Aurelia Butler

Rishi Sunak has launched a high-stakes gamble to seal a deal with Brussels over Northern Ireland, making a surprise visit to Belfast as Tory Eurosceptics warned he was going too far to accommodate the EU.The UK prime minister is seeking to win backing from Northern Irish parties for an outline deal with the EU to resolve the two-year old dispute over the region’s post-Brexit trade. Unionists, Conservatives and businesses complain the current arrangements have impeded business with the mainland. Sunak will hold talks in Belfast before heading to Munich on Saturday, where, on the margins of a security conference, he is expected to meet EU leaders to try to settle the damaging Brexit dispute.But he faces a backlash from Eurosceptic Tory MPs if — as expected — the deal on the so-called Northern Ireland protocol leaves EU judges with a role over the region.David Jones, deputy chair of the pro-Brexit Tory European Research Group, said Sunak had not discussed the putative agreement with his group, arguing that giving EU judges any jurisdiction in the UK “would not be acceptable to any other country in the world”.Jones added: “There would be general dissatisfaction with the leadership of the Conservative party, which would not bode well for the leadership.”Sunak acknowledges the risk that senior Eurosceptics — including former prime minister Boris Johnson — could turn on him over an agreement with the EU. He will decide whether to press ahead with the gambit over the weekend, knowing that a deal could enrage some Tory MPs but help to rebuild relations with the EU, Britain’s biggest trading partner.As expectations of a deal grow, Maroš Šefčovič, the European Commission’s Brexit negotiator, is set to meet James Cleverly, foreign secretary, over lunch in Brussels on Friday. Šefčovič will then brief ambassadors from the EU’s 27 member states at a private meeting called at short notice.Sunak hopes to present the deal to his cabinet on Tuesday. Any agreement would need to be backed by EU member nations, but there has been broad support for the changes proposed by the commission. Sunak will first try to sell the deal to the pro-UK Democratic Unionist party in Northern Ireland, which is boycotting the region’s assembly at Stormont in protest at the protocol, as well as meeting other political leaders and business figures.Jones said that unless a deal on the protocol persuades the DUP to return to the power-sharing executive, it will turn out to have been “a futile exercise”.

The British government has expressed confidence the agreement would win the support of the DUP, which has been less exercised than Tory Eurosceptics about the role of EU judges.The outline deal hammered out over months between the UK and the EU seeks to reduce the border frictions at Irish Sea ports on trade between Great Britain and Northern Ireland.It would do so by the creation of a “green lane” for goods intended to remain in Northern Ireland and a “red lane” for those destined for the Irish Republic and the rest of the EU single market, which would still be subject to checks.The EU insists it must have oversight of trade in Northern Ireland, which under the Johnson Brexit deal remained in the single market for goods when the rest of the UK left the bloc.The European Court of Justice, which enforces the rules of the single market, is expected to retain a role, even if both sides will insist most cases will be settled without reference to the justices in Luxembourg.Downing Street said talks with the EU were “ongoing” and that ministers were in contact with stakeholders “to ensure any solution fixes the practical problems on the ground, meets our overarching objectives, and safeguards Northern Ireland’s place in the UK’s internal market”.Political parties were due to meet Sunak on Friday morning with little information about the contents of any deal. “Truthfully, I think it’s still watertight,” said one business leader.“Northern Irish parties are already feeling aggrieved at being sidelined so if it’s a ‘take it or leave it’ message the prime minister is here to deliver, I wouldn’t be surprised if they kick mud and complexity into the mix and send him back with further problems,” said Katy Hayward, a professor at Queen’s College Belfast and an expert on Brexit.“The engagement really needs to happen jointly: UK, EU and all parties,” she said. More

Rioters incited by President Donald Trump breach the Capitol building in Washington on January 6 2021 © New York Times/Redux/eyevineWhen Karl Marx was forecasting revolution in the British Museum Reading Room in the 1860s, he relished the idea that capitalism was prone to recurrent crises that would ultimately bring down the state. What he did not anticipate was how the growth of democracy over the next century and a half would manage and mitigate those crises, developing a symbiotic relationship in which capitalism provided the prosperity while democracy set the rules and created a shared interest in the outcome.It is not too much of a stretch to see Martin Wolf, the FT’s chief economics commentator, as a modern Marx. He, too, is an economist forever looking for the bigger political and social picture, as well as for the crises that may shape it. But unlike Marx, he does so without relish. And in his fine new book, The Crisis of Democratic Capitalism, his principal concern is with democracy rather than capitalism.Or, rather, it is with the way in which, he fears, capitalism may be undermining, or even destroying, the democracy that for so long has saved it from itself. There is nothing new in worrying about democracy, nor about capitalism. But, to borrow a phrase from the 2011-12 euro sovereign debt crisis, Wolf’s fear is that this once productive pairing might now have trapped itself in a kind of doom loop.

