Scots Independence and UK Leaving EU – Both a Mistake

As Published in the Daily Mail, June 29 2014

Scottish Independence a MistakeIn less than three months the Scots will be voting whether to leave the Union.

They may decide to head out on their own, or they may choose to stay within the United Kingdom and be given as yet unspecified further powers to determine their own affairs.

Although the difference between those two choices might not be that great in the end, a separation following a majority Yes vote would be a significant set-back for the Union, Europe and the Scots themselves.

However, the debate could bring about some good.

As the nation states of the European Union head towards closer economic and political integration, its citizens are feeling that they are losing too much of their national identity and are therefore rebelling.

In some cases this manifests itself in protests against immigration, in others through the resurgence of regional and tribal issues, and in others again, in anger against Brussels ‘red-tape’ and the desire to win back powers for national governments.

The recent European elections gave an increasing share of the vote to the parties on the right arguing against immigration, citing the threat to jobs and criticising EU meddling in home affairs – as UKIP did in the UK.

In my view the real underlying fear is what in Germany we call Ueberfremdung, which translates as ‘foreignisation’.

That is linked not only to immigration, but also to overseas ownership of huge chunks of British industry, including ports, airports and utilities.

This is of course not just a British phenomenon. The same feelings are at the heart of the rise of populist right-wing parties in France, Austria, Greece and Spain.

The only countries that have reacted differently so far are Germany – my native country – and Italy.

Perhaps citizens in these two nations are not as easily reeled in by demagogues with simple messages because they have been there before.

Although the EU has talked much about the rule of subsidiarity – the principle by which decisions must be taken at the appropriate local level – Brussels has failed its member states by not delivering on it and by not making it clear enough.

The rising support for the ‘Yes’ campaign and ‘Scotland for the Scots’ is, I believe, an expression of similar concerns and must be taken seriously.

It is not good policy to try to scare the Scots about losing the pound and being economically worse off, or even by raising doubts about whether an independent Scotland could secure membership of the European Union, as Alex Salmond wishes.

This is much more an emotional issue and should be treated as such by the ‘No’ campaigners.

Far better, then, to concentrate of the positive aspects of the Union. There are not only economies of scale in business but also in politics. Size matters, as every business knows, when it tries to sell in global markets.

Paddling your own canoe economically and politically in a more and more globalised world is difficult, to say the least. The threat of Britain leaving the European Union is similarly counterproductive in my opinion.

Most importantly, the men in Brussels and Angela Merkel in Berlin must have a close look at the results of their actions so far. In the long run they can’t ignore the deep seated fears and mistrust of the peoples of Europe.

Britain may appear isolated following the row over the appointment of Jean-Claude Juncker, but should continue to lead a push for change.

As for Scotland and the UK, the West Lothian Question – whether Scottish, Welsh and Northern Irish MPs should be able to vote on matters involving only England – is unresolved, and the relationship between Scotland and the other countries that make up the Union is not very efficiently structured.

It might be an idea to take a look at the constitution that the Allies gave Germany after the last World War, which has a clear separation of national, state and local powers. It could serve as a model for the men in Brussels.

Role of currency movements in global markets

Published in the Financial Times, 16 March 2014

Sir,

Martin Wolf’s excellent article “The spectre of eurozone deflation” (March 12) leaves out one important aspect of the causes of inflation and deflation in today’s globalised markets, namely the role of currency movements. The euro has been appreciating against the dollar for some time now and making a large number of dollar-denominated imports like oil, other commodities and food stuff cheaper and with that lowering price indexes. That in itself is hardly worrying.

A parallel to this is the reducing inflation in the UK. When sterling devalued in the immediate aftermath of the 2007-08 recession, it did not do much for exports, as was hoped for, but led to soaring inflation, which is only now falling with sterling appreciating again around 10 per cent against a basket of currencies.

It is important to understand that the former drivers of inflation, namely demand increases through wage rises leading to wage/price spirals, no longer exist. Bank of England governor Mark Carney is no doubt aware of this – I hope.

Bob Bischof, Vice-President, German-British Chamber of Industry & Commerce, UK

Interview: European Trade Protectionism

Bob Bischof, vice president of the German British Chamber of Industry & Commerce, talks with Charles Powell, member of the U.K. House of Lords, about European trade protectionism, U.K. inward investment and growth, in an interview with Francine Lacqua and Guy Johnson on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Watch the interview here

Bob Bischof discusses European protectionism on Bloomberg TV
Bob Bischof discusses European protectionism on Bloomberg TV

Beware Abandoning Europe, Mr Cameron

This is an extract of an article published on January 13th 2013. It can be read in full on the Daily Mail website here.

Article Daily Mail January 2013The Obama administration has voiced its concern about Britain’s future in Europe. Some prominent business leaders are getting nervous that political posturing could result in the UK sleepwalking out of the European Union. Prime Minister David Cameron is under pressure from his right wing and the rising UKIP vote to renegotiate the treaty and hold a referendum on EU membership.

