Apple’s Jony Ive is tired of having to design everything

After two remarkably successful decades at Apple, Jony Ive is used to receiving honorary recognition. Sir Jonathan, who was born in Chingford in northeast London, was knighted for “services to design and enterprise” three years ago. This week, he gained the new title of chief design officer of what has become the world’s most valuable company, in large part due to his relentless efforts.

It hardly needed emphasising that Sir Jonathan is design supremo of Apple, and the decision to give him a grand title and promote two executives to run the industrial and software design divisions under him has divided Apple-watchers. Some regard it as a sign that Sir Jonathan is easing his way out, tired from producing a stream of innovative products such as the iPod and iPhone; others that he has accrued yet more authority.

Either way, he is at least the second most powerful executive at Apple after Tim Cook, its chief executive. Some regard him as the most powerful, thanks to his symbiotic relationship with the late Steve Jobs, Apple’s founder, who once described Sir Jonathan as his “spiritual partner”. As Mr Cook put it in the official announcement of his new role: “Our reputation for world-class design differentiates Apple from every other company in the world.”

Many other companies would like to match Apple by integrating design so deeply into the creation of new products and services that it outstrips functions such as sales and marketing. It has paid off for Apple to the tune of $760bn — its current market capitalisation. Who would not want to mimic that?

The problem is that it is incredibly hard, even if a company has an equally talented team of designers. Not only is making things with more than a design flourish applied to the outside expensive, but the scope of design has expanded radically since 1925, when Philips, the Dutch company, hired Louis Kalff to polish its advertising and named him head of “propaganda”.

The cost of listening to what designers say is illustrated by one story in Walter Isaacson’s biography of Jobs. Sir Jonathan wanted to place a recessed carrying handle in the brightly coloured iMacs that he designed in 1998, less for practical reasons than to make the machine seem friendlier to older buyers. Apple’s engineers protested that the handle would be expensive and impractical; Mr Jobs ignored them.

Good design runs deep. As James Dyson, the British inventor, argued in a recent interview in the Financial Times, “If something looks designed on the outside but doesn’t work well, you hate it. It gives design a bad name.” Thus, designers have to work from the earliest stages on what a product is, and how it will be built, rather than making it look good once it is close to completion.

One of Sir Jonathan’s heroes is Dieter Rams, the designer of Braun products such as shavers and radios. Among Braun’s design mottos is: “Good design is as little design as possible.” The tradition of being low-key and yet elegant, without any distracting details, is evident in the slim, almost austere, aluminium MacBook.

Apple does not solely follow the German functional style of industrial design. It also draws on a more exuberant US tradition, reaching back to mid-century designers such as Raymond Loewy and Harley Earl — the man who fitted fins to Cadillacs — in the colourful versions of iPods and other products. Sir Jonathan’s team somehow manages to blend the two approaches.

It is hard to remember now, but Jobs seemed to have set himself an almost impossible task on returning to Apple in the late 1990s — to resist the steady commoditisation of personal computers into a set of grey boxes containing software. By enlisting Mr Ive, he both achieved this and altered where value lay — in the integration of hardware, software and services.

That makes the field of design more interesting, important, and difficult. Philips, for example, has 500 designers working in 18 global locations, whose work has shifted from making consumer devices to thinking about the way, for example, children in hospitals react to Philips-made body scanners. The more relaxed they feel, the less the need to sedate them.

Sir Jonathan was given oversight of software as well as industrial design at Apple in 2012. He now has a hand in everything from the layout of Apple stores to the design of its new headquarters in Cupertino, California, and the furniture inside. Apple is working on a car — maybe a self-driving car — and he is helping to steer this project too.

He has, in other words, made his job far bigger, extending his reach into aspects of production that an earlier generation of designers would not have dreamt of taking on. This could account for his tone of profound weariness in a recent profile in The New Yorker. He described himself as “deeply, deeply tired” and only half deflected the suggestion that he would like to return with his family to live in the UK.

“Apple’s most remarkable quality is discipline,” says Jonas Damon, executive creative director of Frog Design, a design agency. “From the top down, they dictate what the company puts its effort behind.” If being Apple’s great design dictator has become too much for Sir Jonathan, what chance do other companies have?

Fonte: FT

Now China starts to make the rules

Once in a while the question changes. Not so long ago western policy makers asked whether a rising China would sign up as a “responsible stakeholder” in the postwar global system. Now amid controversy over the Beijing-inspired Asian Infrastructure Investment Bank, they query whether a risen China’s plans to create a new international architecture can sit comfortably alongside the US-led order established in 1945.

Everyone in China is talking about President Xi Jinping’s “One Belt, One Road” initiative. No one seems to know precisely what it means. The experts and policy makers, who gathered this week in Guangzhou for the annual Stockholm China Forum hosted by the German Marshall Fund and Shanghai Institutes for International Studies, mulled half-a-dozen descriptions and interpretations. For all that, everyone seems to understand that the push westwards is Mr Xi’s big play — a Eurasian grand strategy that will put beyond doubt China’s status as a global power.


All remaining trace of the diffidence that once marked China’s rise has disappeared. To suggest that China might have become overly assertive in its neighbourhood is to be guilty of “20th century thinking”. The 21st century mind, Beijing says, accepts Chinese power as a simple fact of geopolitics. As for stakeholding, well, great powers are not content with membership of other people’s clubs. They start their own.

Confusingly, the “road” part of Mr Xi’s project is not about retracing ancient silk roads, but expanding and securing maritime routes to the Middle East and Europe. Beijing has always seen the Strait of Malacca as a dangerous choke point. So it is reaching into the Indian Ocean. The blueprint includes a deepwater naval base in Pakistan and another way to the sea through Myanmar and Bangladesh. Beijing is opening northern shipping routes to Europe as the ice melts in the Arctic. The navy, China’s latest military strategy paper says, has moved beyond the defence of offshore waters to “open-seas defence”.

As for the “belt”, the ambition extends beyond mere roads and railways — though officials are noticeably proud of a new rail freight route carrying Chinese manufactures from Zhengzhou overland through Russia to Hamburg. A $42bn aid package for Pakistan announced by Mr Xi is one piece in the mosaic of agreements and deals taking China westwards. The former Soviet Republics of Central Asia are to get power stations, manufacturing plants and pipelines in return for gas supply contracts. A railway and highway will link China to the Arabian Sea. The new connections to the Horn of Africa and Europe will hasten the process of Eurasian economic integration.


There is a something-for-everybody quality about this. There were those at the Stockholm Forum who suspected that One Belt, One Road, was as much about presentation as grand strategy — a panoptic vision conjured up as the organising idea for a disparate set of objectives, motives and projects.

Thus the aid for Islamabad is driven by the desire to limit support for Uighur separatists in Xinjiang province from Islamist extremists in Pakistan. The myriad infrastructure projects across the region are needed to soak up China’s excess industrial capacity. The move into the so-called “Stans” of central Asia is an opportunist response to Russian weakness following Vladimir Putin’s military adventurism in Ukraine; so too are the big gas deals with Moscow. And behind everything, of course, lies the existential imperative to secure supplies of natural resources and energy.

