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12 july, 2012, tale of two cities

Between home, work and the trust, I have been absolutely submerged these last weeks, hardly able to breathe. The effect was amplified as my hungarian niece has been staying, and so we filled our weekends first with a long-planned trip to paris, and then an impromptu one to london. The french spur was a very good session I had at the oecd, and then the family was reunited for a sunny long weekend as unashamed tourists climbing the eiffel tower, taking a boat up and down the seine, visiting notre dame and eating ice cream on the ile de la cite. The kids loved the place but less the touristy bits, so on the last day we split and I went to science city, which was actually very interesting and fun. London was much the same: up the london eye, along the thames, parliament, hampstead, the natural history museum, for them the tower of london, cocktails and the mousetrap, and for us legoland and in particular, their latest obsession, the new star wars exhibition which was less exhibition, more shop, so didn't get away scot free. And lots of rain. All quality time though, great fun, but absolutely exhausting weekends between exhausting weeks - and we're off again this weekend, although to the closer shores of crosby beach. Time really at a premium.

6 july 2012, the bank-lash begins ?

LIBOR is something rather obscure I had the pleasure of using back in my days as a corporate lawyer; me and other thousands involved in the $400 trillion or so of contracts that use it as a reference. There are now many explanations of what it actually is and how its calculated, but it's actually quite a banal index that is used by many parties, including the banks, in contracts with each other. There seem to be two issues. In the first phase, some traders might have been trying to fix it for their own gain. They could conceivably have budged it, but only by the merest margins, although on the volumes traded, that might still have added up to a tidy sum. This is dishonesty, as deserving of prosecution as any other falsehood. The second phase though seems to have a macroeconomic element, in that no-one wanted to report the rates they were really borrowing at, as it would suggest they were in trouble, which in the febrile atmosphere after the lehman collapse would quickly have become a self-fulfilling phrophecy. Although the evidence is only now seeping out, there seems to have been senior management knowledge of this, and understanding, if not even encouragement, from the bank of england, who were desperate to avoid any further big banks going under. If anyone suffered, it would have been pretty evenly spread, as everyone uses libor as a reference, both debtor and creditor. It is unclear whether laws were broken, and I suspect we won't see successful prosecutions. Reputationally though, this is yet another disaster for the banks, whose credibility is absolutely shot to pieces; and maybe we will finally see the fight against them really taken on. They have few defenders.

25 june 2012, hot potato

When public money is increasingly tight, welfare payments inevitably come under scrutiny; as now in the uk. Work on the main political parties' manifestos for the next general election, which will take place on 7 may 2015, is underway, and with the conservatives convinced that welfare reform, as well as reducing immediate costs, is a vote winner, the prime minister has floated a wide variety of ideas. My experience of unemployment includes my father, in manchester 25 years ago, and my other half, in frankfurt about 5. While one got a very small amount and was basically left alone, for many years, the other got real training she needed to get work (german lessons) and also two thirds of her (very good) salary, but only for a year or so, after which it would have gone down in stages - a real motivator. There's also salutary experience from scandinavia (generous) and the us (not), where bill clinton's major "workfare" reforms of the 1990s led to cases of the vulnerable slipping through the net, but in vastly greater numbers also shrank the massed ranks of the unemployed. Their strong economy and a transparent wage subsidies scheme (like tax credits) helped, but the drop in unemployment was so large that workfare clearly played a major and positive role. All of which goes to show that floating ideas is good, and debate is positive, but few things are as illuminating as facts and comparators, in this case of other countries' systems, successes and failures. I look forward to reading much more on this in the coming months to help understand what has the highest chances of working, and what less so.

22 june 2012, night at the monastery

Quite an inspiring night yesterday, at gorton's remarkable franciscan monastery. A pugin architectural masterpiece of the late eighteenth century, it was at its peak the centre of a whole community, but by the 1980s was deconsecrated, and by the 90s desolate and vandalised, to be turned into flats and with anything of value stolen or sold off. This included 12 remarkable statues of saints that sat high on plinths between arches, becoming mystically lit up at a certain time of day. At rock bottom though, a few remarkable people started to care, stopping the auction of the saints as garden ornaments and beginning to clean and fundraise. Year after year the volunteers grew, grants were found, a new roof enclosed the building and brick by brick, wall by wall, feature by feature, the monastery came back to life. And so almost 20 years later, last night was the final piece of the jigsaw, as in the company of the likes of joan bakewell and terry waite the saints finally came marching home. A wonderful story.

