Cull the grey vote — it is an affront to democracy

It was “like addressing sheeted tombstones by moonlight”, said Florence Nightingale’s friend Sidney Herbert, after speaking in the House of Lords. We should never be surprised by the things said or done in those Elysian Fields.

The latest folly from this assembly of has-beens is to conclude that the way to fix what is wrong with British politics is to allow 16-year-olds to vote. This is like looking at the photograph of St Paul’s Cathedral in the Blitz and concluding that it needed better scaffolding.


There is something intensely comical in an unelected bunch of old people opining on how extending the franchise to young people might improve our democracy. How about requiring anyone who wants to legislate to have first to undergo the indignity of standing for election?

Still, consider what the unelected worthies suggest: that 16- and 17-year-olds be allowed to vote in the referendum on whether Britain should remain in the EU. The government is against the idea because, among other things, it would require extra time to register the new voters, limiting its room for manoeuvre on the referendum date. It is not much of an argument.

Young people will have to live with the consequences of the decision long after Prime Minister David Cameron, Labour leader Jeremy Corbyn and the rest of us (I am 65) have joined the celestial choir singing “Ode to Joy”. Perhaps there is an argument for letting 16-year-olds have a say. They can, after all, marry, pay taxes, claim benefits or join the army. On the other hand, we do not allow them to gamble, buy cigarettes or alcohol or to serve on a jury. The 2010 Sunbeds (Regulation) Act bans them from using tanning salons. Society cannot decide whether they are children or young adults. If they are to come of age at 16, they will have to get a grown-up to buy the booze for the party.

If 16-year-olds are to be allowed to take part in a referendum, there is no reason why they should not vote in general elections. And why stop at 16? After all, Britain has the lowest ages of criminal responsibility in Europe (10 in England and Wales, eight in Scotland, compared with 18 in Luxembourg and Belgium).

Their lordships are right: the political system favours the elderly. There are fewer than 6m people aged 18 to 24 in Britain, but more than 11m aged 65 or older. Some scarcely know what day of the week it is, yet their ballot papers are worth the same as a Cambridge professor’s. And politicians know that older people are much more likely to vote — as one put it to me privately, “there’s not much else going on in lots of their lives”.

The grey vote is the one constituency no politician dares to offend. Bus passes? Certainly. Free television licences? Of course. And the number of elderly voters grows year by year.


Pollsters say some stupid things but I am inclined to believe them when they say that in Britain young people are less excited by politics than elsewhere in Europe. One reason is the remoteness of parliament, now colonised by a curious sect who have made the getting of political office their obsessive concern. The young have other things on their minds; education, mating, music and finding somewhere to live are more important to them than to old people watching their bungalows increase in value while they moulder away inside.

At the heart of the issue is responsibility — the counterpart to rights. It is easy to see why parties like Labour and the Scottish National party believe in lowering the voting age: they think most young people will vote left. Yet these are the parties that do not trust young people to act responsibly; hence the nannying about tobacco, alcohol and sunbeds.

But are the old people, whose interests increasingly dominate politics, responsible? “No taxation without representation” are watchwords of democracy. Perhaps the formulation should be reversed — no representation without paying taxes. Why should those who no longer make a contribution to the state be allowed a disproportionate role in choosing governments, which forces others to pay the taxes to keep old people in the style to which they feel entitled? The solution is not to lower the voting age but to cap it.

More sensible to make an explicit connection between working and voting (while recognising the needs of the working-age sick and disabled and stay-at-home mothers). A decent society is one in which those responsible for compassionate actions, such as pensions or healthcare, are those who pay for them.

Members of the House of Lords are not allowed to vote in elections. They should have the vision to see that the privilege of not taking part ought to be accorded to everyone who has passed their sell-by date.




Jeremy Paxman is an FT contributing editor

How not to deal with a humbled Putin

I wonder what happened to Vladimir Putin the grandmaster? I had given up counting the commentaries casting the Russian president as a daring, decisive foil to a collection of feeble, vacillating leaders in the world’s advanced democracies. The hyperbole was always just that. Now we are catching a glimpse of Russia’s real vulnerability.

By any measure, Mr Putin has lost some of his shine. Moscow’s military gambit in Syria was widely hailed as a game-changer — the sort of bold chess opening that US President Barack Obama would never risk. By committing forces the Russian leader had positioned himself at the centre of any international effort to end the civil war. He had put paid to western demands for the forced removal of Bashar al-Assad. Banished from polite diplomatic society after the invasion of Ukraine, the scowling figure in the shadows was suddenly back at the top table.


Television images of sleek Russian warplanes and submerged submarines raining fire on Syrian rebels burnished the president’s self-image as the leader of a great patriotic revival. Who said Russia was no longer a superpower? We have short memories. Not so long ago western audiences mistook missiles lighting up the sky for America’s power to bend the arc of history. Remember Baghdad in the spring of 2003?

The lionisation of Mr Putin came before terrorists affiliated to the self-styled Islamic State planted the bomb that killed nearly 220 Russian holidaymakers on a flight home from the Egyptian resort of Sharm el-Sheikh; the murders were claimed as a reprisal for Moscow’s Syrian intervention. And it was before this week’s downing by Turkish warplanes of a Russian jet, said to have strayed across the Syrian border into Turkey’s airspace. And it was before Ukrainian saboteurs — with or without the collusion of Kiev — turned off the lights in Russian-occupied Crimea by blowing up power-supply lines.

What some had imagined a victory for Mr Putin in Ukraine has turned into a mire. He can claim to have prevented that country falling under the spell of the west, though that possibility was always overstated. Annexing Crimea, though, is a costly burden. So, too, are the pro-Russian enclaves in eastern Ukraine. For their part, European governments have surprised themselves with their own resolve by sustaining economic sanctions that impose real costs on Moscow.

Even without US and European sanctions, the Russian economy would be in serious trouble. The collapse in oil and gas prices has exposed Mr Putin’s failure to modernise or diversify the nation’s sources of output. The economy is shrinking and living standards are falling. Capital flight is draining foreign reserves and overseas investors are staying away. Some say the worst is over; few expect a significant recovery.

None of this is to imply Mr Putin is under threat. At home, his assertive nationalism has public purchase. His popular support remains somewhere in the stratosphere. Mr Obama, Germany’s Angela Merkel or almost any other leader you could think of would happily swap approval ratings with the Russian president. Nor will recent setbacks diminish his capacity to make trouble, whether in Ukraine or in Syria.


The signs are that both Moscow and Ankara want to avoid escalation after the downing of the Russian jet, but it would be a mistake to rule out another flare-up. The overlapping military operations between Russia and western powers offer an ever-present risk of accidental confrontation.

So what should be the west’s next move? The first answer is that it should seek to capitalise on Mr Putin’s troubles by deepening engagement with Moscow in the quest for a ceasefire and then for some sort of a political framework for Syria. The second is that Washington, Berlin and Paris must avoid loose talk about resets and rapprochement. To borrow a phrase from the late Margaret Thatcher, this is no time to wobble. The third, following from the second, is that the west should take what the diplomats call a strictly instrumental approach to the relationship with Moscow.