Yet for all the ragged edges, put these initiatives together and they add up to a lot more than the sum of the parts. If great powers like to start their own clubs, they also set about turning economic weight into geopolitical clout.

China insists the One Belt One Road enterprise has room for all, whether from the west or East Asia. It issued an open invitation to join the fledgling AIIB. Washington has since made itself look silly by trying, and failing, to organise a boycott of the new bank.

The important thing, though, about all the initiatives is that China intends to set the parameters. As the London-based consultancy Trusted Sources puts it, Beijing is harnessing all its economic, financial and diplomatic muscle to drive a process of Eurasian integration from its own border to the Middle East, Africa and Europe. That adds up to quite a sphere of influence.

It will not proceed smoothly, of course. Moscow is already uncomfortable in the role of junior partner in the Sino-Russian relationship. With good reason it is nervous about China’s move into the former Soviet Republics. Estrangement from the west has obliged Mr Putin to sell Russia cheaply.

China’s old rival India is expanding its own naval presence in the Indian Ocean. Large cheques from Beijing will not smooth away the rivalries and competition for resources that bedevil central Asia. And the US could have told Beijing that pouring money into Islamabad does not buy security guarantees.

China is not seeking to upend the existing global order. Not yet anyway. But the geostrategic message could scarcely be clearer. Beijing intends to be a rulemaker as much as a rule-taker. Even as it competes with the US in East Asia, it looks set on becoming pre-eminent in Eurasia. The west has to decide whether to become a stakeholder in someone else’s project.




Philip Stephens




Fonte: FT

America is the best referee to discipline Fifa

Imagine if the attorney-general of Switzerland asked the New York Police Department to drive up Park Avenue and arrest several senior officials of Major League Baseball. The cops would probably do it, if the extradition charges were drawn up correctly, but one or two New Yorkers might demand to know what business it was of the Swiss to interfere in a traditional American pastime.

The most striking thing about the raid by the Zurich cantonal police at the Baur au Lac hotel at 6am on Wednesday is who sought it. Loretta Lynch, the US attorney-general, had asked them to detain seven officials of Fifa, the international football organisation, and extradite them to face US charges. Yet again, America has displayed the longest arm in international law.


Thank goodness, is my reaction. Somebody has to show the determination and will to clean up Fifa, despite the efforts of Sepp Blatter, its entrenched president, to plough through deepening scandal. In Brooklyn, where the charges were laid, soccer is mostly played in parks and at schools, but Ms Lynch correctly did not regard this as grounds to restrain herself.

The tradition of US law enforcers and courts reaching overseas to get their men and women often irritates. Yet in Fifa’s case, and in its broader crackdowns on corruption, the US is correct. When global organisations become havens for bribery and kickbacks — unlike Major League Baseball — they cannot be left to fester simply because enforcing justice is too hard.

By its own admission, plenty of misbehaviour has occurred within Fifa. Concacaf, Fifa’s member confederation covering the US and Central America, concluded two years ago that both Chuck Blazer, its former general secretary (since turned FBI informer), and Jack Warner, its former president, had received millions of dollars in illicit payments from its coffers.

Yet 79-year-old Mr Blatter keeps going, denying all knowledge and lining up his backers to be re-elected for a fifth four-year term on Friday. “The stress factor is a little bit higher today than yesterday, but he is quite relaxed because he knows he was not involved,” Walter De Gregorio, Fifa’s chief spokesman, put it memorably at a briefing following the arrests.

Mr Blatter should not escape responsibility. He runs an organisation that has encouraged patronage by channelling millions of dollars of its revenues each year into its 209 member federations and six confederations. It has failed to ensure that they are run properly, and to prevent national representatives from being offered money to cast votes for countries to host World Cups.


Until recently, Mr Blatter has been in a good spot to ignore this shambles. As Mark Pieth, the Basel University professor who was asked by Fifa to propose reforms in 2012, told the FT at the time, Switzerland “has this legacy of being a kind of pirates’ harbour . . . it’s attractive [to the 60 international sports organisations based there] because there is little regulation”.

Switzerland has since tightened the law to deter corruption in international bodies, and is conducting a second investigation — separate from that of the US — into how Russia and Qatar were awarded the 2018 and 2022 World Cups. The Zurich raids included the seizure of documents by the office of the Swiss attorney-general as a part of this investigation.

Even so, the US has a longer tradition of, and displays much greater vigour in, pursuing international criminality, including piracy. The US constitution gives Congress the power to “define and punish piracies and felonies committed on the high seas, and offences against the law of nations”. The Founding Fathers did not have football in mind but this is broad enough.

The most powerful law is the 1977 Foreign Corrupt Practices Act, which makes it an offence for a US company — or, crucially, a company with US operations — to pay bribes to officials. BHP Billiton, for example, paid a $25m penalty last week for financing the attendance of 176 government officials at the 2008 Olympics in Beijing.

For a long time companies and other countries griped about the US asserting its rights as a global enforcer but it has gradually dawned on them not only that an aggressive stance is justified but also that they should do more to block corruption themselves. Global standards have been raised by others falling into line, both in law and in enforcement.

In the Fifa case, US law stretched as far as it needed. Mr Blazer was based in New York, and defendants from Fifa and sports marketing bodies passed through the city. After he became an FBI informer, according to the New York Daily News, he carried a key chain with a microphone to London to record conversations with officials visiting the 2012 Olympics.

Switzerland is showing more initiative than in the past, but the Swiss attorney-general’s office has gone along with the narrative that Fifa is “the damaged party” in the affair, rather than being to blame. This might be formally true under Swiss law but it does little to dispel the impression that Mr Blatter has the country where he wants it.

Happily, the US offers no such comfort. “Let me be clear: this is not the final chapter in our investigation,” Ms Lynch declared after unveiling charges of racketeering and money laundering. Football may not be a US sport but please carry on.


John Gapper


Fonte: FT

America’s disappointing economic recovery

The coming turn in US interest rates may be the most telegraphed in many cycles. Yet for all Janet Yellen’s strivings at clarity, the US outlook remains clouded by poor visibility. Last week Ms Yellen said the Federal Reserve was still likely to raise interest rates this year — possibly in September — in spite of the sharp slowdown in first-quarter US growth. For one reason or another, including a series of harsh winters, growth in the first three months of the year has tended to underperform the rest of it, often heavily so. The US economy shrank by an annualised 2.9 per cent in the first quarter of 2014 only to rebound in the next three. Hopefully this year’s anaemic 0.2 per cent first quarter expansion will be equally misleading.

It would, however, be rash to make assumptions. It is quite possible 2015 will end as it began with US interest rates still on zero. As Ms Yellen put it: “Based on many years of making economic projections, I can assure you that any specific projection I write down will turn out to be wrong, perhaps markedly so.”

Of course, there is a chance her expectations will be wrong on the upside. The Fed is forecasting US growth of 2.5 per cent for the next two years, which is only marginally above the tepid rates achieved since the start of the recovery, which is now about to enter its seventh year. Should unemployment fall to 5 per cent by the end of 2015, wage growth may finally start to pick up, in which case the Fed will probably need to remove the punch bowl. The balance of risk is skewed the other way, however. After years of virtually no income growth, Main Street is unprepared for positive shocks. It is, for instance, striking that that the US consumer has opted to pocket the recent gains from lower petrol prices rather than boost spending. The same applies to corporate investment, which remains disappointingly weak. The US economy’s key growth drivers each seem to be waiting for the other to move first. Investors are reluctant to invest and consumers are hesitant to spend. What will it take to stoke their animal spirits?

