sexta-feira, 28 de novembro de 2014

PD James, crime novelist, (1920-2014)

Literatura policial, segundo a maioria dos criticos, não é grande literatura: pulp fiction, é  o nome usado pelos mais metidos a besta.  Naturalmente, discordo. Não nego a existência de  varios trabalhos de qualidade duvidosa, mas a maioria dos autores ingleses  pode ser considerada literatura, sem a necessidade de usar o adjetivo - depreciativo - policial. É o caso do falecido Reginald Hill - um dos meus favoritos - e da P D James e da Ruth Rendell, para citar apenas alguns nomes.  Grande perda, para a literatura e justamente quando se aproxima o verão brasileiro..

More than any other British writer, PD James elevated the detective story into the realms of literature, with the psychology of the characters treated in the most complex and authoritative fashion. For almost half a century she was the UK’s queen of crime fiction.
James, who has died aged 94, owed this long­ success to elegant writing, striking characterisation – notably of Commander Adam Dalgliesh, the poet-policeman protagonist with whom she admitted to being “somewhat in love” – and a refusal to write the same book over and over again, even though some elements often satisfyingly reappeared.
Her plots, too, were full of intriguing detail and studded with brilliantly observed locales and milieux. A particular speciality was the isolated setting, a nod back to predecessors from the genre’s golden age, with none more remote from the everyday than 2001’s Death in Holy Orders.
Taking the apparatus of the Agatha Christie detective novel, James enriched it with far greater psychological realism and rendered her detective protagonist a more rounded and plausible figure than Christie’s Hercule Poirot, who was largely an assembly of eccentricities cast in the mould of Arthur Conan Doyle’s Sherlock Holmes.
Baroness James of Holland Park, as she became in 1990, published her first crime novel in 1962. Among modern female writers of detective stories in the UK only Ruth Rendell, her friend and fellow member of the House of Lords, offered any real competition. (The two cheerfully disagreed over politics – James was an “eternally rebellious” Conservative peer who frequently dissented from the more retrograde views of her party, while Rendell served on the Labour benches.)
Born in Oxford on August 3 1920, Phyllis Dorothy James was one of three siblings. Her father worked for the Inland Revenue and she was to hold a civil service post herself. In 1941 she married Ernest White, a member of the Royal Army Medical Corps, and the couple worked together at Westminster hospital, through the Blitz.
Her two daughters were born during the second world war but James had a taste of personal tragedy when her husband was diagnosed as schizophrenic; he died at the age of 44, having been unable to work. James, obliged to be the breadwinner, took a course in hospital administration and worked with the North Western Regional Hospital Board between 1949 and 1968.
While her children were at boarding school she realised an ambition: to write a book. ­­A new career was inaugurated when Faber agreed to publish her. She was in one sense a replacement for Cyril Hare, the company’s sole crime writer, who had died in 1958. Writing was to be her métier for the rest of her life – though, moving to the Home Office, she long maintained her day job.
James’s first really distinctive novel was the 1971 Shroud for a Nightingale, where the quality of the writing matched that of many a more respectable “literary” work. And it is for the long series featuring her highly civilised copper Dalgliesh that she is best known. In her depiction, he keeps professionally busy to cover the missing elements in his private life (he is left emotionally scarred by the death of his wife in childbirth) and is essentially a lonely man.
James once said that she was “a passionate believer in personal freedom”. But this was not a freedom she much accorded her doughty detective, a man in thrall to a variety of responsibilities. And with a few exceptions, she did not allow him a very satisfactory love life.
In spite of Dalgliesh being a modern detective, James often inserted him into the constraints of the golden age style of crime narrative, with all its cloistered settings, unpleasant victims­-in-­waiting and leery suspects (an expression of the author’s playfulness with the familiar conventions she both enjoyed and was impatient of). Still, the clichés of the genre were kept at bay by the dark
psychological impulses beneath the ordered surfaces of her fiction.
In detailed television adaptations starring Roy Marsden, James was particularly pleased that all of her subplots and characters were incorporated into these leisurely multi­-part dramas; she was less happy with a later Martin Shaw incarnation.
Most recently, readers were granted a beguiling (if slight) tribute to the author’s beloved Jane Austen with her Death Comes to Pemberley, which was little more than a jeu d’esprit towards the end of a lengthy career. James, always a hard worker, was writing a new detective story at the time of her death on Thursday; The Private Patient in 2008 was her final Dalgliesh novel.

Fonte: FT

quinta-feira, 27 de novembro de 2014

Cheap energy is the new cheap labour

The price of oil keeps on falling; the shale gas boom has reduced the price of natural gas in the US to a third of that in France; Germany has appealed to Sweden for its support in expanding two coal mines; and the EU’s effort to switch to clean energy is troubled. For companies wondering where to locate, the world has turned upside down.

Cheap energy is the new cheap labour. For two decades, the biggest driving force in industrial globalisation was the gap in the price of labour between the developed world and China. That induced many industries – textiles, electronics and others – to shift production from high-cost factories in the US and Europe to places where people would work for a fraction of the cost.

Now, as the wage arbitrage between the north and south narrows, the energy gap is widening. Wage rates adjusted for productivity in China have risen to more than half the level in the US, according to Boston Consulting Group. Meanwhile, energy prices have been falling and the Opec oil-producing countries have failed to halt the decline. Some fortunate countries, especially the US, are gaining from both of these trends at once.

Although cheap fuel theoretically helps every energy-dependent country, the gains are distributed unevenly. The big beneficiary, thanks to shale natural gas, is the US. Not only is it helped by companies bringing manufacturing home but it is also an oasis of cheap gas. That is luring energy-intensive industries such as chemicals, petrochemicals, aluminium and steel.

Europe made the wrong bet. In the long run, making fossil fuels more expensive by subsidising renewables and charging for carbon emissions could bring the EU a steady supply of clean, cheap energy. At the moment, it is nullifying the benefits of lower energy prices and giving European companies an incentive to relocate.

“There are no energy-intensive investments taking place in Europe now,” says Dieter Helm, professor of energy policy at the University of Oxford. “Why would you locate a new investment in a place with both high labour costs and high energy costs, many of which are self-inflicted?”

Plainly, it is a lot more expensive and harder to build a new aluminium-producing plant or chemical works in another country than to outsource textile or electronics manufacturing to an existing plant in China. These are long-cycle, capital-intensive industries that cannot move on a whim.