The need to co-ordinate military operations in Syria speaks for itself. If Mr Putin is willing to forge a real partnership against Isis, the west should respond with encouragement. There can never be a durable settlement while Mr Assad remains in office, but the so-called moderate opposition held up in Washington and elsewhere as government-in-waiting is in large part a fiction. A political transition would require time to forge a viable alternative and the consent of both Russia and Iran.

The unforgivable mistake would be to accept any crossover from Syria to Ukraine. Mr Putin will want to trade co-operation in Syria for western concessions in Ukraine. That way lies ruin. European leaders tempted to ease sanctions should recall that they successfully separated the Iran nuclear deal from the dispute about Ukraine. And no one should forget that Russia, every bit as much as the west, has an interest in the defeat of violent Islamist extremism.

Syria has left everyone in a hole. The US and Europe misread the conflict almost from the outset. Mr Putin, the decisive tactician, has shown himself a poor strategist. If a deal is still possible then everyone should be ready to seize the moment, but no one should imagine that the Russian president has given up his revanchist worldview.




Philip Stephens




Fonte: FT

Mauricio Macri will make a difference beyond Argentina

This is how socialism ends, not with a bang but with a squeaker. After a commanding lead during the run-up to Sunday’s presidential run-off election, in the end conservative challenger Mauricio Macri’s victory came down to only 200,000 votes in a nation of more than 40m. The defeat of Cristina Fernández’s political machine has prompted euphoria in much of Buenos Aires. Once it dies down, the president-elect will have his work cut out.

In democratic Argentina, non-Peronist presidents are the rarest of birds; none has finished a term in office. Mr Macri does not command a majority of Senate seats (although he can block hostile legislation). He has relatively little support among Argentina’s powerful provincial governors.


Meanwhile, much like Juan Domingo Perón, whose style shifted from militant nationalism to populist socialism, Peronism is amorphous, more patronage than ideology. It will recover.

Mr Macri may need time to transform the economic wasteland he inherits from predecessors who were happy to default on their country’s debt and shield inefficient industries from competition. But the effects of his victory may be sooner felt outside Argentina.

As the socialist tide in Latin America has receded, dragged back by the death or retirement of its charismatic leaders and the turning of the commodity cycle, it has left many a bloated government high and dry — in Brazil, Venezuela and Chile as well as Argentina. Still, Kirchnerism is the first to expire.


As the largest Hispanic country in South America, Argentina casts a sizeable shadow, and Mr Macri has promised to re-engage with the US and strengthen ties with the EU. Just as the rise of Hugo Chávez in Venezuela helped bring populist movements to power across the continent, Argentina’s choice of a market-friendly pragmatism may galvanise opposition movements elsewhere.

In Venezuela’s legislative elections next month, Mr Macri’s victory has shown a nervous electorate that real change is possible through the ballot box. There is even a remote chance it might strengthen the resolve of Brazilians seeking to impeach Dilma Rousseff, or persuade Bolivians that there can be workable alternatives, ahead of February’s referendum on scrapping term limits for Evo Morales.

Beyond what he represents, the importance of Mr Macri lies in what he can do. The past two decades has seen the proliferation of supranational organisations in South America, which has weakened US influence over the sovereign affairs of their members. This, though, has led to an erosion of values. A code of silence has prevailed as like-minded nations refused to call out one another on the chipping away of democratic protections, free media and human rights.


Nowhere is this as visible as in Venezuela, now governed by Nicolás Maduro, a gaffe-prone Pierrot who succeeded Mr Chávez and displays a penchant for collecting political prisoners. Mr Maduro is the most visible symptom of the region’s troubling slide towards authoritarianism.

Mr Macri invited Lilian Tintori, the wife of jailed Venezuelan opposition leader Leopoldo López, to his victory speech. He has promised to invoke a “democracy clause” and suspend Venezuela from the Mercosur trade bloc during a summit in Paraguay, days after he takes office. The odds are stacked against success. All but one of Mercosur’s other voting members are allied with Mr Maduro, and Brazil has already made its opposition to suspension clear. Still, standing up to Mr Maduro would be worth it. It is the one promise that Mr Macri can deliver unilaterally. Forcing the conversation would signal to the US and the EU that Mr Macri is the future, and that the future is bright.



Daniel Lansberg-Rodriguez teaches Latin American business at the Kellogg School of Management

Mauricio Macri’s choice for Argentina: shock treatment or gradual change

The election of Mauricio Macri on Sunday as Argentina’s new president marks the end of an era for the country and, indeed, for the region as a whole. The bounty that accompanied the commodity boom of the past 12 years is over; leaner times will require more prudent and orthodox economic management. That is as true of the economic populism that characterised the two administrations of Cristina Fernández, Argentina’s outgoing president, as it is of other South American countries with out-of-favour leftist governments, such as in Brazil.

There will also be less populist grandstanding of the sort that Ms Fernández is known for. The centre-right Mr Macri, the son of a wealthy businessman and currently the mayor of Buenos Aires, is certainly a business-like figure. In addition, the commodity price crash has cut down to size the popular appeal of charismatic leaders, such as Ms Fernández, who modelled herself on Evita Perón.


The failures of her populist model, and a widespread weariness with her sharp-tongued and confrontational style, saw to that. The same is true of other recent political movements in South America, such as Chavismo in Venezuela, Lulismo in Brazil and perhaps Evo Morales’ rule in Bolivia. South America’s so-called “pink tide” is receding.

Still, Mr Macri’s electoral success last night is unusual. He promised change; indeed, his coalition is called “Let’s Change”. That promise helped propel him from a supposedly distant second in the polls just a month ago, to victory last night with 51.4 per cent of the vote. But change to what, exactly; in which areas; and, how?

The economy is the most pressing issue that Mr Macri must address. Inflation is running at double-digits, foreign reserves have collapsed, there are currency controls, the exchange rate is overvalued, the government is shut out of international markets by its long-running court case with holdout creditors, the central bank is printing money to finance the fiscal deficit and the domestic economy suffers from a web of domestic distortions — including energy subsidies that can shrink a household’s monthly energy bills to the price of a cup of coffee.

The hard call that Mr Macri must make is whether to address these macroeconomic distortions in one go — via a shock treatment package of the kind that Argentines have come to know and fear — or more gradually. Both courses have their merits, and Mr Macri’s team of well-regarded economic advisers is reportedly divided on the issue.

Certainly, Argentina will need to have recourse to multilateral financial support at some point — including, presumably, the International Monetary Fund, even though the IMF is indelibly associated in Argentine minds with the country’s calamitous 2002 debt default and devaluation. So far, Mr Macri has said only that he would start to remove capital controls immediately after his inauguration on December 10.


Mr Macri also faces considerable political challenges. He lacks a majority in Congress, although this may not present an insurmountable barrier to the passage of legislation.

In the lower house, with 257 seats, his coalition has more than 90 deputies, and he may be able to count on the support of over 30 dissident Peronists to carry a majority. Mr Macri also lacks a majority in the Senate. But senators traditionally take their lead from Argentina’s powerful state governors who in turn negotiate directly with the president. So, on important issues, such as solving the holdouts issue, Mr Macri should be able to build the support he needs. He has form here, too. As mayor of Buenos Aires, Mr Macri managed to pass laws through the local legislature even though he also lacked a majority there.