Ms Yellen’s candour on the limits of what monetary policy can do is also striking. The Fed has kept its pedal to the floor for seven straight years. Yet US growth since the collapse of Lehman Brothers in 2008 has consistently undershot previous recoveries. According to HSBC, average US growth in the seven years from the previous peak was 3.5 per cent after 1981, 3.1 per cent after 1990, 2.1 per cent after 2000 and 1.1 per cent since 2007.

The direction is unmistakable. Some economists are even talking of a “great reset” that will require the US to adjust downwards to Japan-style growth. That is probably too gloomy. America has repaired its balance sheet far more rapidly than Japan did in 1990s and its demographic outlook is far healthier. The US also remains the most innovative economy in the world. Yet the growth outlook remains checked by a very un-American sense of pessimism.

If, as expected, US growth rebounds in the next two quarters, Ms Yellen may have little choice but to raise rates in September or shortly afterwards. America’s troublingly low labour force participation rate gives her little leeway to do otherwise. But the turn in the US cycle is likely to be shallow and moderate. It may take years to return to trend interest rates. As Mohammed El-Erian put it, the US is readying for the “loosest tightening in the modern history of central banking”. In an era of tentative forecasts, that is probably as close to certainty as we will get.




Fonte: FT

Passion not PowerPoint will make moral case for Europe’s union

You learn a lot about your country when you embark on a tour of 100 towns in 100 days. In the closing months of last year’s Scottish independence referendum campaign I did just that, taking my argument in support of the United Kingdom to open-air meetings on street corners and in town squares and shopping centres.

I learnt about Scotland’s beauty and its eccentricities. There was the man who jumped on to my crates, shouting “Traitor” into my ear. He said his name was William Wallace; I had my doubts. Then there was the guy whose dog had “Freedom” carefully written on its side in Biro. Many things were, in retrospect, funny. Occasionally the energy from nationalists was pretty unsavoury. But I learnt the truth of that adage of 1960s radicals: democracy is in the street.

I have been thinking about the independence referendum, and the close-run victory for the unionists, as we prepare for the vote on Britain’s membership of the EU. There are four clear lessons for those of us who believe Britain needs to stay in the union — and the need for business to play a central role and speak up early is at their heart.

The first lesson is one I learnt out on the street: successful campaigns need a politics of engagement. To defeat the insurgent populism of the anti-Europeans we must think like them and fight like them — albeit the battleground has been transformed by Twitter and Facebook. The smartphone — the computer in the pocket of three out of four adults — is becoming a dominant source of news. Focus groups reveal significant use of news apps and strong opinions on them. One swing voter was so incensed by what he saw as BBC bias that he deleted the app from his phone and replaced it with Al Jazeera.

In Scotland, the debate and exchange of information went on everywhere: in cyberspace and at work and at home, in pubs and at school gates. And, with 16-year-olds given the vote, it was debated in classrooms, too. In a multichannel world, you cannot expect the public to come to you. That means thinking simultaneously and operating like an incumbent and an insurgent. Combine the firepower of an established actor with the nimbleness of a start-up. Above all, show you care as well as think.

The second lesson is the need for passion as well as facts. True passion in politics — as opposed to bland assertions of it — is rare. Modern politicians, at home in the world of PowerPoint presentations, are often disorientated when faced with the need to move hearts as well as minds.

In the UK election, we have just seen one of the most sanitised campaigns of modern times, where real people were kept behind the ropes. A similar lack of engagement was at times obvious in the work of Better Together, the cross-party campaign against Scottish independence. We had all the facts about the problems an independent Scotland would face, the number of jobs at risk and the costs of going it alone. But, by sticking to the facts, the No campaign left a gaping hole at its heart: call it pride, love or passion, but what was missing was emotion. We needed to present voters with an alternative form of patriotic optimism; the sense that we were not merely naysayers but believed fervently in a cause.

The same risk lies in the way the EU debate is shaping up. Too often it appears to be about the benefits of trading with European neighbours, with the choice being whether we are inside or outside the trading bloc. That is a minimalist view of what is at stake. And it is an argument pro-Europeans can never win since it is technical not emotional.

We, the pro-EU camp, need to emphasise the fact that Europe is not merely a free-trade area but also responsible for one of the great moral triumphs of our time: the establishment of democracy and the rule of law in the south and east of Europe. During the period of British membership, the EU has taken two waves of entrants and supported them on the journey from dictatorship to democracy. In the 1980s it was Spain, Portugal and Greece. After the fall of the Berlin Wall in 1989 it was former members of the Communist eastern bloc.

I saw the value of the EU’s soft power at close quarters as Europe minister in 2007-08. Other aspiring nations modified their behaviour in the hope of a closer relationship with a single market that is also a human rights union.

So the European ideal is just that: an ideal, a vision. What we do as a force for tackling climate change, for spreading human rights, supporting good governance and tackling corruption in developing countries — all this must be front and centre of the campaign to stay in.

This goes to my third lesson: the importance of business. A danger for the No campaign in Scotland was that companies tried to sit out the campaign. There was no doubt most of them shared the view that it would be a significant risk to leave the economic, monetary and free trade union that is the UK. But some preferred a quiet life; others thought the referendum could be won without them.

That created problems. With late declarations by business leaders dismissed as scaremongering, the politicians had to carry too much of the argument. A plurality of voices is needed from the start; it gives the arguments far greater plausibility. Business people will be listened to in a different, more serious way on the economics. And it should not just be the biggest companies or those most exposed to the risk of a Brexit. Those who run trusted brands should speak out — particularly youth brands since young people are highly pro-European.

Finally, let us realise that this vote will not settle the European debate for a generation. That is an easy and early lesson from Scotland. For opponents of EU membership, the next referendum campaign starts when the returning officers make their declaration — assuming we vote to stay. That is just the way politics is.

We have a duty to make the patriotic case for being part of the EU anew every year. The fact that we have neglected to do so is what has led us here. We must not repeat the mistake. If 

we do we will find ourselves here all over again.

Jim Murphy is Scottish Labour leader and was minister of Europe and secretary of state for Scotland

How politics will seal the fate of Greece

Forget debt ratios, fiscal balances, liquidity crunches and the rest. The EU and International Monetary Fund technicians negotiating with Athens are going through the motions. The Greek crisis was always as much about politics as economics. Now it is all about politics.

There are two theories of the Syriza government led by Alexis Tsipras. One presents a cast of bungling amateurs who have spent the past several months digging Greece into an ever deeper economic hole — all the while squandering the trust and goodwill of its eurozone partners. The other says the antics of Yanis Varoufakis, finance minister, are an elaborate political charade calculated to set Greece free from the shackles of merciless creditors


The first hypothesis is the most popular. The preening and pirouetting, the interviews in glossy magazines, the undergraduate Marxism and love of the limelight — all point to a colossal failure on Mr Varoufakis’s part to grasp the depth of Greece’s plight or the sensitivities of its European partners. Along the way, tens of billions of dollars have drained from Greek banks as citizens stash their savings elsewhere.