Energy also takes a lower share of production costs in most industries than wages or raw materials. The EEF, the UK manufacturing body, says that energy comprises 5 per cent or less of costs for 70 per cent of its members. Aluminium-smelting is the biggest fuel-guzzler, at 30 per cent of costs.

European countries have tried to shield energy-intensive industries from the costs of switching to renewables. Germany, whose Energiewende policy of obtaining 80 per cent of electricity from clean sources by 2050 is causing intense stresses, has capped renewables charges to heavy industry, despite EU pressure to limit subsidies.

But the pressures are intense and are unlikely to recede. Even if European countries change tack, no large economy can match the US in shale gas. Even when the US starts to export liquefied natural gas to Europe, it will retain a significant cost advantage.

The comparative significance of energy grows as that of wages lessens. The “onshoring” of US manufacturing is assisted by rising wages elsewhere – between 2006 and 2011, Asian wages rose by 5.7 per cent per year, compared with 0.4 per cent in developed economies. Productivity has also risen: an advanced manufacturing plant often employs fewer than 200 people.

So companies are moving, often by picking the US when they make new investment decisions. BASF, the German chemicals company, is one example: it is allocating a quarter of its €20bn investment budget over five years to the US, and plans to build a $1.4bn propylene site on the Gulf Coast. Natural gas will provide not only the energy but also the chemical raw materials.

Even if a European company keeps a plant open, it can divert some of the production to the US. Voestalpine, the Austrian steel company, is building a €500m facility in Texas, at which it will make iron for two Austrian steel plants. It will use natural gas to power the blast furnaces in Texas rather than the coking coal it uses in Europe.

The temptation for Europe, caught in the middle of transition by unexpectedly low energy prices, is to dismiss such moves as marginal. Only aluminium smelters rely crucially on cheap energy; no company can close a Rhine steel plant for short-term gain; chemicals is a special case, and so forth.

This would be a mistake. In the long run, there are real risks for countries that impose high costs on themselves while their competitors enjoy low ones. If everyone from the US to China adopted the approach together, it would not matter. But in a world of cheap gas and coal, it does.

It is a hard challenge – the US is lucky to have large, accessible shale gas reserves. But Europe must start by realising that the comparative advantage of cheap labour is giving way to that of cheap energy. Turning a blind eye to that fact will not work.

John Gapper

Fonte: FT

quarta-feira, 26 de novembro de 2014

After the crisis, the nation state strikes back

Is the state making a comeback? It can certainly look like it. Old-fashioned interstate conflicts are roiling the China Sea and Russia’s western borders. Inter-governmental meetings such as the last Apec conference and the Group of 20 leading economies in Sydney took on an unwonted urgency. More positively, it is old-fashioned diplomacy that is making the running on issues from Iran’s nuclear programme to global warming.

Yet the dominant view since the early 1990s has been that globalisation meant the transformation of the world through non-state actors. The end of the cold war ushered in an almost Marxist expectation that the state would wither away – overshadowed by free flows of money and goods, undermined by non-state actors of which terrorist groups were only the most obvious. It was an expectation shared right across the political spectrum.

On the left, critics of market globalisation anticipated the rise of people power. Non-governmental organisations would supersede the supposedly worn out institutions of the nation state and create new, more vibrant forms of political activity. Technology would bring better solutions to old problems, bypassing stagnant state institutions.

The neoliberal right hailed the rise of global finance, the dismantling of capital controls and the deregulation of banking, not least because all of these weakened national governments’ capacity to control markets. In manufacturing and services, enormous new powers accrued to corporations able to take advantage of differing tax regimes and wage levels across the world.

Yet these hopes underestimated the sheer staying power – indeed the legitimacy – of the state and its institutions, and the extreme difficulty of creating new ones from scratch. NGOs remain on the sidelines: international organisations are vehicles for clusters and coalitions of national states to act in concert where they can. To that extent they are essentially derivative, reflecting the wishes of their most powerful members. The idea that they could be freed from the clutches of national governments was a pipe dream.

And the neoliberal infatuation with unfettered markets has not fared much better. The era of globalisation was always one of instability and in Mexico, east Asia, and Russia, the costs of crisis were evident to those who cared throughout the 1990s. But it was only a decade later, when the failure of Lehman Brothers and its aftermath robbed Americans and Europeans of their faith in capitalism, that perceptions started to change where it counted.

Since then, power has shifted back towards the state on multiple fronts. It was, after all, taxpayers who bailed the banks out. It fell to central banks, in conjunction with finance ministries, to superintend the exit from crisis. Since 2010, the increasing inequality that has accompanied the recovery has fuelled an underlying swell of electoral anger not only against the banks but also against the light tax burdens enjoyed by many global corporations. The change in sentiment threatens further trade liberalisation and has propelled calls for the international harmonisation of corporation taxes up the political agenda. At the same time, Vladimir Putin’s muscle-flexing illustrates the continued indispensability of states in settling matters of war and peace.

In reality, the state has been with us the whole time. Its fiscal imprint has hardly changed in decades: US government receipts, for instance, are much the same percentage of output today as in 1960. In the UK, public spending has fluctuated within a fairly narrow band throughout the same period. What happened over the past two or three decades was less a withering away of the state than a recalibration of official priorities. Abdicating strategic planning internally, the state become an arbiter of regulatory regimes. Externally, it transformed defence budgets, transferring resources from men to machines.

The financial crisis has accelerated some of these trends and started to reverse others. States – or the politicians who lead them – are still reluctant to do what would have been done in the 1940s. They remain strikingly reluctant to impose tougher penalties on banks or to identify unemployment as a priority. But what is perhaps important is what the crisis has done globally: by discrediting the more mythical idealisations of the market, it has encouraged the restoration of state power as a goal in itself. This programme is easily harnessed by authoritarian leaders in the name of national sovereignty and democracy. Hungary and Russia exemplify the trend. We have heard a lot, this past 20 years, about the decline of the state. We will not be hearing much more.

Mark Mazower is professor of history at Columbia and author of ‘Governing the World: The History of an Idea’

Fonte: FT

segunda-feira, 24 de novembro de 2014

China, Russia and the ‘Sinatra doctrine’

For centuries European navies roamed the world’s seas – to explore, to trade, to establish empires and to wage war. So it will be quite a moment when the Chinese navy appears in the Mediterranean next spring, on joint exercises with the Russians. This plan to hold naval exercises was announced in Beijing last week, after a Russian-Chinese meeting devoted to military co-operation between the two countries.