Perhaps the biggest area where Mr Macri needs to effect change, though, is in Argentina’s investment climate. Financial investors have cheered Mr Macri’s rise and Argentine stocks and bonds have rallied on the prospect of change. But this rally has been a trader’s plaything. Mr Macri’s job is to convert Argentina into a destination for real money and foreign direct investment rather than a hedge fund speculation. For now, that is only a hope as it would mark a decisive change for a country that, during the past 100 years, is unique in having lost its former “rich nation status”.

But even in Argentina, as Ms Fernández remarked ruefully on her Twitter account last night, “nothing lasts forever.”




Fonte: FT

Paris attacks must shake Europe’s complacency

There is an impulse in Europe’s political discourse, by no means the exclusive property of the left, that assumes nothing bad happens in the world without it being somehow the fault of the west in general and the US in particular. This is the mindset that casts Saddam Hussein as a victim, Hugo Chávez a hero and Russia’sVladimir Putin as a bulwark against Nato expansionism. The mass murder of Parisian concertgoers and Russian tourists may be crimes, but they are surely also the product of unprincipled great power intervention.

Listen to Jeremy Corbyn. The leader of Britain’s Labour party cannot censure the outrages of extremist jihadis without reference to the supposed crimes of the US: the siege of Falluja, say, or killing rather than arraigning Osama bin Laden. “We have created a situation where some of these forces have grown,” was Mr Corbyn’s reflection on the slaughter in Paris.


There is no shortage of criticisms to be made of the west — and they do not start or end with the invasion of Iraq. I find it shocking that Saudi Arabia is still treated as a staunch ally even as it exports the extreme version of Islam that informs the murderous credo of the jihadis. Then there is a welcome afforded Egypt’s president Abdel Fattah al-Sisi whose violent repression of the Muslim Brotherhood opens the door to Isis. With its oil and autocrats, the Middle East is a graveyard for anything pretending to be a principled foreign policy.

None of these hypocrisies can be held up in exculpation of the tyranny of the self-styled Islamic State. Those who think it better to explain than condemn forget that by far the greatest number of victims of Isis’ crimes are fellow Muslims in Iraq, Syria and, most recently, Beirut. Or that the caliphate replaces liberty with theocratic intolerance, subjugates women and murders homosexuals. The idea that the west should shoulder blame rests on a corrosive moral relativism blind to the essential evil of those who kill and maim. Indiscriminate murder is wicked. It demands unvarnished condemnation. Full stop.

You could ask whether anyone cares what Mr Corbyn thinks. The Labour leader’s formative memories are of the Vietnam war and the nasty campaigns waged by the CIA in central and Latin America during the 1970s. He has not stepped out of the time warp. He will never be prime minister. Even Fidel Castro thinks it is time to move on.

Yet Mr Corbyn’s response illuminates a broader strand of European thinking — a complacency that takes for granted the Enlightenment and has sapped the willingness to defend its essential underpinnings. Somehow it is easier to blame the west than to admit that there are those for whom freedom, tolerance and the rule of law are natural enemies.

We saw this when Mr Putin overturned the continent’s postwar security order by sending his army into Ukraine. The reaction of many on the right as well as the left was to mutter that the fault lay with Nato’s decision to welcome the new democracies of eastern and central Europe.


There are many more who have decided in the wake of Edward Snowden’s revelations that the principal threat to Europe’s freedoms comes from the electronic “snooping” of domestic intelligence services rather than from jihadis wielding Kalashnikovs and wearing suicide vests. Hopefully the balance will shift somewhat in the aftermath of the Paris attacks.

The original sin was the assumption that the end of the cold war did indeed mark the end of history. The complacency straddled the boundary of economics and politics. Liberal markets would create permanent prosperity, while political pluralism would become the default system of governance. The international order would be remade in the image of European multilateralism.

The first of the illusions was shattered by the financial crash of 2008, but governments and electorates have held on more tenaciously to the idea that democracy is the natural destination of politics. When things have gone wrong — the terrorist attacks of al-Qaeda and now Isis and Russia’s revanchism — the instinct has been to treat them as exceptions. The curtains, though, have now been torn open, not least by the influx of refugees fleeing violent chaos on Europe’s periphery.

What is required is a readiness to fight. This means a lot more than simply sending more warplanes to attack Isis in its strongholds, though the case for fiercer military action is a strong one. Fighting means recognising that the values that form our societies cannot be taken for granted; that the postmodern order imagined after 1989 is at very best some way off; and that even as they confront the enemies of freedom and tolerance European governments must address deprivation and marginalisation within their societies.

This in turn demands a willingness to admit there will be costs. But then anyone who has glanced at the history of the 20th century will know that today’s liberties came at a price. Nor should we imagine that governments will not have to make ugly compromises — not least in Syria — if some order is to be restored.

Above all, it is time for Europeans to celebrate what they have built and recognise it is under threat. The streets of Paris this week have seen a heartening resolve not to be cowed by the murderers. If Europe does not stand up for its values, who else will?




Philip Stephens




Fonte: FT

Economies are too tough for Isis to destroy

A few days after the assault on Paris, it is hard to name the businesses that were singled out by the terrorists. The public venues — the Bataclan theatre and the Stade de France — are memorable. The cafés and bars of eastern Paris — Le Carillon, Comptoir Voltaire, La Belle Equipe — were not symbolic in themselves. They were simply places for people to gather.

Nor, despite the terrible bloodshed, have the attacks had a deep physical impact on the fabric of the city. There are broken windows and some bomb damage but Paris otherwise survives largely as before. In terms of disrupting physical infrastructure or the economy — the energy supplies, communications and supply chains of France — Isis might as well not have bothered


Al-Qaeda’s transnational operating model has been compared with global franchising: its brand is adopted by semi-independent groups that organise and carry out their own attacks.

To judge by Paris, Isis prefers to outsource. From its supply chain of military-grade weapons to cross-border planning of explosions, it is a multinational. “Designed in Syria. Manufactured in Belgium” could be its slogan. Yet the economic impact of Islamist terrorists, who are obsessed with causing as many deaths as possible, is usually minimal apart from on tourism and travel. The attacks of September 11 2001 had little long-term effect after the initial $90bn of damage. The 2008 financial crisis and the 2011 Japanese earthquake, which disrupted global supply chains, were more powerful.

The Paris death toll was high but its financial reach was less even than an accidental explosion at a German chemical plant in 2012. That killed two workers and halted the production of a resin used in brake and fuel parts, which in turn inflicted supply shortages on US and European carmakers.

For this reason alone, French President François Hollande’s talk of war on Isis is misguided. Isis has formed a state within Syria and Iraq by controlling the oil industry inside its territories, but its cross-border brand of terrorism is not warlike. Killing people is terrifying but is insufficient in war: you must destroy infrastructure and degrade supplies, as the Nazis did in the 1940s by bombing the east London docks.

