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Away from the distractions of cakes and parties, we are closer to a major war in Europe than at any time since 1945. If this does happen, and we should all pray it does not, then, as in 1914, it will be the result of miscalculation as much as design.
The issue of course is Ukraine. What, though, is going on? What is at stake? And how did the West find itself in such an invidious position, facing a choice between humiliation by a hostile power and a war the alliance is not prepared to fight? I discussed this in an explainer video which you can watch on the IEA YouTube Channel here.
Ukraine is not a vital strategic interest for NATO but is for Russia - for any Russian government, for reasons of geography and history. That means that in this standoff much more is at stake for the Russians than the West, which means Vladimir Putin is prepared to go further and risk more. The West is not going to use military force because it is divided, mainly because several key countries, above all Germany, are dependent on Russian gas. IEA Analyst Andy Mayer discussed this in an article for CapX, and it was a topic of debate in this week's Live with Littlewood, which you can watch here.
Putin has immediate goals and longer term ones. His immediate goal is to rule out any prospect of Ukraine joining NATO (because he and most Russians see that as a threat to a vital interest – the equivalent would be Cuba joining the Warsaw Pact). He also wants constitutional reform in Ukraine to turn it into a federal state, with greater autonomy for the largely Russian-speaking provinces in the East, including the two currently controlled by rebels. He would like Ukraine to become a client, like Belarus, but would settle for its being like Cold War Finland, a neutral buffer state. Putin would prefer to achieve these goals without the use of force but is prepared to use force if needed. He does not want to absorb Ukraine or divide it – he would rather the Russian-speaking provinces are part of a federal Ukraine so that pro-Russian forces in that country are more weighty.
Beyond that, he has wider geostrategic goals and is using Ukraine to advance them. He wants to weaken Western democracy and to divide the US and Europe, taking advantage of the American pivot towards a focus on Asia. He is also looking to threaten and neutralise Poland, and the Scandinavian and Baltic states. These wider goals must be resisted as strongly as possible. The point is to separate these from the Ukraine crisis, where a compromise is possible.
Some more facts: there is no prospect of Ukraine (or Georgia) becoming a NATO member at any point in the near to medium term future; this can be made clear and explicit by a statement by the US and NATO without conceding a veto on membership to Russia; Ukraine is a deeply divided society with a geographical aspect to that division, as its electoral history shows (West and Centre vs East and South). A federal Ukraine therefore makes sense. There is an agreed deal on the table (the Minsk II accord) that would resolve the conflict in the Donbass but it is being held up by the Ukrainian government.
If an agreement is arrived at (by forcing the Ukraine government to reform their constitution), and armed conflict averted, what then? Western Europe needs to develop its own defense capacity and not rely on the Americans. It needs to work towards energy independence and break the dependency on Russia. Longer term, there should be civil society activism (not USAID or CIA covert action) to work with the liberal reformist forces in Ukraine, Belarus, and Russia itself with the aim of peacefully overthrowing the authoritarian kleptocracies in power in at least two of them.
Dr Steve Davies
Head of Education, Institute of Economic Affairs
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TAXING TIMES
Pressure is mounting on Chancellor Rishi Sunak to cancel – or at least postpone – the hike in National Insurance Contributions (NICs) planned for April. This comes as Office for National Statistics data published this week showed the government borrowed £13bn less between April and December of last year than the Office for Budget Responsibility had predicted.
IEA Economics Fellow Julian Jessop argued this provides the fiscal head room to abandon the tax rise. He said: "The economy has recovered more quickly than expected, creating a ‘growth dividend’ for the Treasury". Julian suggested the government could use the growth dividend to ease the NHS backlog, rather than adding even more to the tax burden by raising NICs now.
Julian's comments were reported across the media including in The Times, Sun, Daily Mail, Guardian. He also appeared on Times Radio to discuss the issue.
IEA Senior Advisor to the Director General Sam Collins appeared on BBC Radio 5 Live and BBC Birmingham to discuss the planned tax hike.
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iN THE MEDIA
All talk?... In a speech in Bury last week, Shadow Chancellor Rachel Reeves MP set out her ‘five point plan for a stronger economy', which included tax cuts and a pro-growth agenda.
In her column for The Spectator, IEA Director of Communications Annabel Denham argued that despite encouraging rhetoric from the opposition, Labour are not yet ready to become the 'party of business' as they continue to align themselves with Boris Johnson's high tax big spend agenda.
Let him eat cake... IEA Director General Mark Littlewood appeared on GB News to discuss the ongoing investigation into events held at the Number 10 while the country was living under lockdown restrictions.
Mark warned that the government has become paralysed by the 'Partygate' scandal and risks neglecting pressing issues such as the cost of living crisis.
Zero-Covid chaos... While the world opens up, conditions are only getting harsher in New Zealand as Prime Minister Jacinda Ardern imposed new restrictions, including a 24-day isolation period for household contacts of positive cases.
Writing for The Telegraph, IEA Head of Public Policy Matthew Lesh argued that Ardern's 'Zero Covid charade' is falling apart, and that her inhumane approach to dealing with the pandemic defies evidence showing the virus is now endemic.
Sound money... Last week, the Office for National Statistics (ONS) recorded that inflation hit a 30-year high in December 2021, reaching 5.4 per cent.
In an op-ed for City AM, IEA Head of Lifestyle Economics Christopher Snowdon doubled down on the need for policy makers to address the cause of rising inflation rather than the symptoms. He criticised the argument that rising prices are down to monopolies 'price gouging', as some in the US are claiming. Instead, Christopher argued monetary policy pursued over the pandemic is to blame for the cost of living squeeze.
Julian Jessop also wrote for The Spectator on the ONS's decision to change the way they measure inflation. Read here.
