Blog
7 may 2012, not just yet
The age of austerity may or may not be right, and may or may not be inevitable one way or the other - but it is certainly not popular. And so sarkozy, who started with such great promise, became a rare one-term french president, and the eleventh european government to lose an election since austerity began. Days before, the uk contingent suffered a significant (though largely consequenceless) defeat, and on the same night anti-austerity greeks stormed to victory. However, the british results conform to a typical mid-term reaction; indeed had they been held a couple of months before, the government would likely have held up very much better. For the french, this was above all an anti-sarkozy vote. Beneath the rhetoric there is vastly more that hollande and merkel have to gain by being nice together (and quickly) than in arguing. A new narrative that destresses austerity, bolts on a new "growth" component that anyway everyone was looking for, tweaks the new treaty and lets hollande claim victory, merkel continue with more small steps, and the eurozone avert a crisis of confidence, all ought to be possible after these new dance partners get used to each other's moves. The big unknown however is greece, where the traditional two party-led system, both reluctant defenders of forced austerity, was shot to pieces; registering together just over 30% of the vote, and probably not enough to form a government. This heralds weeks of negotiation and uncertainty, the real possibility of an anti-austerity coalition, or more likely new elections after no government of any sort can be formed. This is exactly the sort of chaos to throw the markets, the euro area's only counterargument being, once again, that greece is small and exceptional. This very much strengthens hollande's hand, as to evidence that argument rapid unity with france is even more necessary. Weeks then turn to days to show the new "merlande" partnership is going to work. There is little doubt it will; but as for greece...
30 april 2012, the f word
For four years now I've managed to avoid using the f word: football, which for many of my friends and colleagues, let alone much of the general population here in manchester, is one of the most important words in the english language. Ironic then I was on national radio (47 minutes in) today talking about it. My dad was a big united fan, though strangely I saw more manchester city matches as a kid (colin bell, joe corrigan), as his boss was a guy called dovoud alliance who had some connection, so we worked there (sort of) on saturdays. By the time my brother came along, united was far too expensive, and rough, and so they toured local lancashire clubs until alighting on the friendliest and most convenient, the then obscure blackburn rovers, who promptly got bought by a local bigwig, built a new stadium & a great team, got promoted twice and actually won the league, kenny dalglish on that occasion getting the better of alex ferguson. And they've been in the top league ever since, though will finally drop out this year, having being bought by new indian money. City are now built on abu dhabi oil money, whereas united are debt-fuelled capitalism at its most extreme, though it may yet prove a solid enough base to win the english premier league yet again this year, despite this evening's result...
28 april 2012, the art of gentle shoving
I'm not sure its wholly new, or isn't more about presentation, but the "nudge" has become one of those ideas that has what people in the political sphere like to call traction. The british prime minister has his own nudge unit, and now obama is at it too, hiring one of the book's authors. At its heart is a tweak to economics, which traditionally rests on a big presumption: that people act rationally. By contrast, behavioural economics tries to understand why decisions are taken. Maybe people are actually badly informed, or inconsistent, leave decisions to another day, or just lazy. Whatever the logic, maybe we'd take a bit of jam today, rather a whole cake tomorrow. Nudge gives focus to the influence of context, social norms, and looks to change behaviour rather than opinion, for example by presenting choices in different ways. One british trial looked at why people were not taking up incentives to reduce their energy consumption by insulating their homes. It found that many could not be bothered to clear out their loft. So, the insulation firm offered to clear the loft, leading to a tripling of insulation grant take ups. The use that can be made of social norms can be seen in denmark, where green footprints were put on the floor leading to rubbish bins, reducing littering by 46%. An american example reduced energy use by providing information about how neighbours used less. Strangely, some brits don't sign up to their (free) company pension plan. A new law nudges them to do so, by making joining the default option. All good, if not revolutionary stuff, but maybe salvation comes not from exhaltation, but from nods and winks - and nudges.