16 june 2012, the greek election

We are already in a least bad scenario, but what is needed this sunday ? First, stability, which means greece being able to form a government in the next few days, and one that will last through what will be a very stormy few months. For that to happen, the best case is for what have emerged as the two main parties at this point, the traditional centre right new democracy and the radical new centre left syriza, to emerge as strongly as possible. The winner gets an extra 50 seats, putting it in pole position in terms of forming a government. The key point is not really the platform, as in fact all greeks pretty much want syriza's platform, namely an end to austerity but staying in the eurozone. The big question though is whether that is possible. If they think it is, they are increasingly voting syriza, if they think not, then new democracy. Whichever wins, they will at first try to form a coalition from "their" bloc, be that left/right or for/against the austerity-ridden bailout. The very best outcome though would be for them to join forces. Without new democracy, there is simply not the continuity needed; without syriza, the will of the people is thwarted and they will never have consensus. Best would be for a joint approach to renegotiate the bailout, from the starting point of where it is, not a blank sheet; and that needs both of them to compromise and work together. We can only hope.

12 june 2012, woods and trees

I remained unable to quite grasp the power of technology, and to be master rather than servant of the unstoppable flow of information that comes to me even directly by email, let alone the infinite vistas of intelligence available on the internet, but which without a map are utterly suffocating. One thing I've always thought myself good at was quickly getting a grasp of an issue, and then constructing from it an understandable narrative. Before doing that though, you need understanding, and an ability to check and validate, which is where the now endless waterfall of information becomes a barrier, as to wait for its end is to drown. I've noted before (28 march 2010) that in 2003 it took 10 years to analyse 3 billion bits of data and unlock the human genome; it now takes a week. There is simply too much information. We must not though be scared, because data only tells us so much. I am always sceptical, using instinct, context and precedent as much as numbers. Josiah stamp got it about right, "the government are very keen on amassing statistics - they collect them, add them, raise them to the nth power, take the cube root and prepare wonderful diagrams. But what you must never forget is that every one of these figures comes in the first instance from the village watchman, who just puts down what he damn well pleases."

10 june 2012, manchester as europe

Judging the veracity, or otherwise, of this little fantasy, is limited to those that know well the geographies of both the european union and greater manchester. See both as a collection of sovereigns, bound together in a broader union that the evidence suggests drives economic growth, but of which they remain suspicious, because pooling sovereignty, to a degree, is losing it. For germany, largest member state and economic powerhouse, read (the city of) manchester. For the other, albeit smaller, half of the essential partnership, read salford: germany and france are the eu's irreplaceable motor. The third leg, italy, always destined to be a leadership also-ran, is a nation barely a century old yet was in at the eu's creation: with a little squinting, we might see tameside. The powerful outsider, uncomfortable with its strange political bedfellows, that reluctantly joins, because it has nowhere else to go: is for europe, the uk; and for gm, trafford. Stockport, like the benelux, will never call the shots, but has much to gain and little to lose. Wigan, bolton, bury, rochdale and oldham, like poland, hungary and other new member states that joined in 2004, have profoundly different economies: poorer, lower-skilled, with less connection to the higher end of the value chain. They have potential for innovative niches, and seem to need more than they are needed, but bring labour supply, a bigger market and more weighty influence. Interesting that while the eu has complex and varied systems of representation that reflect differing weights, gm has just one person, one vote. Maybe though that's the difference between being 1 year old and 55.

