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.

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

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.

In the short term, the Government will be judged by successfully dealing with the catastrophic financial situation left behind by its predecessor.  In the long term, the Government will be judged on making Britain a more socially mobile and open society.

Social mobility matters.

It matters that so many people are not fulfilling their potential or aspirations.

It matters that life chances are more likely to be decided at birth than at any time since the 1920s.

It matters that, although only 7% of children go to private school, such schools account for almost 80% of judges, 70% of finance directors and barristers; 55% of Tory MPs; and over 50% of top journalists.

That is why the appointment of Alan Milburn as social mobility ‘czar’ is to be welcomed.  At the moment, after 13 years of a Government that promised so much but delivered so little, Britain one of the least socially mobile countries in the world and less mobile than at any time since the war.

The report of the cross party commission (which I praised at the time) headed up by Alan Milburn for the last Government was a devastating indictment of the previous Government’s failure to act on the issue.  It said that, “access to the professions is becoming the preserve of a smaller and smaller part of the social spectrum.”  This is something that a highly talented man such as Alan Milburn feels strongly about and it is only to be applauded that he will be avoiding the tribal taunts of members of the opposition about the fact he wants to do all that he can to help improve the life chances of the poorest.

Social mobility is also something I care deeply about.  I went to a North Eastern comprehensive school (probably of the kind that Tony Blair would have derided as ‘bog standard’).  I saw so many exceptional people who were let down by the system and didn’t always achieve their potential.

There are some people who suggest that an attachment to enhancing social mobility is ‘un-Conservative’.  They couldn’t be more wrong.  It wasn’t un-Conservative when Churchill talked of creating a floor below which none could fall and a sky through which all could rise.

What is more Conservative than ensuring that each and every human being is able to fulfil their potential.    What can be more Conservative than raising people’s aspirations? A modern economy needs highly skilled people to prosper.  What can be more wasteful than seeing so many people not fulfilling their potential?

Political sovereignty in Britain should lie with the Commons.  It should lie with people we elect and can remove.  The rise of both the quangocracy and judicial activism (not to mention the EU) makes that less the case than it should be.

Dan Hannan has a very good blog today in which he points to the case of the budget being challenged in the courts by the Fawcett Society.  As he queries, how can a budget possibly be a legal rather than a political question.

A budget should be entirely the prerogative of the elected chamber and elected politicians.  That was the clear result of the crisis around the People’s Budget that culminated in the 1911 Parliament Act. The Commons, in which the sovereignty of the people resides, should not see its budget decisions overturned by unelected judges.

Judges are not only unelected.  They are thoroughly unrepresentative, representing a small section of British society.  They are not only unelected and unrepresentative – they wield increasing power and they cannot be removed.  Shifting power to the judiciary and the quangocracy only shifts power further away from the people

As Daniel Hannan says in his blog:

“It is worth remembering that we came through a civil war to establish the principle that revenues should be levied and disbursed by the House of Commons. If the Fawcett Society wants a different budget, its members should put themselves up for election and argue their case.”

Judicial activism represents a real threat to the democratic tradition.  Change should be achieved through the ballot box, not at the whim of unelected judges or unelected quangos.