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The Reality of ‘Red October’

‘We shall now proceed to construct the socialist order.’ VI Lenin (speech to Second All-Russian Congress of the Soviets)

On 25 October 1917, (pre-revolution calendar) Vladimir Lenin, leader of the Russian Bolshevik Party, organised a successful coup d’etat and seized power in St Petersburg, then known as Petrograd.

Despite 90 years of Soviet propaganda, the events of ‘Red October’ were never a spontaneous uprising and a revolution by the people. It was an armed insurrection by a minority to overthrow a provisional government. Also, it was not – again despite Soviet claims – universally popular: fighting went on in Moscow and Petrograd for two weeks as the Bolsheviks tried to crush and silence their enemies, to be followed by a prolonged and brutal civil war.

Lenin himself was astounded by his revolution’s success, saying, ‘It takes your breath away.’ However, having seized power, he showed himself as authoritarian as any Czar. When the Second Congress of Soviets assembled on (modern calendar) 7 November 1917 it voted to ratify the revolutionary transfer of state power and, after a walk-out by the opposition – who claimed the coup was illegal – made Lenin ruler of Russia. Lenin’s Marxist Bolsheviks were now the government of a nation that was 3000 miles wide and had 11 time zones. Lenin’s famous call to arms was to unleash misery and death for millions: ‘We shall now proceed to construct the socialist order.’

Russia’s new ruler made crystal clear his aims and means of achieving them: ‘The goal of socialism is Communism,’ and ‘Personal liberty is precious – so precious that it must be rationed.’ In addition, just to show that he meant business, ‘Hang without fail, so the people can see them, no fewer than one hundred known kulaks, rich men, bloodsuckers.’ The rich and middle class got the message and promptly fled abroad clutching their valuables, leaving their property to be seized by the State.

It rapidly became clear that Lenin was no harmless old revolutionary theorist, obsessed with permanent opposition to the bourgeoisie – he turned out to be a ruthless, rabble-rousing, power-hungry class warrior, determined to crush the rich for ever, using ‘The Party’ and his Red Guards to provide muscle when required.

Like all professional revolutionaries however, his priority was money – other people’s money. One of his first decrees was to close down all the banks and steal their money in the name of the State, leaving millions penniless.

Revolutionary socialists had always understood the importance of money to fuel their socialist dream. Josef Dzhugashvili, a,k.a ‘Stalin’ – which translates as ‘Man of Steel’ – or perhaps ‘steal?’ – was just one of many revolutionary bank robbers. He was the main planner of an infamous stagecoach hold-up in Tiflis in 1907. The Bolsheviks attacked a security coach, killing 40 guards and civilians. The thieves got away with over a million roubles, describing their atrocity as a legitimate ‘redistribution of capital for the Revolution.’

Another revolutionary socialist would-be Robin Hood, Mao Zedong, recruited ‘bands of brigands and bandits’ to support his revolutionary cause by theft. In 1927, he organised his own great train robbery in Hupei and stole a huge shipment of banknotes. Interestingly, Mao later organised another wave of ‘revolutionary bank robberies’ when he was actually Chinese dictator. During the Cultural Revolution (1966-76), he unleashed his Red Guard thugs to hold up dozens of banks to ‘shake up society’ in 1966. Ironically, in 1969 Mao suddenly remembered that he was also responsible for China’s law and order, and ordered his Red Guards to stop.

Revolutionary socialists sometimes make fat-cat capitalists seem almost benevolent. Peru’s Maoist movement, the Sendero Luminoso (‘Shining Path’) were not just brutal terrorist murderers responsible for the deaths of 30,000 Peruvians and $20 billion in damage. They were also accomplished thieves. Bank robberies – or ‘revolutionary expropriations’ – soon became a favourite means of raising funds for their planned revolution in Peru. In 1981, Shining Path carried out over 50 bank robberies in Lima alone, and the wave of bank robberies continued throughout the mid-1980s, along with international heists in Brazil and Mexico.

The lesson is that the Socialist State of Lenin’s dreams had as much need of hard cash as any capitalist one. But Lenin’s ‘socialist revolution’ did not confine itself to just stealing other people’s hard-earned savings.

The Russian Civil War demonstrated that not everyone, in what was to become the USSR, favoured Lenin and the Bolsheviks being in power. In the face of mounting anger and opposition from the now less-than-revolutionary masses, Russia’s new dictator ordered a crack-down on all opposition and protest. In December 1918, he ordered the creation of the Cheka, or the ‘All-Russian Emergency Commission for Combatting Counter-Revolution and Sabotage,’ the original bloodthirsty Soviet secret police organisation. The Chekists were led by a Polish aristocrat-turned-communist, the psychopathic Felix Dzerzhinsky, who ruthlessly murdered all Communism’s opponents. Lenin, and later Stalin’s, new secret police made the Czar’s rule seem compassionate by comparison.

The Cheka’s task was to hunt out ‘enemies of the state’. This led to what became known as the ‘Red Terror’. Suddenly anyone could be arrested. The Cheka became sole judge, jury and invariably executioner. Following a failed assassination on Lenin in September 1918, Russians came to dread the Cheka’s midnight knock on the door. Fellow Bolshevik Leon Trotsky even compared Lenin’s crackdown to Robespierre’s French Jacobin ‘Reign of Terror’ – in 1940, he got an ice pick through the brain for his pains. In all, an estimated 20 million Russians would eventually die at the hands of their Party masters in Communism’s ‘Revolutionary Paradise.’

Fat on stolen money, and with dissenting voices silenced, Lenin now turned to actually governing his new Russia. A Decree on Land policy confirmed the actions of the peasants, who had quietly redistributed private land among themselves during the chaos. The Bolsheviks now reinvented themselves as representing an alliance of workers and peasants. The Hammer and Sickle became the symbol of the new Soviet Union. Other decrees ensured there could be no turning back from Lenin’s new Socialist order:

All private property was nationalised by the government
All Russian banks were nationalised
Parliament was abolished in favour of The Party
Private bank accounts were expropriated
The properties of the Church (including bank accounts) were expropriated
All foreign debts were repudiated
Control of the factories was given to the workers’ committees called ‘Soviets’
Wages were fixed at higher rates than during the war; and a shorter, eight-hour working day was introduced

In our time, we have seen something similar in Venezuela. In 2005, Hugo Chávez announced Venezuela’s ‘great socialist leap forward’. Since then, the oil-rich country has followed the strict ‘socialist path’ and – just like the USSR – ruined its economy and impoverished its people. Despite a wealth of natural resources, Venezuela has turned into an economic and humanitarian disaster zone, thanks to an attempt by the government to run a ‘revolutionary socialist economy’ for Chavez’s deeply corrupt Party.

Meanwhile, the disappearance of Venezuelan credit and normal banking has aggravated runaway inflation and a recession, causing hundreds of thousands to flee the country amid chronic shortages, rising malnutrition and increased incidence of preventable disease.

Lenin’s decrees, plus his and Stalin’s desire for state control of everything (including the economy), eventually ruined the USSR, just as it is ruining Venezuela today. The lesson is that Marxist theory may work well in theory and dreams of stirring up ‘socialist revolutions’, but history has shown us that it cannot run a modern state properly. Lenin’s ‘October Revolution’ turned out to be a disastrous experiment with people’s lives and property that just didn’t work. It soon became obvious to all that in Lenin’s new ‘Socialist Order’ some quickly became more equal than others – just like before the Revolution.

The ‘October Revolution’ may have been one of the twentieth century’s defining events; it was also one of the most bloody and tragic.

It stands as a model for how not to reform society.

Brexit: Another Fine Mess

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‘I do declare that no foreign prince, person, prelate, state or potentate hath, or ought to have jurisdiction, power, superiority, pre-eminence or authority within this Realm.’ The Bill of Rights (English Parliament, 1689)

‘Well, here’s another nice mess you’ve gotten me into!’ Laurel and Hardy’s catchphrase seems particularly appropriate as Britain approaches Brexit, due on 29 March 2019.

Few of us can remember a more confused and troublesome time in politics. From Donald Trump’s surprise election as president, to Italy throwing its Euros out of the pram; and from Korea’s nuclear threats to the collapse of ISIS, none of these cataclysmic events has caused as much heart-searching among Britons as the vote to leave the European Union: Brexit.

It is important to record two key facts from the start; first, the vote was on the largest turn out in British electoral history, with 30 million voting and a majority of over one million to leave. Second, the very generation that voted the UK to join the European Common Market back in the 1970s was the very generation that voted to quit forty years later. (Under forties mainly voted to remain.)

