US Presidential Elections: Why they Matter

With less than 2 weeks to go before the next Presidential elections in the United States, I have to put in my tuppence worth, even if in so doing, it only tips one or two wavering voters towards making a better choice than they would have done beforehand. For it strikes me that seldom has the outcome of a US presidential election been more important, both for America, as well as for the world over which it has so much influence (whether it, or the rest of us, wants that or not!).

For anyone with any appreciation of international issues and the importance that the United States has in the conduct of global affairs, the previous 8 years under George Bush and the Republicans has been an unmitigated disaster on every front conceivable. Voting for such a regime the first time around in 2000 was perhaps excusable (although the outcome of that election was at best, dubious), but to repeat the mistake again in 2004 was a damning indictment on either the US electoral system (again), or the American electorate, or probably both. The message that this re-election sent out to the rest of the world should have shamed Americans! The Bush regime’s behaviour has most certainly damaged the reputation of America, American values and those who share them, to such an extent that it is going to take at least a generation of greatly improved behaviour to undo all the damage that this regime has done. (I do not wish this to sound lecturing: I am just very concerned!)

The naivety and incompetence of the Bush regime has been staggering, with the debacle in Iraq crowning them all! In all my travels around the globe, I have almost never come across anyone (Westerner or local) who has had a good thing to say about the conduct of the American government, and not just in Iraq, but in Afghanistan, its approach to the UN, the drugs industry, international trade and aid, global warming, international relations, and now of course, to the economic mess that it leaves behind.

As a fellow Westerner, I share many of the same values that are (apparently) espoused by the American way of life. But I am ashamed and embarrassed to be associated with such a regime. In my travels, I take every opportunity to explain to non-Westerners that many of us do not support the decisions and conduct of this current regime and its lackeys (including Tony Blair’s UK government and John Howard’s Australian government); and that although we claim to live in democratic societies, many of us feel emancipated and excluded from many of the decisions that governments make, apparently in our name. Understandably, this is often a difficult challenge, given the manner in which many Western government lecture others to improve their governance. But I am constantly surprised and grateful at the level of patience and forgiveness that I have experienced from those to whom it is us who should be apologising!

American voters can of course, claim that the role of their President is to defend the interests of their country and this is indeed the case. Likewise, what the rest of the world thinks of them may not appear to be any of their concern. But I hope that the immense damage inflicted on America and its way of life (and values) by the current US government has made Americans better understand that like it or not, the views that the rest of the world has of their country and its ways of life DO matter to them, even if they never leave Hicksville in the Mid-West. We live in an increasingly integrated (and over-crowded) planet, in large part driven by the forces of globalisation that were unleashed by the American way. Whether we like it or not (and evidently, many do not like it), this means that we have to learn to get on with others whose values, cultures, customs and ways or life are different from our own. If not, then what is the alternative? Do we attempt to crush their ways of life, eradicate their customs or bomb them into submission? Evidently this seems to have been uppermost in many of the decisions made by the current Bush regime! Has not experience taught us that when people feel they are being coerced into something with which they do not agree, then sooner or later they will reject this?And that the more forcefully we try to suppress their freedom to express and be themselves, the more violently will be the reaction?

Ultimately, if we wish to modify the behaviour of others, then quiet diplomacy, gentle encouragement and humility will always be more effective than intransigence and blind dogmatic force. Unfortunately, this alternative approach takes longer to achieve and grabs fewer headlines, but I see no realistic alternative in the long term. As an example, if instead of spending the gigantic sums of money on the war in Iraq, the US government had spent only a tiny fraction as much on providing instead safe drinking water for all Middle Eastern countries, how much more effective would that have been in propagating America’s standing in the region? How much more effective would that have been in spreading peace and goodwill towards the American way of life than the current approach, and undermine those who oppose it? Of course, this is not without its risks, but neither in the current approach.