The key moment for him is the attempted overthrow of US democratic process and laws on January 6 2021, by followers of would-be autocrat Donald Trump. But the key episode, both for what it revealed and what it caused, is the 2008 global financial crisis, in reality a crisis spawned in the democracies of America and Europe and then inflicted on the world.To Wolf, this calamity was not just some technical error in economic policy. It was, and is, the result of “the rise of rentier capitalism”, in which inequality in many of the liberal democracies has grown while too much of capitalism has come to consist of creating quasi-monopoly profits, or “rents”, and then using the resulting wealth to buy the political influence needed to defend them. One of Wolf’s strengths is his ability, as the Chinese say, to seek truth from facts. His data on the entrenchment of inequality is especially compelling, although he glosses over the point that his own data shows it has grown not just in the US, UK and Canada but also Japan and Germany. Compelling too, is his analysis of the rise of the financial sector to a disproportionate role in the economy and in politics, and the way those two trends distorted the policy response to the 2008 crash especially in the UK and US. 

So why hasn’t democracy once again righted its own ship? Why, in an era of technological disruption, haven’t the forces of innovation and competition eroded those excess profits and power? They could still do so, and much of the book is devoted to recommending ways in which enlightened political leaders and policymakers should help this to happen.Some of those recommendations will be familiar to readers of Wolf’s columns, especially his desire for a restoration of tough antitrust enforcement and for stricter financial regulation to create much bigger capital requirements (and lower profits) for banks. Others will surprise and provoke, such as his defence of trade unions — “public policy should support the creation of responsible worker organisations, within the law” — and of higher taxes to enable states to provide the “security, opportunity, prosperity and dignity” that are, he argues, the correct aims of economic policy.How to nurture and empower those enlightened political leaders, the successors to Franklin D Roosevelt who Wolf credits with saving democratic capitalism in the 1930s? That is a much harder question, for which there are no straightforward answers. Shining a bright light on the doom loop is an important start. The loop itself is not new: as he writes, Adam Smith warned two centuries ago of “the tendency of the powerful to rig the economic and political systems against the rest of society”. But each time it needs to be fought against.

This problem, while all-too obvious in the huge lobbying industry and unlimited campaign finance of the US, can be seen in the personage of Boris Johnson. The idea the former UK prime minister promoted of “levelling up” to remedy inequality was admirable as well as politically astute. A glance at his personal and political finances, dependent on billionaires and hedge funders, shows that he would never actually carry this out.Wolf is no dystopian shoulder-shrugger. He thinks democratic capitalism can be saved, and closes with an appeal for a renewed concept of citizenship to make this possible. But, as befits someone whose forebears suffered terribly from fascism, he feels a duty to be worried: “As I write these final paragraphs in the winter of 2022, I find myself doubting whether the US will still be a functioning democracy by the end of the decade.” The Crisis of Democratic Capitalism by Martin Wolf Allen Lane £30, 496 pages Bill Emmott is a former editor of The Economist, and author of ‘The Fate of the West’ (2017)Join our online book group on Facebook at FT Books Café More