Islamist terrorism, which in the mid-1990s overtook leftist forms of insurrection in which industries and business leaders were often primary targets, does not do that. It attempts to encourage a clash of civilisations by fomenting terror in what Isis calls “the grey zone” — the millions of people who do not want to be trapped in a caliphate and prefer to enjoy their liberty elsewhere. Beneath the scathing rhetoric about “targeting the capital of prostitution and vice” in Paris, Isis recognises a reality: that it would like to destroy the French economy but it cannot.

As Todd Sandler, a professor at the University of Texas who studies the economic effects of terrorism, says: “They can scare the heck out of us but they do not seem to have much economic impact.”

It is partly a matter of scale. Most terrorist attacks, even those in Paris, are small and localised: if you do not happen to be nearby at the time, you are not in danger. It also reflects the resilience of diversified modern economies. There are some choke points in power and communications infrastructure but most are well guarded — the soft terrorist targets are less financially critical.



“Companies may suffer but industries as a whole are very robust,” says Yossi Sheffi, professor at the Massachusetts Institute of Technology. In order to create long-term damage, terrorism has to be sustained, focused and targeted at a small area. The output of Spain’s Basque region was estimated to have been reduced by 10 percentage points by a 20-year separatist campaign — much of it, unlike with Islamist terrorism, aimed at industrial targets.

The Paris attacks may dent France’s economy and those of other European countries if governments respond — as some are threatening to — by reinstating border controls and weakening the Schengen agreement that allows free movement of people and goods. Citigroup economists warned this week of “a growing backlash against a key element of globalisation”.

Isis would welcome it as an economic side effect of its religious offensive but it is not a given. Attacks such as that on the World Trade Center and the Madrid train bombings of 2004 did not curtail growth in global trade. The damping of trade growth, which dropped to 3 per cent in 2013 compared with an average of 7.1 per cent growth between 1987 and 2007, has other causes.

The most significant, according to one International Monetary Fund study, is a levelling in supply chain fragmentation and the “back and forth” of industrial components after a prolonged growth in outsourcing of US and European manufacturing to China and Asia. Globalisation paused not because of terrorism or trade protectionism but because it had reached limits.

Terrorism has its own logic. It fosters fear far in excess of the danger it presents and is a marketing campaign for recruits. It does what its planners want. But set against natural events such as earthquakes, and the ebb and flow of industry and trade, even large attacks are economically minor.

It is hard to keep in mind when faced with atrocities but it is the reality. Many Parisians fell but Paris stands.




John Gapper




Fonte: FT

Corporate surpluses are contributing to the savings glut

The notion of a “savings glut” helps explain the ultra-low real interest rates we have seen since the global crisis of 2007-09. But the idea of “secular stagnation” suggests that this glut had emerged even before that. To explain why this was so, we must look at the behaviour of the corporate sector.

Where, then, do corporations fit into an analysis of the shifting balance between planned savings and investment? The answer starts with the fact that companies generate a huge proportion of investment. In the six largest high-income economies (the US, Japan, Germany, France, the UK and Italy), corporations accounted for between half and just over two-thirds of gross investment in 2013 (the lowest share being in Italy and the highest in Japan)

Because corporations are responsible for such a large share of investment, they are also, in aggregate, the largest users of available savings, but their own retained earnings are also a huge source of savings. Thus, in these countries, corporate profits generated between 40 per cent (in France) and 100 per cent (in Japan) of gross savings (including foreign savings) available to the economy.

In a dynamic economy, one would expect corporations in aggregate to use the excess savings of other sectors, notably those of households — thereby generating both buoyant demand and growing supply. If investment is weak and profits strong, however, the corporate sector will, weirdly, become a net financer of the economy. The result will be a mixture of fiscal deficits, household financial deficits and current account surpluses (that is, capital account deficits). In Japan, fiscal deficits offset huge corporate surpluses. In Germany, a capital account deficit offsets corporate and household surpluses.

Since the crisis, the corporate sectors of the big high-income economies have run surpluses of savings over investment, with the exception of France. The surplus savings of Japanese corporations are, amazingly, close to 8 per cent of gross domestic product.

The corporate sectors have therefore contributed substantially to the savings glut. This is not just a post-crisis phenomenon. Even in the run-up to the crisis, corporate sectors ran surpluses in Japan, the UK, Germany (except in 2008) and the US (except in 2007 and 2008). A US Federal Reserve paper notes that the Great Recession has been partly responsible for these surpluses, but it adds that even in the half-decade before the crisis, rates of corporate investment “had fallen below levels that would have been predicted by models estimated in earlier years”.

The rise in the surplus of corporate savings over investment is driven by a combination of strong profits and weakening investment. This weakening of investment is both structural and cyclical. Moreover,the weakening is widespread. Nevertheless, Japan’s corporate savings glut is unique in scale. Any analysis of Japan’s economic challenges that does not start from this fact is essentially worthless.

It is also important not to confuse the excess of corporate savings over investment with the widely noticed accumulations of cash by many companies. Businesses can acquire cash not only by hoarding retained earnings but also by borrowing or by selling assets.

The observation that a structural surplus of savings over investment appears to have emerged in the corporate sectors of the big high-income countries is highly significant. It is significant for the growth of potential supply, since it reflects relatively feeble investment, but it is also significant for the shape of aggregate demand.

If the corporate sector runs a structural surplus of savings over investment, other sectors must run offsetting structural deficits. If the government is to be in financial balance, either households or foreigners must run these deficits. In the eurozone, this logic has led to huge current-account surpluses (a financial deficit for foreigners). For the UK and US, it is likely to mean renewed household deficits — a perilously destabilising possibility.

Why is corporate investment structurally weak? The ageing of societies is one reason: by slowing potential growth, it lowers the level of investment needed.

Globalisation is another: it motivates relocation of investment from the high-income countries. Another reason is technological innovation. Much investment today is in IT, whose price is collapsing: constant nominal investment finances rising real investment. Again, much innovation seems to reduce the need for capital: consider the substitution of warehouses for retail stores. Another explanation could be that management is not rewarded for investing.

Together, all this might explain why, to take the US example, the ratio of corporate investment to profits has declined substantially since 2000.

The behaviour of the corporate sector also raises important policy questions. Corporate taxation, for example should surely encourage both investment and the distribution of profits. The way to achieve these joint objectives could be through higher tax rates on retained earnings, together with full deductibility of both investment and dividends.

Beyond this, it has to be accepted that, so long as the corporate sector runs a structural financial surplus, macroeconomic balance is likely to require fiscal deficits. Moreover, if the corporate sector is unable to invest even its own savings, savings in the rest of the economy are bound to have a low marginal value. In such a world, both ultra-low real interest rates and high equity prices are not at all surprising. They are to be expected. So stop complaining.

Martin Wolf

Fonte: FT

Do Paris terror attacks highlight a clash of civilisations?

Ever since the late Samuel Huntington predicted that international politics would be dominated by a “clash of civilisations”, his theory, first outlined in 1993, has found some of its keenest adherents among militant Islamists. The terrorists who inflicted mass murder on Paris are part of a movement that sees Islam and the west as locked in inevitable mortal combat.

