Blog
10 january 2011, masochistic voters
Some proof, perhaps, of what I have long suspected: that although instincts and the governor of the bank of england suggest that the purveyors of the biggest cuts in public expenditure in the uk this side of the battle of hastings are likely to be out of power after all this for a generation; instincts and the governor may be wrong. Alesina, carloni and lecce, nicely summarised in the economist studied the ten harshest periods of cuts in western, i.e. oecd, countries and the elections that followed them within 2 years. 37% saw a change of government - compared to an all-period average of 40%; statistically insignificant. This also works for the harshest 60 cuts periods. As interestingly, there was a great difference between those instances where spending cuts took the strain, with just 20% of governments losing their jobs, as opposed to tax rises, where it was 56%. There are of course many questions like cause and effect (was it strong governments that could implement the cuts ?) but the evidence here is pretty strong: if fiscal consolidation is the right thing to do, voters can be made to understand it, and purposeful governments can reap the reward.
5 january 2011, home is where the heart is
Back, as usual in the new year, from a brief spell in hungary. Word association around europe is not the country's eu presidency, which began 1 january, but the new "draconian" media law. Despite the coverage, by hardly an uninterested party (or abroad at least, a particularly well-informed one), I'm not sure it's really the return of stalin, but seems certainly another chapter in the sad and long, long running saga of new hungarian government, new party posts at every state level. More unusual are a couple of novel fiscal measures. Most controversial is a new tax imposed on foreign investors, which companies such as e.on, deutsche telekom, allianz, ing bank, axa and omv have all bitterly and publicly blanched at, threatening to pull out of the country altogether, but rendering a total of some eur1.3bn (a UK windfall tax a few years ago on the oil companies pulled in many times more), I suspect protestething rather too much going on. More ominously the new government's nationalist streak is encouraging tens of thousands of new hungarian citizens, despite them living in other - "greater hungary" - countries. My old colleague adam lebor's long-residence in budapest perhaps leads him to underplay this. Perhaps most interestingly, though, and another seesaw policy that changes with each election result, is another push to increase the indigenous population, through reducing income tax for bigger families is an interesting mechanism designed to benefit those that pay taxes in the first place...
25 december 2010, as failure to act has consequences
As bombs are man-made and we're terribly used to them, and with dozens not thousands dead, I doubt the pakistan blast will define this year's christmas day as the tsunami did boxing day a few years ago. Nuclear-armed pakistan though is a critical place in the world today. I well recall a friend who served some un-time there likening it to cold war berlin: a fault line of the geopolitical world where any spy worth their salt could do business. Whilst the most unstable nuclear state award undoubtedly goes to north korea, its range and arsenal are limited. Pakistan by contrast is a crossroads for many of the world's conflicts, and a player in its own right. It's also hugely unstable politically, and today's bomb is notable for being a first female suicide bomber. If you see the extreme islamists as hamas, and the american-aided government as plo, one begins to understand that such extremists having a national bomb programme almost as big as britain's is unlikely but possible. More worrying still, as politics is shades of grey over time, the more bombastic end of the current establishment already refers proudly to its "Islamic Bomb". As in many things though, what drives this as much as anything is western double standards, india and israel both having accepted nuclear arsenals despite their refusal to sign the nuclear non-proliferation treaty, and providing justification for pakistan and others like iran to go nuclear. And some fine obama words notwithstanding, we have gone back on the deal we signed up to, literally, a generation ago that if you don't go nuclear, we will disarm. Over time, and that time may be coming, saudi arabia, turkey, egypt, japan, taiwan, south africa and australia may all reassess whether the status quo can hold indefinitely, making mass nuclear breakout within a decade a dramatically realistic scenario. Happy 2011.