1 june 2012, yes

Referendums have a habit of getting a no (20 february 2011), but in ireland, when on a european treaty, they usually have a second try to get the right answer, both on nice in 2001 and lisbon in 2008. Then, the fate of the eu pretty much hung on a purist irish constitution that empowers people over parliament but is a process subject to populist pressure. Today though, they resoundingly said yes, in a reluctant vote against greek-style self-seeking victimhood rather than take the medicine; which would have meant more medicine administered more harshly. The vote signals ireland's maturity and is a milestone on their long road back to growth and stability. For europe it is also a minor triumph, for the wonks amongst us, because for the first time there was no power of veto. Only 12 members states need to ratify, and so had ireland voted no, the treaty would still have come into force, but ireland would have excluded itself from the (underwhelming but serious) array of tools, like the esm, that the treaty brings on line to help stabilise the eurozone. The new treaty's architects have finally cracked giving countries a genuine choice, rather than making every vote a gun-against-the-head all-or-nothing. That much is sure, the next bit is not; but the innate optimist within me sees a low-key turning point in a population saying quite loudly that it believes that the euro is going to make it. For some time now the doom-mongers have been making the running. Suboptimal make-do politics in a complex scenario is willfully seen as dereliction and aimlessness, and a break up as inevitable. Francois hollande's victory was seen in that way, with france and germany set to tear consensus apart. That has not happened (7 may 2012) and, as they have done for a long time now, leaders are still ready to do what they need to muddle through to avoid collapse at all costs. The root of stability lies in neutralising greece, and that, as it was in ireland, is in the hands of the people, when they vote on 17 june either to take the medicine for the foot they have shot themselves in (5 november 2011), or head off into the chaos and uncertainty of "out", by which time the euro has hopefully got its big bazooka plans in place to firmly stabilise the new configuration.

30 May 2012, no easy road to increasing competitiveness

The stagnation of zero growth stalks the economy, dreadful public finances, very high unemployment, the universalist welfare state under threat, a radical government trying to make the labour market more mobile and the now-traditional driver of the economy, the consumer, resolutely not spending. The uk in 2012 - and germany in 2005. In that year gerhard shroder's centre-left government gave way to a grand coalition led by angela merkel, but the hard and unpopular work of reform continued almost without missing a beat. The economic pressure made germany's big companies restructure and cut costs, helped by workers and trades unions that ultimately accepted less and less pay, bringing down unit labour costs, helping germany become more and more competitive - making it once again the world's leading exporter (it is still second only to china). Heaped on the pain of paying for unification - some 1.3 trillion euros, or about half germany's annual gdp - this was a decade long squeeze on the population, but it was shouldered largely without complaint, and in the years following germany emerged as, and remains, europe's powerhouse economy, with its industry and exports going from strength to strength, a solid economy, deep social safety net, strong business confidence and, despite the euro's woes, the faith of the markets, giving germany extremely low borrowing costs, although its debt levels are low and sustainable. Was that medium term pain for long term gain ? Some might say.

25 may 2012, greece on grease

Few stories have dominated the news like greece has (I'm at 2:45 and later) for now so many weeks and months; quite remarkable for a small country of just 11 million people, although disproving the truism that all publicity is good publicity. There remains such a wide variation of possible outcomes that no-one at all knows what will happen and that level of uncertainty totally undermines confidence not just in greece but in growth in europe, to such a degree that we might not even make it through to the june elections. In an ironic way this is something of a success, in showing how deeply interconnected the eu has become, and especially the euro, which now is really the heart and soul of the project. It it is difficult to imagine the one existing in its current form without the other. It is a sign that greeks have begun to realise this that support for keeping the euro has actually gone up over these weeks (to 80%) even as support for the anti austerity party also rises. And people have begun to draw out their euros and stick them under the mattress. Solutions such as eurobonds are part of a proper fiscal co-ordination package (8 may 2010), and even the fiscal compact, seem slow and irrelevant, but in fact it's the architecture that's wrong (monetary without economic union) and so at least agreeing on that, and then showing some determination to fix it with a realistic plan that may get support and be implementable, is a key part of the solution, a foundation on which confidence can be built, followed by stability and then growth. Fresh with a renewed term as poresident, van rompuy is the latest to have another try at that, hopefully before the jokes start about humpty rumpty (21 november 2009). For all that the higher ups do or don't though, this is going to be decided by voters - in ireland next week, and in greece a fortnight later.

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