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Article Deconstruction, vol. 6: Brown and 'protectionism'

by Jerome a Paris Mon Apr 10th, 2006 at 10:26:11 AM EST

Fran pointed us this morning to an article in the Financial Times about the failed attempt by Gordon Brown to create a new "anti-protectionism" taskforce. Nomad pointed to a paragraph from another article, this time from the Guardian on Saturday, which related that offensive before it was cut short in Brussels. The contrast is pretty instructive.

Brown lambasts Europe over protectionism (Guardian, 8 April)
Brussels rejects Brown plan for protectionism taskforce (FT, 10 April)

I'll start with the story in the Guardian, and insert as appropriate the outcome from the FT along with my own comments.


from the Guardian

Gordon Brown will today urge his fellow European finance ministers to make a new push to open up EU markets to competition and resist a growing tide of protectionism within the 25-nation bloc.

The chancellor, who said last week that badly functioning gas markets in the EU meant British consumers were now paying £10bn a year more for their gas than they should, is pushing for tougher action from Brussels against what is being called "economic patriotism" in countries such as France, Spain and Italy.

The Guardian had an article on this whose title is pretty explicit (Europe's protectionists add £10bn to our gas bill, says chancellor) and not really substantiated in the article, which basically lists all price increases in the energy sector in the UK, and simply prints Brown's contention that it is the fault of Europe's "protectionists".

As a note again, the "protectionists" that are quoted by name in all these attacks are ALWAYS the same: France and Spain. Italy is not usually listed, but that probably reflects both their honorary membership of the "Club Med" of perenially inefficient economies and the expectation that they will soon become an evil lefty country again...

from the Guardian

He is presenting an Ecofin meeting of EU finance ministers and central bank chiefs in Vienna with a new pamphlet called the Case for Open Markets: how increased competition can equip Europe for global change.

"The EU needs to do more to complete the single market, drive up levels of competition and open up to the rest of the world," Mr Brown's pamphlet says.

He will call for the establishment of panels of experts in particular fields to report back regularly to EU competition commissioner Neelie Kroes about uncompetitive behaviour or market abuse by firms in sectors such as energy and telecoms so that the commission can launch legal actions against companies.

That did not go too well in Brsueels, for two reasons:

  • they never saw the paper
  • it is a direct assault on functions already performed by the European Commission

from the FT

But the plan received little support and was seen by some ministers as athinly disguised attempt to undermine the Commission, which already has sweep-ing powers to investigate and tackle antitrust behaviour.

Joaquín Almunia, the EU monetary affairs commissioner, said Neelie Kroes, his colleague in charge of competition policy, was already carrying out sectoral inquiries into restrictive practices in the energy and financial services sectors.

Speaking at an informal Ecofin council of finance ministers in Vienna, Mr Almunia said: "The most effective and respected experts in Europe regarding competition are in the competition department of the European Commission.

"Everyone agrees the Commission acts with absolute independence. I think the best thing we can do is support the work of Neelie Kroes."

One official at the meeting said Mr Brown did not press the point with colleagues and that some had not even seen Mr Brown's paper on the subject, even though it had been widely trailed in the British press.

As so much of the European debate in the UK press, it is about domestic issues, and about shifting the blame for mthe government to the "bureaucrats in Brussels" or some other European plot. To be fair, the same is true in most European countries, and using Brussels as a scapegoat for unpopular policies is a long abused tool of most national politicians, but nowhere, to my knowledge, do you see such messianic and ideological statements, promoting the policies of one's country as the only rational ones, and insulting and blaming others for not adopting them.

from the Guardian

The government is furious that a lack of adequate gas supplies in winter through an undersea pipeline from Belgium to Britain pushed spot gas prices up to record levels.

Mr Brown believes that the new competition regime put in place by the Labour government in Britain has worked well, improving the efficiency of markets and lowering prices to consumers. Britain's openness to overseas investment, he thinks, has increased wealth and boosted employment in Britain. He thinks much of Europe, fearing the impact of globalisation, is becoming more inward-looking. Examples include the French government late last year publishing a list of industries it would not be prepared to see taken over by foreign firms and, in February, engineering a merger between French company Suez and Gaz de France when Suez became the target for a takeover by an Italian firm.

