Deflation has been imposed on Greece.  It is unlikely that the Greek economy will be able to grow for many years to come.

The Spanish economy has stumbled into marginal growth, with the country suffering from an unemployment rate of around 20%.

The unemployment rate in Portugal is the highest for three decades.

The Irish economy has collapsed and unemployment is at a 16 year high.

What have all these economies got in common?  They are all members of the Euro.  They have all decided that a political goal of a single currency should be created on the backs of the unemployed.  For the first time since the Gold Standard, national Governments decided to sacrifice the interests of their domestic economy for the sake of the viability of an international economic ‘dream’.

And the people of Spain, Portugal, Greece and Ireland are paying the price for their leaders dreaming that dream.  They have been placed in a straightjacket, unable to devalue their currency or set their own interest rates.  As Paul Krugman said:

“The fact is that three years ago none of the countries now in or near crisis seemed to be in deep fiscal trouble. Even Greece’s 2007 budget deficit was no higher, as a share of G.D.P., than the deficits the United States ran in the mid-1980s (morning in America!), while Spain actually ran a surplus. And all of the countries were attracting large inflows of foreign capital…

Then came the global financial crisis. Those inflows of capital dried up; revenues plunged and deficits soared; and membership in the euro, which had encouraged markets to love the crisis countries not wisely but too well, turned into a trap.

What’s the nature of the trap? During the years of easy money, wages and prices in the crisis countries rose much faster than in the rest of Europe. Now that the money is no longer rolling in, those countries need to get costs back in line.

But that’s a much harder thing to do now than it was when each European nation had its own currency. Back then, costs could be brought in line by adjusting exchange rates — e.g., Greece could cut its wages relative to German wages simply by reducing the value of the drachma in terms of Deutsche marks. Now that Greece and Germany share the same currency, however, the only way to reduce Greek relative costs is through some combination of German inflation and Greek deflation. And since Germany won’t accept inflation, deflation it is.

The problem is that deflation — falling wages and prices — is always and everywhere a deeply painful process. It invariably involves a prolonged slump with high unemployment. And it also aggravates debt problems, both public and private, because incomes fall while the debt burden doesn’t.”

The single currency, founded almost purely on the basis of orthodox neo-liberal economic ideas should be anathema to anybody who describe themselves as progressives.  The problem is that many progressives have forgotten the meaning of the word.  They are prepared to put their vague belief in ‘internationalism’ above any faith in democracy or any belief that nation states should have economic weapons to handle conditions unique to their country.

Just as previous generations of politicians risked economic catastrophe because of their dedication to the Gold Standard (Keynes, as ever, is worth a read on this one), so progressive politicians today can be blinded by their dedication to the Euro.

One of the great questions of recent years is why so many so called progressives have embraced the European project with such fervour in recent years.  One of the great triumphs of British radicalism has been universal suffrage and popular sovereignty.  Now, as Tony Benn famously said, many on the left have decided that   “a good King is better than [what they view as] a bad Parliament.”  It is very hard to understand how anybody schooled in the traditions of British radicalism could take that view.   Benn continued:

“We are discussing whether the British people are to be allowed to elect those who make the laws under the which they are governed. The argument is nothing to do with whether we should get more maternity leave from Madame Papandreou than from Madame Thatcher. That is not the issue… My next job therefore is to explain to the people of Chesterfield what we have decided. I will say first, “My dear constituents, in future you will be governed by people whom you do not elect and cannot remove. I am sorry about it. They may give you better creches and shorter working hours but you cannot remove them”….I know that it sounds negative but I have always thought it positive to say that the important thing about democracy is that we can remove without bloodshed the people who govern us. We can get rid of a Callaghan, a Wilson or even a right hon. Lady by internal processes. We can get rid of the right hon. Member for Huntingdon (Mr. Major). But that cannot be done in the structure that is proposed. Even if one likes the policies of the people in Europe, one cannot get rid of them… Secondly, we say to my favourite friends, the Chartists and suffragettes, “All your struggles to get control of the ballot box were a waste of time. We shall be run in future by a few white persons, as in 1832.”

In wresting economic control from national governments at a time of economic crisis, the Euro is being distinctly regressive – possibly the most regressive financial instrument since the Gold Standard.  In wresting democratic power from national electorates, the EU, as it is presently constituted is ignoring the great tradition of the Levellers, the Chartists and the Suffragettes.  That is something that should give some progressives pause for thought.

This fuss over the ‘landmine’ of the Equality Act is completely ridiculous. The Act doesn’t require anything beyond a consideration of how government actions impact on people – which frankly is something I would expect any halfway competent politician to do anyway.

I think there is an argument to be had about the way that governments expect to pull a lever and have a wide-spread social effect – but it’s not specifically that Act.