The conspiracy theory, though, also has its adherents. They start with the assumption that no one could be quite as witless as Syriza has often seemed. Mr Tsipras’s government knew from the outset that it could not reconcile its domestic promises with Greece’s international obligations. The problem was that Greeks had voted at once for an end to austerity and to stay in the euro. A crisis had to be manufactured to show the government’s hand had been forced. By the Germans, of course.

I lean towards the former theory, but it hardly matters. Even at this late hour it would be unwise to say that a deal with creditors is absolutely impossible. High-stakes politics occasionally demands that pigs are seen to fly. What strikes me, though, is how far the conversation in other capitals has moved on. The risk of contagion in the rest of the eurozone has long been discussed. The talk now is about the chaos that would descend on Greece after default and euro exit. Would it be manageable or would the EU be left with a failed state?

Two political impulses are at work. Most obviously, the rest of the eurozone has concluded that Athens is unable or un­willing — probably both — to implement an economic reform programme. The problem is not so much the debt, nor even the pace of deficit reduction, but Syriza’s refusal to embark on reform of the state. The words most often spoken to describe governance in Greece are clientelism, corruption, rent-seeking, special interests and favouritism. Without radical overhaul of the nation’s political and administrative capacity, no economic programme can work.


Greece’s partners also have their own politics to tend. The confrontation in the eurozone is most commonly framed as one between Berlin and Athens. Wolfgang Schäuble, Germany’s outspoken finance minister, lends credence to the idea with his sideswipes at Mr Varoufakis. Yet the real hardliners are to be found in Madrid, Lisbon and Dublin. These nations have already felt the pain of austerity and reform. They are beginning to see shafts of light. Their political leaders do not see why Greece should be let off the hook. To concede now to Syriza, they say, would be to legitimise the populists in their own countries. And they also have elections to fight.

The assumption in many capitals is that it is now probably too late to save Greece. And they are not sure Syriza wants to be saved. But the consequences of default and departure from the euro would be devastating. Economists will tell you that the big competitiveness gain from devaluation would over time more than cancel out a slump in living standards. Such calculations, however, rest on the assumption of a functioning government with the capacity to lock in the advantage. More likely it would be wasted in rising wages and inflation.

One option now is for creditors to force a showdown by tabling a take-it-or-leave-it-deal along the lines of that offered to Cyprus — with an expectation that Mr Tsipras would probably leave it. Yet for all the frustration and fatalism hanging over negotiations, no one is too keen to force the denouement. There is a delicious irony here: if politics is pushing Athens towards the exit, geopolitics is the only thing that can now keep it in the euro club.

Greece sits in the strategically vital southeast corner of the European continent. It provides an entry for migrants and asylum seekers fleeing the fires of the Middle East, and a potential stepping off point for Islamist jihadis seeking to bring their war to Europe. The Balkans are an area of intense focus in Russian president Vladimir Putin’s efforts to destabilise the western alliance. Greece is a member of Nato. Can Europe really allow the government in Athens to fall into the arms of Moscow? What would be the signal to the rest of the Balkans? What about divided Cyprus?

Such are the thoughts swirling in the heads of policy makers as Athens approaches each new payment date. Would the strategic cost of letting it go outweigh the political, and financial, burdens of allowing it to stagger on? These are matters for heads of government not technicians.

Either way, the story has an unhappy ending. Inside or outside the euro, with or without additional debt relief, Greece can recover only when it starts to build a modern European state




Philip Stephens


Fonte: FT

Silicon Valley has become a dream factory

Coming to San Francisco for the first time in a few years brings home how much it has been transformed. Whatever you call what is happening — a boom, a bubble or a flood of money into what was known as new technology before the “new” became redundant — has augmented the city’s reality.

Once, there was a gaping divide between southern and northern California — between Hollywood and Silicon Valley. To the south was the dream factory of fantasy and imagination; in the north was science, hardware such as the transistor and chino-clad venture capitalists who worked in business parks on Sand Hill Road and lived in sprawling suburbia. San Francisco was a pretty, but unexciting tourist town.


It feels more like Hollywood now, full of people writing scripts and honing pitches. “Brave new world companies create something that was not there before. They do not just save somebody money,” a middle-aged man told a young entrepreneur at a nearby table in a diner on Monday morning. The ingénu should portray his venture as more than “faster, better, cheaper”.

Later that day one venture capitalist described his own firm’s decision to turn down Uber when it was first raising money as “a lamentable failure of imagination”. The partners should have realised that the pitch for a smartphone limousine service in San Francisco implied a platform to revolutionise global transport. Instead of thinking of the legal obstacles, they ought to have suspended their disbelief.

The old things are shrunken — the San Francisco Chronicle is thin and full of wire stories — and others are exploding. An entire district has sprung up around China Basin on the edge of the city; Apple, which used to carve its stores into old buildings, has levelled a building by Union Square to build a Foster + Partners retail temple; the city’s bars are sleek and vibrant.

Silicon Valley is at one of those historic moments when a set of technologies start to work — and to work together — in unexpected ways. In this case, the interaction of mobile, robotic and artificial intelligence is producing a wave of applications and devices, from voice-activated software to self-driving cars. The machine knows what you want and where you are, and is steadily learning how to serve you.

Andrew McAfee, co-author of The Second Machine Age, describes the experience of being transported in one of Google’s self-driving cars as going “from terrifying to thrilling to boring in 15 minutes”. The machine not only drives competently but with tedious predictability, always observing the speed limit and slowing at every obstacle, as if constantly trying to pass a driving test.

Behind innovations that have suddenly come to feel routine, such as facial and voice recognition, lie rapid ad­vances in pattern recognition and emerging forms of artificial intelligence. The capacity of computers to sift through databases and comprehend what people are saying, what they mean and what they desire is evolving faster than many researchers had anticipated.

As a result, plenty of investors are eager to throw money at start-ups that look as if they possess a piece of technology and a business idea that will form at least part of the brave new world. The fear of missing out is overwhelming the fear of losing money, as Bill Gurley of Benchmark Capital warned recently.


History’s famous investment bubbles often formed around such combinations of easy money and fantastical inventions, and some of today’s venture capitalists suffered through the dotcom bust of 2000. Prod them about that and the optimists respond that the $48bn invested by US venture capital funds last year is only half the amount sloshing around at the last peak 15 years ago.

This ignores the fact that a lot of the new money is coming not from venture funds but from other investors, including mutual funds such as T Rowe Price and Fidelity. Three-quarters of recent fundraising rounds by “unicorns” — start-ups valued at $1bn or more — were led by “non-traditional” investors, according to a recent study by Fenwick & West, a Silicon Valley law firm.

One is Carl Icahn, the activist investor, who this week put $100m into Lyft, a rival to Uber. Mr Icahn often makes life difficult for his investment targets but
is as enamoured as everyone else with his Silicon Valley picks. “We’ll be the first to admit that you are more knowledgeable in these areas than we are,”
he wrote fulsomely to Apple this week.