I can't blame Brown for saying these things, after all, he is a politician and trying to put his record in a good light. Bur for the Guardian to reprint these blatant distorsions of the facts uncritically is really bad journalism.

  • affirming that the competitive regime is working "and lowering prices for consumers" is THE core lie of the freemarketistas: markets do not guarantee lower prices, only more transparent prices, which then supposedly allow sellers and buyers to transact on the best terms and accordingly decide whether to buy, sell, invest or find substitutes...

  • saying that the policy has brough "lower prices" at a time when prices are at their highest takes quite a bit of chutzpah - but it works if nobody is there to provide another interpretation

  • repeating that Britain is more open to foreign investment appears so self-evident that it is not even worth checking, right? Well, as afew pointed out no long ago (protectionalism), it is not so obvious:

  • blaming France is always easy, and using the same tired facts that everybody repeats without context (the industries protected from foreign takeovers in France are, for instance, all strictly defense-related, plus casinos, legitimate sectors to protect in all countries - and indeed they are everywhere)

Let's repeat it again. Free markets do not guarantee lower prices. The only thing that guarantees lower prices in the energy sector (like in others) is surplus production capacity on the supply side. That exists on the continent thanks to State investment or regulation, but it does not exist in Britain because market signals did not encourage investment on the production side for so long as prices were low (and they were low thanks to earlier, public, investment in the sector). So, with (temporarily) low prices, the private sector was not incentivised to invest, and with no regulatory push to force them, it indeed did not happen. Now that they are high, investment is indeed spurred, but sadly, these things take time in that sector, thus leading to prices being much higher for a while... and now government "regulation" comes in the form of panicked attempts to try to steal - there is no other word - spare capacity from the neighbors...

As to the assertion that producers on the continent are withholding sales to the UK, all it means is that there must be opportunities to make a quick buck by taking advantage of the price differential on the two sides of the pipeline - any smart market player should be able to buy gas on one side and sell it on the other side, no? There cannot be "no gas", can there? Because it would mean that "markets" do not work, and that cannot be, can it?

(And to those that say, "nut there is no gas because the existing players are withholding gas or transport capacity, I respond that, thanks to the liberalisation efforts of the past years, all these companies are publicly quoted companies, focused on their profits like all normal companies, and if they could take advantage of that price differential, they certainly would. If they don't, it means that they are constrained by other things, presumably prior contractual commitments to deliver gas to their existing customers, and they consider that causing shortages for these customers is not (yet) worth the quick profit to be made by diverting the gas to the UK...)

And thus the Guardian becomes an extra wheel on the Murdoch anti-European carriage.

"We need to put in place the conditions that will enable European companies and brands to thrive in a global market and make Europe an attractive location for global companies to invest," the report says.

The commission launched actions against 17 of the EU's 25 members earlier this week for violations of the single market, particularly in the electricity and gas industries, which are due to be fully liberalised in July next year. Mr Brown wants the commission's powers in this and other areas beefed up and broadened.

Maybe it would be worth mentioning that Britain is amongst the 17, alongside France and others... And maybe the record number of takeovers in Europe in recent months, conveniently used when there is a need to praise the financial wizards in the City of London which all make it possible, also reflect that attractivity of Europe as a place to invest?

The chancellor has long been exasperated at much of the EU's inability to push through sweeping economic reforms to labour, product and capital markets agreed at Lisbon in 2000 which were designed to increase economic growth and reduce the bloc's 20 million unemployed.

He thinks that only by embracing the opportunities of globalisation, rather than perceiving it as a threat, can Europe deliver more jobs and prosperity. And this does not mean that Europe has to abandon its social democratic traditions.

"Increased flexibility in labour, product and capital markets does not have to come at the expense of fairness. We will need investment in skills and active labour market policies to ensure that Europe can provide opportunity for all," Mr Brown's report adds.