More widely, I think the furore shows us something instructive about how Labour and the Conservatives approach society.

Labour is all about phrasing , not delivering , and just showing that they ‘care’; and requiring; and splitting people up into discrete little groups so politicians can try to target what are effectively bribes at them.

Conservatives are about making sure that overall, people have the opportunity to make of themselves whatever they want. It’s not about putting people in boxes – it’s about making sure that they all have equal opportunity to break out of whatever box they have been abandoned to by Labour.

The Emergency Budget was – let’s face it – tough on everyone. It had to be. The problem is not that our taxes were too low, but that our spending was too high.

There are a few things that strike me as obvious but which clearly aren’t for some – firstly, that to make work pay you have to make sure that living on benefits becomes less attractive: that doesn’t mean punitive, but it does mean, for example, that lavish housing benefits far beyond what people in good jobs can afford have to go. Secondly, that of course when you cut spending, those who use public services the most would be disproportionately affected if you make no other changes to reform those public services in order that they deliver better (this is the great argument that Betapolitics has been advancing in recent weeks). And finally, that when bodies like the IFS have considered fairness and progressiveness, they only look at what the state pays out. Why don’t they look at the opportunities for growth, for better jobs, for more social mobility as well?

It isn’t all about the state. It is all about society.

Perversely, the fiscal crisis strengthens the chances of Cameron’s modern Conservatism surviving and possibly becoming a model for Conservative Government.

The combination of coalition government and economic breakdown encourages a reformist administration.  With the public finances in such a mess the time is ripe for reform and acting tomorrow is viewed as inappropriate and irresponsible. During the election campaign one of the Conservative’s central arguments was that excessive government spending had made the state obese. This profligate way of running the country was both unnecessary and unsustainable, thus reducing public spending would be the priority for any new Conservative administration. At the heart of new conservatism is a desire to deliver a smaller state through positive delegation.

The Coalition government strengthens Cameron’s reinvention of Conservatism because the Liberal Democrat’s naturally support the ‘new’ ideas. The Big Society agenda, with its promotion of localism and individual responsibility, effortlessly brings together forward thinking Tories and centrist Lib Dems. Cameron’s modernisation would have been under greater threat if the Conservatives had gained a tiny majority, forcing him to negotiate with the outer reaches of his own party, many of whom are dismissive of the chosen direction of travel. If the Party forces Cameron to retreat to old Conservatism the Coalition will crumble.

The economic situation created a strong adhesive between the coalition partners, fostering a feeling of togetherness and joint ownership. Coalition negotiations took place against the backdrop of a burning Greece, which focused minds and, ultimately, led the Lib Dems to embrace fiscal Conservatism. Unity on economic policy is crucially important to ensuring the coalition lasts the full five years, giving Cameron enough time to implement the Big Society agenda.

In Cameron’s first 100 days his administration has enjoyed a political honeymoon. Attacks have been easily brushed off; mistakes forgiven and the tough choices agenda has not led to public outrage but this mood can’t last. It’s easy for people’s rational minds to support the concept of cutting spending to balance the books, however, it becomes a different and emotional issue if ‘my child’s school roof can’t be mended’ or ‘my contract is cancelled’. Mistakes will be portrayed by the media via a ‘cuts are hurting’ narrative. Nothing sells papers like a good old scare story, especially if blame can be heaped on those in high office. Groups, both left and right, who are wary of Cameron’s agenda will use the change in mood to attack the Coalition. Strong leadership will be needed when making decisions that may be right but not instantly popular.

The new Conservative ideas are about resolving the structural problems that created the fiscal crises. Cameron will make it work because it has to work. There will be no mandate for a second go and no money to spend on a second agenda.

This post was originally published at The Frum Forum – http://www.frumforum.com/is-the-honeymoon-over-for-cameron-clegg

It was never going to be easy.  The coalition Government has faced a set of challenges largely without parallel in post war history.

In May the Government was faced with a record deficit; an economy gradually getting back to its knees following the deepest recession since records began; plummeting faith in the political system; widening inequality; stalling social mobility; and seemingly intractable social problems.

100 days is always a slightly arbitrary time to judge a Government’s record.  However, it is actually crucial – the political capital of any Government is at its highest at the beginning.  It marks the perfect time to get things done.

Unlike other blogs, we at Platform 10 have always been enthusiastic supporters of the coalition.  On May 9^th, I called for a ‘coalition of the progressive centre.’ I argued that:

“With the support of the Liberal Democrats, a Conservative-Liberal coalition of the progressive centre can deliver the radical economic, political and social reform the country needs.”