The Chinese will doubtless enjoy the symbolism of floating their boats in the traditional heartland of European civilisation. But, beyond symbolism, Russia and China are also making an important statement about world affairs. Both nations object to western military operations close to their borders. China complains about US naval patrols just off its coast; Russia rails against the expansion of Nato. By staging joint exercises in the Mediterranean, the Chinese and Russians would send a deliberate message: if Nato can patrol near their frontiers, they too can patrol in Nato’s heartland.

Behind this muscle-flexing, however, the Russians and Chinese are pushing for a broader reordering of world affairs, based around the idea of “spheres of influence”. Both China and Russia believe that they should have veto rights about what goes on in their immediate neighbourhoods. Russia argues that it is unacceptable that Ukraine – a country ruled from Moscow for centuries – should now join the western alliance. The Putin government’s aspiration for a “Eurasian Union” also seems intended to re-establish a Russian zone of influence over much of the former Soviet Union – which could then counterbalance the EU.

Until recently, China relied primarily on its economic might to spread its influence throughout Asia. But Beijing has now also become more directly assertive on security matters. It is pursuing its territorial disputes with neighbours such as Vietnam and Japan with increased energy. Last year Beijing also declared an “air defence identification zone” in the East China Sea – insisting that foreign aircraft declare themselves to the Chinese authorities.

There are some in the west who suggest that – on grounds of pragmatism and in the interests of peace – Russia and China should be tacitly granted these “spheres of influence”. In a recent interview with Der Spiegel, Henry Kissinger made it clear that he regarded it as reasonable to tell Ukraine that it is not free to decide its own future.

The Obama administration, however, has explicitly set itself against this idea. Tony Blinken, US deputy national security adviser, has said of Russia’s aspirations: “We continue to reject the notion of a sphere of influence. We continue to stand by the right of sovereign democracies to choose their own alliances.”

As Mr Blinken’s statement makes clear, the Americans believe that the argument about spheres of influence is about the defence of a fundamental principle. If undemocratic countries, such as Russia and China, are conceded a sphere of influence in their neighbourhoods, they are implicitly granted a veto over the policies pursued by nominally independent nations. Russia can forbid Ukraine from joining Nato or the EU. China can force Vietnam, the Philippines – or even Japan – to pay tribute.

As far as the Russians and Chinese are concerned, however, this is an argument that is fundamentally about power – and all US talk about “principle” is simply hypocrisy. After all, ever since the Monroe Doctrine was announced in 1823, America has proclaimed its intention to keep outsiders away from its own hemisphere. In recent decades, it has intervened militarily in Grenada, Panama and Haiti. Even more recently – as the Russians never tire of pointing out – the US has led military interventions far from home, in Iraq, Afghanistan and now Syria.

Indeed, as Moscow sees it, America’s global military reach is so pervasive that Washington has got used to treating the whole world as its “sphere of influence”. There are US troops in Japan and South Korea, US naval and air force bases in Bahrain and Qatar, and Nato bases all over Europe – to name just a few of America’s most high-profile global commitments.

The American response is to point out that the US global military presence is built around alliances between willing partners. Indeed, in an effort to underline the idea that America now genuinely repudiates the idea of spheres of influence, John Kerry, the US secretary of state, even declared last year that “the era of the Monroe Doctrine is dead”. Henceforth, it seems, America will endorse what a Soviet spokesman once called “the Sinatra doctrine” – the idea that all nations can do it their way.

It will not be hard for the governments in Moscow and Beijing to point to continuing inconsistencies in America’s rejection of spheres of influence. But the US argument still rests on a basic truth. There is a vast difference between a sphere of influence based on willing consent and one that is constructed around intimidation and force.

It seems to be almost a rule that the closer a country is to any putative Russian or Chinese sphere of influence, the more eager it is to cement an alliance with the US. From Poland to Japan – and points in-between – America’s allies need little persuasion to shelter under the US security umbrella.

The arrival of the Chinese navy in the Mediterranean next year may only add to the persuasive pull of Nato.