The key question in this increasingly heated debate is whether the UK could become a Switzerland or Norway with a trading agreement with the Union.

During the past two decades Britain has looked mainly west towards America for political and economic inspiration rather than east towards Europe. As the headlong rush into globalisation emasculated the unions and kept real wages low, demand had to be stimulated in new ways.

Under the last Labour government, Gordon Brown and Ed Balls took their guidance from Federal Reserve supremo Alan Greenspan and Wall Street.

Following the US example, wage increases were replaced by increased limits on credit cards and rising mortgages on the back of the asset bubble.

When Margaret Thatcher came to office in 1979, private household debt stood at around £60billion. When Labour got into office in 1997 it had risen to £750billion and when the Coalition took over, it had reached £1.45trillion.

Instead of government debt being reduced during the boom years, the opposite happened, with the rescue of the banking sector completing the disaster.

Taking the lead from the US in economic strategy has been an unmitigated disaster not only for Britain, but left other countries such as Ireland, Spain, Portugal and Greece. It even influenced such countries as Switzerland, France and Germany, as their banks were trying to become global players, pay their managers Wall Street salaries and adopt the casino culture.

Fortunately, in the northern European countries the excesses were not quite as pronounced, but they now have the unenviable task of bailing out their profligate southern neighbours. Following the US lead during the past decade has not been a great success and no wonder open-minded people all over Europe are looking for alternatives.

A lot of my German business colleagues regret, as I do, that Germany and Britain did not get together as leaders of Europe, as Helmut Schmidt and other German chancellors had hoped.

Britain is approaching the crossroads and my hope is that leaders will look at the alternatives carefully and not be influenced by political expediency.

Corrosive Pay-Day Loans Should Stop

This letter appeared in the Financial Times Monday 26 November 2012

With his assertion (Letters, November 22), that APR calculations are meaningless and that banks charge even more on occasions, Errol Damelin, chief executive of Wonga, is trying once again to defend the indefensible. May I remind your readers why Wonga and the other 50 pay-day loan companies are not operating on the continent – very simple, Mr Damelin and his peers would likely be in prison under usury laws, if they plied their trade in Switzerland, Austria, Germany, Netherlands or the Nordic countries. Contracts that bear exploitative interest rates, generally above 15-20 per cent cannot be enforced in law. Repeat offenders, who try it, get a prison sentence. Maybe it is no coincidence that the above countries are the so-called creditor nations in Europe.

Usury laws protect the socially weak, uneducated, desolate and weak-willed from predators. There seem plenty of those around in the UK to feed this market. It is high time that the government acts against them, and at least they are prevented from advertising – their products are more socially corrosive than cigarettes or alcohol.

Letter in the Financial Times regarding payday loans by Bob Bischof

Steve Mann's reply in the Financial Times
Steve Mann’s reply in the Financial Times

Neue Labour: Can German Business Ideas Revive the UK Economy?

Sunday 11 March 2012 – Bob Bischof appeared on BBC Radio 4’s ‘Analysis’ to share the ideas from Germany that could help improve the UK’s fortunes.

Presenter Matthew Taylor travels to Bob’s birthplace, Hamburg, to discover how apprenticeships are set up to buffer businesses and workers against hard times.

You can listen to the programme in full here: http://www.bbc.co.uk/programmes/b01cvkg6

The BBC article by Matthew Taylor is at http://www.bbc.co.uk/news/business-17213556

‘Hire and fire’ has destroyed Britain’s jobs economy

Europe’s biggest problem now is youth unemployment – we should be looking at the German labour model

As published in the Guardian: by David Marsh and Robert Bischof. http://www.guardian.co.uk/commentisfree/2012/jan/26/hire-and-fire-destroyed-uk-jobs

These days we tend to talk about the divisions in Europe as one between net creditors and debtors. In reality this is just a sideshow. There is a much more fundamental gulf, hinted at by Angela Merkel in her Davos speech yesterday: between countries with organised industrial training systems such as Germany, the Netherlands, Belgium, Scandinavia, Austria and Switzerland – all currently with jobless rates of between 3% and 7% – and those with much higher rates of unemployment, often in double digits, in peripheral Europe.

The issue pits Anglo-Saxon precepts of free market regulation against the Germanic “Rhineland” system of managed capitalism, with modern apprenticeship systems built on a long-term compact between labour and employers. In the years before and immediately after the euro’s birth in 1999, the peripheral countries of the European monetary union (Emu) often followed Anglo-Saxon principles by liberalising parts of notoriously inflexible labour markets. “Hire and fire” became the motto.

Initially this seemed to work. But as debt market conditions worsened and growth stalled after the 2007-08 financial crisis, Emu’s periphery has been left seriously exposed by the failure to replace unproductive regulations with new mechanisms to generate jobs.