Leading western politicians, by contrast, have almost always rejected Huntington’s analysis. Even former US President George W Bush said: “There is no clash of civilisations.” And everyday life in multicultural western nations, most of which have large Muslim minorities, offers a daily refutation of the idea that different faiths and cultures cannot live and work together.


In the aftermath of the Paris attacks, that core idea needs to be reaffirmed. And yet a necessary restatement of liberal values should not prevent a sober acknowledgment of some malign global trends. The fact is that hardline Islamism is on the rise — even in some countries, such as Turkey, Malaysia and Bangladesh, previously regarded as models of moderate Muslim societies. At the same time, the expression of anti-Muslim prejudice is entering the political mainstream in the US, Europe and India.

Taken together, these developments are narrowing the space for those who want to push back against the narrative of a “clash of civilisations”.

Terrorist attacks, such as those in Paris, promote tensions between Muslims and non-Muslims — as they are intended to. But there are also longer-term trends at work that are driving radicalisation. One of the most pernicious is the way in which the Gulf states, in particular Saudi Arabia, have used oil money to spread intolerant forms of Islam into the rest of the Muslim world.

The effects are now visible in Southeast Asia, the Indian subcontinent, Africa and Europe. Malaysia has long been held up as an example of a successful and prosperous, multicultural nation with a Muslim Malay majority and a large ethnic Chinese minority. But things are changing. Bilahari Kausikan, a former head of the foreign ministry in neighbouring Singapore, notes a “significant and continuing narrowing of the political and social space for non-Muslims” in Malaysia. He adds: “Arab influences from the Middle East have for several decades steadily eroded the Malay variant of Islam . . . replacing it with a more austere and exclusive interpretation.” The corruption scandal that is undermining the government of Prime Minister Najib Razak has increased communal tensions, as the Malaysian government has fallen back on Muslim identity politics to rally support. One junior government minister even recently accused the opposition of being part of a global Jewish conspiracy against Malaysia.

In Bangladesh, a Muslim country with a secular constitution, radical Islamists have been responsible for murders of intellectuals, bloggers and publishers in the past year. There has also been a rise in attacks on Christians, Hindus and Shia Muslims. Much of this violence has been perpetrated by Isis or al-Qaeda. But, as in Malaysia, the rise of radical Islam seems to have been heavily influenced by the Gulf states — through the funding of education and the connections forged by migrant workers.

For many in the west, Turkey has long been the best example of a majority-Muslim country that is also a successful secular democracy. But in the era of President Recep Tayyip Erdogan, religion has become much more central to the country’s politics and identity. Mr Erdogan has been labelled as “mildly Islamist” by The Economist and others. But there was nothing mild about his statement in 2014 that westerners “look like friends, but they want us dead, they like seeing our children die”.


While Narendra Modi, India’s prime minister, has not said anything this inflammatory about Muslims, he has long been accused of tolerating anti-Islamic prejudice and violence. During his first months in office, Mr Modi reassured some critics by concentrating on economic reform. But in recent months, members of his Hindu nationalist Bharatiya Janata party have ramped up anti-secular and anti-Muslim rhetoric — with the lynching of a Muslim man, accused of eating beef, making national headlines.

In Europe, even before the Paris attacks, the migrant crisis had helped to fuel the rise of anti-Muslim parties and social movements. As Germany has opened its doors to refugees from the Middle East, violent attacks on migrant hostels have risen. In France, it is widely expected the far-right National Front will make significant gains in next month’s regional elections.

Anti-Muslim rhetoric is also rising in the US and has become commonplace among Republican candidates for the presidential nomination. Ben Carson, who leads in many Republican polls, has said that no Muslim should be allowed to become US president; Donald Trump has said that he would deport any Syrian refugees admitted to the US.

The confluence of these developments in North America, Europe, the Middle East and Asia is fuelling the idea of a clash of civilisations. Yet the reality is that the Muslim and non-Muslim worlds are intermingled across the globe. Multiculturalism is not a naive liberal aspiration — it is the reality of the modern world and it has to be made to work. The only alternative is more violence, death and grief.




Gideon Rachman




Fonte: FT

The definition of recession needs a rethink

Bright and early on Monday morning, expect to hear some gloomy news — that Japan is in recession, for the fourth time in just five years. Doom will be mongered; foes will declare it a fresh blow to Prime Minister Shinzo Abe’s “three arrows” of economic stimulus. And I will not believe a word of it.

That is not because the cries of recession will be false — even though the unemployment rate is low and falling, the corporate mood is one of cautious optimism and Japan is manifestly not entering a slump. Output is expected to fall by 0.1 per cent in the third quarter after a 0.3 per cent decline the quarter before — and, on the standard definition, two consecutive quarters of contraction equals a recession.

The trouble is this definition of a recession is anachronistic and misleading. It is an idea that no longer means what we think it does — that is, a significant decline in activity. Even worse, the way we use it causes harm, not just in Japan but also in an increasing number of advanced economies. The R-word needs a rethink.

Japan keeps entering “recessions” because its population is falling and so the economy has little potential to grow. The Bank of Japan puts trend growth at 0.5 per cent or less, compared with the US Federal Reserve’s estimate of 2 per cent for America. It is as if the US is a couple of metres away from the swimming pool but Japan is walking along the edge and needs only a slight nudge to fall in. As other countries age, they will have the same problem.

In fact, Japan barely needs even a nudge. The average revision to its initial estimates of growth is more than 0.5 percentage points, so the statistics will frequently show recession when the country is actually growing normally, and normal growth when it is actually in recession. Add in some sampling error, plus a bit of unseasonal weather, and a recession every year or two is pretty much guaranteed.

There are three reasons why these false “recessions” are a problem. First, they render comparison between different countries meaningless. A recession in Japan is totally different from one in the US, which is different again from a recession in China.

Second, they mask the concept that actually matters: turning points in the business cycle, when the economy switches from expansion to contraction.

Third, there is some reason to think constant declarations of recession may themselves hurt the economy. Recent work by academics Scott Baker, Nick Bloom and Steven Davis shows uncertainty about economic policy can affect production and employment. Who is going to hit the boutiques of Ginza, or pour millions into a new factory, when the television channels blare downturn?


In the US, a National Bureau of Economic Research committee looks at a host of indicators and then declares when the business cycle starts and stops, but its judgments are only available months after the fact. We need a more automatic way for everyone to know a turning point is upon us.

My proposal is two consecutive quarters of growth 2 percentage points below a country’s trend, as defined by its central bank. For the US, the trend is 2 per cent, so that means two consecutive quarters below zero; for Japan, trend is 0.5 per cent, so it means two consecutive quarters when the economy shrinks by more than 1.5 per cent.

On this measure, Japan’s only recent recession was 2008-09, with a near miss after the tsunami in 2011. That lines up with the unemployment rate and what it actually feels like for the public, who keep being told they are in recession, even as construction sites multiply on the Tokyo skyline. It resembles the traditional definition but allows fair comparison between countries.