23 december 2010, collaborative consumerism
I'm very happy to admit that sometimes I'm a magpie, in that I swoop down and pick up other people's ideas; but knowledge is something that can be infinitely shared without losing value. Indeed sharing often develops and strengthens. So it may be with collaborative consumption. Rachel botsman, seen here on the excellent ted site, may have cornered the 2010 market, but swapping, trading and barter are as old as the hills. The internet of course means that your reach is no longer just the village, or even the national tv audience swap shop (an old uk tv programme) had, but the world. You can even swap money: a loan matching a borrower. "Social lending" websites like zopa have been around for years now, but haven't taken a significant cut of the action. Internet shopping though is certainly beginning to bite into western high streets, and this season's snow-in will nudge those figures north. Rachel's point though is that swapping is not consumerism, but the recycling of goods and the renewal of trust within social networks where people do not know each other, the "big shift" that makes the market for swapping big enough to be viable. Need that drill you have in the garage ? Actually you need the hole it makes, and could very easily rent the drill for the ten minutes a year you need it if the transaction costs were sufficiently low. She also highlights the growth of co-working, people - potentially on the other side of the world - sharing a job. I'd certainly add car sharing - if only I could easily connect to the 5, 000 people that drive past my front door into manchester every morning. I don't really want the car. Access is better than ownership. We're waking up, says Rachel, from a humungous hangover of emptiness and waste.
19 december 2010, first in, first out
Few worlds are worse than british health for throwing up their own impenetrable lexicons and structures, but two years after being appointed (bottom of page) to the board of a hospital, I have just about learnt the difference between a pct, sha, pbc and pbr. Just as a new government has decided to scrap them all. Hospital of course is a simplification - I'm actually on the board of a healthcare trust, or acute provider, which manages 3 hospitals (one is altrincham, in a terrible state, which we've spend huge efforts to convince our funders to let us rebuild), the main one of which, trafford general, is whose doors the first patient of the much-fabled national health service walked through. It's also the centre of a great deal of planning that made it cutting edge today in the uk for providing "integrated care" essentially between general practitioners (the local gatekeepers), the pct (who commission) and our trust. Now however, such trusts need to move rapidly towards becoming semi-independent, or "foundation" trusts, supposedly more communal "patient-led" organisations, freer from central control. A smallish trust like ours, it seems, can't possibly make the grade, despite an absolutely excellent recent safety record, having a very good senior management team in place and being named medium-sized trust of the year for the whole of england. So we were one of the first to signal it is looking for a partner to merge with or acquire it, although there are actually many models this headline description could follow. Whilst everyone wants an administrative structure that provides the best outcome for our community - quite possibly no local structure at all - divining what that is will be the stuff of many debates over the coming, interesting, months.
Attached File: integrated care.pdf
11 december 2010, the fall and rise of the euro
The basic rule of the markets is buy low, sell high, or "when others are fearful, be greedy" as warren buffet put it. On that basis, time surely to invest in the euro, both financially and politically. Despite its difficulties, much derided in the uk in particular, countries are still queuing up to join: estonia will do so in a few weeks, and iceland is putting itself through the deeply traumatic and unpopular step of joining the eu, just for the currency (ditching the krona). Don't forget that despite its recent downward blip, the euro is up around 20% against sterling over the last 3 years; some 33% over the last 10 against the dollar - and everything points to continued and sustained dollar depreciation, which means a rising euro, especially as euro rates will go up quicker than others in 2011. For the uk, the long-term political-economic case remains as strong as ever: yes, one size will never fit all (as greece and ireland have discovered; but so for long have engineering firms in scotland), but the world's largest and most successful economy, the us, with no less variance than the eu, has made it work, and so can we. Juncker's latest contribution is a very good one whose time will come. For all the downsides, they are outweighed by the sum of the ups of not being a small dingy in choppy seas, but being part of a global cruiser. If the current turmoil shows anything it's that a currency crisis in the euro area is hugely unlikely; not so the poor pound (even if policy has skilfully avoided it for now). The world is still wandering evermore towards economic control by strong currency blocs, of which the euro is one, with sterling doomed to being buffeted by manoeuvring between giants. An independent currency is 19th century policy in a 21st century world. We will one day join the euro: so why not restart the debate now when the terms of trade for uk entry are all in our favour. That won't be the case when the uk needs it. Now's the time to buy.