The writer is a professor at Oxford university. Philip McCann, a professor at Manchester university, also contributed to this articleJoe Biden and Rishi Sunak are facing the same problem — the persistent divergence between regions that began during the Thatcher-Reagan era. But the US president and the British prime minister have chosen opposite economic and political strategies to address it.In the US, this trend now pits the large cities against the rest; in the UK, the booming South East has left other areas behind. By 2016, anger at the increasing divergence exploded into political mutiny, with despairing voters in neglected regions backing Donald Trump’s presidential campaign and the rupture of Brexit. The geography of discontent mapped the geography of voting in both countries. Yet, these regional divergences had been historically atypical and countries such as Germany, Korea and Japan remain largely free of them. The processes driving the apparently twin US and UK stories are in fact different. American democracy increasingly came under the influence of the super-rich. Whether right- or left-leaning, they were predominantly based in large coastal cities: their agendas ignored the tragedies in the interior “flyover” states. Biden has a genuine back-story as a representative of a left-behind region. His State of the Union address was a clear reset for Democrat priorities: “My economic plan is about investing in places and people that have been forgotten . . . a blue-collar blueprint to rebuild America.” The Inflation Reduction Act will generate the funds for investment — without austerity. Britain’s problem is different and less tractable: it is the Treasury. Combining the functions of public finance and economic policy but dominated by the annual Budget process, this all-powerful department has multiple cabinet supplicants. Local government must also beg for funds. Its elite recruits rush to cut spending to match revenues. Investment gets squeezed: without an economics ministry, there is no voice for the future.While viewing itself as the bastion of economic orthodoxy, the Treasury does not realise that this short-termism is exceptional. Its power is wholly atypical among advanced economies, and hopelessly inappropriate for today’s economic challenges. The UK is the most top-down and highly centralised large state in the industrialised world. Whitehall overrules and crushes local agency, energy, incentives and action, with leaders on the ground denied the powers or resources to solve proximate problems.OECD-wide evidence tells us that devolving power is essential for fostering national growth — particularly in economically weaker places. The Treasury’s micromanaging approach is doomed to fail. The UK is low on the OECD rankings for growth, civic engagement, quality of life and trust in central government. Yet the Treasury’s repeated response to failure has been tighter centralisation. In contrast, even the two other large unitary states, France and Japan, have been devolving for decades. That the UK today also has among the highest regional inequalities in the industrialised world is not coincidental. Local priorities have long been relegated: by 2016 voters reacted.In 2019, Boris Johnson promised “levelling up” but little has changed. Appointing Michael Gove as head of the new department invigorated the plan to renew left-behind regions — his 2022 White Paper even anticipated Biden’s themes and advocated greater local decision-making matched by public investment. The aim was to outwit the Treasury’s stranglehold and short-termism. The post-unification renewal of formerly East German states, led by Helmut Kohl, demonstrated that it could work. Once much poorer than everywhere in the UK, this region is now richer than anywhere in Britain except the South East.Sunak has repeatedly had the chance to assist Gove’s shift in direction. Instead, he pushed back. He assigned no money to the levelling up plans; due to Treasury scrutiny and delay, 95 per cent of the money Gove found elsewhere is unspent and will be clawed back. Moreover, as EU support for the UK’s poor regions is replaced, it has also been cut. Sunak’s government has now crossed the Rubicon, stripping Gove of authority to spend and rejecting any serious industrial policy.Biden and Sunak have chosen diametrically opposing paths: the US will prioritise redirecting growth to left-behind Americans while Sunak imposes further austerity on their long-abandoned British counterparts. It will not take long for us to discover which approach works. More

The European Central Bank should shift to smaller rate increases soon or risk stamping out growth, one of its executive board members said on Thursday. Fabio Panetta urged his fellow rate-setters to move in “small steps” after raising its critical policy rate by half a point at its past two meetings, saying falling energy prices could lead to a “rapid” decline in eurozone inflation this year to levels close to the central bank’s target of 2 per cent. The ECB has raised rates by 3 percentage points since July 2022, and has signalled that it will increase borrowing costs by another half point in March and by an unspecified amount in May. Its benchmark deposit rate is now 2.5 per cent. However the governing council’s doves are increasingly concerned that the pace of rate rises risks wiping out growth and exacerbating risks to the stability of the financial system. They are pushing for the central bank to switch to smaller rate rises — or pause tightening altogether — in May and beyond. “To move in small steps is not to move less,” Panetta told an event in London, saying the decline in energy prices — if maintained — would mean inflation falling to as low as 3 per cent later this year. “We face so much uncertainty in both directions, I would consider it unwise to move very fast.”The comments by Panetta, one of the most dovish members of the ECB board, indicate there are widening divisions among its rate-setters over how much further it should raise borrowing costs given the recent falls in inflation.Inflation has slipped from a high of 10.6 per cent in the autumn to 8.5 per cent in January. However, core inflation remains at record high levels of 5.2 per cent. Some rate-setters, such as Spain’s central bank governor Pablo Hernández de Cos, think the core rate is also likely to fall in the coming months. In a speech earlier this week, he said the ECB had reached “a crossroads” from which point the downward pressure from falling gas and electricity prices will more than offset any residual upward pressure that is still to feed through from last year’s energy shock.Panetta said the ECB needed to move in a “non-mechanistic way” as he warned that “what we do not want is to drive like crazy at night with our headlights turned off”. Investors are pricing in a further rise in the ECB deposit rate to a peak of 3.5 per cent. “I would agree with the flock of doves at the ECB that if it raises rates above 3.5 per cent then it would almost guarantee the economy slides into a deep recession without almost any benefit in terms of fighting inflation,” said Daleep Singh, chief economist at US investor PGIM Fixed Income.