I am not optimistic about cutting back on the word “recessions”, though — too many people have reason to declare one. It is a potent word politicians can use to attack opponents, brokers to get clients trading and journalists to push pixels.

We need to start thinking of them as soft patches, not as cataclysms. Perhaps there is a way to use the word more frequently elsewhere, and draw its sting. By the standard now applied to Japan — two quarters of growth 0.5 percentage points below trend — the US had a recession in 2012, pushing the Fed to launch its third round of quantitative easing.

There is some reason to redefine recession like this anyway, because there are signs of the business cycle growing smoother in recent years, and downturns rarer. Before the shock of 2008-09, economists talked of a “Great Moderation” replacing the old cycle of boom and bust. Even after the collapse of Lehman Brothers,many studies still find evidence that output is less volatile than it once was.

But if “recession” meant growth just 0.5 per cent below trend, it would leave the question of what to call the nasty episodes when growth is more than 2 percentage points below trend and the economy is spiralling downwards.

A rare but deep and destructive downturn? There is a good word for that: depression, which is normally saved for 1929-33, but seems a perfectly apt description of 2008-09 and its aftermath. Just remember: if Japan’s economy shrinks for a second quarter on Monday, and everyone declares a recession, the two are very different things.


Robin Harding


Fonte: FT

In the long shadow of the Great Recession

The US and Europe still live with the legacies of the financial crisis of 2007-09 and the subsequent eurozone crisis. Could better policies have prevented that outcome; and, if so, what might they have been?

A recovery is under way, but only in a limited sense. The change in gross domestic product of crisis-hit countries is now almost universally positive. But GDP remains far below what might have been expected from pre-crisis trends. In most cases, growth has not recovered, mainly because of declines in productivity growth. In the eurozone, GDP was still below pre-crisis levels in the second quarter of 2015. In crisis-hit members, a return to pre-crisis output is still far away. They will suffer lost decades.

From a sample of 23 high-income countries, Professor Laurence Ball of Johns Hopkins University concludes that losses of potential output ranged from zero in Switzerland to more than 30 per cent in Greece, Hungary and Ireland. In aggregate, he concludes, potential output this year was thought to be 8.4 per cent below what its pre-crisis path would have predicted. This damage from the Great Recession is, he notes, much the same as if Germany’s economy had disappeared.

A central finding of the work by Prof Ball and, more recently, by Antonio Fatás of Insead and Lawrence Summers of Harvard, is that estimates of potential output track actual output. This suggests that “hysteresis” — the impact of past experience on subsequent performance — is very powerful. Possible causes of hysteresis include: the effect of prolonged joblessness on employability; slowdowns in investment; declines in the capacity of the financial sector to support innovation; and a pervasive loss of animal spirits.

This year Jason Furman, chairman of the US Council of Economic Advisers brought out the impact of low post-crisis investment: after the crisis, the contribution of investment labour productivity fell to very low levels (see chart). This was strikingly so in US, where the estimated impact actually was negative.

The hysteresis hypothesis is not universally accepted. There are at least three other explanations for the enduring post-crisis collapse in output.

First, it is argued that credit booms raised pre-crisis estimates of potential output far above sustainable levels. One objection to this is that the expansion in credit raised asset prices far more than it fuelled actual spending. Adair Turner, former chairman of the UK’s Financial Services Authority, makes this point in his book Between Debt and the Devil . A further objection to this argument is that it confuses the contribution of debt to the structure of demand with its effect on overall supply.

A second explanation for the post-crisis collapse in output is that the impact of new technologies on output is being underestimated. Yet, even if this were true (which is possible), it would not explain the sharp slowdown in the growth of productivity after the financial crisis. The difficulty of measuring the impact of new technologies also did not suddenly increase in the UK (the country worst affected by a post-crisis slowdown in productivity growth) relative to the US (the home of these new technologies, yet relatively less affected by the productivity slowdown).

A final explanation is that productivity growth slowed before the crisis. In the US, this does seem to be the case. But it is less obviously true elsewhere.

On balance, then, the hysteresis hypothesis retains substantial force. This is why it is so important that we avoid huge crises and respond strongly to any that occur, to minimise their economic impact. Otherwise, the bad cycle might permanently damage the trend.

This raises two further questions: could the adverse impact of the crisis have been smaller? And can it still be reversed? The answer to the first must be yes. But it would have required stronger fiscal and monetary responses, and more aggressive restructuring of damaged financial institutions. The eurozone, in particular, should have done far better. Yet, even today, it lacks the will and the institutions it needs.

The answer to whether the losses in output levels and growth rates can be reversed must again be yes. By the early 1960s GDP per head in the US had regained the level indicated by a continuation of pre-1929 trends. Unfortunately, the fiscal boost from the second world war was a deus ex machina for policy. It cannot be repeated in peacetime. Even so, it might at least be possible to return to pre-crisis trend rates of growth. A mix of ag­gressive support for demand and contributions to long-term supply — notably via far higher levels of public investment — would hit both objectives at once.

The evidence, then, is that festering recessions have prolonged effects on prosperity. One conclusion is that it is vital to act swiftly to restore demand. Moreover, the evidence is now clear that the big high-income countries enjoyed the policy space needed to act decisively. Whatever many so foolishly said in 2010, they never faced the slightest risk of turning into Greece. The US and, still more, the eurozone should have responded far more aggressively.

Experience indicates something else no less important. It may be hard to avoid crises but it is vital to make them both small and rare. Financial crises lead to deep recessions and prolonged slowdowns, partly because policymakers fear making sufficiently strong responses. For this reason the regulation of finance simply had to be tightened. The question is only whether it has been tightened in the right way.

Martin Wolf

Fonte: FT

The interplay of a Fed tightening and an ECB easing

The latest Federal Open Market Committee minutes seem to have surprised market participants who were expecting the first rate rise to take place only in 2016. The “news” coming out of the US central bank after the September meeting suggested that the state of the world economy was still too risky to take the decision before the end of the year.

However, the grounds for the new messageare not entirely clear. The macroeconomic data and financial market situation have not changed much in recent days. It may be that the European Central Bank’s announcement a couple of weeks ago that monetary policy in Europe could be further eased in December made a difference. In a press conference on 22 October, Mario Draghi, ECB president, clearly indicated that various options had been considered by the central bank’s governing council, including a further reduction of the deposit rate, which is already at a negative level (minus 0.25 per cent), and an increase in the monthly purchase of assets under the quantitative easing programme.

Why should the ECB’s intention of further easing monetary policy have induced the Fed to anticipate its tightening?

There is a broad consensus that QE tends to become less and less effective over time, particularly when interest rates have reached the zero lower bound. The combination of sustained purchases of government bonds and the negative interest rates on deposits that banks hold at the ECB has certainly lowered the burden of debt for eurozone governments and facilitated deleveraging for households and companies. But there are also side-effects. Savers and pensioners are increasingly worried about the diminishing returns on their investments, and may be induced to save even more, which produces recessionary consequences for the economy. Furthermore, the low cost of debt is reducing pressure on governments to reform and to consolidate public finances.