25 april 2012, the dreaded double dip
People get terribly hung up on definitions, and so it was today when the uk dipped back into "recession". In fact, whether or not the national economy has momentarily dipped below an arbitrary line or not is far less important than people's reaction to it, which is fanned by the near-hysterical reaction of a round-the-clock and all-pervasive mass media desperate for screaming headlines to send traffic to websites (15 august 2011). It is a vicious circle: recovery seeming further away means less hiring, more firing, less investment and less spending, all of which acts as a further break on economic activity, making recovery further away. I was on the radio talking about all this today (7 minutes in). It may yet last another quarter or two, given the above and the diamond jubilee, but the zig will zag back in due course, which will probably be the pattern for the uk economy for many years, hugging a narrow band close to zero growth, as we get through the great deleveraging (24 november 2011) that is as inevitable as it will be painful.
21 april 2012, will they back down ?
I've long held that reducing greenhouse gas emissions (or coe two as the kids call it) may well be the right thing to do, but we shouldn't pretend it would be cheap, wouldn't work against economic growth, and would not involve drastic change in our western lifestyle. The best illustration of the latter is air travel, which for my grandparents was a once in a decade expense, for my parents biannual at most, but between me and my two siblings never a month goes by when one of us isn't airborne, often at a cost of less than a train. The eu has long tried to lead the world on changing the pricing of coe two (5 january 2012), but its efforts have seemed doomed since the new world order made its debut at copenhagen (a great entry, of 28 november 2010), which failed to deliver a mandatory global framework. This means europe runs the real risk of business simply shifting outside its borders to avoid higher costs; not a policy to be adopted lightly in hard economic times. Yet, it is still going on planes, which have now been brought within the groundbreaking emissions trading scheme (20 july 2011), adding perhaps two euros cost to a flight. Airlines are not happy, both european ones and others, the chinese threatening to cancel billions worth of airbus orders. Europe though is doing the right thing, as was recently recognised by five nobel economic laureates, who correctly diagnosed the political problem as starting in washington, where far from obama's election representing "the moment when the rise of the oceans began to slow, and our planet began to heal", things carried on much as they did under george bush the climate change denier. "Because emissions are not priced" they wrote "the world is wastefully using up a scarce resource, the earth's ability to safely absorb greenhouse gas emissions". Good economics, good policy, good for the long-term and those that come after us; bad short-term politics. Let's see what wins out.
14 april 2012, a quick one
Grand national day today (see 10 april 2011) and much to do, as the sun shines and I complete my study's annual move back into the conservatory, having been exiled in the dining room for a few months. Work has piled up, both at home and from the office, and the kids of course let me do none, as the demands of lego and cycling top the bill for the weekend. There's also those now more than one hundred emails I'd like to reply to, and some of the organisation of a forthcoming weekend and, and, and. And we're in london two of the next three weekends: one for a wedding (without kids) and one to see my sister and family (definitely with). It's raining now, lego calls, and I think I'm expected to make lunch, as my other half is near her photo exhibition (which needs crowdfunding) and has a million things to do; about a million less than me then. Just had a grand ten-day break, so can't really complain, but all work and no play makes baron a dull boy... Postscript: we won ! My younger picked the same horse as I randomly drew at the office sweepstake - and it sneaked home in an exciting photo finish, and so we went out to celebrate, with breadsticks, pasta, bread...
6 april 2012, still crazy after all these years
I was so struck by bosnia, by such carnage, in such sophistication, in the middle of europe. And so very close to me, across the hungarian border whose capital I was living in at the time (see 26 may 2011). Still today, I can't work out the degree to which it was caused by religion, and how much religion was pressed to the cause. In a city known across the continent for its tolerant, secular population, neighbours seemingly suddenly drew lines in the road they literally defended with their lives. To see first world war trenches, holocaust imagery, african child soldiers, israelis in uniform, all somehow speaks of war to my particular cultural programming, but to see men shooting out of the windows of well to do houses, with family photographs on the walls, somehow seems stranger and that it ought to have been easier to stop it happening. I do remember seeing the serbian soldiers start shelling sarajevo from the very spot where just a few years before the winter olympics has been taking place. All war is madness, but this seemed especially so. After a traditionalish religious childhood, and an early adulthood much less so, the wheel has begun to turn again as our kids make their way through school, and as a family we have welcomed the culture into our lives, although on our own terms. As an arch modernist and secularist, it is a strange internal discourse, and sometimes uncomfortable for someone so usually sure in their views. Not an unpleasant situation though, on the contrary on days like today as we prepare for our seder, amongst my very strongest and best childhood memories. I am making more for my own children, and I am strangely and incredibly happy about that.