Wall Street needs Silicon Valley more than the other way round. Large late-stage funding rounds such as Lyft’s are allowing unicorns to prance around for longer in private instead of being acquired or seeking initial public offerings. They can get on with their efforts to change the world without the world being able to second guess.

Is it any wonder that a lot of young technology entrepreneurs, and the engineers they employ on high salaries and rich stock packages, feel as good about themselves as film stars? “These guys don’t fear the big companies as much as they should. They think they can just sling rocks at them and win,” says one venture capitalist.

They are creating a new reality, or at least they appear to be — which is enough to attract money. It will not last for ever, of course. Herds of unicorns may perish, leaving people to wonder why they were so credulous. But Silicon Valley is a fun place to be.


John Gapper


Fonte: FT

The wary retreat of the bond bulls

Is the three-and-a-half decade long bull market in the highest-rated government debt over? If so, would that be a good thing or a bad one? The answer to the first question is that it seems quite likely that the yield of 0.08 per cent (8 basis points) recorded on the 10-year Bund in April was a low point. The answer to the second question is that it would be a good thing: it would suggest confidence that the threats of deflation and eurozone disintegration are fading. At the same time, this bounce does not mean that a rapid rise in yields to what used to be normal levels is on the way. We should want to see yields rise, but modestly. This is also what we should expect.

Yields on 10-year bonds have behaved like the grand old Duke of York in the nursery rhyme: they marched right up to the top of the hill and then marched right down again. Yields on government bonds of the big advanced economies peaked in the early 1980s: Japan’s peak was near 10 per cent, Germany’s 11 per cent and those of the US and UK 15 per cent and 16 per cent. Then came a decline. Japan’s rates had fallen below 2 per cent by the late 1990s. Yields in the other three countries were between 3 and 6 per cent before the crisis, only to fall far lower still.

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Theory suggests that long-term interest rates should be a weighted average of expected short-term interest rates, plus a “term premium”, as Ben Bernanke, former chairman of the Federal Reserve, argues in a recent blog. The premium should normally be positive, even in the absence of default risk. Longer-term securities are riskier than short-term ones, because their prices are volatile. Expected short-term rates should be determined by expected real interest rates and expected inflation. Again, expected domestic real interest rates should be determined by expected global real interest rates and expected changes in real exchange rates. Expected global real interest rates should, in turn, be determined by the expected balance of saving and investment. Finally, special factors, such as risk-aversion — at the limit, outright panic — and purchases by foreign governments and central banks, will also affect the prices of long-term bonds.

Most of what explains the collapse in bond yields (and so the rise in the prices of such bonds) is reasonably clear. Up to the mid-1990s, the dominant causal factor was the collapse in inflation. In Japan, deflation even became entrenched in the 2000s. From the late-1990s up to the crisis, the main explanation was a decline in long-term real interest rates from a little below 4 per cent to a little above 2 per cent, as shown in yields on the UK’s index-linked gilts.

Since the crisis, the dominant factor has been further marked declines in real interest rates. These are close to zero in the UK and US. In America and Britain people expect prices to keep rising modestly, in line with targets, though not in Japan. The European Central Bank’s recent policy measures are designed to keep inflation expectations up in the eurozone. Meanwhile, the risk premium can only be estimated. Over the long run, it has been volatile. Estimates from the New York Federal Reserve suggest it is now close to zero.

Many think purchases by central banks are the dominant cause of low yields. The evidence suggests this is untrue, though it has to be a factor. Far more important is the expectation that short-term rates will stay low.

Today, long-term bond yields in the UK and US are remarkably low, given their economic recoveries. One reason is a spillover from the developments in the eurozone. In recent years, the ECB has been successful in eliminating perceived risks of break-up. Its current programme of asset purchases and other measures have also lowered the general level of eurozone nominal yields. But a powerful safe-haven effect also operates, with shifts into Bunds and also Swiss (and other) bonds. Ten-year yields on Swiss bonds became negative when the currency was allowed to appreciate. Ten-year yields on Bunds effectively fell to near zero. (See chart.)

So what might happen now? The following points must be remembered.

First, nominal and real yields are very low in all the important high-income countries. Thus, they are vastly more likely to rise than fall from recent levels, unless sustained long-term growth and positive inflation are over.

Second, yields are astonishingly low in core European countries. If the ECB succeeds with its endeavours and so the recovery continues to gain pace, then yields should rise a great deal. The same should ultimately be true for Japan.

Third, post-crisis headwinds — among them, high levels of household debt — nevertheless are strong. Also important must be the economic slowdown in China. Thus, the equilibrium global real interest rate is likely to remain low by historical standards for quite a long time.

Fourth, sharp rises in expected short-term interest rates and so in long-term conventional yields are only likely to follow a strong recovery (which would drive up real yields) and so perhaps a strong rise in inflation expectations. This is possible. But it seems unlikely. Whether a big jump in yields would be a good thing depends mostly on whether it is driven by optimism about the real economy or pessimism about inflation.

Finally, falls in nominal and real yields below recent low levels would imply a descent into deflation. Central banks can and will prevent that; never say never, but this looks highly unlikely.

In short, the long fall and recent collapses in nominal and real yields on safe securities should now be at an end. One must hope so. Further declines would be highly disturbing. At the same time, a swift return towards levels considered normal before the crisis seems unlikely and would certainly create some instability. This might well be a turning point. But, given uncertainties, it would be best if yields turned slowly.

Martin Wolf

Fonte: FT

University of Oxford to spurn coal and tar sands investments

The University of Oxford, one of the world’s oldest and wealthiest academic institutions, is to shun direct investments in coal and oil sands companies in a move hailed as a victory by fossil fuel divestment campaigners.

The University council, Oxford’s executive governing body, said on Monday it had asked managers of its £2bn endowment fund to bolster oversight of environmental factors in their investment policies.



“Given the importance of carbon emissions and climate change to society . . . council has also called for the level of engagement and public reporting on these issues to be strengthened,” the university said in a statement.

The university said it would “avoid direct investments in coal and oil sands companies”, revealing it currently had none, and also bar investment in “sectors with high social and environmental risks”.

Many campaigners welcomed the move, the latest response from investors facing an international campaign to stigmatise the use of fossil fuels.

“It’s definitely a massive step forward for Oxford,” said Andrew Taylor, fossil free campaigns manager at the People & Planet student network.

Bill McKibben, the US environmental campaigner who helped kick off the fossil fuel divestment movement, said Oxford’s decision was “unbelievable”.

But other campaigners said they would like to see Oxford go further and sell out of all types of fossil fuel company.

California’s Stanford University, the heirs to the Rockefeller oil fortune and the Church of England have all announced plans to sell or cut their holdings in coal companies, and in some cases oil sands groups, over the last 12 months.

The University of Edinburgh has ruled out such a broad step, saying last week it would only ditch coal and oil sands companies if “realistic alternative sources of energy are available” and if the businesses fail to invest in measures to address climate change.

The vice-chancellor of Oxford university, Professor Andrew Hamilton, said the university was already “a leading force in the global fight against climate change”, and believed the main purpose of its investment fund was to generate financial resources to support its academic purpose.

“However, our investment managers take a long-term view and take into account global risks, including climate change, when considering what investments to make,” he said in a statement.