In the battle between rival systems, “Rhineland capitalism” appears to be winning hands down. In the two years since the global economic downturn in 2009, Germany has expanded employment by 1.8m, while the UK, US, France, Italy and Spain have shed 7m jobs. In 2007, when most other countries were nearing the end of a boom driven by excess credit, Germany had the highest unemployment rate (8.7% of the workforce on a harmonised basis) of the group of seven leading industrialised countries. Yet in late 2011, according to OECD figures, German unemployment, at 5.2%, was the lowest in the G7 apart from Japan.

While the UK struggles with record youth unemployment, Germany’s youth unemployment rate is one third of the OECD average and one eighth of the rate in Spain. High youth unemployment is the most pressing problem in Europe right now – Merkel acknowledged as much when she admitted that mere austerity would make the European project meaningless for the next generation of young people. “Structural reforms that lead to more jobs are essential,” she said in her opening statement.

But Merkel is drawing strength from Germany’s own experience with low unemployment in the mid-noughties, and she is right to do so. While the German labour market underwent some Anglo-Saxon-style deregulation under Gerhard Schröder in 2003-2005, it still places more emphasis on employers’ freedom to build long-term loyalty between employers and workers. These relationships are embedded in a strikingly different cultural approach to industrial training, closely tied to the German tradition of family-owned Mittelstand businesses buttressed by long-term savings that take a generational approach to assembling skills and technology.

British politicians are keen to talk about “skills”, but at the same time they are reluctant to let go of the flexible labour laws that have set them apart from the European mainland in the past. They can’t have it both ways. Employers who do not have a sense of social responsibility for training are unlikely to be durably persuaded to hire apprentices through one-off state payments. Instead, governments should consider building comprehensive vocational training schemes that could be funded through a reduction in the social costs ensuing from unemployment. Tinkering with apprenticeship programmes on a piecemeal basis, as has been done in the UK, is unlikely to yield long-term results, as such half-hearted reforms result in expensive and wasteful systems that lack both scale and content.

And it’s not just the German system of apprenticeship schemes that could do with being copied. One of the main reason why Germany’s economy was able to recover so quickly after the downturn was the system of short-time working support (Kurzarbeit), introduced in the 1920s and extended in recent years.

Funded by an employment insurance levy, it pays for firms to keep workers for six to 12 months, provided employers can show their businesses are in a cyclical and not a structural downturn. Imagine a small engineering firm that ran into financial trouble in 2008: rather than letting go of the 17-year-old apprentice who had recently joined the firm, it would have been able to keep employees on board and then benefit from their experience when the economy was back on its feet. Even if the company had gone bust, the apprentice would by law have been sent to another company.

Sir Anthony Bamford, chairman of UK excavator maker JCB, points out that his company was forced to shed more than 20% of staff in Britain when production halved in 2009. By contrast, the Kurzarbeit system enabled him to keep all his labour force in Germany.

Such examples underline how Germany’s previously unfashionable model has enabled it to become the industrialised world’s premier job machine. As the economic climate darkens, 2012 will be a difficult year both for Germany to hold on to its advantages and for other countries striving to follow the German lead. Yet unless they start to lay the groundwork for longer term gain, time for catching up will soon run out.

Investment in Skills & Productivity: German-British Forum Conference

Better training as the key to economic dynamism

Bob Bischof will be co-chairing the upcoming German-British Forum Conference on Monday 22 and Tuesday 23rd November this year.

Entitled Investment in Skills & Productivity: Better training as the key to economic dynamism, the conference will address pressing macro- and micro-economic themes around how to ensure young people are being trained in the right ways to address the future needs of modern European economies.

Investment in Skills: the German-British Forum Conference
Download the Conference Programme and Registration Form PDF

Europe as a whole recognises that a high-skill, high-productivity economy provides the most effective platform to boost competitiveness and enhance well-being.

As Peter Loescher, Chief Executive of Siemens AG, put it at the Annual Dinner of the German-British Chamber of Industry and Commerce on 9 June 2010 in London;

“We have to get the message across to our youngsters in schools and universities that we need to out-innovate the innovators all over the world.”

German Industry UK (GIUK) has been at the forefront of efforts by German businesses in the UK to attempt to provide in Britain a framework similar to the German Dual Training System.

GIUK has held constructive meetings with Ministers from both the Labour government and the new Conservative-Liberal coalition administration and has now set up a working group within the Department for Business, Innovation and Skills to determine how this can be done for England.

The new UK government has made tackling the skills gap a significant priority in its efforts to spur economic renewal. There is considerable interest in learning lessons from Germany, where equipping the workforce with competitive skills through the vaunted apprenticeship and vocational training system, in partnership with industry, has long been a centre-piece of economic policy.

The presence of a large number of German companies in the UK has added impetus. Underlining this point, Robert Bosch, BMW, EON and Siemens are all giving support to the conference.

The gathering will highlight the role of the Technician Council, a new body set up in the UK to promote a new non-academic route to technical excellence for employees in many different fields.