This poses the question, what has changed? The answer is simply, Europe. What Britons joined as a Common Market has morphed into something quite different. Today’s EU has taken on all the trappings of a superstate, with its own flag, anthem, currency, budget, courts, diplomatic representation, unelected bureaucracy in Brussels, border police, and is even trying to build its own army. What we see today is not the Common Market Britons thought they were joining back in the 1970s. The electorate was tricked into joining Europe – and quite deliberately, too.

We now know from three impeccable sources that what Christopher Booker called The Great Deception was based on a barefaced lie. Sir Edward Heath, the British Prime Minister who took Britain into the Common Market, lied consistently to the British people about the true consequences of joining Europe. He knew he was signing away Britain as an independent power. He admitted it years afterwards. Moreover, his highly classified Foreign Office briefing notes are now available (FCO 30/1048, April 1971) and confirm his lies beyond all argument. Sir Con O’Neill, the Whitehall mandarin behind this astonishing briefing paper, warned Heath that Britain would, by ceding judicial and executive powers, eventually end up as little more than a vassal state taking orders from Brussels. They knew: and so did Heath. O’Neill advised Heath to ‘swallow the lot and swallow it now’, according to the hitherto secret official record of the EEC talks.

Astonishingly, the faceless authors behind the briefing paper made an even more sinister recommendation; they advised ministers to hide the truth from the British public. The result of this deception has been that successive governments have deliberately kept the British public in the dark about what EEC membership really meant, hoping that it would one day be too late to leave. What Heath and the civil service never anticipated was that sooner or later the British public would see though the fraud and vote to quit Europe in a fiercely contested referendum half a century later.

Britons cannot pretend that they were not warned. There can be no doubt that the avowed purpose of the EU has always been to create a single European super-state, governed from Brussels, absorbing formerly independent and autonomous nation states. But don’t just take my word for it. Here are some quotes from European politicians over the years to confirm the point:

‘A United States of Europe is our goal’. Arthur Salter and Jean Monnet, 1923.

‘Europe’s nations should be guided towards the superstate without their people understanding what is happening. This can be accomplished by successive steps, each disguised as having an economic purpose, but which will eventually and irreversibly lead to federation.’ Jean Monnet, 1952.

‘We have sown a seed … Instead of a half-formed Europe, we have a Europe with a legal entity, with a single currency, common justice, a Europe which is about to have its own defence.’ Valery Giscard d’Estaing, President of the EU Convention, June 2003

‘The European Union is a state under construction.’ Elmar Brok, European Parliament’s Committee on Foreign Affairs.

‘We need a true political union … we need to build a United States of Europe with the Commission as government and two chambers – the European Parliament and a “Senate” of Member States … European Parliament elections are more important than national elections …’ Viviane Reding, Vice-President of the European Commission, January 2014

Even the UK politician, Kenneth Clarke, former Conservative Chancellor, in a rare moment of honesty from a British politician takes a similar view:

‘I look forward to the day when the Westminster Parliament is just a council chamber in Europe.’ International Currency Review, Vol 23 No 4, 1996

All this flatly contradicts Heath’s famous 1971 speech on joining the Common Market.

‘There are some in this country who fear that in going into Europe we shall in some way sacrifice independence and sovereignty, even that we shall begin to lose our national identity. These fears, I need hardly say, are completely unjustified and exaggerated ….’

If ever there is proof of a lie to the British electorate, the evidence is clear. Heath arguably committed an act of treason. He deliberately misled the British people and betrayed the Queen into breaking her Coronation Oath. Today’s inevitable backlash from a badly mis-sold electorate is what has fuelled the uncivil battle over Brexit faced by Theresa May.

Unfortunately for her, time to come up with a workable exit EU strategy is fast running out. PM May has just a few weeks to devise a new, mutually acceptable solution because, since Brussels rejected her Chequers proposals, she is trapped between the proverbial rock and a hard place: between her mutinous Eurosceptic party wing and an unyielding Commission, determined not to give an inch for fear of encouraging other increasingly rebellious EU nations. The former ‘arch ditherer’ at the Home Office now has to make a crucial decision. Britain’s timid but stubborn leader must shake off her rabbit in the headlights diplomacy.

As for the Europhiles, Britain must be punished, if only pour décourager les autres.

Frau Merkel has said so. She and France’s latest would-be Napoleon, President Macron, dare not back down. To do so would unleash a flood of anti-EU challenges, starting with Italy and its dodgy Euro, to be followed by the rebellious ‘Visegrad Four’ nations of Eastern Europe, who don’t want any more ‘refugees,’ thank you very much. The EU line must be held, at all costs. The European Commission agrees, warning that the political and economic damage inflicted by Brexit simply presents too great a risk to the EU.

Because Brussels recognises that the defection of the UK could be the capstone that collapses the EU’s arch. The loss of 10% of the Commission’s budget alone is a grievous blow: but the threat of mass defections and an unravelling of the whole European project terrifies the EU Federalist elites, let alone the nervous European banks. Their gravy train could hit the buffers.

The irony is that this bitter and protracted struggle to stifle dissent and lock the stable door is caused by an organisation that was meant to foster European harmony. The Europhiles and the Commission appear to have allowed their dream of a united Europe to over-ride the genuine concerns and anxieties of democratic voters in free nations. They don’t understand, for example, that the annexation of Northern Ireland into the EU means political suicide for any British PM.

What is now clear is that the biggest change to the unwritten British political constitution since 1689 was based on a politician’s lie and the British electorate was deliberately deceived. It was also legally questionable, according to the Bill of Rights.

Whether you agree or disagree with Brexit is immaterial. Brexit goes to the heart of what the UK is. Will Britain be self-governing? Or part of a new federal state?

That’s why it matters.

ISIS: The Final Countdown?

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Winston Churchill once famously said, ‘battles are the punctuation marks of history.’ Well, we have just avoided a potentially disastrous ‘exclamation mark’ in the bloody history of the Middle East. Whilst the post-colonial Versailles settlement of 1919 is being brutally readjusted to take account of the harsh realities of today’s Muslim world, a major crisis has just been avoided. At Russia’s Black Sea resort of Sochi, Turkey and Russia have agreed to form a joint, demilitarised buffer zone around Syria’s embattled north-western province bordering Turkey: Idlib.

This agreement defuses a growing crisis between Ankara and Moscow by preventing any major Russian-backed government offensive from exploding into ISIS’s final rebellious Syrian redoubt. However, significant obstacles remain; Idlib could still become a flash point.

The problem is that the Middle East is as much of an unexploded bomb today as Europe was in 1914. Sunni Saudi Arabia hates Iran, and Shi’a Iran loathes the Saudis. Shi’ite Assad’s remaining chunk of Syria is the close ally of Iran. Behind the Saudis stand the USA, Britain and France. Behind the Iranians stand the Russians, sometimes the Turks, ever keen to obliterate the Kurds, and perhaps China – and watching nervously from its ringside seat is Israel.

For the past ten years we have all been living with this savage struggle to the death. Muslim has been slaughtering Muslim, all in the name of the Prophet of the religion of Peace and Love – ‘May his name be blessed.’ Now this round is nearly over; or is it?

The Turkish-Russian Sochi deal has been welcomed by all sides as an opportunity to avert the suffering that any major offensive would inflict on the province’s 3 million civilians. UN Secretary-General António Guterres welcomed the agreement, saying that the ‘creation of a buffer zone in Syria’s rebel-held Idlib province should avert an all-out military assault and provide reprieve for millions of civilians.’

It would also avoid the heavy losses that would be incurred by government forces in launching the biggest battle yet of the Syrian war against the cornered rebels. Turkey, the UN and aid groups have warned that any major assault by Russian and government forces backing President Bashar al-Assad against the trapped rebel fighters would lead to a massacre. It could also send 800,000 new refugees fleeing across the border into an already overwhelmed Turkey.

Many of the civilians in Idlib are already refugees from other parts of Syria following the collapse of the opposition resistance in cities such as Aleppo. The consequences of an all-out offensive against Idlib with its hapless civilians and the risk of Turkish troops fighting Russians could have led to a bloodbath.

The agreement is specifically designed to halt this major Russian-Syrian-Iranian attack on Idlib, with its trapped civilians. The agreement calls for a 9- to 12-mile demilitarised zone around the borders of the region, safe from Syrian and Russian air-force attack and which must be in place by 15 October. Heavy weapons including tanks, mortars and artillery will be withdrawn and Russian and Turkish troops will police the neutral zone. The Syrian government said that it ‘welcomed any initiative that stops bloodshed and contributes to security and stability.’ President Recep Tayyip Erdogan added, ‘With this memorandum of understanding, I believe we have prevented a major humanitarian crisis in Idlib.’