Brown's exasperation is only for the consumption of the credulous journalists who eat it up. As to the idea that "increased flexibility does not have to come at the expense of fairness" - does that mean then that, when it is unfair, it is all right to protest? Nah, because, strangely enough, it has yet to happen without being unfair... But protesting "increasing flexibility without fairness" is still a sign of total backwardness. Sigh...

from the FT

Thierry Breton, French finance minister, opposed Mr Brown's plan. "I think we should not increase bureaucracy," he said.

(...)

Finance ministers also unanimously rejected protectionism and agreed that globalisation was good for Europe, a statement not necessarily shared by their bosses in the national capitals.

France and Spain are among those facing criticism for trying to defend national champions, particularly in the energy sector, from foreign takeovers.

Again the unsubstantiated charges about protectionism in national capitals. Or do they know something they don't need to tell us about? As this is a British paper, presumably they mean something in London, right?

As to Breton's cheap shot, he should have played it smart and welcome Brown's commission, and point it to the OECD graph posted above... That he didn't means that he actually believes what Brown says and was just trying for an easy out of this debate he presumably thinks he cannot win. That's just as disappointing, of course.

Why blame the Guardian, when everybody that counts believes the same tripe? Because they have a responsibility to their readers, not towards the common wisdom of the politicians and wonks, a responsibility they seem to be forgetting. For a lefty paper, it's a disgrace.

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by Jerome a Paris (etg@eurotrib.com) on Mon Apr 10th, 2006 at 11:17:55 AM EST
Brown is quickly becoming a joke, as is Labour in general.  With all of the anti-terrorism nonsense, along with the reckless spending on Brown's part, it's just absurd.  Labour's idea of liberalization is talking the free-market talk while doing nothing to help produce a healthy economy.  Where is the "Iron Chancellor" I used to hear so much about?  Brown came to office and ran budget surpluses, initially, and he rightly handed control over rates to the BoE.  I was with him for a while on the deficit spending and higher rates, as a means to attacking the housing bubble, but I think he's crossed the line at which smart spending and not-so-much spending are separated, and he needs to get the God-damned budget back into balance so that the BoE won't need to juggle so many inflationary forces.

When Brown gets his shit together, he can start lecturing Europe.  He talks all day about private investment, but last I checked Britain wasn't looking so well in that area.  Productivity has plunged.  Brown is only able to meet his own "Golden Rule" by moving the goalposts.  Enough, already.  I've really had enough of he and Bush's Poodle.  They're just morons.  I hope Britons vote for the Lib-Dems in '09 or '10, even if it means handing power to the Tories for a couple of years.  At least Labour might learn a lesson.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Mon Apr 10th, 2006 at 11:58:21 AM EST
Frankly, I don't know you manage to keep it up, Jérôme. I tried deconstructing when debating with a pro-Sarkozyste yesterday and quickly got tired in front of the basic reactionarism I was hearing.
by Alex in Toulouse on Mon Apr 10th, 2006 at 12:04:02 PM EST
Just respond that Sarkozy is just like Chirac, only 25 years younger: all hat and no cattle (que de la gueule). He doesn't believe in anything apart form himself, and all is know is how to destroy political adversaries and be smooth on TV (so make that a combination of Chirac and Blair).

He doesn't care for any longterm policies, only short term visible results, and he has left messes in all the ministries he worked in. Economically, he is very illiberal (he wants to be in control, or his friends to profit) - and the Economist has already noticed.

He is anti-Europe, and anti-"neutral State"

Sarkozy is Chirac, only younger. He would be a(nother) disaster for the country.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Apr 10th, 2006 at 02:10:00 PM EST
[ Parent ]
Very good points, I just need to find them when I'm in a hot-blooded debate.

I tend to go for the easy, childish options, like "Sarkozy, p'tit zizi" (Sarkozy, littl' dick, with word-pun on the -zy/zi).

I also came up with a few childish slogans for Ségo(lène) Royal, though not yesterday but a few days before that, when discussing the CPE with friends:

"Ségo c'est pas macho" (Ségo is a non-macho choice)
"Ségo c'est plus rigolo" (Ségo is a more fun choice)
"Ségo c'est pas Sarko" (Ségo is not like voting Sarko)
"Ségo c'est plus fort que toi" (derivation of a 90s cult French advertising line for Sega: "Sega, it's stronger than you")

But my adversaries were as likely to appreciate those as Bush is to regret invading Iraq, so it was to no avail.

by Alex in Toulouse on Mon Apr 10th, 2006 at 02:20:09 PM EST
[ Parent ]
This isn't an op-ed or a commentary article, it's a straight news item from the business pages - as such, it's very much about reporting what people say and/or do (with some context of course) rather than critiquing or commending what they said or did.

