the high point of the post-war special relationship in killing off Communism.

To his credit, he didn't.

Rethinking Britain's Greatness II

From a column in the Guardian today by Madeleine Bunting:

What "punching above your weight" means in practice is unbridled ambition and massive risk-taking. The obvious parallels with BP are those other former giants of British corporate power, the banks HBOS and RBS. All are now cautionary tales of corporate hubris. In 1998 Blair made a speech in Dublin in which he talked of Britain "emerging from a post-imperial malaise". It was the era of Cool Britannia and the beginning of Blair's military adventures: culture, finance, military participation and corporate ambition were the key, mutually reinforcing, planks of his project.

One by one they have either led us to some form of disaster (financial sector, BP), or to embarrassing failure (liberal interventionism in Iraq and Afghanistan). Last August Newsweek's London bureau chief, Stryker McGuire, wrote an influential front-cover article on how time was up for "once-great Britain". He argued that Blair had tried one final stab at greatness by locking Britain into America's wars, but that he was merely postponing the inevitable decline in the country's place in the world.

This is one of those issues on which it is very hard for politicians to conduct a serious conversation. Nick Clegg was pilloried in the election campaign for his commonsense remarks on Britain's second-class status in the world. It is compulsory piety for politicians to talk of Britain as great, and anyone who challenges that delusion is dismissed as talking Britain down. But we should be very wary of delusions of grandeur now that we are counting the cost of the devastating fallout – from the Gulf of Mexico and the Muslim world to the bank bailouts – of a decade and a half of this notion of punching above our weight.

Rethinking Britain's Greatness

Hardly a day goes by in London that some august gathering or eminent institution is not considering, or reconsidering, Britain's role in the world. Never more so than right now, with a new government settling in and budgetary axes flying up and down every corridor in Whitehall.

In this working paper, Michael Codner, director of Military Science at the Royal United Services Institute (RUSI), elegantly lays out the choices confronting Britain as one of the world's great military powers and America's most capable and important fighting ally. A taste: "The UK is currently the fourth biggest defence spender in the world but the ninth largest economy. In other words, the country pays more for defence than its world economic standing justifies. The dilemma turns on the retention of world status; if the taxpayer is unprepared to fund defence at current levels (2.3 per cent GDP), Britain will be unable to prevent its dwindling international influence. The UK could make moderate defence cuts or even slash defence spending to the NATO European average of 1.65 per cent. Either way, large cuts could be made if Britain abandoned its predilection for perceived world influence."

Seeing Through the Fog

Amid all the huffing and puffing in post-revolution Britain, two really standout pieces of commentary: Martin Kettle in the Guardian, who says, among other things, "No Conservative leader has taken such a risk for such essentially liberal ends in living memory," and Martin Wolf in the Financial Times, who says, "All British political careers end in failure. Mr Brown’s is a grim reminder of this truth. But it is far too easy to blame him alone for the UK’s current plight. The truth, I would argue, is that his biggest error was to believe in the conventional wisdom about the prospects for durable economic stability, the robustness of modern financial markets and, surprisingly perhaps, the strength of the post-Thatcher UK economy. He then doubled up on this bet by building his plans for public spending on the assumption that the good times would roll on forever. Mr Brown’s boasts of durable prosperity proved to be based on evanescent success. The inconvenient truth is that the UK economy proved far more fragile than almost anybody with influence had believed. If the new government is to succeed, it must dare to confront this sad truth."

Remember This Face

Well, well. Just when you thought the leaders' debates in the UK, like presidential debates in the United States, would be rubbish, along comes Britain's first-ever televised version of same, and we're blown away. Maybe not blown away, but something pretty impressive happened in Manchester last night, and as a result the pre-May 6 election political dynamic is very different today than it was yesterday. See my piece
in the Evening Standard.

Every Stat Tells a Story, Don't It?

They say a picture is worth a thousand words. How about a number? Some remarkable statistics from Stephen Roach at Morgan Stanley:

"While China and India collectively account for close to 40% of the world’s population, their combined consumption is only about $2.5 trillion. By contrast, while the United States contains only about 4.5% of the world’s population, its annual consumption bill is running at about a $10 trillion rate."

When Markets, Not Ministers, Rule

In Newsweek this week: Labour Prime Minister Gordon Brown hasn't even set a date for the British general election yet, but financial markets have already bet on the outcome by, among other things, hammering the pound. And why not, since the markets could end up running the country instead of the politicians.

Recent polls on Britain's election--which must be held by June 3--point to an outcome so close that any incoming government will have no real popular mandate and possibly no majority. Hardly by accident, the forecasts of a hung Parliament have coincided with an abrupt 5 percent drop in the pound's value against the dollar. Of course, the pound has been in decline for months. The state of Britain's economy is no secret: heavily indebted, slow to recover. What the sterling's recent nosedive reflects are concerns in the marketplace that a weak new government, rather than a more robust Tory one, will not be able to muster the political support needed to put into place stringent fiscal measures to address the growing deficit.

Paradoxically, however, a truly weak government in the form of a hung Parliament could impose fiscal discipline on Britain's finances. To avoid being punished by the markets and risking real damage to the British economy, the country's political leaders will have little choice but to bow to market forces. A lot can change between now and the election, and a hung Parliament is by no means a certainty. But if that's the outcome of the balloting, ministers won't be writing the next budget--the markets will.

The Not-Always-White House

Whatever happens over the course of the Obama presidency, there's one historical milestone that cannot be undone: the presence of an African-American family in a White House that was built in part by slave labor. These photos by White House photographer Pete Souza are worth looking at.

The Blair Witch Project

As I write in Newsweek this week, Tony Blair remains an esteemed figure in the distant ballrooms and boardrooms where he makes much of his money these days. But at home the former prime minister has become a British version of Lyndon Johnson, his substantial accomplishments buried beneath a mountain of opprobrium over his role in the Iraq War. Any attempt to defend his record during a decade as prime minister evaporates instantly in the heat of anti-Blair rage, and so it will be for some time to come.