Gaza - The dumb and the dumber

For the past several days Israel has rained down rockets on Gaza, causing hundreds of deaths, including those of children. Israel justifies its actions as a response to continued rocket attacks on its civilians by armed members of Hamas, the party which rules Gaza. The stupidity and blindness of all the parties in this latest bout of the Israeli-Palestine conflict is painful to witness.

Why is Israel doing this? And why is it really doing this? The answer to the first question is: to put a stop to Hamas's actions of launching crude and indiscriminate rocket attacks on civilian areas of Israel. Which Hamas have undeniably been doing. The real reason however is to attempt to de-legitimise Hamas within Gaza and the wider Arab world. Both strategies are doomed to fail.

Morally, any government whose citizens suffer indiscriminate and murderous attacks is justified in attempting to destroy the aggresors. In fact they are duty-bound to do so. And this line has been put out by everyone from Tzipi Livni, Israel's current foreign minister, to internet commentators. The problem is that things are not quite as clear-cut as that.

Israel occupied Gaza in 1967 and hundreds of thousands of Palestinians have been crushed into that tiny area ever since. Following decades of uprisings and conflicts Israel withdrew its forces from Gaza in late 2005. In 2006 Hamas defeated the ruling Fatah party in Gaza elections, garnering 42% or so of the vote and becoming the elected representatives of Gaza. They consolidated their role in a power-struggle with Fatah's armed wing. The reaction from Israel, the US and the west was to immediately attempt to overthrow this democratically elected party, by arming and training Fatah fighters and then by a crushing blockade of Gaza itself. This is the key to today's bloodshed - the attempt at regime change of a democratically-elected government. It doesn't sit easily with the 'Bush doctrine' of overthrowing dictators and dealing with democrats.

In its charter Hamas openly calls for the destruction of Israel, denying its right to exist. It is therefore condemned by Israel and the US as a 'terrorist' organisation. History has shown us, however, that this word is a pretty loaded one. Today's terrorist is tomorrow's freedom fighter, interlocutor or even statesman. Its happened countless times, especially in Iraq and Afghanistan. So Hamas finds few friends in Western governments today. The Palestinian President, Mahmoud Abbas, condemns Hamas for creating this situation. But then he would - he is a Fatah leader, their rival, and is backed by the US as an alternative leader.

Here's the irony. When Israel had the chance to negotiate with Fatah, and its then leader Yasser Arafat, they did everything they could to undermine them and discredit him. Now the more secular, Arab nationalists of Fatah have been sidelined, Israel has to deal with the more Islamist Hamas. And now, of course, Israel wants Fatah back. Bit late now though, isn't it?

So Israel's devastating air attacks on Gaza aren't really about Hamas's rather puny rocket attacks, even allowing for the fear and casualties they cause amongst the Israeli civilians on the receiving end. It is about attempting to manipulate Palestinians' representatives. The theory is that Hamas will have been shown to have brought misery on the Palestinian people and so will be rejected by the Palestinian voters. It is a strategy absolutely guaranteed to fail. As indeed it will fail to bring security for Israelis.

Israel will have Palestinians, and Arabs, as their neighbours forever. Outside backers like the US will come and go, but the Palestinians will never go away. Hamas is indeed stupid and immoral for playing their part in the conflict, for deliberately murdering civilians and for marginalising pragmatic Palestinians. But Israel has also killed innocent civilians; they may have a slight moral edge in that it is clear Israeli jets to not deliberately target civilians, but there is no doubt whatsover that Israel's actions constitute 'collective punishment' on a civilian population, which is explicitly outlawed under international law, treaties and conventions. It is also perfectly obvious that air strikes in such as crowded area are absolutely guaranteed to produce civilian deaths.

Finally, Israel has left moderate Arab opinion swinging against them, and they're the ones they will eventually need to be able to strike any sort of deal. The short-termism of Israel's actions is so stupid and counter-productive it's unbelievable. Apparently there's an election coming up in Israel. I don't suppose the current attacks have anything to do with that, do they?