9 december 2010, trapped inside the treasury
Minor riots in london today as parliament voted on increasing student's tuition fees from some £3k to some £9k. Epicentre was the treasury, with me sat inside talking about tax incremental financing and social impact bonds as the chants grew louder and the nice russian security lady came around to ask us to close the blinds. The country's bankrupt and all that, but it's a difficult one to call this for those of us that got our degrees free and indeed were given a pretty decent grant to go on holiday, sorry to university, for 3 years. Actually I learnt tons and have pretty much traded on it the rest of my life, so I definitely see it as a public good we should all be paying for. I see too though that its particularly hard on the working majority that didn't go, and so whose taxes in effect subsidise those that did. Universities certainly need and deserve the funding, but every corner of the uk government is girding itself to stop making and funding central plans and to make people and institutions call their own shots, and pay for them too - so why should the higher education sector be any different ? Everybody wins really when the student pays - except the student. It's too obvious to say many can't afford it, as it's actually free to go, you just have to repay the loan over your working life. Far, far too many in society though, and surely a massively disproportionate number of the disadvantaged, will simply not have the family or environmental history, support or culture to give them the confidence to do this, making them naturally risk-averse to take on a sizeable debt. So too many of the talented don't and won't go to university. Didn't stop many brilliant entrepreneurs though, although I have to say, it might have stopped me.
8 december 2010, it was 30 years ago today
All we are saying - keep talking- is give peace a chance. Everybody's talking about revolution, evolution, masturbation, flagellation, regulation, integrations, meditations, united nations, congratulations... As soon as your born they make you feel small, by giving you no time instead of it all, till the pain is so big you feel nothing at all. A working class hero is something to be. Keep you doped with religion, sex and tv, and you think you're so clever and classless and free... Nobody told me there'd be days like these, strange days indeed... you may say I'm a dreamer, but I'm not the only one, I hope some day you'll join us, and the world will be as one... power to the people.
28 november 2010, the day of the new world order
Driving home from my sister's 40th birthday party in london, we caught one of those excellent but rare documentaries that light up a subject and cram a lifetime's understanding into 30 minutes. I'd recommend listening to what really happened in copenhagen in full, but the story is most startling for its geopolitical climax. It shows that my call then (20 dec) was on the money. Denmark dismally failed in the usual host's duty of bringing forward a compromise at the right time to get momentum and seal an agreement, and at the end of 2 weeks, and indeed of 2 years negotiations beforehand, as the world's leaders flew in, there was nothing for them to sign. The programme gets insiders to paint the remarkable picture of obama actually negotiating a text himself in a sweaty room, with merkel, sarkozy, brown and 35 or so other nations' premiers. But several were missing. Upstairs, china, south africa, brazil and india were negotiating their own text, and blocking anything else. Eventually obama excused himself from the world as we know it meeting and gate-crashed the (now-christened) BASIC nations, where he quickly agreed to drop what had been the central tenet of the 2 year negotiation, the aspiration for a legally-binding agreement, in return for a clause on monitoring. To the astonishment of the rest of the world, and not a little fury, he then went to the press with the deal that had been done - and copenhagen was duly wrapped up. One would expect that experience to weigh very heavily on obama in his understanding of who is on the real top table if america is seeking to keep its place as the world's leader.
Attached File: the group that no-one paid any attention to.pdf
20 november 2010, bad policy and catastrophic politics
The financial times has surely called it right that the eu using the irish crisis as an opportunity to rid themselves of the running sore of ireland's 12.5% corporate tax rate would "politically, be the most monumental own goal europe could score. The irish were converted to the lisbon treaty by guarantees on tax sovereignty. Reneging on them would cause cracks in europe's political edifice that no words could paper over." Much as many do not agree with this rock of irish fiscals, and much as the quid pro quo for a community bail out must be rigour and reality in national affairs, that policy has proved as successful as any, and is their democratic right to pursue. This is not greece, where root & branch reform of the fiscal administration is necessary; the irish have been bold and competent in this department. The tragically lax and wayward was bank lending, which surely means a focus on regulation and balance sheets, the ultimate journey being wind down and removal of irish lending capacity, which should not be irreplaceable given open access to other euro lending. Isn't that part of what a sustainable single currency needs to be ? The press in the uk meanwhile is full of tosh about how it's all ireland's fault for joining the euro in the first place, though of course having their own currency would not have stopped irish banks irresponsibly lending the ludicrous amounts of money that are the source of the problem. It would though have robbed them of 15 years of roaring tiger growth that economically transformed this once-obscure part of europe, and nor would there be weeks of negotiation with a friendly eu white knight, but rather it would be the immovable imf against an ireland with its hand undermined by a currency crash.