However, the devil is in the detail. The deal’s success hinges on the withdrawal of an estimated 10,000 fanatical jihadi rebel fighters from the buffer zone, fighting under the banner of Hayat Tahrir al-Sham (HTS), the Syrian franchise of al-Qaida and listed as dangerous terrorists by Russia, the USA and the UN.

These are some of Syria’s fiercest rebels, battle-hardened over years of gruelling warfare. HTS will fight to the death rather than surrender and they have good reason to do so: talks with the government have gone nowhere. In recently recaptured parts of the country, Assad’s goons have promptly arrested former rebels and opposition officials despite assurances of amnesty. Many have disappeared into Assad’s torture dungeons. ‘It’s either die, or surrender – and then die,’ says one rebel leader.

Despite these problems, Iranian Foreign Minister Mohammad Javad Zarif (a staunch supporter of Assad) tweeted: ‘Diplomacy works.’ However, he added that his visits to Turkey and Russia in recent weeks had achieved ‘a firm commitment to fight extremist terror.’ Putin himself added, ‘Russia and Turkey reiterated their commitment to continue anti-terrorism efforts in Syria in any of its forms or manifestations.’

Quite how this agreement to quarantine Idlib helps to stamp Islamic terrorism remains unclear because the deal is very fragile. With jets from at least six countries – Israel, Russia, Syria, Turkey, Britain and America – roaming the skies over Syria, the risk of mistakes leading to further escalation of the fighting are just a pilot’s blink away. Also, where will the rebels go?

Nevertheless, the international consequences of Sochi are important. Russia has scored a major diplomatic victory by striking a deal with Turkey. Moscow has avoided damaging its growing strategic relationship with Ankara, whilst achieving its own aims in Syria without more bloodshed. The Syrian war may be ending.

However, some things have not changed. ‘Russia doesn’t like the rebels and they want to help Assad lock down his victory; but they also have strong incentives to continue courting the Turks,’ said Aron Lund, an expert on the region. ‘Syria is just a small part of what Putin cares about. If he can just make the Syrian conflict quiet and unthreatening with Assad still in power, then Russia has won the war ….’

Idlib’s locals have mixed emotions about the Sochi deal. Abdulkafi Alhamdo, a 32-year-old teacher living in Idlib remains wary. ‘After seven years, if we trusted anyone we would be fools. Whenever we trust anyone they trick us,’ said Mr Alhamdo, who lived through the siege of Aleppo before fleeing to Idlib. He added that he was ‘so happy, and so sad’ about the deal, because it still leaves them in limbo. ‘People might be able to live again. Children might know there is tomorrow without planes. But we are still in nowhere. Refugees forever.’

Others have spotted the loopholes in the agreement. Thanassis Cambanis of The Century Foundation warns: ‘The gaping hole is that “terrorists” are still fair game. Putin has endorsed a lot of truces, but then Russia proceeded to bomb groups it defines as terrorists, because it says they weren’t part of the wider deal.’

This truce might be different. Putin’s own credibility is at stake, having made such a high-profile deal with President Erdogan. Turkey and Russia are increasingly becoming trade and diplomatic partners. Russia is building Turkey’s first nuclear reactor. The Kremlin also sees the strains between Turkey and western countries as a wonderful opportunity to divide and weaken the NATO alliance, to which Turkey provides the second largest number of troops. Putin has a personal stake in the Idlib agreement.

However, whilst for the Jihadis the battle may be lost, their long war is not over, because crushing ISIS in Syria will not eradicate the real problem. If the jihadis escape, the deadly spores of terrorism will merely disperse to spread their Islamist terrorism, which is already ‘global and growing.’ Islamist extremists caused 84,000 deaths in 2017 and intelligence agencies have identified 121 groups sharing a common ideology, now operating worldwide. They killed 84,000 people – nearly 22,000 of them civilians – in 66 countries in 2017, according to latest reports.

Even Whitehall admits that a convicted jihadi terrorist is being released onto the streets of Britain nearly every week. Home Office figures show that 46 prisoners held for terrorism offences were released in 2017 (The Telegraph, 13 September 2018)

ISIS and al Qa’ida are still very dangerous. Whatever happens in Idlib, we have not heard the last of them. The fallout from Syria will be with us for years.

Hunting the Algorithm

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Algorithms rule your life. Really. I’ll also wager that most of us don’t have a clue what an algorithm is, or what it does. Most of us can’t even spell it.

Nowadays, however, thanks to advanced algorithms, computers can learn and reprogram themselves. They can make their own decisions automatically, without human intervention. Visions of The Terminator franchise’s murderous robots could come true, which is worrying for all of us. Our digital ‘Brave New World‘ is frighteningly close – and seriously alarming.

So, how can we address this issue? First, we have to decide what an algorithm really is, which is a bit like hunting the Snark. They are everywhere and yet there are invisible. The best definition is, ‘a process or set of rules to be followed in calculations or other problem-solving operations, especially by a computer.’ Note that last word: computer.

Algorithms are the mathematical rules that tell your computer what to do and how best to do it. Computer programs comprise bundles of algorithms, recipes for handling information. Algorithms themselves are nothing more than pathways to manage pieces of data automatically. So, if ‘A’ happens, then go to do ‘B’; if that doesn’t work, then do C. It’s pure ‘either/or’ logic. Nothing could be simpler; or maybe not ….

Any computer program can be therefore viewed as an elaborate cluster of algorithms, a set of rules to deal with changing inputs. The problem is that computers increasingly rule our lives, whether we like it or not. We need to keep a close eye on these robotic machines as they can be dangerous.

Taking a nasty example, one dark night in March 2018 a computer-driven SUV mowed down and killed a female cyclist in Arizona. Sensors told state-of-the-art onboard algorithms to calculate that, given the robot SUV vehicle’s steady speed of 43 mph, the object must be stationary. However, objects in roads seldom remain stationary. New algorithms kicked in, looking for a split-second resolution. The SUV computer first decided it was dealing with another car, before it realised the car was bearing down on a woman with a bike hung with shopping baskets, expecting the SUV to drive passed her. Confused, the SUV computer handed control back to the human in the driver’s seat within milliseconds. It was too late: the cyclist, Elaine Herzberg, was hit and killed. The tech geeks responsible for the SUV then faced difficult questions like: ‘Was this algorithmic tragedy inevitable?’, ‘Are we ready for the robots to be in charge?’ and ‘Who was to blame?’

‘In some ways we’ve lost control. When programs pass into code and then into algorithms, algorithms start to create their own new algorithms, it gets farther and farther away from humans. Software is released into a code universe which no one can fully understand …’ says Ellen Ullman, author of Life in Code: A Personal History of Technology.

The problem is that algorithms now control almost everything. Amazon, Facebook, Google, university places, welfare payments, mortgages, loans and the big banks all rely on the algorithms in their computers to manage their decisions. Algorithms are seen as cool and objective, offering the ability to weigh a set of conditions with mathematical detachment and an absence of human emotion. ‘Computer say “No”‘, the catchphrase of the Little Britain character Carol Beer, is all too real nowadays, thanks in large part to algorithms.

However, currently we are experiencing first-generation, ‘dumb’ algorithms, which calculate solely on the basis of the input of their human programmers. The quality of their results depends on the thoughts and skills of the people who programmed them – people like us.

In the near future, something new and alarming will emerge. Tech pioneers are close to realising their dreams of creating human-like ‘artificial general intelligence’ (AGI): computers that don’t need programming, once they are up and running. Like Bender in Futurama, these machines possess intelligence: they can learn. A genuinely intelligent machine is able to question the quality of its own calculations, based on its memory and accumulation of experience, knowledge and mistakes. Just like us. Critically it can then modify its own algorithms, all by itself. As an analogy, It can change the recipe and alter the ingredients – without the busy chef realising what is happening.

Early iterations of AGI have already arrived: predictably, in the dog-eat-dog competitive world of financial market trading. Wherever there’s a fast buck to be made, clever individuals are already training their customised computers to attack and beat the market. The world of high-frequency trading (HFT) relies on central servers hosting nimble, predatory algorithms that have learned to hunt and prey on lumbering institutional ones, tempting them to sell lower and buy higher by fooling them as to the state of the market.

According to Andrew Smith, Chief Technology Officer at ClearBank, a major finance trading company in London: ‘In essence, these algorithms are trying to outwit each other; doing invisible battle at the speed of light, placing and cancelling the same order 10,000 times per second or slamming so many trades into the system than the whole market goes berserk – and all beyond the oversight or control of humans.’ (‘Franken-algorithms: the deadly consequences of unpredictable code‘, The Guardian, 29 August 2018)

In the same Guardian article, science historian George Dyson points out that HFT firms deliberately encourage the algorithms to learn: they are ‘just letting the black box try different things, with small amounts of money; and, if it works, reinforce those rules.’ These algorithms are making these decisions by themselves. The result is that we now have computers where nobody knows what the rules are because the algorithms have created their own rules. We are effectively allowing computers and their algorithms to evolve on their own, the same way nature evolves organisms.