Furthermore, the forces of globalisation are likely to hasten the rebalancing of geopolitical power from the affluent but relatively under-populated Western countries towards the far more numerous ‘developing’ countries. The current economic malaise spreading around the globe may well speed up this process. Few commentators doubt that in 50 – 100 years time, the USA and other West economies will no longer be the predominant economic (and hence political) powers in the world. Instead, it is probable that they will either have to share this with other countries such as China, India, Brazil and Russia, or worse (from the Western point of view), they will have relinquished their predominance altogether. In such an eventuality, Western countries will be less able to assert their values on others. In fact, they may be fighting a losing battle against superior but more unpalatable value systems. Unfortunately, given the attitudes that we currently adopt towards others, we will have little moral authority or goodwill to resist exactly the same approach being taken towards us. When we are no longer in the driving seat, this will not be pleasant!

These ideas are directly relevant to the presidential choices facing American voters in the next few weeks (and in the future too). For anyone who agrees with any of the above, the choice of whom to vote for should be crystal clear! The role of the Christian fundamentalists in the current Bush regime should be of as much concern as are Islamic (or Jewish, Hindu or other) fundamentalists are to any rational minded, free-thinking liberal. (And why I must ask, is being liberal considered to be a bad thing these days? Would we rather be governed by intransigent, narrow minded bigots?) The judgement of anyone who believes in Creationism in the face of all the evidence to the contrary should be of real concern! Likewise, anyone who advocates the continuing use of overwhelming military force as the way to solve multicultural, multiethnic issues should not be leading anything more than a small dog! These attitudes are not conducive to the open-minded tolerance or flexibility that leaders need in today’s integrated world.

Unfortunately, no individual can control the global issues that face us today. But we desperately need a leader for the world’s most powerful nation that can envisage an international future, and furthermore, communicate it effectively. Barack Obama is clearly far more qualified for both of these vital roles than is the Republican party. (I am absolutely amazed that after 8 years of Bush and the Republicans, this election has even been a contest. Are there that many voters in America who are so ignorant, bigoted or stupid?!) So, I (like most of the rest of the world), firmly nail my colours to the Obama mast!

I do however, also have a word of caution: the expectations placed on Obama after he is (hopefully) elected will be wholly unrealistic. The damage done over the last 8 years will take a long time and a lot of hard work to rectify. The important thing for the next president will be to set out a positive vision for the future (rather than the negative, fear based threatening with which we have alas, become all too familiar), inclusive for all (including the globally disadvantaged); and to communicate that effectively to all. Obama can do this, but it will be up to the rest of us to help make it happen. I wish him much luck and good fortune: he’ll be needing it!

Where are Today’s Leaders?

Wherever are our leaders today? Whether in the field of politics and business, why are so many of these “leaders” no more than managers, tinkering with the life’s minutiae whilst avoiding issues of substance? Is it due to the processes by which they are appointed or do those who follow them bear some of the responsibility for what is wrong?

Leadership isn’t easy to define, but it is certainly not the same as management. Management helps us to climb that ladder of success more efficiently: leadership ensures that it is leaning against the right wall! Leadership involves having clear values and principles, a positive vision for something better in the future, and the ability to communicate this to those who will follow, inspiring and motivating them to collectively work towards something better. It means recognising that there are at least two sides to any issue (or it isn’t an issue!), but it also means being willing to make what are often tough decisions, and having the courage to stand by them (i.e. taking responsibility). Great leaders earn respect and it is given willingly, for it is not respect if demanded or given reluctantly.

Inadequate leadership is endemic throughout both the commercial and political worlds, but its absence is especially evident where it is needed most. The troubles that persist in all of the trouble spots around the globe, such as in the Middle East, the Balkans, Cyprus or the Caucasus, are inflamed and perpetuated by “leaders” who can not transcend the immediate, selfish needs of their constituencies. They refuse to recognise that ‘it takes two to tango’. As strongly as they feel aggrieved by the injustice of their cause, so the other side holds the same strength of conviction for their opposing views and positions. Bellicose posturing many play well to their own constituencies, but it is immature, short-term and does nothing but damage to any hope for a brighter, better future for all concerned. It undermines the development of tolerance in each community, and hence to any real hope for forgiveness and worthwhile progress towards something better.

