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There’s been a lot of coverage of the call by retired generals to scrap the planned replacement for Trident. This will undoubtedly be grasped by many people (especially our friends on the left) as a further sign that replacing Trident will be a massive waste of money/militarily useless. However, there are several health warnings about the advice of the generals.

Firstly, generals will always (understandably) be a partisans for their service: Trident is a piece of naval equipment and therefore only serves to give prestige to the Navy. Ergo, the army don’t like it.

Secondly, the time frame required to replace Trident is exceptionally long: no security/defence analyst now can honestly predict the strategic environment that we’ll be faced with in 20-30 years. Replacing it is therefore a very good insurance policy: the recent resurgence of Russia is a case in point and would have taken an extremely high level of prescience to predict during the mid-nineties. Furthermore, other countries are likely to retain nuclear weapons for the time being: putting it simply, having nukes means that people listen to us. Putting it crudely, we want to retain our relative power position in the world in order to pursue a robust foreign policy where necessary.

Thirdly, deterrence is a necessary option for a country of our size: during the Cold War it was often repeated that all the Red Army needed to invade Britain was enough boots. We are a small nation in terms of population/forces we can put in the field: given that it is not inconceivable that another state power may wish to coerce us by force in the future, it’s absolutely necessary the UK possesses something that could make them think twice.

Lastly, whilst I sympathise with the plight of the army (I would like to see funding for the military increased to address pay/conditions/kit issues that the Generals rightly bring to the fore), it is frankly a bit rich for the army to talk about obsolescence when the army order of battle has changed itself so little from the Cold War period. If we want to talk about ineffective weapons systems lets look at tanks. Impossible to deploy quickly (so much for rapid reaction), only useful against other tanks (and there are much better means of killing tanks), the number of cavalry regiments remains artificially high simply for the reason that they have a greater social cachet (and therefore more friends in high places) than infantry regiments. The same goes for 90% of the artillery.

Massive resources are tied up in army equipment that has a role that can be better performed by something else. Yet, when the army last restructured the number of infantry regiments was cut whilst cavalry remained the same: to reiterate this point, the continued requirement for cavalry/artillery regiments to do ‘dismounted’ tours (i.e. as infantry) acts as a pretty stinging indictment of the current order of battle. In this regard then, the army needs to have a long look at itself before criticising other services (and there are undoubted criticism of the navy and air-force that can be made that move well beyond Trident).

So, whilst I welcome the chance for a healthy debate about the future of defence spending, I think it’s necessary for people to be aware of the problems surrounding the general’s advice. Trident is a vital part of our defence posture and needs to be replaced.

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“We’re going to cut public spending in order to enact a tax-cut that will cut private spending. That’s exactly what we need when aggregate demand is collapsing.”

Genius.

In the history of the Labour Party, no one is quite as reviled as the ‘turncoat’ PM Ramsay MacDonald. In the face of the Great Depression, rising unemployment, and a growing budget deficit, MacDonald proposed cutting public spending and raising taxes to defend the currency and balance the budget: this saw the collapse of a Labour government (and near destruction of the Parliamentary Labour Party) and in so doing furnished the left with one of it’s most treasured legacies: that it is only through betrayal that socialism has never been realised. Moreover, it explains the psychology of how Labour is responding to the current crisis.

Keynesian economics gained much credence in the wake of what was seen as MacDonald’s austere deflationary programme: thus the idea that ‘something must be done’ in the current crisis is perpetuated. That Keynesian economics (at least as practised) was ultimately proved wrong, that purchasing a little economic stability now stores up huge dislocations later, and that in trying to pump-prime a retail sector bloated will only perpetuate the causes of instability seems beyond the point: the most corrosive element of Keynesian thought to make a comeback is the obsession with the short-term. Rather than focussing on how to keep unemployment low today, the focus should be on what will create the new jobs of tomorrow. UK R&D spending, along with productivity, lags behind other developed countries and it is these that will impede a recovery when it comes.

The most apposite comparison is Germany (which recently dismissed the pre-budget report as irresponsible). In the post-war period Germany focussed on having a stable currency and low inflation. Britain focussed on Keynes instead, and set eye-wateringly low level of unemployment as the primary macroeconomic target. This came at a huge cost in terms of productivity which ultimately led to the collapse of much of UK manufacturing. We are in danger of making the same mistakes now in response to the credit crisis, and though it is painful for a Labour supporter to admit, we may see the destruction of a reputation for economic competence that New Labour worked hard to achieve as a Labour government once again approaches the exit door with high unemployment, a devalued pound, and a budget deficit running out of control.

So, what is to be done? I cannot claim to have any easy answers, but given a historical trade deficit something must be done to return the UK to a position of being a net exporter. We can only finance more debt if there is a prospect that we will, as a nation, have the means to service it. This means supporting innovation, cutting regulation and taxes where necessary, and promoting research and development. It also means updating Britain’s dilapidated transport infrastructure. This however, may all prove to be academic.

The continuing collapse in the value of the pound predates the news that a second bailout may be required for the banking sector. How this bailout is financed is important. It has been calculated that the UK’s external debt is now 400% of GDP so extra borrowing is going to be extremely difficult to finance unless you consider the politically toxic option (for Labour) of going cap-in-hand to the IMF (there is the other option of ‘quantitative easing’: printing new money like wallpaper in laymen’s terms but how this prevents a further slide in the value of the pound is beyond me). So, if the economic situation worsens and more specifically liquidity in the banking system dries up, Labour will be faced with the option of cutting public spending dramatically or bankrupting the country. Faced with that alternative, it might seem that Ramsay MacDonald wasn’t so wrong after all. Would the left admit as much? Of course not. However, it would be a pyrrhic victory for orthodox economics if this came to pass.