Road Hogs - the auto bailout

The US car giants - GM, Ford and Chrysler - have won themselves a taxpayer-funded multi-billion dollar bailout to prevent their destruction. $17.4 billion, in fact. This picture should put a smile on your face for Xmas. Or maybe not once you think about it.

Let's look at this logically. Car manufacturers are up merde creek because people aren't buying their cars. Why is this? Well, firstly it's because, as the poster explains, American (and British) cars are rather crap, and the public knows it. In the UK you see French, German and Japanese cars everywhere. Not Fords. The European and Japanese models are better value, more reliable and (frankly) look better. Secondly because times are tough and people want to balance their books and save right now, not splash out on a new motor.

So the US car industry has failed, and has only itself to blame. (The management that is, not the general labour force.) If the bailout goes ahead the message will be that no matter how ossified your business strategy, how incompetent your leadership and how poor your sales, you will never, ever, go to the wall. You are immortal. And when times are tough the government will take money from more efficient, more successful businesses, and ordinary families, and use it to bail you out.

Of course this money can come from only 3 sources: higher taxes, higher borrowing or printing more notes. Any of these options will ultimately cost jobs in other, more efficient, sectors. There's no escaping that, however you try to cut it. So on balance it's probably better to let the industry die. Harsh, indeed. Which is why the US and UK governments probably won't do it.

Now lots of people's jobs are tied up in the car industry. And no-one wants to lose their job, so I feel a lot of sympathy for those whose livelihoods are at risk. It's not their fault. But it is the fault of the management. Why didn't they adapt and produce cars the public want? They could have saved themselves. But then of course they are a powerful lobby. So if the US and UK governments are going to bail out the car industry, they should insist on big changes. Fire the management. Demand changes to contracts with unions and suppliers and take preferred shares to at least have a chance of re-couping some of the money. Whenever there is a bailout, governments have to make it plan that there's no such thing as a free lunch.

Note to Gordon Brown: Debt is not good

"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

Mr Micawber, "David Copperfield".



Readers of Dickens will be familiar with Mr Micawber's injunction against indebtedness, but it seems that the British Labour government has not heeded this warning from English literature. The debtors gaol was where the financially reckless ended up in Dickens' time; Downing Street is where they seem to end up nowadays. The problem is that the root cause of the crisis - debt - is being posited as the solution.

Thanks to 11 years of spending beyond our means, both public and private sectors in the UK are crippled by debt. The idea, therefore, that a fractional decrease in VAT is going to get the economy going again is laughable. Think about it: are you going to charge into the shops on a spending spree because iPods and clothing are now a pound or two cheaper? The stores themselves have 25% or even 50% sales, so what difference is VAT of 15% going to make? Not a jot, which is why politicians in Germany have rightly been mocking the Prime Minister's stratgegy. People's desire, understandably, is to save. That is the sentiment, and you can't buck it. So what should the government do?

In the 1930s government spending constituted a much smaller percentage of GDP than it does today so to 'pump' the economy the government of the day could increase public expenditure. Today government spending has soared and the tax take is a huge proportion of GDP. They say that generals always fight the last wars, but Gordon Brown's government seems to be fighting the slump of the 1930s - and it won't work.

To change the economy you have to chime with people's sentiment. This is because the crisis we are in is first and foremost about confidence. So - removing as many businesses and private citizens out of tax altogether will give them extra cash. Once they have this money they will use it - not to spend on things - but to reduce their debts and increase their cash holdings. This in turn will re-liquidate the banks, reducing their 'Please Sir, I want some more' begging-bowl act with the government (to continue my Dickensian theme). By doing this a virtuous circle of reduced debt will be created.

It is people, and their improved confidence - not meddling politicians - who will drag us out of recession. So Gordon Brown and his absurd Chancellor Alistair Darling could make a start by massively raising the tax threshold for as many people and businesses as possible. By contrast Brown's plan to borrow massively, cut VAT a little and mollycoddle the banks will be futile, and even worse will saddle us and our children with gargantuan debt for a long time to come.