Gideon Rachman

Fonte: FT

sexta-feira, 21 de novembro de 2014

Central banks: Stockholm syndrome

When the global financial crisis broke in 2008, Sweden’s central bank seemed to be one of the best-equipped to fight it. The Riksbank was led by Stefan Ingves, a former senior official at the International Monetary Fund whose expertise lay in financial crises and how to avoid them. One of its deputy governors was Lars Svensson, an expert on Japan’s long battle against deflation and a top thinker on monetary policy.
With these credentials, the two men seemed ideally suited to guide the Riksbank’s policy through the turmoil, says Christian Odendahl, chief economist at the Centre for European Reform. The aftermath of the crisis “was exactly made for these two people on what should be done”, he says.
At first, they found common ground as the Riksbank cut interest rates in 2009 to 0.25 per cent, their lowest level since its founding in 1668. But for the next two years, the duo clashed bitterly over monetary policy. Their debate – about when an economy is healthy enough to stop crisis-fighting measures – is still resonating at central banks from the US Federal Reserve to the European Central Bank and the Bank of England.
The Riksbank’s decision in 2010 to start raising rates – an idea Mr Svensson firmly opposed – has transformed the Swedish central bank from a small but respected institution to a cautionary tale for central banks worldwide.
“Sweden has done an experiment the whole world is interested in,” Mr Odendahl says. “What should we do when monetary policy should be accommodative but there are financial risks? The Swedish lesson is that tightening policy prematurely isn’t the answer.”
Paul Krugman goes further, calling the policy “sadomonetarist”. The winner of the Sveriges Riksbank Prize in Economic Sciences, commonly known as the Nobel Prize in economics, calls the Riksbank’s rate rises “possibly the most gratuitous” policy error of the crisis. “In terms of really having no obvious justification in terms of macro indicators, you would find that hard to match anywhere in the crisis. It is the most out- of-thin-air tightening policy out there,” Mr Krugman told the Financial Times.
Mr Svensson feared that the rate rises could push Sweden closer to deflation, the toxic bout of falling prices that he had observed in Japan. Last year, he resigned from the Riksbank in frustration just as his fears were coming true.
Sweden’s headline inflation was minus 0.1 per cent in October and has only been positive in eight of the past 24 months. After raising rates to 2 per cent in 2011, the Riksbank woke up to the risk of deflation and began to reverse course. Rates were cut to a record low of zero last month.
Throughout this, the Swedish economy has held up, unlike in Japan, with growth in gross domestic product of 1.6 per cent in 2013 and government forecasts of 2.1 and 3 per cent for this and next year. Unemployment remains stubbornly high by Swedish standards at 7.9 per cent, although that is lower than in many European countries.
The Riksbank’s preferred core inflation measure – which excludes the impact of its own rate cuts – was 0.6 per cent in October, a long way from its 2 per cent target. Policy makers remain on edge. “Deflation is definitely a worry. We cannot see that there is an immediate risk that we are very close to it but it is a risk. If inflation is too low, all of a sudden you are there and it’s very dangerous. Just look at Japan,” says Stefan Löfven, Sweden’s prime minister.
Mr Svensson’s association with the Riksbank began during another extreme moment. At the start of the 1990s, he was an adviser to the central bank just as the Nordic financial crisis hit Sweden. The Riksbank briefly – and boldly – raised interest rates to 500 per cent. It also became one of the first central banks to introduce inflation targeting.
Mr Svensson left Sweden at the turn of the century to become a professor at Princeton, where he became friendly with Ben Bernanke, the former Fed chairman, as well as Mr Krugman.
When the Riksbank asked him in 2007 to return as a deputy governor, it was seen as a coup for the central bank. “I could not decline to see how it could be implemented in practice,” Mr Svensson says.
Almost immediately, he was plunged into Sweden’s battle with the financial crisis – but not before he joined Mr Ingves in pushing through an ill-fated interest rate rise just two weeks before the collapse of Lehman Brothers. Weeks later they were cutting rates, including one of the biggest reductions of any western central banks, a 1.75 percentage-point drop in December 2008.
Mr Svensson started expressing dissent soon after. He thought the rate cuts should go faster and then that rates should be reduced all the way to zero rather than the 0.25 per cent where the Riksbank stopped.
A year later came a far more serious disagreement. In June 2010, the Riksbank decided to start raising rates again. Some governors saw the booming economy – growth was 6.6 per cent that year – and began to fret about rising house prices and high household debt. But Mr Svensson, and another deputy, Karolina Ekholm, wanted to keep rates low because inflation was still below the 2 per cent forecast and unemployment near its post-crisis high at 9.6 per cent.
The Riksbank is almost alone among the main western central banks in releasing detailed minutes of its monetary policy meetings that include the specific comments of each committee member. In the June 2010 minutes, Mr Svensson started by saying: “The risks associated with breaking off the expansionary monetary policy too early are still much greater than the risks of continuing to pursue it for too long.”
But Mr Ingves talked of a rate rise helping “a normalisation of monetary policy”. With household debt at a record high of about 170 per cent of disposable income, he added: “A low interest rate for too long could lead to a troublesome situation beyond the forecast horizon as a result of a credit expansion.” For Mr Krugman, this is symptomatic of a divide between policy makers – typically between those in the US and those in Europe – over the merits of low interest rates. “The Riksbank is representative of a current of opinion that thinks there must be something wrong with an extended period of cheap money even if the inflation numbers are below target. They got one of the world’s leading scholars [in Svensson] and then put him in the corner,” he says.
Mr Svensson himself says that had he been at the US Fed he probably would have been seen as a “boring mainstream person” while in Sweden he was an “outlier”. He says the Riksbank’s forecasts in 2010 showed inflation would remain below target until 2013 while unemployment was well above pre-crisis levels. “I wanted to focus on stabilising inflation and unemployment. The forecasts were very similar to those in the US but the policies were very different.”
The majority at the Riksbank and many economists at Swedish banks saw a different world. Sweden seemed to be bouncing back strongly from the crisis, and while there were troubling signs in Greece in the summer of 2010, normal monetary policy rules suggested they should tighten policy.
“If you have a combination of a strong economic rebound, inflation in the area of the target and a policy rate of 0.25 per cent, it is very easy to say that conventional monetary policy analysis should imply a higher policy rate and a beginning of a normalisation in the policy rate,” says Cecilia Skingsley, who has been a deputy governor at the Riksbank since last year and before that was an economist at Swedbank, a local lender.
Others urge critics not to use the benefit of hindsight to beat up the Riksbank. “If anybody had told us that inflation would be zero, we would not have believed it. It is so easy to look back now. You can’t blame Ingves for observing some asset inflation and some fairly good fuel in the Swedish economy,” says Christian Clausen, chief executive of Nordea, the biggest Nordic bank.
Whatever the merits of the debate at the time, the outcome appears to have vindicated Mr Svensson. “With the benefit of hindsight, maybe they should have started to cut somewhat earlier. Faster, quicker, stronger – all that,” says Ms Skingsley, the closest the central bank has come to an admission of error.
Household debt and house prices chart
Perhaps unsurprisingly, Mr Svensson thinks the Riksbank should go further still, by trying out negative interest rates as inflation is so low. “The Riksbank naively thinks inflation will quite quickly come back to target,” he adds.
The central bank indeed thinks zero rates should suffice to improve the inflation outlook. But Ms Skingsley hints at other options if inflation remains too low. First up is likely to be a commitment to keep rates at zero for longer than the current forecast of a first rise in mid-2016. A currency floor, quantitative easing or negative rates are also possibilities.
The lessons for other central banks from the Riksbank’s actions fall into two broad categories. First, there is the difficulty of using monetary policy not to guide inflation but instead to try to rein in household debt or asset bubbles – what economists call “leaning against the wind”. The ECB is also battling against deflation while some of its members worry about the impact of low interest rates on financial stability. Mr Svensson’s advice is not to confuse objectives: “There is really no evidence that monetary policy has a systematic effect on financial stability.”
Ms Skingsley says she believes the “leaning against the wind argument was blown out of proportion” as it was not crucial for the rate rises. But the Swedish central bank has largely conceded defeat and now says financial regulators should take the lead in tackling debt.
A second lesson for central banks is to be cautious when raising rates after a crisis. “I can assure you that people at the Fed have heard about this and are thinking about it,” Mr Krugman says. Both he and Mr Svensson invoke the Fed’s decision to tighten in 1937 – which is blamed for tipping the US back into recession.
So where does this leave Sweden? Some have sought to compare the country to Japan but Mr Svensson does not agree. “I don’t see it as out of control yet,” he says. “It’s not like Japan where the Bank of Japan did not have control.”
Sweden’s mix of zero rates, no inflation, some growth and expanding credit means its policy makers are set to be in the spotlight for some time. “The Riksbank may have done a great disservice to its own economy but it may have done a service to the global economy,” he says.
Household debt: How much is too much?
The Scandinavian economies top many polls on happiness and living standards. But they also have the worrying distinction of leading the developed world in household debt.
Denmark has the highest household debt-to-disposable income ratio among the world’s richest countries at 310 per cent. Norway and Sweden are not far behind with ratios of 200 and 170 per cent respectively, according to the Organisation for Economic Cooperation and Development.
Policy makers have taken different approaches in each country. In Denmark, officials seem relaxed , arguing that Danes have lots of assets and are able to withstand rising interest rates “The threat to financial stability from [household debt] is therefore not serious in the current situation,” Lars Rohde, governor of the central bank, told Bloomberg this year.
But the Riksbank in Sweden has long worried about rising house prices and household debt levels. The central bank sought (and failed) to gain control over macroprudential policy – measures designed to ensure financial stability, such as capping the amount home buyers can borrow for a mortgage. Instead, macroprudential policy was given to Sweden’s Financial Supervisory Authority, which is already tightening mortgage rules. Today, Swedes only have to repay the interest on mortgages, meaning some loans take as many as 140 years to repay.
The FSA this month proposed that new mortgage holders would have to pay down half of their loans.
The impact of such measures is hotly disputed. Distortions persist in the Swedish and Norwegian housing markets, where there is far greater demand than supply in the biggest cities. Borrowers in both countries are also able to claim tax relief on mortgage interest.
Some argue that reforming these distortions would be the most important change authorities could make. Christian Clausen, chief executive of Nordea, says politicians need to take responsibility for helping create asset bubbles.
On Sweden’s tax incentives to own a house, he adds: “You have a screwed system that wants to over-leverage in principle in an asset that you don’t want to over-leverage on.”