“The university believes that approach to be the right one and today’s decision reinforces it by encouraging greater engagement and reporting on this crucial issue to the environment and all of society,” he said.

Oxford said it still supported the continued inclusion of a broad range of energy investments “where financially prudent”.

At the end of last year, it said its fund had an estimated 3 per cent exposure to the wider energy sector.

This was made up of 1.7 per cent in exploration and extraction activities; 0.2 per cent in refining and marketing; 0.4 per cent in storage and transportation and 0.7 per cent in equipment and services.

The University of Cambridge, meanwhile, said on Monday it had agreed to set up a working group to “explore its position in the light of developments in the understanding of the integration of environmental, social and governance aspects in investment decisions”.




Fonte: FT

Draghi perches nicely on both sides of the fence

“Men who can be right and sit tight are uncommon.” Coined by Wall Street trader Jesse Livermore, this saying works as well with monetary policy as stock market speculation. Even when events pass just as intended, the central banking mentality is to seek out problems. Much of the time their investigations should leave policy exactly as it was.

Such is the situation in which Mario Draghi finds himself. The president of the European Central Bank is no stranger to dilemma. Credited with rescuing the eurozone from meltdown, his promise to backstop government debt risked the ire of Europe’s largest economy, Germany. Every week brings closer an excruciating choice between the integrity of his balance sheet and the financial survival of Greece. But what is pleasantly absent from Mr Draghi’s current worry-list is that staple of central banking: balancing growth against inflation.


Twice in the formative years of the euro, Jean-Claude Trichet reacted to high inflation by raising rates, only to reverse course when Europe tipped into recession. His successor is spared a similar quandary. Europe is recovering again, but this time inflation remains negligible. France and Italy, two of the continent’s laggards, are each growing well; at 0.6 per cent, France last quarter handily outpaced Germany, whereas any growth is greeted with prosecco in Rome. Even Greece, while once more in recession, shrank less than expected. Its government is quietly registering a rising primary surplus on its accounts.

In a speech this week Mr Draghi credited the monetary warmth emanating from his bank for coaxing out these green shoots. The past 12 months have seen the ECB deploy cheap loans and conduct a stringent examination of bank balance sheets, which together have boosted the credit supply. As global deflation took hold last autumn, Mr Draghi prepared the ground for quantitative easing, and this year began to deliver a trillion euros of QE. In his view, the improving economy shows that monetary policy loses little of its potency when interest rates are low.

Yet, like the central banker he is, Mr Draghi could not resist raising some oft-heard criticisms of QE, if only to head them off. The critics — often while denouncing it as ineffective — warn that sustained monetary ease causes a misallocation of resources. In plainer English, markets respond to cheap money by no longer distinguishing solid investments from reckless gambles. Prices are pushed ever higher by the press of funds, incubating a future crash. Such Cassandras see this month’s switchback ride in the bond market as evidence of how the ECB is playing with fire.

The other charge is that QE has potent distributional consequences. By raising this Mr Draghi treads on difficult ground. Last month he was showered with paper by a protester accusing the ECB of “autocratic hegemony”. When its policy actions are measured in the hundreds of billions, any hint that they may reward one section of society over another could undermine central bank legitimacy.

But neither concern should divert the ECB from restoring stable growth to the eurozone. Having gained an array of “macro prudential” tools, there is no call for it to slow the economy just to smother financial risk. If an uneven distribution of wealth hands the rich a windfall from easier monetary policy, it is for governments to mitigate the consequences. More than expensive asset prices, high unemployment is what poses the greatest risk to Europe’s poor. Mr Draghi is right to sit tight and keep the monetary spigot open.




Editorial do FT

The mistake that could trigger Brexit

Amid the sound and fury that will soon describe Britain’s relationship with Europe, the standard-bearers for Brexit in David Cameron’s Tory party hold a valuable card. The unavoidable fact of the prime minister’s promised renegotiation is that he cannot rewrite the founding rules of the EU club. A promise of reform, yes; a special protocol or two, quite possibly; but the repatriation of a measurable degree of sovereignty, never.

This simple fact is well understood by eurosceptics. They allude to it when they say, almost disarmingly, that all they ask is for authority over the nation’s borders or decisions about welfare policy be returned to parliament. This is the test they will apply to any deal — in the certain knowledge Mr Cameron will fail it. Even if the prime minister were to return from Brussels garlanded with concessions, the sovereignty pooled in successive EU treaties cannot be reclaimed.


Pro-Europeans also know this, but pretend otherwise. They look instead at surveys saying most Britons favour staying in what Mr Cameron calls a “reformed EU” and keep their counsel. On the anniversaries of Agincourt and Waterloo, why not collude with the government in declaring another famous victory over the continentals?

Putting aside the deception — who said politics was an honest business, and anyway, surely the end justifies the means? — the Europhiles are making a grave error. The first rule of war is to choose the ground on which the battle is fought. A referendum that turns on the worth of a reform deal hands the choice of terrain to the sceptics.

The British demands fall into three categories. One asks for guarantees to ensure Britain will not be disadvantaged by its absence from the eurozone — safeguards, in other words, for the City of London. The second calls for EU-wide reforms that, inter alia, would curb access to benefits of migrant workers, promote deregulation and limit intrusions into the nooks and crannies of national life. The third — so far vague — speaks to British exceptionalism. One idea is a British opt-out from the ill-defined EU goal of “ever closer union”.

Such changes will be difficult but not impossible to negotiate. Politicians from eastern Europe will defend ferociously the principle of free movement of workers. Wolfgang Schäuble, the German finance minister, has given George Osborne, the chancellor, the message already transmitted to Greece’s Syriza government. A mandate bestowed by one electorate does not bind anyone else. So Mr Cameron should not expect to get treaty changes by piggybacking on reform of the eurozone.

German chancellor Angela Merkel — Mr Cameron’s indispensable interlocutor — has her own red line: the accumulated body of EU law, the precious acquis, cannot be unpicked. But, while the talks will have their rages and disputes, not least because all sides will play to their domestic political audiences, Britain’s partners have a serious interest in reaching a settlement.


To the extent that Europe exercises economic and political clout around the world, its standing has already been greatly diminished by the eurozone crisis. What would China, India, Brazil, or even the US make of a union that had lost one of its most powerful members? Cussed as it is, Britain lends weight.

All this though is the chaff of the referendum debate. For every point won by Mr Cameron the sceptics’ counter-charge will be that parliament is still shackled by the Treaty of Rome. If Britain is to vote for staying in, the argument must turn not on the window-dressing of reform, but on the essential merits of engagement.

Simply stated, for all the intrusions and irritations, Britain’s selfish national interest is best served by membership. Whether it is the economy or trade, security and foreign policy — even, yes — migration — the EU is a multiplier of, not a subtraction from, national power.

On this ground, the Europhiles have ammunition aplenty beyond the manifest truth that even largish nations have limited leverage in a world of closely connected, competing powers. The proof was gathered by the Tory-led government during the last parliament.

This “balance of competences” study was conceived by Tory sceptics as a way to demonstrate the EU’s unacceptable reach into national life. In the event, prejudice was felled by the overwhelming weight of evidence. Nearly three dozen detailed analyses concluded that national security and prosperity could not be separated from close collaboration in the EU. Outside, Britain would be weaker, less secure and poorer.