The recent events in Georgia are a sad example of this. There has been no mature leadership shown by any of those concerned: the Georgian ‘leadership’ should not have initiated the events, the Russians should not have responded as they did, and the Western ‘leaders’ have failed to acknowledge their hypocrisy, or make any serious attempt to better understand the view and feelings of their Russian ‘opponents’. Everyone concerned is worse off than before and unless mature leaders materialises miraculously, bigger problems loom for all concerned in the future.

But this is only an acute example of poor leadership that is endemic around the world. In many developing countries what they need most are benevolent dictators (if that is possible!), people who really do have the best interests of their communities uppermost: leaders in whom the populations can trust to lead them out of the crises they endure each day. Even in richer countries, too many governments base their legitimacy on the fear of something worse if they are not re-elected (such as terrorism, mass migration or economic malaise), rather than on anything positive. This is no way to lead anything: it focuses on looking backwards in fear, rather than forwards in hope!

In our ever crowded and integrated world, we need to learn to tolerate others who (due to circumstances that are inevitably different to our own), have views and ways of life that are different to our own. Otherwise, what are we to do? Massacre them? Ethnically ‘cleanse’ them? Imprison or exclude them? A wise leader understands that these approaches can never work in the longer term. Surely by now history has given us enough examples to teach us this lesson?

Worthy leaders recognise that however unpalatable it may be, other views, values and interests DO exist, and they will reach out in an attempt to better understand and communicate with others, rather than raise the psychological barriers. They are prepared to take the risk that their attempts may be shunned and ridiculed. They aspire for a brighter future and are willing to place their reputations on the line, in their pursuit for this. They have an inherently positive, optimistic view of the future, rather than a negative, fear-laden one, as seems to prevail today. And they believe in the inherent integrity and goodness of most fellow human beings. Travel to other countries and you will soon realise that underneath the veneer of cultural differences, most people are decent, honest and incredibly willing to help if we ask them. We all seek and value similar things: peace, food, shelter, families, education for our children, work, health, security and care in our old age. Once we recognise and acknowledge that we are more similar than different, we can better respect others’ differences, and even start to learn from these differences.

Some may scoff at these ideals, claiming that they are not realistic or feasible in practice. Perhaps so, but admirable recent examples of real, positive leadership do exist around the world today. Nelson Mandela is the shining example, one that any civilised individual can but admire, regardless of their own background. But so too must one applaud the leaders from Northern Ireland who took the risk to reach out for a better future. Within local communities around the world where there previously existed civil strife, leaders exist who are putting the past behind them, forgiving and looking to a better future together. That is leadership at the local level, and so surely it is only reasonable to expect the same from more ‘senior’ leaders around the globe?

Idealistic or not, do we wish to conduct our affairs on the basis that we do not trust nor respect others, rather than recognise the inherent goodness that exists in most of us? Is this the right approach for us to achieve a better common future for our shrinking, crowded planet? And is this the sort of attitude that we should seek in our leaders? Perhaps we have been appointing leaders for the wrong reasons and in the wrong way, for leaders only exist where others are willing to follow.

Most of us have leadership qualities within us, ready to be nurtured and blossom, perhaps in specific areas or at specific times. Nevertheless, in many situations most of us will remain followers (the many) rather than leaders (the few). However, followers have a responsibility to ensure that their leaders possess the characteristics that they seek. There are (at least) two shortcomings (each of which deserves a whole article in itself):

• We expect too much of our leaders and our governments. Increasingly, we expect them to fix all our problems, protect us from any eventuality (risk aversion) and all for as little of our financial input and commitment as possible. We are too ready to abrogate our personal responsibilities to politicians and governments, and then complain when in attempting to balance up the conflicting interests of everyone in our communities, our own interests are not protected. Unfortunately, our present crop of ‘leaders’ are only too happy to accept greater control over our lives (it offers them greater power), rather than encouraging us to take greater responsibility for our own futures.
• I fear that in our Western ‘democracies’ the mechanisms we have adopted towards selecting our leaders is fundamentally flawed. Although someone may enter into the fray with firm principles and a vision for something better, in order to rise through the system to a point where they are able to exercise these principles and pursue their vision, they must compromise so much that they are no longer sure what they stand for, except to retain the power that they have worked so hard and long to achieve. Alas, this seems to apply in the commercial world as well as the political.