This is potentially dangerous territory. Who is in charge when situations get out of hand?

Eighty years ago the science fiction writer Isaac Asimov foresaw these problems in his ground-breaking Robot series of short stories and novels, of which I, Robot is the most famous. Asimov formulated ‘Three Laws of Robotics,’ which make even more sense today, as we stand on the brink of a future world infused with robots. These Laws are:

A robot may not injure a human being or, through inaction, allow a human being to come to harm.
A robot must obey orders given to it by a human being except where such orders would conflict with the First Law.
A robot must protect its own existence as long as such protection does not conflict with the First or Second Law.

Asimov’s stories focus on the perils of ‘technology getting out of control’, when robots become problems, either because of conflicts between the Laws or because humans trying to interfere with the Laws, allowing robots to go their own way. Now, Asimov’s fictional concerns are coming true: today we face the challenge he only imagined. The problem remains what can we do about potentially vicious ‘creatures’ that may escape into the wild?

One truism is that we cannot disinvent things. From the crossbow (which a medieval Pope tried to ban) to the torpedo and the atom bomb, our clever and murderous species has invented dangerous toys. We have all had to live with their lethal consequences. Computer algorithms are no different. We are stuck with them.

If we don’t find a way of controlling algorithms, we may wake up one day to find that they are controlling us. Algorithms are already telling us what to do, particularly in public services such as law enforcement, welfare payments and child protection . Algorithms have become much more than data sifters; they now act as more like gatekeepers and policy makers, deciding who is eligible for access to public resources, assessing risks whilst sorting us into ‘deserving/undeserving’ and ‘suspicious/unsuspicious’ categories. Helped by their ubiquitous algorithms, computers are now making decisions for us.

However, we have to recognise that not all governance is data-based. Real life has to deal with the messy, complicated complexities of decision-making among conflicting demands. Policymaking is a human enterprise that requires us to deal with people, not numbers. It’s time to look at Asimov’s concerns anew, because soon it may be too late.

Unless you can guarantee unplugging the robot, of course ….

What’s Going On with the Lira?

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When Turkey sneezes, then the Turkish Republic of Northern Cyprus (TRNC) catches a cold. Nowhere is this more true than in the TRNC’s currency, the Turkish lira.

The Turkish Army bled to liberate the Turkish Cypriots in 1974. Turkish soldiers’ graves lie on TRNC soil. Since that legal intervention to protect Turkish Cypriots over four decades ago, Ankara has maintained a garrison in the North to deter any foolish Greek adventures. From this benevolent occupation many other things have flowed: Turkish taxpayers pay for the TRNC; Turkish money provides jobs and infrastructure; and, above all, the TRNC uses the Turkish lira as currency.

But of late something has gone badly wrong. In the past few months the Turkish lira has plummeted in value on the international money markets. The impact on the TRNC is cataclysmic.

So what has gone wrong? The simple answer is that Turkey, having emerged from the global financial crisis of 2008-09, borrowed heavily in foreign currencies to fund its government’s programmes. With interest rates at an all-time low this made sense. Cheap foreign money could boost growth.

This plan worked well initially. The Turkish economy has grown by 300 per cent since the early 2000s, riding an unprecedented wave of construction and consumption. Foreign investment poured in. Huge projects – such as the USD $11bn (GBP £8.6bn) Istanbul–Izmir motorway, a high-speed Ankara-Istanbul rail link and plans to build the world’s largest airport – have soaked up foreign loans. The economy grew by a whopping 11 per cent in 2011.

However massive borrowing at low interest rates cannot last for ever; it has to be repaid. Now the chickens have come home to roost. To make matters worse, many of Turkey’s big construction companies have borrowed too much the past decade and are finding it difficult to repay them. This makes the economy very vulnerable.

Also, the geopolitical game has changed. US interest rates have got tighter and the dollar is strengthening. Any country that has borrowed heavily from abroad to fill its budget deficit is suddenly under pressure. Now Turkey has to repay its debts in foreign currency and there’s the rub: it can’t afford to.

Turkey has a deficit in its international trade: it imports more than it exports, which means that it spends more than it earns. This deficit has to be financed, either by foreign investment or by more borrowing from the world’s money markets. There’s nothing unusual about that: Britain’s Treasury does just that, year in year out.

Turkey’s position is not like the UK, however. With a growing deficit of national income, or GDP, in 2017, investors are becoming increasingly wary of lending more money to Turkey, for three reasons.

Ankara has a lot of debt due for repayment in the near future – loans that have to be repaid or more money borrowed from someone else to pay them off. To the financial markets, the debt has to be ‘refinanced’. However, borrowing from Peter to pay Paul has never been good economics, either personally or nationally. Credit rating agencies like Fitch estimate that Turkey’s total debt is a whopping USD $223 billion – about a quarter of Turkey’s GDP – USD $50 billion of which falls due in 2019, USD $20 billion by December 2018. Where will Turkey find that money?
Since many big Turkish companies have borrowed in foreign currency, nervous investors suspect that the companies may have over-reached themselves. These loans become more expensive to repay if the value of the national currency declines – which it has. The result is that a number of major Turkish corporations, among them Doğuş Holding and Yıldız Holding, are already in trouble and need to restructure their loans. Türk Telekom has actually been taken over by its creditors after Oger Telekom defaulted on a USD $4.75 billion debt.
Investors are increasingly reluctant to put their money into Turkey. They are actually selling off their holdings of Turkish lira, forcing the value down. The nervous markets are causing a self-perpetuating fire sale of lira. Like lemmings going over a cliff, bankers everywhere are trying to dump their lira holdings as fast as possible at knockdown rates.

In other words, Turkey’s reliance on the foreign investment to keep itself afloat is drying up. For many years, this did not matter as interest rates in developed economies were at record lows, so borrowing from abroad remained cheap. Now those days are gone.

Exchange rate (TL-GBP): 2008-present

This growing currency weakness also aggravates Turkey’s persistent inflation problem, because as the lira grows weaker imports become more expensive. Just like the TRNC, Turkey relies on imports for much of its goods.

At the same time, markets are alarmed by the refusal to raise interest rates, which is the normal economic weapon to tempt timid investors back into lending their dosh. The recent US sanctions on Turkey have compounded this whole problem. ‘With a backdrop of rising rates and a stronger dollar, the imposition of US sanctions were the final ingredient for a perfect storm for the economy and Turkish assets,’ explains Nafek Zouk at Oxford Economics.

The impact of all this high finance has hit ordinary Turks and Turkish Cypriots hard. Tourist Janet Cowley, a foster carer and former police officer, said: ‘I’ve been paying for things in pounds sterling, just so the people here have some money. It’s terrible for them. Good for the tourists, though.’

Business owners are similarly concerned. In the TRNC many of the goods in the shops and supermarkets are imports bought in foreign currencies. The businesses that have taken out loans in dollars or in euros are suffering the most. One shopkeeper explains: ‘We have to pay for our stock in dollars, euros or pounds and then sell them for lira. We now need more lira – a lot more lira – just to pay our bills.’

The effect on inflation is obvious to anyone living in the TRNC. All energy has to be imported and oil is priced in dollars. Retail prices have shot up by at least 20 per cent on imported goods. Profiteering has become rampant and blatant, with some stores relabelling prices overnight on goods that have been on their shelves for weeks and were paid for months ago. Sadly we should never underestimate the Levantine temptation to grab a quick buck and let the customer rot.

The other great worry for the TRNC is that many high-value goods, such as houses or cars, are priced in pounds sterling. This means the buyer or a shopkeeper renting a shop and taking in lira as income has to find a lot more lira suddenly – as much as 40 per cent more in some cases. In turn, that means that a lot of shopkeepers will be unable to find enough lira to pay their increased bills. This leads to bankruptcies or worse: evictions. Pakistani Gastarbeiter (migrant workers) paying GBP £250 for a one room shared flat, suddenly find that TL 1,800 a month won’t keep a roof over their heads, let alone a chicken on the plate. The social consequences, and dangers, of the collapse of the lira on ordinary working people throughout the TRNC will be profound – and worrying.

So what is the answer this financial crisis? The first step would normally be to put up interest rates or capital controls. Ankara has insisted it will not do that. Instead Turkey is buying time with a US $15bn loan from embattled Qatar, desperate for an ally in the Arab world. This is a fleabite, however, and the money won’t last long. In the background are Ankara’s new best friends, Moscow and Beijing. If China’s rack record is anything to go by, look out for the PRC bankrolling Turkey by buying up everything in sight, from Istanbul Harbour to factories and even an airport or two. Ankara is now looking to the East for salvation.