This substantive case has the additional merit of demanding from the sceptics what they present as the alternative to membership. Do they really want to join Norway or Switzerland as outsiders obliged by their need to access to the single market to implement every EU rule and regulation without any say in shaping them? Or would they prefer to drown in the deep blue sea?

There is no harm in cheering Mr Cameron’s crusade for reforms. Some are sensible, some silly. But the case for the EU is as it has always been. Britain cannot afford to isolate itself on its own continent. Margaret Thatcher knew this when, as Tory leader, she backed a yes vote in the 1975 referendum: “We are inextricably part of Europe . . . [no one] will ever be able to take us ‘out of Europe’ for Europe is where we are and where we have always been.”


Philip Stephens


Fonte: FT

Picasso is not just a valuable abstract

When a group of wealthy investors compete with each other to buy an asset, surely they have a clear idea of its financial value? Jussi Pylkkänen, president of Christie’s, who on Monday night auctioned Picasso’s “Les Femmes d’Alger” (Version O) to an anonymous buyer for $179.4m, thinks they do.

“People sometimes think of buying art as a frivolous occupation but these bidders are very conscious of what the object is worth, and they make decisions in an extremely considered way,” Mr Pylkkänen assured me afterwards. He emphasised that the final bids for the Picasso, in a New York auction that raised $706m for 34 works of 20th-century art, proceeded in careful, $500,000 increments.


Amid record-breaking auctions in London and New York, art is increasingly treated as a financial asset. “Swamped”, a painting by Peter Doig, a 56-year-old Scottish artist, sold for $25.9m on Monday night. Billionaires fly to Art Basel Miami Beach to buy from big galleries, private bankers tell clients to diversify into art; masterpieces clog free port warehouses in Geneva.

But paintings are not securities. The financial value of any work of art remains as unknowable and intangible as the Mona Lisa’s smile. As the economist William Baumol put it 30 years ago, the prices of paintings “float more or less aimlessly . . . exacerbated by the activities of those who treat such art objects as ‘investments’”. Those seeking intrinsic value, in the financial sense, must look elsewhere.

Although we do not know who bought the Picasso, beyond the fact that he or she can afford to drop $179m on a work that would be difficult to shift for the same price in a market panic, we can speculate on the motive. The true value lies in owning a painting that the Tate or Getty museums would love to display in public, and being able to dazzle yourself and others in private.

The only way to prove that you are the kind of person who is both cultured and wealthy enough to own a major Picasso is to buy one. Auction houses prosper by holding it in front of you briefly, while offering to sell it to your rival. “They suddenly say, ‘I am never going to get this chance again’, and go all the way,” Mr Pylkkänen says of the world’s ultimate art collectors.

Works of art are “a very rational choice for those who derive a high rate of return in the form of aesthetic pleasure,” Mr Baumol concluded. The economist John Picard Stein wrote in 1977: “Any superior performance derivable from paintings can be attributed entirely to the viewing pleasure they provide, not capturable by speculators.”

There are social as well as aesthetic rewards. The status value of buying art — being invited to gallery and museum dinners, and regarded as a person of exquisite taste — is alluring. Sixty one per cent of collectors surveyed last year by Deloitte, the accounting firm, admitted to this motivation.

The financial returns are murkier, despite the efforts to explain rationally the tide of money flowing into art. Sales of fine art globally rose to €51bn last year, according to the European Fine Art Foundation, overtaking the previous peak of €48bn in 2007. This is minuscule compared with the $294tn of global financial assets, but it demands to be justified financially.

That is hard to do. The Mei Moses World All Art index, which tracks the prices of works sold at auction, rose 7 per cent between 2003 and 2013 — slightly less than the Standard & Poor’s 500 index (contemporary art achieved a higher return at 10.5 per cent). Art has performed better than bonds on some measures over some decades, but there are reasons for scepticism.

One is that measuring financial returns on works that are sold and later resold at auction ignores those that never resurface, possibly because they have fallen in value. A second is that the art market is highly illiquid and opaque — no painting, even by the same artist, is exactly equivalent to another work. A third is that the transaction costs are extremely high — auction houses charge buyers about 20 per cent.

The oddest aspect of the market (among many) is that the wealthiest collectors take the least predictable financial risks, at least when bidding at auctions rather than buying works privately through galleries. Masterpieces such as “Les Femmes d’Alger” often underperform in the long term, while less-glamorous paintings stand a better chance of achieving a stable return.

Masterpieces can lose their lustre — postwar art is celebrated as older works have faded. Mr Doig has surpassed Damien Hirst but the buyer of Mr Doig’s “Swamped” cannot know whether that will last. Jianping Mei and Michael Moses, the economists, warned in one study of art prices between 1955 and 2004 that “investors should not be obsessive [about] masterpieces and they need to guard against overbidding”.

Or perhaps they need not. Defying the odds, making a bravura public statement and finally taking possession of a revered Picasso painting is sufficient. “Standing in front of the object and having people know that you’re the buyer is worth all the money in the world,” says Jeff Rabin, co-founder of Artvest, a New York art advisory firm.

There is no doubt that “Les Femmes d’Alger” is an extraordinary work of art. Whether it will be an exceptional investment is another question. To the bidder, it may not matter.


John Gapper


Fonte: FT

Good corporations should drive the economy

We will cut spending but not as fast or as nastily as the Conservatives; we be­lieve in a market economy but not very strongly.” These were central elements of the Labour party’s economic policies in last week’s UK general election. They do not constitute a persuasive narrative and they did not persuade.

The European left has been in intellectual disarray since the collapse of socialism. The threadbare content of Labour’s economic thinking echoes similar weaknesses in the French (not very) Socialist party and Germany’s Social Democrats. In Greece and Spain, the extreme parties of the left are gaining electoral ground by promising things they cannot deliver. The third way of Tony Blair, former UK prime minister (and Bill Clinton, former US president ), who saw the need for fresh economic thinking back in the 1990s, has collapsed into vacuity.


So here is one idea to start Labour’s rethinking of economic policy. The profit-making corporation is, should be and will remain the central institution of the modern economy. But that does not mean the purpose of a profit-making corporation is to make a profit; we must breathe to live but breathing is not the purpose of life. The purpose of a corporation is to produce goods and services to meet economic and social needs, to create satisfying and rewarding employment, to earn returns for its shareholders and other investors, and to make a positive contribution to the social and physical environment in which it operates.

Mr Blair flirted with the idea that the purpose of the corporation was a central issue when he embraced “stakeholding” before his election in 1997, but the debate died, partly through the opposition of businesspeople who thought stakeholding meant trade unionists on company boards. It may be an idea whose time has come again.

The usual objection, that an organisation cannot have more than one objective, can be swiftly dismissed. The statesman must balance competing pressures and interests, and every household must manage the sometimes incompatible demands and needs of different family members. Likewise, the job of the professional manager is to balance sometimes complementary, and sometimes conflicting, claims.

Similarly, the good school imparts factual information while stimulating critical thinking. The good smartphone compromises between portability and battery life. We recognise good schools and smartphones when we see them, and we know a good company in the same way.