As voters, we are not blameless, for every politician knows that we will not support any candidate who admits to not having an answer to all our problems, or admits that we must compromise and reach out to our apparent foe, or that we need to take more responsibility for our own lives.

Once again, psychology plays an essential role in this debate about leadership, for the qualities it needs are based on appropriate attitudes. These are entirely within our own control and therefore our own responsibility. Leaders must possess personal maturity and integrity. They must feel confident in themselves and have the courage of their convictions. They are willing to take responsibility for their own actions and decisions. Great leaders do not need to lean on the artificial props of their office or position: the Dalai Lama has no formal power, nor does Nelson Mandela and nor did Ghandi, but because of their psychological maturity and wisdom, when they speak, others listen and act. How precious are such leaders, how valuable, but alas, how rare too. As followers however, we must look for these attributes in our future leaders.

What to do About the UK Housing Market

With the inevitable downturn in the UK housing market over the last year or so, the government is being placed under lots of pressure to “do something” to help all those people who are suffering as a result. For example, at a recent “listening” business breakfast in Gatwick, UK, various business representatives (especially, understandably, from the housing sector), were putting a lot of pressure on the politicians present, to ‘do something’ to help the housing market. So far, (besides making the housing market worse by making non-committal noises), the government has not committed any public money to ‘support’ or ‘stabilise’ this market. (I won’t go into the ‘Northern Rock’ or banking crisis here!) However, I sincerely hope it will not interfere in it, as I see this as throwing large amounts of good taxpayer money away.

For someone who lived outside of the UK from 1996 – late 2007, (and indeed for anyone with any ounce of objectivity) it was clear that the property market in the UK (and in many other countries) was a bubble waiting to burst. Prices were inflating way beyond economic reality, and it should not come as any surprise to anyone that sooner or later this bubble (like all others) would burst. Unfortunately, having grown for so long, the resulting ‘pop’ is going to be that much bigger. However, now that the day of reckoning has finally arrived, there are a couple of questions we should be asking ourselves:

1. What should be done about the fallout from this collapse? And
2. How do we avoid similar situations occurring again?

There is I believe, an important role for governments to play in both these areas, but perhaps not in the expected ways.

The worst thing that the government could now do is to throw taxpayer money into this volatile market, where huge fortunes can disappear as quickly as the English summer sun. Any such actions merely prolong the agony as the market adjusts itself back to reality. And until it does so, the whole economy will continue to suffer, (as I hope will become obvious below).

If the government is to help, then their (our) limited resources would be better focussed on helping those who are in dire economic trouble. This may include efforts to help people remain in their over-priced houses, if the alternative is eviction, destitution and the social and psychological angst that comes with these dire circumstances. But the onus must be on those whom require assistance to demonstrate their predicament, and could for example, be provided in return for part ownership of their properties. This would be a more focused use of limited public resources compared to blanket measures such as a suspension of stamp duty which is poorly targeted, helping the well off even more than those who really need help.

The same must be said for tax breaks for mortgage holders, and indeed to cries that the Bank of England should keep interest rates low because of the impact higher rates would have on the property market. Of course no one wants to see undue suffering, but the underlying problem has been the way that the housing market bubble has so severely distorted the whole UK economy. Such high property prices filter through into higher costs throughout the economy, making the country more uncompetitive and forcing everyone to pour more and more effort, time and money into a place in which to live. Property prices may not appear in official inflation statistics, but their steep rises still contribute to higher costs throughout the economy, as anyone living with these higher prices in the UK (and other countries) will confirm.

Such a focus on property is not healthy for any economy. Aside from increasing prices, it also diverts a great deal of the country’s wealth into assets that do not in themselves create any wealth; unlike a business, which could create significant wealth in its future. And yet, absurdly, the tax system gives tax-free gains for any increase in non-wealth producing property, but taxes other wealth creating investments. Consequently, the current tax system encourages anyone with spare funds to ‘invest’ in their property (for tax-free gains), rather than in other investments that are more desirable and advantageous to the country’s economic future. And this is particularly so when the property market is growing so strongly, thereby exacerbating the inflationary bubble. The policy of governments (from both parties) of not taxing profits made on people’s primary place of residence has therefore had unfortunate and undesirable consequences. It distorts the entire economy in an undesirable way and particularly benefits those who are already better off, (the poorest in society can not afford to get on the property ladder, and do not receive any tax benefit from renting their accommodation).