More harm than good?... This week, The Digital, Culture, Media and Sport Committee found that the government’s Draft Online Safety Bill is "not clear nor robust" enough to tackle certain types of harmful content.
Commenting on the findings, Matthew noted that the Committee is right to highlight the ambiguity of the draft bill, but that the scope of the legislation is also far too wide-reaching. He warned that attempts to clamp down on 'legal but harmful' content will allow the government to make decisions on morality, and represent a dangerous threat to freedom of speech. His comments were featured in City AM,
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LIVE WITH LITTLEWOOD
Live with Littlewood was back this week with another stellar line-up guests: political commentator Alex Deane; Dr Alan Mendoza, Executive Director of the Henry Jackson Society; John Rentoul, Chief Political Commentator at The Independent; and IEA Senior Research Fellow Dr Jamie Whyte.
The panel analysed the Russia-Ukraine crisis, questioning the durability of international institutions like the UN and NATO to deal with foreign policy crises in the 21st century. Alex Deane and John Rentoul disagreed on how best to stimulate economic growth, while Jamie Whyte and Alan Mendoza discussed the accuracy of Covid modelling – and debated how to hold 'experts' to account.
You can watch the full episode here.
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ON THE IEA BLOG
A freer world...? In a debate column, Head of Lifestyle Economics Christopher Snowdon went head-to-head with Director of the Initiative For African Trade and Prosperity Alexander Hammond on whether classical liberals should be optimistic about the 2020s.
Alex argued that free trade and strong institutions will pull millions out of poverty in the developing world, while developed economies will continue to innovate and grow. Christopher, however, foresees the decade being hijacked by ruinous economic policies and growing anti-capitalist sentiment. Read the full debate here.
Show us your ID... In this week's episode of Markets & Morality, the panel discussed whether introducing voter ID would be an affront to civil liberties. Director of Epicenter Adam Bartha was joined by Mark Johnson, the Legal and Policy Officer of Big Brother Watch, and IEA Head of Regulatory Affairs Victoria Hewson to debate the topic. Watch here.
Let the market decide... IEA Trustee Bruno Prior discussed the market discovery process, which he argues is a far more efficient way to innovate and produce goods than bureaucrats who 'pick winners' at the cost of taxpayers. Read the full blog here.
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IEA PATREON
Thank you to all of you who have already signed up to become an IEA Online Patron. Becoming a Patron grants you VIP access to our latest videos, priority invites to our virtual events, and the opportunity to engage directly with IEA Director General Mark Littlewood and the IEA team. For just a small donation you can get all these benefits and more.
To visit the page and find out more about the IEA’s Patreon, follow the link here or watch our trailer here.
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IEA DIGITAL
IEA Podcast... IEA Communications and Public Affairs Officer Kieran Neild-Ali spoke to Anna Powell-Smith about how the state can better utilise data. They focused on the Subsidy Control Bill which, as Anna argues, fails to disclose vital information needed for transparency and competition. Listen here.
Anna is a public-interest technologist and the director of the Centre for Public Data. She was also the founding technical director at the University of Oxford's DataLab, which uses data to help doctors make better decisions.
You can now watch Aurelien Portuese's lecture from the joint IEA-Information Technology and Innovation Foundation conference on the competition and regulation of digital markets on the IEA YouTube channel.
Aurelien Portuese explored some key differences between Hayek’s and Schumpeter’s views on competition, and the important nexus between them. He is director of The Schumpeter Project on Competition Policy. Watch here.
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WE'RE HIRING!
Head of Public Affairs... The IEA Communications team is looking for a new Head of Public Affairs, with responsibility for leading on all civil society and public affairs outreach. Deadline for applications is 5pm, Thursday 10 February. Find out more here.
Editorial Internship... The team is also looking to hire an intern to support our editorial output. This is a full-time internship, with expenses paid.
The primary responsibility will be to write, edit and commission articles, draft newsletters, and promote content across all IEA social media channels. You can find out more here.
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CALLING ALL STUDENTS!
We have a several opportunities coming up for students, including exam revision courses, internship programmes, and summer schools.
A-Level / IB Economics Exam Revision Course... For the first time, we will be running an exam revision course from Tuesday 12 – Thursday 14 April.
Our week-long Internship Programme will also run as normal from Monday 4 – Friday 8 April. Applications for both programmes close on February 4 2022.
Residential Summer School... In partnership with the Institute of International Monetary Research, the Vinson Centre, and the Initiative for African Free Trade and Prosperity, the IEA will host a residential summer school.
This programme is open to undergraduate students and will take place from 27 June to 8 July. It will have four streams: general economics, monetary theory, economic history, and trade and globalisation.
Sixth Form Future Thought Leaders’ Programme... You can also apply to attend a week-long programme for sixth formers which will take place from Monday 25 – Friday 29 July. The week will include lectures, discussions, and debates with expert economists.
Summer School Internship... Last but not least, our summer school internship will start from Tuesday 2 August – Friday 19 August. Interns will participate in lectures, seminars, debates, discussions, as well as workshops on professional and career development.
You can find out more about all of our internship programmes here, or email IEA Education, Outreach and Programmes Manager Brittany Davis at [email protected] with any questions.
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MONEY WEBINAR SERIES
You can now register to attend a new series of online webinars hosted by the Institute of International Monetary Research.
On Wednesday 9 February, economist Mark Skousen will discuss the implications of using Gross Output for the making of monetary decisions. Register here.
World-leading monetary analyst Professor Tim Congdon will hold a webinar on banking in a free society on 23 February. Register here.
Professor David Llewellyn will explore whether the regulation pendulum has swung too far in the banking industry on 16th March. Register to watch here.
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