The Guns of August

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The trouble with August is that the historical record shows that whilst everyone is on holiday it’s a great month to start a war.

From the guns of August in 1914, via the start of the Wehrmacht’s ‘Grand Tour of Europe’ in 1939, the Gulf of Tonkin Vietnam war inciting incident of 1964, Saddam Hussein’s invasion of Kuwait in 1990, down to the Russo-Georgian War of 2008, August has meant ‘war’.

This August doesn’t look much better. There is global trouble brewing, big time. It may be the heat: perhaps the madness of ‘le Cafard,’ (the Foreign Legion’s description of the delirium caused by a Saharan summer), but the war drums are beating once again.

The problem is Iran. The US and Iran have been at odds increasingly over Tehran’s growing political and military influence in the Middle East. Things are not looking good for the ‘Mad Mullahs’ of Tehran this August. Trump has deliberately put the clerical regime in Tehran and the Iranian people between a rock and a hard place. The Ayatollah and President Trump are on a collision course.

Many thought that Trump would go back on his threat to quit Obama’s 2015 wishy-washy nuclear ‘deal.’ They were wrong. The economic war started on Tuesday, 7 August 2018, with new US sanctions on cars, aircraft, currency and gold. Any company with an office in the US caught ‘trading with the enemy’ will be prosecuted. Sanctions will cut off the money tap. Europeans are stunned by their loss of potential profits, but the Yanks mean business.

The current American President has simply followed through on his campaign promise. If anyone was in doubt about his willingness to use US power, Trump has shown that when he sets his mind to something it’s going to happen, despite the anguished wails of dismay from EU corporations who thought that their juicy new Iranian contracts would bring them an early Christmas.

Trump is deliberately placing the Iranian economy under intolerable pressure. Global companies are now fleeing the country and the Iranian rial has collapsed, losing half its value since April. Behnam Ben Taleblu, Research Fellow at the Foundation for Defense of Democracies in Washington DC, says: ‘Re-imposing these sanctions is the first step towards tightening the noose on Tehran, putting the regime to a choice between continuing its malign activities or improving its economy.’ Washington’s new penalties are just the first warning shot for even more savage sanctions planned for early November that will target Iran’s valuable oil exports.

The threat is mortal. Tehran needs to sell its oil to survive. The lack of oil revenue could bankrupt Iran. The reaction to American threats from the regime was therefore predictable: Iranian President Hassan Rouhani promptly threatened to disrupt international oil shipments through the Persian Gulf if renewed US sanctions strangle Iran’s oil sales. ‘No one who really understands politics would say they will block Iran’s oil exports, and we have many straits, the Strait of Hormuz is just one of those …. We are the honest men who have throughout history guaranteed the safety of this region’s waterways. Do not play with the lion’s tail, it will bring regret.’

Trump promptly Tweeted in kind, mostly in capital letters: ‘To Iranian President Rouhani: Never, ever threaten the United States again or you will suffer consequences the likes of which few throughout history have suffered before. We are no longer a country that will stand for your demented words of violence and death. Be cautious!’

Whether that will change the change the minds of Iran’s Shi’ite clerical leadership is another matter. Already Tehran is preparing for a fight. The US military’s Central Command reported on Wednesday, 8 August 2018, an increase in naval activity in the Strait of Hormuz, the critical waterway at the mouth of the Persian Gulf for the international shipment of oil from the Middle East. Iran is threatening to block it off with ships and mines if the USA’s renewed sanctions begin to bite.

The spokesman for Iran’s Revolutionary Guards confirmed the deployment of more than 100 vessels to the Gulf: ‘This exercise was conducted with the aim of controlling and safeguarding the safety of the international waterway in the Persian Gulf and within the framework of the programme of the Guards’ annual military exercises.’ He added: ‘They are to enhance defence readiness and to confront threats and potential adventurous acts of enemies.’

In turn, the Americans have warned Iran off. According to Washington, ‘Iran has threatened to close the Strait of Hormuz. They’ve done that in the past. They saw the international community put dozens of nations of the international community naval forces in for exercises to clear the straits. Clearly, this would be an attack on international shipping, and it would have, obviously, an international response to reopen the shipping lanes with whatever that took, because of the world’s economy depends on those energy supplies flowing out of there.’

This is fighting talk by both sides, but America has serious muscle on the water to back its rhetoric. The US 5th Fleet, based in Bahrain, is the ‘combined 5th Fleet’, which means it does not just comprise the US Navy. As well as a powerful US Carrier Strike Force, it has got Kuwaiti, Bahraini, Saudi, and Emirati vessels under command, as well as the occasional Royal Navy warship (when Britain’s MoD can afford to spare one as a token gesture).

From the Iranian side this war of words is not just sabre rattling. This is a battle Iran dare not lose, for domestic reasons. The Government of President Hassan Rouhani is already facing serious trouble at home, where the opposition has demanded action on corruption and for renewed efforts to rescue the economy. A combination of scarcity and inflation has caused prices to soar. Everything from real estate, groceries, and electronic goods have almost doubled in price. Iran is facing the worst economic crisis the country has ever seen.

Worse is to come. Iran has major internal socio-political problems, with serious water shortages and street protests breaking out in the country since the beginning of 2018 over high prices, disconnected water supplies, power cuts and widespread corruption. Since the start of August 2018, thousands of people have rioted in Iranian cities – including Isfahan, Karaj, Shiraz and Ahvaz – in protest against high inflation caused in part by the collapsing rial.

Already there are signs of a widespread clampdown by the clergy and the Revolutionary Guards. What started off as protests, spurred on by the deteriorating economic conditions in Iran and the inflation in prices of basic necessities, could now escalate into a rebellion against the Islamic Republic itself. As domestic economic conditions get worse there is growing anger at Iran’s foreign policy – which includes spending billions of dollars to supply weapons and fighters to take over Syria, funding the Houthi rebellion in Yemen, as well as lending financial support to Lebanese Shi’ite group, Hezbollah – whilst Iranian citizens back home go short. The Mullahs can no longer rely on a docile population.

The questions to pose are, ‘To what extent are these protests threatening the theocratic regime?’ and ‘Could such an upheaval foreshadow a second Iranian revolution?’ This is a real possibility and it explains Washington’s adamantine stance. Despite US denials, Trump and his team really want nothing less than to bring the Mullahs down.

This would explain the sudden receptiveness of the regime to the pleas of the protesters. In January 2018, Iran’s Parliament rejected a then-recent budget plan that increased the price of petrol by 50% and proposed increases in the price of water, electricity, and gas (‘Protests, 2018 budget and public discourse in Iran’, Al Jazeera News, 30 January 2018).

This apparent responsiveness from the current Islamic Consultative Assembly government is a desperate attempt to defuse the sense of grievance felt by many Iranians in the hope of reducing the risk of more violence on the streets or, in the worst-case scenario, protests escalating into a fully fledged revolution. On every front, trouble looms.

Will it end in tears and war? If so, when? Who can predict the outcome?

Once again, the guns of August are loaded and ready to fire – on both sides of the crisis.

Who Needs Money Anyway?

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Here’s a riddle for you:

Question ‘What loves money, but hates cash?’
Answer ‘Governments and banks.’

Governments love money – your money – because it helps them to bribe electors. Not for nothing has modern democratic politics been dismissed as the art of redistributing taxpayers’ money. There is no such thing as ‘government money’ – just your hard-earned dosh, taken from your pocket by law. As Louis XIV’s Minister of Finance, Jean-Baptiste Colbert, put it so elegantly, ‘The art of taxation is in plucking the goose so as to obtain the largest amount of feathers with the least amount of hissing.’

But modern governments, like banks, hate real money. This deep-seated dislike of cash in people’s pockets is because governments cannot control it. Money is mobile; money is anonymous. Money is running loose out there in the wild. For the control freaks of every government and their snivel serpents, money is an untidy, reckless, irresponsible commodity, out of government control and, horror of horrors, in the hands of ordinary people. Cash makes all those illegal economic activities easier – from terrorist activities to criminals using cash to pay for drugs, because it cannot be traced; in any cashless economy, counterfeit notes would be useless. So it’s no surprise that governments around the world want to eliminate cash because all transactions have to be linked to bank accounts that can be taxed.