Richard Milne 

Fonte: FT

quinta-feira, 20 de novembro de 2014

Europe’s economic future depends on French reforms

The crisis of confidence in the euro – when millions of citizens feared for their savings and virtually the entire economic system was at risk – is over. This is largely due to the tremendous efforts of EU member states, and European institutions in Brussels and Frankfurt that worked well together to avert disaster. That we have mastered this crisis together is undoubtedly a success.

But questions remain. As the EU’s autumn economic forecasts showed, growth prospects remain weak. There is talk of stagnation and a possible risk of a return to the crisis. If we are to avoid this, and really put the threat behind us, we need to chart a credible course in economic and financial policy. Our work on bolstering confidence in the euro must continue. And, to achieve this goal, structural reform will play a critical role.

In this regard, the role of eurozone heavyweights such as France and Germany will be decisive. But so too will be the more immediate question of how strict the European Commission is in addressing the issue of France and its high budget deficit.

Next week the new commission is set to take probably the hardest and most serious decision since taking office this month. It must decide whether Paris should for the third time be granted extra time to bring its budget deficit below the limit of 3 per cent of gross domestic product set out in the stability and growth pact, the rules under­pinning the single currency. France last managed to stay beneath that limit in 2009. The commission has twice granted an extension, most recently until 2015.

Yet the autumn official forecasts show even this will not be met. On the contrary: without additional efforts France’s deficit will rise further – to 4.5 per cent of GDP in 2015 and 4.7 per cent the following year. For 2014 it is forecast at 4.4 per cent.

This raises the question of the willingness to act and whether to go further in tackling the deficit; and of how the commission should respond. It would not be credible to extend the deadline without asking for clear, concrete steps in return. France must commit to policy goals that can solve its economic and fiscal problems in the long term.

This should not be seen as a decision taken against France but rather as a measure for, and with, France. It is not just about one country. Without an economically strong France, the eurozone as a whole will not recover.

Paris has already shown a possible way out of this situation. At the EU summit in June, it endorsed recommendations on economic and budgetary policy aimed at, among other things, tackling deficits, reducing labour costs and slashing red tape.

France has taken a number of steps with regard to some of these points but it has not gone far enough. For example, it has introduced a pension reform. Yet as it stands, this reform appears unlikely to meet the objective of ending the deficit in the pension system any time soon. With regard to high labour costs, the government has relied on additional public spending rather than improvements in wage-setting. Similarly, a cut in corporate tax has been announced but is set to take place only in a few years.

This means the biggest, most urgent challenge facing France remains the need to implement deep structural reforms. Only these will increase investment, create jobs and boost growth. Structural reforms are also the best way to rebuild the trust needed to provide the economy with effective credit once more.

For this reason any extension of the deadline by which France must correct its excessive deficit and comply with the stability pact is acceptable only if Paris makes a clear and credible commitment to reform. Yes, some steps have already been taken. But these have been too few and not sufficiently ambitious. More is needed. That is in the interest of France but also of the eurozone as a whole.

Therefore the commission should link any extension of the deadline to concrete, measurable policy steps; and it should also set the timeline for their implementation. The Lisbon treaty that underpins the EU offers ways to do this. We should use these. For the sake of France – and for Europe.

Günther Oettinger, a member of Germany’s Christian Democratic Union, is EU commissioner for the digital economy and society

Fonte: FT

quarta-feira, 19 de novembro de 2014

What goes up must come down – even China

What would China look like if it were growing at just 2 per cent a year? That sounds like a ridiculously pessimistic question given China’s performance in the past three decades. Certainly, it has manifold problems. Indeed, its economy is already slowing. But what misadventure could possibly bring its growth rate crashing down so spectacularly?

That is the wrong question, according to an influential paper by US economists Lant Pritchett and Lawrence Summers. For them, “the single most robust and striking fact” about growth is “regression to the mean” of about 2 per cent. Only rarely in modern history, they say, have countries grown at “super-rapid” rates above 6 per cent for much more than a decade. China has managed to buck the trend since 1977 by harnessing market forces, engineering possibly the longest spell “in the history of mankind”. But what goes up, the authors tell us, must eventually come down.