This brings up the issue of how to avoid similar problems in the future. Tax policies should be neutral, raising necessary revenue for government without distorting the economy in undesirable ways; (although taxing environmentally damaging activities to modify people’s behaviour is probably ok, as this arguably distorts the economy in desirable ways).

I am the last person to advocate higher taxes, but I do want to see an equitable and neutral taxation system. Contrary to popular opinion, governments really are non-profit making organisations! If they raise taxes in one area, then they can reduce taxes in others. It is the amount of total tax that matters, as well as how it impacts on the productive parts of the economy, (and it is only through the success of the productive parts of the economy that we can pay for anything).

Despite this aversion to higher taxes overall, I strongly advocate imposing capital gains tax (CGT) on any capital gain (profit) made on people’s primary place of residence, thereby treating it on an equal basis to all other ‘investments’ we make. When I suggested this at the forum above, it was interesting to observe the knee-jerk reaction from those present, all of whom rejected this idea outright. But if you think about this, it has a number of distinct advantages over the present approach:

• It does not distort the economy, as there is no tax advantage to ‘investing’ funds into one’s home, rather than in a wealth creating business opportunity.
• In a rising property market this CGT will discourage the sort of silly speculation we have seen recently in the UK. In a falling market, the losses can be written off against other income, mitigating personal losses. This is likely to dampen swings in the market.
• In a rising property market, the government can benefit from the sometimes substantial gains that the well off are making (currently without paying any tax), allowing it to redistribute these gains to the worse off who can not make such tax-free gains.

People may claim that imposing CGT on homes will make property even more expensive than is currently the case. This is not so! Firstly, it would only be the gain in price that would be taxed, not on the whole price paid. If there is no price inflation, then no tax would be paid (allowing for personal allowances, as is currently the case elsewhere). Secondly, unlike the present system, there would be no advantage for such price increases to occur. With such high property prices, the differences in the cost of a small house compared to a larger one increases in absolute terms. (Ten years ago, moving from an apartment into a 3 bedroom house might have cost an extra £40,000: now that difference might be more like £200,000.) Buyers still have to pay this extra amount: hence the huge mortgages people need now. The only winners in such times are those down-sizing: everyone else loses out. What we should all wish to avoid is rapidly increasing prices of anything in our economy (it’s still inflationary!), especially on something as important as property and people’s homes.

As non-profit institutions, it is important to recognise that where governments tax with one hand, they give back with the other, and any revenues raised from this proposed CGT would result in tax reductions elsewhere. For one, I would advocate the removal of all transaction taxes (Stamp Duty) on property. This would better lubricate the market: moving house is expensive and stressful enough without this added tax, that hammers the poor buyer, rather than the wealthy seller (as a CGT would). In a mobile and ever changing society, we want to make it as easy as possible for people to move if necessary, rather than discouraging them as the current tax system does. (This is exacerbated by the current tax advantage of owning rather than renting one’s home.)

In the current political environment, such a proposal would probably be seen as yet another of this government’s “stealth taxes” and would therefore be very politically unpopular. This is understandable, but as I hope is evident from the points above, unfounded. The benefits from such a move need to be more widely understood (and I am here attempting to play my part in that!), but it also requires some political guts and leadership, which alas, is too often lacking! However, to mitigate the political impact of such a measure, it could be introduced progressively, through for example, slowing increasing the CGT on primary property over a number of years (with corresponding tax reductions elsewhere), until the rate equates with that imposed in other areas of the economy.

Furthermore, now is the ideal time to introduce such a tax: with property prices stable or falling, few people would pay it anyway, making it’s introduction considerably easier.

Look at it objectively (as we always should for such mattes) and you know it makes sense! Advocate it to your piers, press and politicians!