Banks in their turn dislike hard cash, albeit for different reasons; all those dirty banknotes and coins need to be counted and added to ledgers. Money needs branches where you can visit to check on your dosh or negotiate a loan with a human being. However branches require staff – expensive staff. Replacing them with self-service apps allows the senior managers of financial institutions to control customers directly and, of course, such a system cuts costs and boosts profits. For the big banks, what’s not to like?

So ‘Big Finance’, enthusiastically backed by the man in Whitehall, is pushing hard for what they see as the bright new future of a cashless society; a world where IT and digital communications can get the customers to do their work for them without recourse to all that messy money. The most powerful advocate of change is the payments industry, with its credit card companies and banks. Every transaction that is done using cash is really a missed opportunity for Visa and MasterCard to earn another 2.5%. Unsurprisingly it is in their interest to trumpet that cash is redundant, inconvenient and inefficient.

However, the cashless society is a con – with Big Finance behind it. Already, all over the Western world, banks are trying to shut down branches and ATMs. They are trying to push you into using their own digital banking infrastructure to make digital payments. Financial institutions want to force everyone to put all their money through the banks’ digital systems to be recorded and harvested. Cost cutting and control is the order of the day, and our brave new digital world is making it possible. IT has made a cashless society a reality – and this demands some hard thought, because the cashless society will change all our lives.

For a start, in many cases, money as a traditional exchange of value is losing ground. Money is becoming much more a concept of ‘credit reassignment’ rather than a transfer of physical material. Everywhere today people are using credit and debit cards on a regular basis in everyday situations, such as shopping. These are cashless transactions. The question is, ‘What exactly is this cashless society?’ This leads to real impacts of living in a cashless world?

Perhaps the best finance model to consider is Sweden, which is fast becoming the world’s first completely cashless society. For example, none of the banks around Stockholm’s main Odenplan Square handle cash any more. If you want a cup of coffee and Kanelbulle in the country’s largest café chain you can only pay by card or by using your smartphone. No money please! Also, there is no chance of using coins or notes if you want to hop on one of the shiny blue busses purring past – contactless payment swipe only. Tak!

The Swedes see nothing unusual about this cashless phenomenon. Most Swedish banks have long stopped allowing customers to withdraw or pay in cash over-the-counter. A quarter of people living in Sweden use cash only once a week. Sweden’s cashless trend has been praised as the way of the future, mainly by banks and the credulous commentariat, and is increasingly being copied in places as far apart as Idaho and India.

However, not everyone is convinced that the Nordic nation’s embrace of living by technology is quite the happy Valhalla claimed. There are growing concerns about the pace of change. For example, many older Swedes are becoming alarmed amid concerns that this cashless society is causing problems for the elderly and other vulnerable groups.

‘As long as it is legal to use cash in Sweden, we think people should have the option to use it and be able to put money in the bank,’ says Ola Nilsson, of the Swedish National Pensioners’ Organisation and its 350,000 members. ‘We’re not against the cashless society, we just want to stop it from going too fast.’

They are right to be wary; because the cashless society hides some very dangerous trends. The debacle of TSB and Visa’s disastrous IT switchover is a cautionary tale for our potential cashless future. The more we rely on technological solutions, the more we will have a problem when they fail.

Moreover, there are some clear downsides to a cashless world. First, it will alienate a lot of people and put them on the fringe of society, if not make them outlaws. Not everyone has a smartphone, a bank account or even a permanent address.

Nor do all developed countries wish to go down the Scandinavian route. Switzerland, for example, rejects non-cash transactions as an invasion of privacy. The Swiss were not even keen on cashless train travel cards, worrying that the government could snoop on their travel habits. Many people wouldn’t want their day-to-day spending habits recorded and monitored.

Then, there is the serious matter of censorship. There is already an ugly precedent. In February 2016, Uganda blocked the popular Money Mobile app during its elections. The allegation was that the opposition would use it to buy voters. The real reason was to block donations to the opposition party. In another instance, Bank of America, Visa, MasterCard, PayPal and Western Union blocked donations to Wikileaks, which has seen its revenue dip by over 95%.

Finally, cash is an important safeguard against economic disaster. When things go wrong, when confidence in the banking system crashes, citizens like to withdraw their cash in wadges and stuff it under the mattress. A run on the banks is governments’ worst nightmare: remember the Northern Rock debacle? A cashless society makes that impossible – and, paradoxically, it also makes it impossible for governments to control money flow and unable to inject money (i.e. ‘print banknotes’) to stimulate the economy.

The conclusion is that because of its reliance on electricity, electronics, software and IT, modern society is becoming more and more fragile, and vulnerable. Cyber-attacks are increasingly common, as is theft by hacking. So real money will remain a bulwark against technological vulnerability. In 2017 the average amount of cash carried by people was £33; that has now fallen to £21 in 2018. However, when technology goes wrong, hard cash still remains the safest way to make basic transactions.

So ignore those ‘nudging’ you towards purely digital services – it’s really all for the banks’ benefit, not yours. Obviously, plastic and helpful IT have their part to play, but we should not get carried away by the vision of a cashless society.

The signals say, ‘proceed with caution.’

Democracy?

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Sir Winston Churchill famously growled, ‘Democracy is the worst form of government – except for all the others.’

The great man had a point. He understood the dangers of ‘the tyranny of the majority’ very clearly, even adding on one occasion, ‘the best argument against democracy is a five-minute conversation with the average voter.’ Despite this, Churchill was a genuine democrat. He believed in the people and accepted their judgments.

‘Let’s do this the Democratic way …. Hands up all those who agree with me?’

This is highly relevant today, because democracy is under attack. The most obvious is Britain’s undeclared civil war over Brexit, where a narrow majority of voters – albeit on the biggest recorded electoral turn out – voted to quit the European Union. The subsequent uproar and the blatant attempts to pervert and obstruct the people’s decision to leave have shown that the democratic will is only recognised by some when it suits them. That is profoundly undemocratic. But, as in some many things, it all depends on what you mean by ‘democracy.’

Democracy as a political idea dates back to ancient Greece. Literally, it means, ‘rule by the people.’ The word comes from the Greek word dēmokratiā, which is a combination of ‘the people’ (demos) and ‘to rule’ (kratos). The first major exponent of the system was the city state of Athens, around 400 BCE. Not every Greek agreed with the concept. When a Spartan aristocrat argued for more democracy, he was put down firmly by the retort, ‘I’ll believe it when you run your own family as a democracy!’

Since then, both the theory and the practice of democracy have undergone profound changes. What worked for certain types of male citizens of Athens centuries ago (women, slaves, foreign residents and children under 18 years of age had no vote) clearly does not work for hugely diverse countries like the USA or complex modern societies like the UK.

However, the idea of the people as ‘sovereign in their own affairs’ persists at the heart of democracy. Lincoln spelled it out simply in his Gettysburg Address: ‘… government of the people, by the people, for the people shall not perish from the earth’. From this, three principal systems of democracy have emerged; ‘direct’; ‘delegated’; and ‘representative’.

Direct democracy means every voter has a direct say via referendums. The Swiss and Californians like these.
Delegated democracy means that the people elect an individual to carry their views to a governing body such as a Senate, as in Ancient Rome. British Trades Unions are a modern example. Shop stewards are given instructions from their members and send delegates to the TUC with ‘a mandate from their members’.
Representative democracy means that elected officials represent a group of people. This is the theme of the rest of this article.

Colonial America favoured a system of representation because of the new country’s enormous size and widespread population. The Constitutional Convention (1787) realised that ‘the People of the United States’, could only govern themselves at the national, Federal level by electing Congressmen to go to distant Washington DC to represent their wishes.

The key word is ‘represent.’ Whereas a delegate is merely a mouthpiece, a representative is sent to use his (or her) best judgment on behalf of his constituents. The English political thinker Edmund Burke described his role as an MP to the voters of Bristol in 1774: ‘Your representative owes you … his judgment; and he betrays, instead of serving you, if he sacrifices it to your opinion.’ This explains why, for example, hanging is not put to the popular vote. Polls show that any referendum of the people would reimpose capital punishment, but Britain’s elected representatives in Parliament disagree. MPs think they know best, so they use their judgments to represent their constituents; they do not take their instructions from the people between general elections, which gives rise to the saying: ‘If you don’t like me or my views, then you can vote me out.’

Democracy therefore can mean different things to different people. What is clear, however, is that representative democracy requires mutual trust: trust of the representative by the people; and trust in the people by their elected representatives. Somewhere in the past 20 years that trust has begun to break down. We live in a world where politicians spout democracy – but do everything in their power to overturn it when the people give the ‘wrong answer’ at elections.