However, some hawkish members of its rate-setting governing council have urged it to keep increasing borrowing costs at a pace of half a point for several more months. Germany’s central bank president Joachim Nagel said in a speech last week that it would be a “cardinal sin” to stop raising rates too early because there was a “great danger” of inflation staying too high.Other central banks, including the US Federal Reserve, have slowed the pace of rate rises to a quarter point on signs that inflationary pressures are dissipating. “The cost of going too high could be greater in the euro area because of the way the economy is functioning,” Panetta said, pointing out that the bloc’s economy was less dynamic than the US. If the Fed raised rates too high it could “easily adjust” without causing too much damage to growth because of the greater strength of its underlying economy, he said. More

(Reuters) – Low-income Americans will soon receive less in food assistance or completely lose their eligibility for the benefits, as the federal government ends policies adopted at the beginning of the COVID-19 pandemic that kept millions from going hungry at a time of lockdowns and rising unemployment.Anti-hunger advocates warned that the looming drop in aid could undo progress toward a Biden administration goal to end U.S. hunger by 2030. The Republican-controlled U.S. House of Representatives may also pursue further cuts to food assistance to shrink the U.S. deficit.”It’s going to put millions of households at risk of hunger,” said Eric Mitchell, president of the Alliance to End Hunger.The changes mean cuts of about $82 a month beginning in March for recipients of Supplemental Nutrition Assistance Program (SNAP) benefits, said Ellen Vollinger of the Food Research & Action Center, an anti-hunger group. The average SNAP benefit will be about $157 after the reduction.Since Congress passed the Families First Coronavirus Response Act in March 2020, states have been able to allocate the maximum allowable benefits to SNAP recipients, instead of applying deductions tied to income and other factors. Initially, those “emergency allotments” were linked to the pandemic public health emergency. But in December’s spending bill fight, Congress negotiated a compromise to end them in February in exchange for a new summer food program for children. President Joe Biden’s administration has also said it will lift the coronavirus public health emergency in May. This will end other changes that expanded access to SNAP, like a suspension of the program’s three-month time limit for adults without children and exemptions for some college students.In recent months, the additional benefits tied to the pandemic response have come to about $3 billion a month, according to the Center on Budget and Policy Priorities (CBPP).Those higher benefits kept the percentage of Americans experiencing food insecurity steady at 10% through 2021, even as the first two years of the pandemic drove up unemployment, said Dottie Rosenbaum, senior fellow and director of federal SNAP policy at CBPP.Meanwhile, food insufficiency – a more severe form of food insecurity wherein households sometimes or often do not have enough to eat – dropped by about 9%, according to a study by Northwestern (NASDAQ:NWE) University’s Institute for Policy Research. A separate study from the Urban Institute said the benefits kept 4.2 million people out of poverty. Anti-hunger advocates worry the looming reduction in aid could reverse those gains. In states where expanded benefits have already ended, 29% of SNAP recipients visited food pantries in December, compared to 22% in states that still had the benefits, according to data collected by Propel, a technology company that makes financial products for low-income people.’WAY TOO LOW’Debate over U.S. spending on food assistance is likely to heat up in the coming months as lawmakers negotiate a new farm bill, a legislative package passed every five years that funds nutrition, commodity, and conservation programs. More than 76% of the current farm bill’s $428 billion price tag went to food assistance programs that serve 41 million people annually. The bill expires on Sept. 30. Democrats generally support expanding benefits, while Republicans typically oppose expansion. “The SNAP benefit was already way too low, even before the pandemic,” Rep. Jim McGovern of Massachusetts, a Democrat on the House Agriculture Committee, told Reuters in an email. “We need to seriously boost benefit levels to reflect the reality of food costs today,” he said. Food prices are up 10% since last year, according to the Bureau of Labor Statistics.House Republicans have indicated they might review and tighten SNAP work requirements as part of farm bill negotiations. The House Budget Committee has also floated cuts to SNAP as a means of reducing spending in the ongoing debt limit fight. More