They have trawled through the data and drawn two powerful conclusions. One is that there is almost no statistical basis for predicting growth from one decade to another. Extrapolation is a mug’s game – or, as they put it, “current growth has very little predictive power”. From 1967 to 1980, Brazil grew at an average annual rate of 5.2 per cent. Few would have predicted, then, that for the next 22 years per capita income would grow at precisely zero.

Their second finding is that episodes of super-rapid growth last a median of nine years. China is the big exception. The only countries with fast-growth
episodes that come close are Taiwan and South Korea, which managed 32 and 29 years respectively. According to the authors, once such episodes end, the median drop in growth is 4.65 points. That would cut China’s growth to 4 per cent and India’s to 1.6 per cent, far lower than almost anyone is predicting.

The thesis has huge potential ramifications, both economic and geopolitical. If China and India continue their current growth trajectories, their combined gross domestic product will rise to $66tn by 2033, against $11tn today. If they regressed fully to mean, they would reach a combined GDP of just $24tn. The authors have no need to explain why China’s, or indeed India’s, growth should fall so precipitously. This is just what happens. Their reasoning puts the onus on optimists to explain otherwise.

There are several conceivable rejoinders. The first applies to emerging markets generally. The idea of “convergence” holds that poor countries can grow faster than rich ones. That is partly because there is low-hanging fruit; for example, moving people from unproductive rural jobs to more productive urban ones. Poor countries can also copy rich ones; they do not have to reinvent the wheel. Niall Ferguson, professor of history at Harvard University, refers to “six killer apps of prosperity”: competition, scientific revolution, property rights, medicine, consumer society and the work ethic. Since we already know what they are, they can be “downloaded”. Several Asian economies, including Japan, Taiwan, South Korea and Singapore have more or less caught up with western living standards. If they can do it, why not others? Regression to mean, however, implies that such speedy catch-up is impossible, or at least very difficult.

Is there anything about China specifically that suggests it could buck the trend? First, it has already done so, growing rapidly for more than 30 years. The two economists say this makes a rapid slowdown more likely. But perhaps it is the reverse. Chinese leaders may have learnt how to beat the odds. Second, as Jim O’Neill, who coined the term Brics, says, the authors’ data may be skewed by the mostly disappointing economies of Latin America, the Middle East and Africa. Perhaps Asian economies have discovered a secret sauce. Third, China’s long-lived expansion follows many decades of chaos and suboptimal growth. What we are seeing now could plausibly be a long-pent-up recovery – the country’s own regression to mean. Fourth, China’s size could confer growth-sustaining advantages in terms of economies of scale and size of domestic market. If true, that would also apply to India.

The authors do offer one reason for believing China’s growth rate is unsustainable: “institutional inadequacies”, particularly the failure to control corruption. To some, the argument is an old saw dressed up in new data: the country cannot keep growing because it is not democratic. Still, the regression to mean theory provides a powerful corrective to mechanical extrapolation. The authors are right. Any time you hear the words, “based on current growth trends”, you should pause for thought.

David Pilling

Fonte: FT

terça-feira, 18 de novembro de 2014

Barry Eichengreen: The bond market’s dance over European debt will not last forever

The dismal third-quarter growth figures for the eurozone last week underscore, once again, doubts about the sustainability of sovereign debts. Yields on Spanish, Irish and Portuguese government bonds last spiked in mid-October as investors took fright at prospects for the world economy and the implied cost of borrowing for weaker eurozone countries jumped. The question is whether they are about to do so again.

To look at the official European strategy for managing debt you would think it was aimed at keeping the problem going for as long as possible. The plan is for governments to run primary budget surpluses with the goal of bringing down the debt-to-gross domestic product ratio to a tolerable 60 per cent by 2030.

The implied surpluses are mind-boggling. Under reasonable assumptions about growth rates and interest rates, the average annual primary surplus for the decade ending in 2030 would exceed 4 per cent for Spain, 5 per cent for Ireland, Italy and Portugal, and 7 per cent for Greece. Put simply, no country can run such monumental surpluses for such extended periods without inciting a taxpayer revolt.

Well, almost no country. Since the mid-1970s there have been just three cases of countries that have run primary surpluses as large as 5 per cent for as long as 10 years.

One is Norway, starting in 1995. The country ran large surpluses during the period of maximum oil and gas production, salting away revenues in its sovereign wealth fund. A second case is Singapore, starting in 1990. The city-state has an exceptionally strong executive and, as a very small, open economy, is highly susceptible to global shocks. These singular circumstances compelled it to save revenues for a rainy day. But its circumstances, like those of Norway, have no relevance to Europe today.

The third case, Belgium starting in 1995, might seem more pertinent. But there too circumstances were unique. The second half of the 1990s was when the decision was taken to create the single currency. Belgium had to show that it was committed to bringing down its debt in order to qualify for membership. Not qualifying would have been a disaster for an EU founding member whose economy was closely connected to those of Germany and France.

The story of Belgium’s large primary surpluses raises the question of why others, Italy for example, did not behave likewise. The explanation lies in the institutional reforms that Belgium put in place from the 1980s onwards, in anticipation of the need to sustain large primary surpluses.

It reformed its tax code, expanding the tax base and lowering top marginal rates. It empowered the Federal Planning Bureau to issue independent budget forecasts. It constrained spending by regional governments. It restructured the High Finance Council, giving it a clear mandate to monitor and co-ordinate fiscal policies between the federal and regional levels.

The timing of these actions, plus the fact that the large primary surpluses disappeared not long after Belgium succeeded in adopting the euro, point to the importance of the combination of strong external pressures and robust domestic institutions.

Are the circumstances confronting Europe’s heavily indebted governments today at all similar? To be sure, those governments face strong external pressures from the bond market. But they also face strong internal pressures from voters, who are unlikely to sit patiently for 10 to 15 years while 5 per cent of national income goes to pay off the debt of previous generations. The countries in question clearly lack the strong fiscal institutions needed for this task.

The implication is that Europe’s official strategy for resolving its debt crisis will not work.

Fortunately, there are feasible alternatives – or at least in theory. One is to grow the denominator of the debt/GDP ratio. The effective debt burden can be reduced by growing the economy and thus government revenues. This would expand the states’ capacity to service their obligations. But sadly growth cannot be conjured up out of thin air. European policy makers have shown an inability to conjure it up any other way.