Nowhere was this more in evidence than the 2008 farce of Irish voters rejecting the Lisbon Treaty, only to be sent back to vote again after EU officials’ behind-doors deal to force a second referendum. Similar European Commission’s contempt for democratic majorities – and for democracy itself – has been seen in Denmark and France. For Brussels, ‘the people’ cannot be trusted and must be forced to vote again until they come up with the ‘right answer.’ This is dangerous stuff and reflects Bertholt Brecht’s sardonic comment on Communist elections: ‘Would it not be simpler, if the government simply dissolved the people and elected another?’

Closer to home, the UK’s Brexit referendum and Trump’s election in the USA sent shock waves through liberal elites, by coming up with the ‘wrong answer’. The chattering classes were horrified. What these events revealed across the Western world is a widening chasm in far too many countries between voters and the cosy governing class represented by the likes of Davos, the Bilderburg Group, Brussels, Westminster, Washington, politicians, intellectuals and civil servants. This gap is made worse by the refusal of these elites to accept the will of the people; vested interests do everything in their power to block resolutions using non-elected institutions, such as supreme courts and the European Commission, to clamp down on dissent and liberty. For the EU it’s the (deliberate) ‘democratic deficit’; for the chatterati it means finding some way to ignore or neutralise voters’ wishes.

So, when added to the alternative-fact extremes of frightened metropolitan-elite politicians who wish to bash the masses using phrases like ‘post-truth politics’ to control the ‘unqualified simpletons of the great voting public,’ something sinister and profoundly undemocratic is emerging.

Democracy itself is under attack across Europe and the USA, a fact becoming plainer with every daily headline. The idea that the ‘common people are too ignorant and too driven by base emotions to really understand what they voted for’ has gained ground in political circles ever since Trump was elected and Britain voted for Brexit. This is sold as defence of human rights, and especially minority rights against the ‘tyranny of the ignorant majority’. These days it’s not the aristos who fear the mob – it’s the ivory-tower academics and intellectuals who think only they know what is best.

Their solution? ‘Ordinary people are too ill-informed to know what’s best for them – leave it to the experts.’ Well, the experts of the IMF, CBI, the EU, most of the media, the Chancellor and the Bank of England forecast instant ruin, famine, unemployment and plagues of frogs if Britons dared to leave the EU. They’re still waiting.

Another chestnut touted by the new anti-democrats is that ‘Democracy leaves semi-illiterate voters at the mercy of fake news and media lies.’ The high-minded BBC naturally does not agree; but heartily agrees that Fox News and the Daily Mail’s ‘propaganda’ only confuses ordinary, simple folk – quite unlike the BBC and The Guardian, of course ….

The truth is that democracy itself is under attack. Nowhere can this be seen more clearly than in today’s struggle over Brexit, but showing contempt for the masses can only end one way.

As Chairman of the Public Administration and Constitutional Affairs Select Committee, Sir Bernard Jenkin MP has said he ‘dreads to think’ what will happen to British politics if the Establishment fails to implement the people’s verdict in the Referendum. He warned: ‘That’s not what democracy looks like in my book. Of course, the EU has always tried to reverse every adverse referendum … but if they defeat the British people in this endeavour, that would be a disaster for our country.’

And for democracy? Watch out for forthcoming variations on the ‘I’m a democrat, but …’ theme before politicians and bureaucrats then ignore the will of the voters. Be very careful; the ‘post-Democratic’ age is being touted as the way ahead.

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The Wolf at our Door

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‘The Assyrian came down like the wolf on the fold,’ wrote Lord Byron in his famous poem about the ancient Persians on the rampage. Well, the modern Persians are on the rampage now; and they are right on our doorstep.

Fortunately President Trump is well aware of the danger; he has slammed the diplomatic door in Tehran’s face, to the fury of France, Germany and EU companies, all suddenly forced to ditch their lucrative contracts with Tehran.

One of the mistakes Westerners make is thinking that the Middle East is run by Arabs: wrong. The Middle East is mainly split between Persians and Arabs; and they don’t get on – and never have. The ancient Persians were the bane of Greece and Rome; it wasn’t until the fanatical Arabian warriors of Islam conquered Persia in 651 that the Persians even became Muslim. To this day Persia – now calling itself Iran (after its Persian name) – is a separate culture, language and even a separate branch of Islam.

Persians are Shi’ite Muslims and believe that Islam should be ruled by direct descendants of the Prophet. Most Arabs are Sunni Muslims, believing that Muhammad’s successor was an elected Imam called Abu Bakr. The ‘religion of peace and love’ fell out in 661 when Muhammad’s cousin and son-in-law, Ali, was murdered. Since then the religious split has widened and acquired political significance – Persians are mainly Shi’a; the rest of the Arab world (85%) are Sunni.

This matters because the modern Assyrians are once again muscling in across the Middle East – and even further. Thanks to Iran, and the meddling Mullahs of Tehran, the great geo-strategic tectonic plates are shifting, and not necessarily for the better. Iran is on the march – and Iran wants a nuclear bomb.

Iran’s efforts to expand its influence are there for all to see. Following the rout of ISIS by Kurdish infantry and American and Russian air power, Iran now controls large swathes of the Middle East, as well as dominating the governments in Baghdad and Damascus, whilst simultaneously intimidating the Gulf States. Through its use of proxy fighters like the Houthis in Yemen, Hezbollah in Lebanon and Hamas in Gaza, Tehran’s tentacles have now reached the Mediterranean. Iran is busy setting itself up as a regional superpower.

However, Tehran’s real interests are much wider; as Trump warned, we ignore them at our peril. Azerbaijan’s traditional alliance has been with Turkey: Azeris are ethnically Turkic, and the two countries’ languages have shared roots. However, with Turkey now mired down in Syria as a result of Ankara’s paranoia over the Kurds, Tehran is suddenly wooing Baku, because Azerbaijan was once part of the Persian Empire and over 20 million ethnic Azeris live in Iran. Tehran is concerned that the Azeris might try to break away – like the Kurds.

However, Iran’s interests are much wider than domestic unrest on its northern border. Assad’s rump Syria is, once again, effectively a Persian satrapy. This worries Jeddah, because far to the south west, Tehran is fighting a proxy war with Saudi Arabia, the other big player in the region. (‘War’ is no exaggeration. When guided missiles start falling near your capital, that’s war!) The luckless hosts for this struggle for regional dominance are the wretched Shi’a Houthis of Yemen, whose rebellion against their government is being brutally crushed by the Saudis and Gulf States, determined to stop the Shi’a gaining even more power on their doorstep.

Washington is not fooled by Tehran’s manoeuvrings, either. With respect to Iranian aims, US General Jack Keane warns: ‘Syria for Iran is a strategic anchor in the region … they really want to gain more influence and domination of the countries in the area … the Iranians have been conducting a military build-up in southern and south-western Syria .… What they really want to do is replicate what they’ve done in Lebanon, where Hezbollah have in their hands 130,000-plus rockets and missiles capable of reaching Tel-Aviv and Jerusalem. This is serious stuff, what Iran is up to. They certainly want to undermine the government of Israel, create instability and eventually, in time, destroy it.’

Iran’s leaders make no secret of their ambition to emerge as the dominant power in the Middle East and, eventually, the entire Islamic world. Tehran is quite open about its aims: to roll back the influence of the United States in the region and to work towards Israel’s destruction. For example, in 2015, Ali Younesi (a senior intelligence adviser to Iranian President Rouhani) outlined a clear blueprint for Iranian plans, describing Iran’s role as ‘protecting the interests of all the people in the region – because they are all Iran’s people .… We must try to once again spread the banner of Islamic-Iranian unity and peace in the region. Iran must bear this responsibility, as it did in the past.’ Interestingly he spoke of Iran’s past as an empire, and called for a ‘greater Iran’, stretching from the borders of China to the Persian Gulf.

There is however a built-in limit to imperial Iranian dreams: Sunni Arabs are deeply suspicious of Persians. As a Shi’a power, Tehran finds it difficult to win support outside Shi’ite Arab populations. The principal tool of Iranian expansion has been the Islamic Revolutionary Guard Corps (IRGC), led by the experienced Mohammad Ali Jafari, an advocate of asymmetric warfare using its elite al-Quds Force, whose prime mission is to create Shi’a political/military proxies in other countries and further the ‘Iranian Islamic Revolution’. The chaos in Syria and Lebanon opened the door to Iran’s take-over, using the IGRC as its vanguard.

Iran’s control of Iraq’s Shi’a Arabs rams the point home. According to a recent report in the Asharq al-Awsat, the IRGC openly maintains a permanent staff of senior officers and political appointees in Baghdad to manage the Shi’a militias and control the Iraqi countryside. Similar IRGC units are being set up in Syria and Lebanon.