The main channel of transmission of QE to the real economy has been the exchange rate. The euro fell against the dollar from 1.25 a year ago to slightly above 1.05 in early March when the QE programme started. Thereafter, the exchange rate moved back to around 1.10 and showed an appreciating trend each time the Fed decided to postpone the first rate rise. The weakness of emerging market economies has also fostered an depreciation of their currencies. In trade-weighted terms, the euro has appreciated by about 4 per cent since the summer.

The strengthening of the European currency in recent months represents a risk for the fragile eurozone recovery and for the prospects of inflation moving back towards the ECB’s target of 2 per cent. The ECB’s announcement at the last governing council meeting is clearly intended to make the markets aware that unless the euro falls back to levels close to parity against the dollar, monetary expansion will be stepped up. Markets seem to have fully understood the message as the euro has fallen from about 1.14 to the dollar to below 1.08 since then.

How does this affect the Fed’s decision? Everybody expects the dollar to strengthen when US rates rise, be it in December or early next year. However, the appreciation would be even stronger if it was the result of a combination of a Fed tightening and an ECB easing. If the Fed were to wait for the ECB to ease before it raised its key interest rate, the impact on the dollar exchange rate would be much larger. Once it had decided to cut the deposit rate or to step up its asset purchases, the ECB would not easily reverse its decision, just because the Fed had raised its rates. The Fed would de facto lose degrees of freedom and the pace of its tightening would become dependent on what other central banks would do.

By anticipating the first rise in December, the Fed may hope that the ECB will reconsider its intention of further easing. The depreciation of the euro resulting from the US rate rise would do part of the job for the ECB.

Indeed, this scenario may actually not displease the ECB. A weakening of the euro that would follow the Fed decision could be sufficient to maintain an adequate monetary accommodation for the eurozone, and might make further measures unnecessary. Difficult discussions about the pros and cons of QE could be postponed, and the unpleasant public display of dissent would be avoided.

It sounds almost too good to be true.

Lorenzo Bini Smaghi is a former member of the executive board of the European Central Bank and currently visiting scholar at Harvard’s Weatherhead Center for International Affairs and at the Istituto Affari Internazionali in Rome

China is sailing into a sea of troubles

Nothing can separate us. We are one family”. So said Xi Jinping after becoming the first president of China to shake hands with a president of Taiwan. The meeting between Mr Xi and Ma Ying-jeou was undoubtedly historic. And yet Mr Xi’s talk of “family” reminded me of the way that a Hollywood mafia don might use the term — in a manner that mixes charm with menace. The fact is that Beijing still insists that Taiwan is a rebel province and reserves the right to attack its family member should Taiwan ever declare independence.

The ambiguities do not end there. On one level, Mr Xi’s decision to break with decades of ostracism was the act of a confident leader. Yet the Chinese president’s boldness probably reflects anxiety as much as confidence. For when he looks out at China’s near abroad he confronts a sea of troubles.


The politics of Taiwan are moving against China. Beijing is also under increased pressure from the US over its territorial ambitions in the South China Sea. Mr Xi has troubles on dry land, too. America and 11 other nations have just agreed the Trans-Pacific Partnership, a trade agreement that excludes China, challenging its central position in the economy of the Asia-Pacific. Meanwhile, pro-democracy protests in Hong Kong in 2014 have left a legacy of bitterness with the mainland, raising the prospect that Beijing’s “One China” policy could be challenged in Hong Kong and Taiwan simultaneously.

What is more, all this is taking place against the background of a slowing domestic economy, see-sawing stock markets and a Chinese elite that has been deeply destabilised by Mr Xi’s anti-corruption campaign.

Given all these other problems, the last thing the president needs is a new Taiwan crisis. His decision to meet Mr Ma comes two months before a presidential election in Taiwan, which is likely to result in a victory for Tsai Ing-wen, the leader of the independence-minded Democratic Progressive party (DPP), a group abhorred by the Chinese government. Friday’s handshake looks like an attempt by Mr Xi to boost Mr Ma’s Kuomintang party (KMT). But the DPP is so far ahead in the polls that the gambit is likely to fail.

If the DPP wins power and is too explicit in its rejection of Beijing, Mr Xi may feel compelled to resort to more threatening language. That, in turn, would ratchet up security tension with the US at a time when there is already a mini-crisis in the South China Sea.

During the most recent Taiwan Strait crisis, from 1995 to 1996, the US sent an aircraft carrier to the region, in response to China’s military intimidation of the Taiwanese. Since then, Beijing has adopted much subtler tactics, relying on burgeoning economic and travel ties to draw the “rebel province” gradually back into its orbit. The election of a pro-independence president in Taiwan would suggest these tactics had failed.

In the past 20 years, the military balance in the Taiwan Strait has probably tilted towards Beijing but it would be a bold Chinese president who put this proposition to the test.

In all this jostling for influence, China’s strongest card remains the power of its economy. Almost all the nations of Southeast Asia do considerably more trade with China than with the US. But that makes the TPP potentially threatening to China.

Some Chinese analysts have even called the TPP “an economic Nato”, since they see it as an alliance aimed explicitly at isolating China. America says that eventual Chinese membership remains a possibility. And it is clear that many of the signatories of the TPP, including Singapore and New Zealand, would genuinely like China to join the new trade bloc. They do not like the economic or the political implications of excluding Beijing.

But the US and Japan, the two biggest signatories of the pact, are more sceptical. Some of the provisions of the TPP, such as commitments on labour and environmental law, and on cyber space, might have been designed to make it hard for China to join.

Long-term exclusion from the TPP could make China less attractive as a production base, just at the time when rising costs are eroding the country’s competitiveness.

Issues such as the South China Sea and the TPP — however difficult for Beijing — are, at least, largely about government policy. The questions of Hong Kong and Taiwan are more unpredict­able, and therefore dangerous, because they involve something Beijing cannot control: public opinion.

In both Hong Kong and Taiwan, there is growing evidence that the young are less and less inclined to treat Beijing’s edicts with respect. Hong Kong, which is now part of China, had its “umbrella” movement in 2014, demanding free elections. Taiwan has the “sunflower” movement, which also rose up last year in protest over a new trade agreement with China.

These are fiercely difficult problems for Mr Xi. But they are also problems of Beijing’s own making. By insisting with such ferocity on stale political formulas, such as “rebel province” and “one country, two systems”, the Chinese government has boxed itself into a corner.

Meeting the president of Taiwan is a powerful symbol of flexibility. But if Mr Xi really wants to calm his sea of troubles, he needs to change the substance of Beijing’s approach to Taiwan and Hong Kong.


Gideon Rachman


Fonte: FT

Silicon Valley faces a new political problem

One of the more unexpected moments in recent US political history came four years ago when news of the death of Steve Jobs reached the forces of Occupy Wall Street — then in possession of fairly substantial swaths of urban parkland. Some of the protesters were pretty distraught and took to Twitter to mourn the loss of one of history’s greatest wealth creators.

The sadness on the city streets revealed one of the more curious blind spots of much of today’s American left. The occupiers were angry with the influence wielded by the richest 1 per cent of the population but they were willing to make exceptions for some captains of industry in the technology sector.