The other alternative is debt restructuring. European officials continue to dance around the idea of writing down public debt, promising Greece lower interest rates and longer maturities but denying the need for more fundamental restructuring and for applying such measures more widely. The events of recent weeks make clear that they will not be able to dance much longer.

Barry Eichengreen is professor at the University of California, Berkeley and University of Cambridge. This column is based on research undertaken together with Ugo Panizza

Fonte: FT

segunda-feira, 17 de novembro de 2014

The wacky economics of Germany’s parallel universe

German economists roughly fall into two groups: those that have not read Keynes, and those that have not understood Keynes. To describe the economic mainstream in Germany as conservative misses the point. There are some overlaps with the various neoclassical or neoconservative schools in the US and elsewhere. But as compelling as a comparison between the German mainstream and the Tea Party may appear, it does not survive scrutiny. German orthodoxy straddles the centre-left and the centre-right. The only party with some Keynesian leanings are the former communists.

A good example of orthodox dogma was last week’s annual report of the Council of Economic Experts, an official body that advises the government. They did not criticise a lack of investment, excessive current account surpluses or overzealous fiscal rectitude. Instead they criticised the minimum wage and some minor relaxation to the retirement age. In other words: they want the government of Angela Merkel, chancellor, to be even tougher.

The Germans have a name for their unique economic framework: ordoliberalism. Its origins are perfectly legitimate – a response of Germany’s liberal elites to the breakdown of liberal democracy in 1933. It was born out of the observation that unfettered liberal systems are inherently unstable, and require rules and government intervention to sustain themselves. The job of the government was not to correct market failures but to set and enforce rules.

After 1945, ordoliberalism became the dominant economic doctrine of the centre-right. In the 1990s, the Social Democrats started to embrace it, culminating in Gerhard Schröder’s labour and welfare reforms in 2003. Today the government is ordoliberal. The opposition is ordoliberal. The universities teach ordoliberal economics. In the meantime, macroeconomics in Germany and elsewhere are tantamount to parallel universes.

In practice, German macroeconomic exceptionalism did not really matter all that much – until recently, when it started to matter a lot. When you have your own currency and engage with the rest of the world mainly through trade, a wacky ideology is your problem. That changes when you enter a monetary union, which is when policy makers have to work together.

Nobody had paid much attention to this issue. Much of the early theoretical discussion about the eurozone centred on the notion of an optimal currency area: which countries are fit to join a monetary union? What turned out to be far more important is a common understanding that allows people to communicate and act with one another.

For example, German ordoliberals simply refuse to acknowledge the presence of a liquidity trap where the central bank becomes powerless in affecting market interest rates. Ludwig Erhard, Germany’s revered economics minister in the 1950s, once tried to explain the Great Depression in terms of cartels. It was an ordoliberal attempt to bring something into their mental framework for which they have no obvious explanations. Erhard’s successors repeated the mistake in the eurozone crisis, which they see as a story of fiscal indiscipline.

Right now there are three fundamental issues with ordoliberalism that are of wider importance. First, ordoliberals have no coherent policy to deal with depressions – once or twice in a century disasters. Whenever I ask one of them what one should do in a depression, the answer usually includes some reference to “creative destruction”.

Second, ordoliberals lack their own coherent monetary policy framework. They used to be Monetarists. Their position today is mostly inconsistent.

My third criticism is more fundamental. It is far from clear whether ordoliberal dogma translates from a relatively small open economy like Germany to a large closed one like the eurozone. The ordoliberal world view is asymmetric. Current account surpluses are considered more acceptable than deficits. Since the rules are based on national law, ordoliberals do not care about their impact on the rest of the world. When they adopted the euro, the rest of the world suddenly did start to matter.

The ordoliberal doctrine may even have worked well for Germany, though I suspect that the country’s economic success is due mostly to technology, high skills and the presence of some excellent companies, rather than to economic policy. Through its dominance of the euro system, Germany is exporting ordoliberal ideology to the rest of the single currency bloc. It is hard to think of a doctrine that is more ill suited to a monetary union with such diverse legal traditions, political system and economic conditions than this one. And it is equally hard to see Germany ever giving up on this. As a result the economic costs of crisis resolution will be extremely large.

Wolfgang Münchau

Fonte: FT

sexta-feira, 14 de novembro de 2014

Papa Emerito Bento XVI, seu irmão Monsenhor Georg Ratzinger e equipe que cuida do Papa Emerito no Monasterio Mater Ecclesiae...

Italy’s Post-it premier hopes reforms stick

Italian Prime Minister Matteo Renzi attends the Italian Parliament in Rome June 24, 2014. REUTERS/Remo Casilli (ITALY - Tags: POLITICS) - RTR3VGVB©Reuters

Matteo Renzi, Italy’s youthful and reform-minded prime minister, has been dubbed il rottamatore or “the scrapper”, for the way he has gone about transforming the country’s staid economic system and gridlocked political institutions.
But nine months into his job, he has taken on another moniker for himself. “Sometimes I feel like a Post-it note,” he explained to a group of business people in Brescia this month, “because my job is to remind Italy of who we are.”
However, the eurozone’s third-largest economy has failed to take off under his watch, taking some of the shine off the 39-year-old former mayor of Florence and heaping pressure on him to translate his lofty goals into concrete legislative victories – and quickly.As he seeks to awaken Italians from decades of political and economic stupor, Mr Renzi has set out to overhaul the country’s sclerotic labour laws, its clunky civil justice system and its expensive public administration. His prescriptions have earned him widespread support among Italians yearning for a radical transformation – and a few enemies fearful of what it might entail.
They have also raised hopes, from Brussels to Berlin, that Rome finally has a leader with both the political will and the popular backing needed to enact policies they have long demanded.
“My sense is that Renzi is giving a dynamism to Italy that it didn’t have before and moving things in the right direction. But that’s not enough and when you look at the [economic] numbers they tell us that the results aren’t there,” says Andrea Montanino, director of global business and economics at the Atlantic Council in Washington, and former executive director for Italy at the International Monetary Fund.
When Mr Renzi gained power in February, replacing Enrico Letta through a coup within his Democratic party, he was expected to ride a wave of improving economic performance that would help build support for his reforms. The government had projected that, after two consecutive years of contraction, Italy would return to 0.8 per cent gross domestic product growth in 2014.
But by the summer it was apparent that those expectations were wildly optimistic, as the global economy slowed and the Ukraine crisis hurt Italy’s export-heavy economy.
Now, it seems Mr Renzi will have to settle for a decline in GDP of about 0.4 per cent this year – which at best means the Italian economy is shrinking more slowly than in previous years. Third-quarter GDP figures will be released tomorrow, offering the latest verdict on the country’s economic performance.
It would have been unfair to expect Mr Renzi to engineer an immediate turnround. His aides warn the impact of his policies should be judged over years, given the depth of Italy’s decades-old economic problems. They also insist the Renzi agenda has not been derailed by recent poor growth.
“We are not happy that the outlook has worsened,” says Marco Simoni, one of Mr Renzi’s top economic advisers and a professor at the London School of Economics. “We would much prefer a positive number. But these differences are not meaningful from the point of view of policy making.”
There are, however, signs that the absence of an Italian economic recovery is changing the equation for Mr Renzi. It has certainly increased the pressure on him to accelerate his reforms – both domestically and internationally.
At home, he has the backing of the Italian business community. “[He] has taken on the heavy burden of leading Italy away from outdated rules and cultures that would lead us to an unstoppable decline,” says Giorgio Squinzi, president of Confindustria, Italy’s most influential business group. “We need to be grateful for this hard work.”
But this support could change if there is no tangible improvement and there have already been some signs of impatience.