Now Iran has been caught stirring up trouble in another area of expansion, this time on the Atlantic, a very long way from home: Morocco. When colonial Spain left Morocco in the 1970s, Polisario guerrillas fought for independence for the Sahrawi people until a UN-brokered ceasefire. However, Iran and its Lebanese Shi’ite ally, Hezbollah, have just been exposed running arms secretly to the Polisario and training its fighters. ‘Hezbollah sent military officials to Polisario and provided the front with … weapons and trained them in urban warfare’, according to Rabat. Intelligence reports confirm this meddling. Sunni Morocco has reacted by expelling the Iranian ambassador and severing all diplomatic ties.

However, the greatest danger of all is Iran’s nuclear ambitions, as Trump warned when he scrapped Obama’s 2015 naive Iranian deal. Under pressure from Obama and the EU, Iran had agreed to limit its attempt to develop a nuclear capability in return for the lifting of crippling economic sanctions. But, as Israeli intelligence has proved conclusively, the Persians lied and cheated. Now, despite EU corporations’ wails of lost profits, Trump has re-enforced savage sanctions to bring Tehran to its knees once again and scupper Iran’s nuclear programme once and for all. Iran’s aims may be ambitious but its armed forces lack any genuine capability to attack its neighbours; so, without a nuclear capability, Tehran’s options to become the bully on the block are limited.

Iran’s long-term strategy is clear: a naked grab for regional hegemony, mainly by controlling proxies. The irony is that Tehran has badly overplayed its hand; Iranian interference and subversion abroad has been too blatant and encouraged international resistance to Tehran’s over-ambitious dictators. Absolutely no-one wants to see the mad Mullahs with a nuclear bomb. Perhaps the Ayatollah should heed the old Persian proverb? ‘Experience teaches us that wishful thinking only leads to disappointment.’

But be in no doubt: the Iranian wolf is hungry.

Money Makes the World Go Round

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For the second time in a month, to my surprise, I find myself agreeing with President Putin. Speaking at the International Economic Forum recently he warned: ‘We don’t need trade wars today … we need a comprehensive trade peace.’

Cuddly old Vlad was really warning us that there’s a financial firestorm brewing. Looking at what is going on with the euro and the Turkish lira, it’s hard to disagree.

The euro is really our old friend the Deutsche mark, cunningly devalued and disguised to pay for German re-unification, and now Europe’s chokehold currency of no choice. For example, any independent Scotland joining the EU would nowadays be ‘forced’ to accept the euro. Difficult for the Scots: not for nothing did Thomas Carlyle call economics ‘the dismal science.’

Dismal science or not, money makes the world go round – and always has done. Even St Paul admitted: ‘The love of money is the root of all evil.’ This titanic battle for economic power rages around us every day, as China and America tussle behind the scenes over who owes how many dollars to whom and what they are worth, whilst a worried Commission in Brussels watches nervously as its great dream of a superstate called ‘Europe’ begins to disintegrate.

Because the UK’s ‘Brexit’ is the least of the EU’s problems. With Poland refusing to toe the Merkel party line, the Balkan states disobeying Juncker’s ‘diktats’ on immigration, and now a major trade war looming with the USA, Brussels has its hands full. Money is at the heart of it all. The unfolding Italian political train crash that is the new populist, anti-establishment Eurosceptic government is Brussels’ worst nightmare. It threatens their euro. Austrian chancellor Kurz gives the game away, bleating: ‘We saw in Greece how dangerous it is if a country has a bigger and bigger debt and I hope that we will not have a second Greece in our neighbouring country, Italy.’

The reason? Money and debt. Frightened hard currency has been haemorrhaging out of cash-strapped Italy for months, driving it even further into the red, amid fears of a Greek-style euro debt crisis which would bring the country to its knees. The new Italian government is even threatening to quit the euro and set up a parallel currency.

This is serious, because Italy is the eurozone’s third largest economy, nearly ten times the size of Greece’s.

The former chief economist of the IMF – Olivier Blanchard – believes the eurozone is heading for an ‘horrific crisis,’ denouncing Italy’s popular new government’s plans as ‘likely to violate all EU and domestic fiscal rules and put debt on an unsustainable trajectory’. What he means is that Rome is inviting an economic and political war, because the big French and German banks risk losing billions if Italy says, ‘no more pay offs.’

Brussels now has the beginnings of a serious rebellion on its hands. However, once again Italian voters have been over–ruled by EU technocrats, pressuring President Mattarella to ignore the voters, just as the Berlusconi government was toppled in 2011 by Brussels and the European Central Bank, in what was effectively a ‘soft coup.’

This is dangerous territory.

The Italian president’s refusal to accept the Lega-Gillini finance minister because he ‘could provoke Italy’s exit from the euro’ is dynamite. The political message to Italian voters is clear: whoever you vote for, the eurozone rules. A Lega spokesman explained: ‘You have to swear allegiance to the god of the euro in order to be allowed to have a political life in Italy. It’s worse than a religion.’

In Brussels, Juncker openly threatens: ‘There can be no democratic choice against the European treaties. One cannot exit the euro without leaving the EU,’ and Günther Oettinger, European Budget Commissioner for Budget, actually said: ‘This will teach the Italians to vote for the right thing.’

Because the ECB and Brussels will fight to the last drop of Italian money to stop anyone escaping from their eurozone straitjacket. The French Finance Minister warns: ‘If the new government takes the risk of not respecting its commitments [in other words, “If Italy doesn’t pay its huge debts to our big French and German banks”], the financial stability of the eurozone will be threatened. Everyone must understand that Italy’s future is in Europe and nowhere else. … there are rules that must be respected.’

This push to smother Italy’s eurosceptic rebellion, as they muzzled Syriza in Greece, comes from a worried Berlin, Brussels, and the EU power structure. But this time they may have blundered into a trap, because the EU’s economic problems grow worse every day. Now debt-ridden Spain admits it is in serious trouble. And Spain owes euro banks ‘zillions’, too. The bottom line for the EU is that if the Italians and Spanish welch on their euro debts, then the euro is finished – with huge international bankruptcies on the cards.

‘So what?’ says the man in the Kyrenia café, ‘How do big economic problems affect me, my family and my bank account? Who cares?’

The answer to the puzzled denizens of Turkish North Cyprus is ‘look at your money.’ Something very odd has happened to their Turkish lira. One year ago, 1 GBP pound sterling bought you 4.30 TRY; ten years ago, on 31 May 2008, a quid bought just 2.12 lira. And today? Going to press, a pound buys you around 6 lira. That’s what international currency fluctuations do to the expat, watching his pension. That’s how small Turkish Cypriot businesses, being paid in lira whilst paying for their rents in sterling, go bust. The reason? Money: because the Turkish lira is now in deep international doo-doo.

For years, Ankara’s AKP government has funded its massive vote-buying economic programme with money borrowed from overseas investors, attracted by Turkey’s generous interest rates. No less than 70% of Turkey’s deficit is covered by short-term foreign loans.

The problem is paying off those loans. Interest payments were biting deeper and deeper into Ankara’s Central Bank’s precious reserves of hard currency US dollars or euros. Loans began to dry up, so the Central Bank increased interest rates to tempt the punters and keep the all-important foreign dosh flowing. The problem is that at 13.5% the interest payments were expensive – but, at 16.5%, they could become ruinous.

At which point Turkey’s would-be President stepped in, boasting that he personally intends to run the economy when he wins the election on 24 June to become all-powerful leader. On his orders, interest rates will be slashed to 10% to save Turkey’s money. Result? Instant panic and predictable flight by spooked, nervous lira investors. Consequence? A market panic with foreigners desperate to unload their lira while they can. ‘Cheap? Your real, genuine Turkish lira. A real bargain, guv … Gotta sell.’

Because that’s what markets do. That’s how economics works: supply and demand. No demand for lira, they go dirt cheap. The result is that Turkey will either have to devalue, introduce capital controls or accept that, whatever their ‘Dear Leader’ thinks, foreigners will decide just what the Turkish lira is truly worth: and foreign investors are not impressed.

As an anonymous fund manager at a major asset management firm, complained: ‘Erdogan is fighting the extremists, he is fighting after the failed coup – now he is fighting the financial markets, and that is dangerous …. You can fight your domestic foes all you want; but when you are trying to take on the global financial market, that is a battle you can’t really win.’

And the EU? Watch this space. Of one thing we can be sure: the Commission, Berlin, Paris and Frankfurt will gang up in a darkened alley, ready to bludgeon, beat, bribe, browbeat and bully Italy to keep their precious euro together at all costs. Once again, the financial gloves are off. It’s going to get ugly. Just ask the Greeks.

Money really does make the world go round.

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John Hughes-Wilson

Author, broadcaster and military intelligence expert

Category Archives: Blog

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