If, as you contend, all the major players are basically drinking the same free market kool-aid when it comes to competition policy within the EU - what is the Guardian to do when it comes to a "he said/she said" piece in this policy area? Clearly there is an element of editorialising that occurs when deciding which stories to run, so does this mean that they should not report what the chancellor of the exchequer is saying at Ecofin because they don't agree with it? If so, what should they have been reporting on instead?

Regards
Luke

-- #include witty_sig.h

by silburnl on Mon Apr 10th, 2006 at 01:18:19 PM EST
A straight news item or a command performance? Seager is flacking for Brown, that's all.
by afew (afew(a in a circle)eurotrib_dot_com) on Mon Apr 10th, 2006 at 01:33:09 PM EST
[ Parent ]
When a politician says what can only be described as lies, are you supposed to report these as facts, without a comment?

If Bush and Blair start saying that Iraq is responsible for 9/11 and Saddam Hussein needs to be punished, then it's okay to print that uncritically, and beat the drums for war with headlines like "Saddam nukes 45 mn from London (says Blair)"

Sigh...

Why don't they say that they've been fed a report by Brown prior to the meeting in Brussels, a report "that is at odds with statistics provided by OECD and is likely to cause lively debate..."? That's information too, isn't it?

Or maybe they could quote ET to keep to their "he said she said" ways...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Apr 10th, 2006 at 01:56:49 PM EST
[ Parent ]
The Guardian puff for Brown that I flagged is by Ashley Seager, "economics correspondent". Seager has a longer piece up toady that purports to be an economic analysis of French events:

The French go marching into the past.

He (I suppose it's a he) makes a couple of fair points -- structural unemployment over the last two decades, "insider-outsider" situation -- but otherwise comes out with all the clichés and the CW, including, of course, the two polls mentioned by the Economist leader and since repeated throughout the press. (I would love to know how many of them have actually seen these polls or could give a reference to them).

Here are some pearls:

Once on the inside, which is where all the protesting youths want to be, jobs are very comfortable, with a 35-hour week and lots of computers and other capital to work with. These are typically the people who defend the French "social model", looking down on what they see as Britain and America's "Anglo-Saxon" model with its "hire-and-fire" jobs market and long working hours. In fact, Britain's average work week is 37 hours, according to the ONS, the government statistician - that is little different to France's.

That's a fairly astounding paragraph. The truth is that we do hear often that the French economy doesn't work because the French are slackers, while the economies that are "taking up the challenge of globalisation" are the ones where people work more. Well, now we know it's not the working week that causes the problem. And how about that preemptive strike in the middle: no one in the English-language press ever talks about an "Anglo-Saxon model", or makes out the US and the UK are the ones to follow -- no, it's young French protestors who made up the "models" meme, and, what's more, they are of course (being sneering frogs), "looking down" on poor, honest Americano-British ways of doing things.

Anyway, we understand that these pampered French kids are on the inside track and they want things to stay like that. So it's strange to read, lower down:

It is depressing that the very group that M de Villepin is trying to help are the ones protesting loudest.

Jaw drops. If these are inside trackers, why is Villepin "trying to help" them?

There's lots more. All the usual stuff about unemployment figures. A big piece about all the French working in London (only the ones in financial services, though ;)).

Ignorance or deliberate bias. Ashley Seager, in any case, is a Brown mole. The level of attack on France is quite astonishing. And to him must be added Jon Henley, who does a hit job full of all the stereotypes in this Comment is Free piece that keeps changing title and URL (possibly because Comment Is Free is a mess).

All this to say that I think the Guardian is taking a serious Blairo-Brownite slide to the right and lining up on the push-France-out-of-the-driving-seat in Europe effort.

(Sorry I've no time to write more now... ;))

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Apr 10th, 2006 at 01:31:16 PM EST


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