The good corporation — like the good smartphone or the good school — can be identified by what it achieves. It pays workers a living wage; it does not engage in aggressive tax avoidance. It develops the skills and capabilities of its employees and does not bewilder customers with complex tariff structures. It earns profits, reinvests some and pays a dividend to shareholders. Its executives spend more time walking around offices and shop floors than sitting in the meeting rooms of investment banks. The good corporation contributes relevant expertise to the formation of policy but does not engage in lobbying on a scale that corrupts political decision-making.

The political and social legitimacy of the market economy, and of the corporations through which it functions, cannot simply be asserted — as it has been in the market-fundamentalist rhetoric that has dominated economic policy for the past three decades. Its legitimacy has to be earned by the behaviour of the leading economic institutions. That social contract has too often been broken in recent years. And drawing attention to that breach, and the measures needed to regain trust, is an agenda that is not hostile but rather friendly to the long-term interests of the business community.




John Kay




Fonte: FT

Cameron and Crosby vindicated as Conservatives head for victory

Years will pass before we arrive at some understanding of what has just happened in Britain. David Cameron will struggle to make sense of it on Friday morning, even as he savours electoral vindication and at least a few more years as prime minister.

To put the shock in context: Scotland has become a nationalist monopoly, the Liberal Democrats have lost around four-fifths of their MPs, members of the cabinet were felled — and yet none of these events was the most surprising of this general election. That status belongs to the Labour party’s horrendous showing in England, where Mr Cameron’s Conservatives exceeded their most sanguine expectations.


There will be an inquest by polling companies into their own errant work, which had foretold rough parity between the two main parties in popular votes and parliamentary seats. Instead, with counting still under way, the Tories are not far off an overall majority in the House of Commons and a strapping plurality of votes cast. For all the gains Labour made in England, the party may as well have spent the past five years on holiday.

Labour were plucky and romantic campaigners. The rhetoric of change poured out of Ed Miliband, the party’s cruelly traduced leader, who defied low expectations. But political gravity told in the end. Voters do not rate him, or Labour’s grip on economic matters. No party can survive such fundamental weaknesses, not even with a vaunted “ground game” and celebrity endorsements. Mr Miliband will go quickly, leaving his party to absorb the reality that this election was lost on September 25 2010, when it chose him ahead of his brother David as leader. It must avoid another misjudgment when its newest leadership race begins. The candidates are likely to include Andy Burnham from the left, Liz Kendall from the right and Chuka Umunna from who knows where.


The Tories have headaches of their own. Constructing a stable government is still an arithmetical challenge and their apparent disappearance from Scotland allows nationalists to describe Mr Cameron’s premiership as illegitimate north of the border. He might have to grant some radical devolution of power to Scotland; the UK certainly feels like a country ripe for federalism, and perhaps another referendum on Scottish secession within a matter of years.

Still, whatever the rumples, there is no getting around it: the Tories have performed sensationally. They increased their majority in many seats they were expected to lose. Having presided over cuts to public spending for five consecutive years, they have actually added MPs. A campaign viewed as bleak and sour by the media’s armchair strategists has turned out to be well-judged. Mr Cameron knew that Britons wanted security more than they desired change. His well-paid strategist, Lynton Crosby, can now write his own ticket.

Some form of Cameron-led government will take shape in the coming days, but Britain’s future is less certain than his. Scotland looks like another country this morning and a referendum on the UK’s membership of the EU is probably on the way, too. The prime minister is entitled to a moment of self-satisfaction today. Once it passes, there are existential questions with which he must wrestle.


Janan Ganesh


Fonte: FT

The unforeseen effects of Chinese medicine

When it comes to investment pledges, $46bn is a sum that really grabs people’s attention. That is what China is supposedly ploughing into Pakistani energy and transport projects, according to plans unveiled during last month’s visit to Islamabad by President Xi Jinping. Delegates at the Asian Development Bank’s annual meeting in Baku, Azerbaijan, this week, could talk of little else. The ADB, historically run by Japan, could not dream of such firepower. Last year it lent about $13bn across the entire region.

It is easy, of course, to talk big. Much of Beijing’s promised investment in Pakistan — which would, among other things, help that country’s chronic energy problem by doubling electricity capacity — may not see the light of day. (To put it another way, the lights may never actually come on.) Still, if even a fraction of the sums bandied about turn up as roads, railways and power stations, Beijing will be making its formidable economic firepower felt.


China’s efforts to extend its influence go far beyond Pakistan. It is setting up the Asian Infrastructure Investment Bank, a rival to the ADB that will have initial capital of at least $50bn. Beijing’s “one belt, one road” initiative, which aims to improve land and maritime links between western China through Asia to Europe and north Africa, are gradually leaving the realm of fantasy and turning into concrete (lots of concrete) plans. To start things off, Beijing has dipped into its considerable foreign currency reserves for some small change: $62bn.

China’s efforts to splash the cash mark a new phase in its diplomacy. To call it soft power might be a misnomer. Its authoritarian system still lacks the necessary attraction, although many of the countries in which Beijing seeks to invest are not exactly models of democracy themselves. The definition of soft power provided by Joseph Nye, the Harvard professor who coined the phrase, is “the ability to get what one wants by attraction and persuasion rather than coercion or payment”. Billions of dollars look like payment. Yet loans and investments are not bribes. Part of US soft power — as well as Hollywood and the attraction of lofty ideals — was created by institutions such as the International Monetary Fund and World Bank, which spread Washington’s view of capitalism and opened foreign markets for US business.

Whether we call it soft power or not, China is attempting something new. One Chinese official in Baku called it “Chinese medicine”. You might not know how it works, but that does not mean it will have no effect. Beijing’s efforts have been spurred partly by the limits of its hard diplomacy. China’s build-up of military strength and its more assertive stance over disputed territory has rattled the neighbours.

Scott Kennedy and David Parker from the Center for Strategic and International Studies acknowledge the potential of China’s new strategy to win influence. The “one belt, one road” initiative, they say, can “entrench Sino-centric patterns of trade, investment and infrastructure” and strengthen Beijing’s diplomatic leverage. The case of the AIIB does not look a million miles away from soft power either. The UK felt compelled to join in spite of Washington’s pressure. Of course, London may have been motivated in part by the prospect of financial gain for British companies. Yet that does not tell the whole story. In all, 57 countries have joined.

Of course, there are risks. Building vast projects in foreign lands is not guaranteed to please. In Sri Lanka, China’s overweening presence was one of the reasons for the dramatic defeat in last year’s election of Mahinda Rajapaksa, the president who had openly courted Beijing. Even the generals who ran Myanmar tired of what they saw as China’s relentlessly extractive and exploitative form of capitalism.

The fact that so many western countries are now in the AIIB could help to restrain Beijing from such excesses.Prof Nye says that the AIIB now will not be “a Chinese political slush fund”. If the UK and others help ensure its projects are more sustainable and sensitive to local needs, they will — whether involuntarily or not — be playing their part in making the bank a more effective tool of diplomacy. Call it Chinese medicine if you will. But from Beijing’s point of view, having western governments help burnish China’s image in Asia must sound pretty close to a definition of soft power.




David Pilling




Fonte: FT