Executives such as Jobs were not part of the problem, in the view of many of the young people banging their drums at night in the parks. They were part of the solution, disrupters of traditional businesses and creators of the communications infrastructure that was enabling the smartphone-wielding activists to express themselves as never before.

But the times may be a changin’. Evidence that US progressives are turning against their old heroes in the Silicon Valley emanated this week from an intriguing locale: San Francisco, the Californian city by the bay that has become a very expensive place to live thanks to the presence — and arguably the products — of the high-tech elite.

The rebellion came in the form of ballot proposals designed to maintain the supply of affordable housing in the city. One sought to prevent landlords from converting residences into permanent offerings on the Airbnb home-sharing site by limiting short-term rentals to 75 days a year. Another would have stopped the construction of luxury homes in the traditionally working-class Mission district for 18 months.

Both local propositions went down to defeat on Tuesday. But I would note that they were supported by tens of thousands of San Franciscans, garnering more than 40 per cent of the vote in both cases. This flaring of anti-tech feeling is significant because Californian ideas have a way of spreading to other places. The hippie movement is one example. The anti-tax crusade that began with a California ballot initiative in 1978 is another. So too were the iMacs, iPods, iPhones and iPads sold by a certain Cupertino, California, company that employed Jobs from time to time.

San Francisco’s case also comes as something of a wake-up call in a country where neither major political party has shown any inclination to stand in the way of Silicon Valley — either through antitrust enforcement or other laws.

Rightly or wrongly, the Republicans tend to be focused nowadays on older technologies — witness Donald Trump’s call for the US to follow the example of Qin Dynasty China and build a great wall on the Mexican border.

The Democratic presidential campaign has featured plenty of big-business bashing as the frontrunner Hillary Clinton has been “pulled” to the left by socialist Bernie Sanders. But when Democrats complain about capitalists, they are usually talking about the ones working at the big banks, demonstrating the tendency of politicians, like generals, to fight the last war (when Wall Street was really falling apart during the 2008 campaign, few leaders in either party said much until it was too late).

If you run into a prominent Democrat talking about Silicon Valley these days, chances are they are doing so in the employ of a technology company. As Airbnb mounted an $8m campaign against the San Francisco proposal on short-term rentals, it hired Chris Lehane, a former adviser to President Bill Clinton. David Plouffe, President Barack Obama’s 2008 campaign manager, has provided similar assistance to Uber, the ride-hailing service, while Jay Carney, his former press secretary, can be found kicking up a fuss on behalf of the happy campers at Amazon.

I would argue that political people of either party ignore the anti-tech stirrings in a place like San Francisco at their own peril — even though the city’s ballot proposals this week were far from perfect. Airbnb rentals, after all, could help homeowners of more modest means make ends meet. Higher-end housing developments in the Mission also could create jobs for lower-income people who might otherwise be idle.

The bigger point is that there are good reasons for people to worry about the Silicon Valley behemoths. The disparity in wealth between San Franciscans in the tech sector and other fields is raising questions about how the city can remain a home for both groups. Transport services such as Uber are threatening the livelihoods of taxi drivers around the world. The systemic online snooping into our personal affairs by private-sector entities points to the need for new rules of engagement (my sympathies on this score are with Walter Kirn, author of an Atlantic magazine article entitled: “If you’re not paranoid, you’re crazy”.)

A political reckoning with the big Silicon Valley groups is in order — just as one was with the leading banks when they were spreading their tentacles during the past decade. All it would take to get started would be one presidential candidate serious enough to talk with the American people about such things.


Gary Silverman


Fonte: FT

A life without work can be fatal

How bad is a life without work? I have been asked this question a lot lately. It is becoming pretty clear that the forces of globalisation and technological progress are reshaping economies and societies, especially in advanced economies, and that these effects are being felt most right in the centre of the workforce — across the individuals and families that make up what Americans call the middle class. Lots of the traditional jobs for these people are disappearing in the rich world, and wages for remaining workers are pretty stagnant.

The fact that the middle class is being hollowed out in country after country is rightly of concern. A large, stable, prosperous middle class is important for civil society; most informed observers agree that it supports inclusiveness, tolerance, democracy and many other good things. It is also a great engine of overall demand for an economy — lots of moderately affluent households buy lots of things. But what happens when the industrial-era jobs that underpinned the middle class start to vanish? Voltaire offered a prescient caution, observing: “Work saves us from three great evils: boredom, vice and need.”


Of these three, I’m least worried about need. Trade and technological progress, after all, make a society wealthier in aggregate. The problem that they bring is not one of scarcity — of not enough to go around. Instead, they bring up thorny questions of allocation. Most of us earn money to buy the things we need via our work — what do we do when opportunities for work become scarce?

So to boredom and vice: how bad are they? How worried should we be about them? I sometimes hear the argument that we should not be worried at all. If we do not need people’s labour, the logic goes, why should we care what they do? Why should traditional notions of boredom and vice matter? If people want to drink, take drugs, engage in casual sex or play video games all day, where is the harm? These are not the most conventionally respectable or productive activities, but why should we let convention hold sway?

One reason for concern comes from research by the political scientist Charles Murray documenting how much social conditions have changed over the past 50 years for lower-middle class Americans (while remaining essentially unchanged for the upper-middle class). Divorce rates have skyrocketed, as have crime rates, the number of children being raised outside two-parent homes and the number of men who have essentially dropped out of family and community life.

These social ills have come alongside the disappearance of industrial era jobs. There is active debate about whether the disappearance of steady work causes them, or whether they’re all due to other factors. I’m in the camp that believes that the disappearance of work is a cause, not just a correlation.


A recently published paper by 2015 Nobel Prize winner Angus Deaton and Anne Case reveals a much more alarming trend than social decay: while death rates for almost all American adults have dropped sharply in the past few decades, those of the least educated middle-aged whites have actually increased. They found that between 1999 and 2013 the death rates of this group rose by 134 per 100,000. This is a huge jump. As Mr Deaton writes: “Only HIV/Aids in contemporary times has done anything like this.”

What is causing this tragic spike? Professors Deaton and Case found that the majority of the rise could be attributed to three factors: suicide, chronic liver disease and cirrhosis, and alcohol and drug poisoning. The people in this socio-economic group, in other words, are killing themselves deliberately and inadvertently, quickly and slowly.

Much more research is required to understand the causes of this development. But I do not think the employment woes of this group are incidental to the story; I think they are central to it, and that it is far from a coincidence that the employment-population ratio for US adults with no more than a high school degree was less than 52 per cent in September. The boredom and vice that come when work goes away are a serious public health problem.

Intriguingly, Profs Deaton and Case find that Hispanic and black Americans have not seen the same recent mortality increases. This could be because they have been more economically marginalised, and so less accustomed to the steady middle-class jobs that whites have enjoyed, but that are now vanishing for the least educated among them.

This is far from the whole story. But it seems to me that Voltaire’s first two great evils are starting to show up in the social and health statistics, and we should all be concerned about that.




Andrew McAfee is co-author of ‘The Second Machine Age’ and a blogger for FT.com




Fonte: FT