I believe that the coalition has, so far, lived up to those lofty expectations.  It has governed in a progressive and radical manner.  Already, in 100 breathless days, the coalition has:

• Dealt with one of the biggest fiscal catastrophes the country has faced since the war.  Faced with a choice of setting out a credible plan to pay down a record budget deficit or letting our domestic policies be placed at the whim of global financiers (as Greece, Spain and Portugal have found), we wisely opted for the former;
• Laid the framework for renewed growth and renewed job creation;
• Placed as a priority delivering social justice and enhancing social mobility;
• Created a bonfire of restrictions on civil liberties.  Even after 100 days, this Government has claim to be the most civil libertarian since the war – a welcome change after New Labour’s social authoritarianism;
• Set out the biggest programme of constitutional change for decades.  House of Lords reform is, after a century and more of dithering, set to be achieved.  Governmental transparency looks set to improve both visibility and performance of Government.  Ideas of recall and referenda (albeit slightly too limited at this early stage – as Douglas Carswell argues) have at last been injected into the body politic.  Indeed, the cooperation across party lines in itself is something that most people outside of the political class have welcomed;
• Already decentralised power to local people to an unprecedented extent.  Hopefully more decentralisation will follow;
• Instituted a Great Repeal Bill – with the aim of repealing unnecessary legislation that impinges on freedom;
• Unveiled an evidence based policy on prisons that has more in common with traditional Conservative views than the authoritarianism of recent years.

After thirteen years of small ‘c’ conservative Government, it comes as a breath of fresh air to have a Government prepared to make the brave and radical decisions that are in the national interest.  Despite the heckling from nay sayers, it is the coalition that has made this possible.

The Economist has described the Government as a “radical force.”  I am confident that 100 radical, progressive days will become five radical, progressive years.

I have already posted on here that the appointment of Alan Milburn as social mobility ‘czar’ is one to be welcomed.  Improving social mobility is one of the biggest challenges facing British society today and it is a good thing that somebody as talented and passionate about the subject as Milburn feels ready to  continue to contribute to the subject.

As Peter Bingle said in his excellent blog:

“Politics was the loser when Alan Milburn stood down from the House of Commons at the last election. One of the few genuine stars of the New Labour Project, Alan was the most radical Health Secretary since Aneurin Bevan.

A former member of the hard left, Alan had all the conviction and passion of a convert. He embraced the market in a way that no other Labour Cabinet Minister dared to do. In the end he was thwarted by the then Chancellor Gordon Brown and left the government …

In the dying days of the last government, Alan Milburn was asked to chair a commission into social mobility. It is an issue about which he cares passionately. From a poor background himself he believes (and has said so publicly) that nowadays it would be almost impossible to achieve the social mobility which he has achieved himself…. The commission’s recommendations were largely ignored by Gordon Brown to the intense irritation of its chairman … I was therefore not surprised to learn that Alan had accepted an invitation from the PM to become the Social Mobility Czar. I suspect that his political instincts are much closer to those of this PM than the last one.

Alan is the latest in a long line of senior Labour figures to accept a role advising the coalition. They all deserve our thanks and support for putting country before party.”

Like Alan Milburn, I come from a North Eastern working class background and share his passion about the importance improving life chances for people from low income backgrounds.

What followed the announcement was a number of Labour figures abusing Alan Milburn in very personal terms.  This was John Prescott’s ‘tweet’ on the matter: “So after Field & Hutton, Milburn becomes the 3rd collaborator.  They collaborated to get Brown OUT.  Now collaborating to keep Cameron IN.”

Now I’m a fan of John Prescott.  One of the reasons that I like John Prescott is that he came from a very humble background to be a great success in politics.  Maybe before throwing the word collaborator about, Lord Prescott should consider that what Alan Milburn is doing is channelling his passion to help more kids from humble beginnings realise their dreams and aspirations.

Andy Burnham also attacked Alan Milburn for his decision.

Maybe people on the left attacking Milburn should consider what is more important – the kind of tribal politics that turns so many people off or ensuring that the life chances of people from lower income backgrounds are improved.  Milburn clearly believes the latter.  Throwing insults about a man who is channelling his talents to helping improve social mobility seems pretty unedifying to me.

And then there was Iain Dale on the right.  He had a blog paraphrasing Martin Niemoller’s remarkable poem ‘First They Came’ and suggesting that the job should have gone to a Tory.  First off, I reckon there are some pieces of poetry that shouldn’t be used for partisan slagging and this is certainly one of them.  Secondly, Milburn is a highly talented individual, hugely respected and an expert in the field.  He understands the issues regarding social mobility and cares passionately about them.  He would be, for most people on both sides of the divide, one of the first names that come to mind when you ask who should head up this kind of work on social mobility.

This is simply too important an issue to be reduced to tribal posturing and party political point scoring.  The snipers may think that tribal purity is more important than helping improve social mobility.  They are wrong.  Thank goodness that Milburn has decided to put country and improving life chances of lower income people ahead of tribalism.