5 april 2012, patient capital
I've just returned from a short break in budapest, mainly to see my other half's family, but also because I love the place I've twice lived in and will at some point make a hat trick. This time, we left the kids with their grandfather and stayed at the flat of a friend that now lives in strasbourg (12 february 2011). Her flat though has been transformed into an aladdin's cave, with thousands of books lining every surface and piled to the ceiling. She started her small firm - csimota - about a decade ago and it has blossomed amazingly both into a hugely diverse and original cultural force, and also, it would seem, a social and entrepreneurial success. I could not be happier that someone I like so very much, doing something I think of as so important, has done so very well. While we were away (as well as my old mp, george galloway rather sensationally winning a by-election), big society capital was launched, to help a thousand flowers exactly like csimota bloom. It is riddled with people I half know, like stephen bubb (4 october 2011) and ronald cohen, and who ought to be able to make a great go of it. I'm immensely enthusiastic about social investment as an efficient use of capital and have been an eager advocate for some time of using it more systematically in my part of the world, something which this week has only made me even more determined to pull together.
24 march 2012, bank on it
I often correct people who think that I worked in a bank, that actually I worked in a central bank. Even more different is the world bank, whose new president looks like being jim yong kim, a south korean born american academic, and an astute pick by obama. Of the bretton woods twins, I have a very much closer association with the imf. However, it's actually the world bank I have probably been more interested in, from my period at the united nations and my ongoing interest in development and human rights, which has in these last years taken a back seat to my family and my work. Whilst it is the imf that has the main role to play in squaring the macroeconomic circle, it is the world bank that needs to pick up the human pieces of poverty, inequality and recession, which is what makes the asian health specialist a sensible shift. There is no shortage of work for the "bank" to do: two in five females are aborted due to preference for a son, a sixth of girls die in early childhood, more than a third of women die in their reproductive period and 4 million a year go missing. 10, 000 staff cover more than 124 countries, so this is no small outfit, and a hugely important one in the world of development, providing the link as it does to money and global governance. The bretton woods institutions were founded to rebuild the shattered world of 1945, to ensure international economic cooperation so that the eventual results of the depression, fascism and war, did not come about again. The design, mainly of british economist john maynard keynes (to plan b or not to b), has proved a durable one. In today's circumstances, it still has a big job to do.
17 march 2012, ice to have
Although pretty much every week in the local press, I am not so often in the economist, the last time but one being about iceland. I used the bankrupt european outpost as an allegory to the uk to wax lyrical about the inevitability of it losing its own currency and eventually joining the euro (ditching the krona - is sterling next ?). Now, it looks that while the first of those presumptions may hold true, the second may not, as so bad is the euro's reputation at the moment, iceland may instead adopt the canadian dollar. This is not quite as mad as it seems (and indeed mirrors a newt gingrich proposal for the uk to join nafta) because trade flows exist, and the loonie can be unilaterally adopted, unlike the euro where iceland would first have to join the eu, with its despised-in-iceland common fisheries policy. Things will come to a head early next year with a referendum on eu membership. I am usually an optimist on such things, but although I think the eu's long term future is safe and indeed strong, it is clearly not looking quite so to many at the moment - and the euro, its strongest element and the big draw for iceland - looks weak. Thus, it may well be outweighed by the generational national survival issue of fish. As I doubt it though, perhaps it will happen...