Labour pains

In September, as the outlook soured, Mr Renzi launched his push for labour market reform designed to make it easier for companies to hire and fire workers, even at the cost of taking on the trade unions and the leftwing of his own party. But the sluggish economy may make it tougher for him to close the deal, or could lead to a watered-down version of the legislation, if his opponents sense he is in a weaker position.
“It makes everything more difficult. To impose tough changes you often need a crisis but it is easier to reform in the context of positive prospects,” says Riccardo Barbieri, chief European economist at Mizuho International in London.
Mr Renzi notched up a big win last month when the framework of the new labour law was approved by the Italian senate, but it has yet to receive a green light from the lower house of parliament. Even if it passes by the end of the year as predicted by Mr Renzi, all the crucial details of the plan will need to be filled in by implementing legislation, which could take months.
“The labour reform was initially put on hold and the framework law introduced is too vague. If Renzi wanted to give a sense of real change, he should have moved sooner,” says Mr Barbieri.
Italy’s poor economic performance has also worsened the country’s fiscal position. Its indebtedness as a share of GDP has continued to rise to 133 per cent, leaving Mr Renzi with limited options to stimulate the economy.
His latest budget – which offered more tax cuts than spending cuts – only narrowly passed muster with the outgoing EU commission and awaits a verdict as early as this month from the newly appointed one led by Jean-Claude Juncker. As part of the deal, Italy agreed to a small 0.3 per cent decrease in its structural budget deficit that was not as much as Brussels wanted, but more than Italy desired.
As Mr Renzi has tried to fight austerity and create more fiscal flexibility he has clashed publicly with Angela Merkel, the German chancellor, most notably last month after her quip that European economies should do their “homework”. Mr Renzi responded that Italy was not a “schoolboy”.
Earlier this month, he traded barbs with Mr Juncker after saying that even the EU’s founding fathers would “become eurosceptic” in the face of the bloc’s bureaucrats.

Bargaining with Brussels

Even so, European observers of Mr Renzi say that so far he has been fairly adept at getting his way with Brussels, alternating the tough rhetoric designed for a domestic audience with quiet behind-the-scenes negotiating on the numbers. But his standing in Europe could also suffer if the economy fails to grow and reforms falter.
“He has managed the relationship with the EU skilfully,” says Olli Rehn, a Finnish member of the European parliament and former EU commissioner for economic and financial affairs. “But I’m not sure that fighting for a few decimal points on the budget is the right battle instead of intensifying reforms.”
If Italy’s economic difficulties persist or worsen, there is speculation it could tip Mr Renzi into making a bet on new elections, possibly next year. The current Italian parliament is scheduled to stay in power until 2018, but its composition is unfavourable to the prime minister, who is governing with a slim majority.
Moreover, new elections could plunge Italy back into political instability, which Mr Renzi is reluctant to do. But if his support begins to fade on the back of a weaker economy, and he feels his reform agenda is being stymied in parliament, he might try to capitalise on his strong position to forge a more friendly legislature for the next five years.
Speculation about an early poll has been stoked by negotiations between Mr Renzi and Silvio Berlusconi, the former prime minister and leader of the centre-right Forza Italia party, over a new electoral law that would give more seats to winning parties and coalitions. The two reached a deal late on Wednesday, and if approved by parliament it would make it make it easier for Mr Renzi to govern if he prevailed in an election.
Mr Renzi remains personally popular, while his Democratic party is polling close to its record highs. There is no credible challenger to his power emerging on the centre-right, and the populist Five Star Movement led by former comedian Beppe Grillo has lost steam.
“Renzi’s opponents can slow him down but they cannot stop him,” says Roberto d’Alimonte, a political science professor at Luiss, a university in Rome. “He has widespread popular support and there is no alternative.”
While it has slipped since February, his personal approval rating remains at a healthy 54 per cent. But recent polls suggest the lack of an economic recovery is beginning to hit home. One Ipsos poll found that just 16 per cent of Italians believe the economy has improved since he took power, with 25 per cent saying it has worsened.

Investing in the PM

“There was a big investment in Renzi by the Italian people – based on hope,” says Luca Comodo, a director of political and social polling at Ipsos in Milan. “But things have changed a little this autumn – they expected a minimal amount of recovery, yet the outlook got worse, the condition of many families remains difficult and faith in Renzi has dropped.”
Mr Renzi’s allies seem unfazed, however. “Italy has been in a context of extremely slow growth for such a long time that it is debilitating,” says Mr Simoni. “The awareness of the need for change is so high that I don’t think we have a short window. This exercise is what the population is asking for.”
As he faced the business owners and managers in Brescia last week, Mr Renzi betrayed no sense of political fragility and continued to feed them expressions of optimism despite his country’s ailing economy and anxious spirit.
“If we do what we are capable of doing, Italy will be a locomotive in Europe over the next few years,” he said, offering the audience a prospect that seems far off today. “This is an insane opportunity, and to not grab it would be a huge mistake for us and our children.”
James Politi

Fonte: FT