Tuesday, December 14, 2010

Write and submit an essay to win an all-expenses-paid Literary Tour of England. See http://www.revelationmovement.com/tour_entries/new Sphere: Related Content

Monday, November 22, 2010

We don't know what is going to happen in the next week, but...

Are we set for inflation or deflation? Is world growth going to recover right now or in the near future - or only in a few decades?

If you have been following the various rantings of people trained in economics, such as myself (though I hope better trained and more eloquent than myself!), I think you will agree that there is no consensus and very little agreement among us.

So it interests me to see that the Conference Board (in the USA) hazards a view, not just about tomorrow or next week, not only about next month or simply about next year, but for the whole of the coming decade!

If you wish to consult this daring oracle, go to http://www.conference-board.org/data/globaloutlook.cfm?utm_source=email&utm_medium=europe_1111&utm_campaign=emailexpress Sphere: Related Content

India's relations with Southern Sudan

An Indian friend who is active in this field wrote to me some time ago as follows, about an event at the House of Lords in the UK, where he was invited to speak:

"There was much interest from both aid agencies and business from the UK.
What saddens me is that this is a wonderful opportunity for Indian SMEs to step in and offer our brand of cost effective solutions that Sudan (and many other parts of Africa) so desperately need.
There are already some Indians from Uganda and Kenya moving in but they are perceived to be traders and profiteers.
I have given a number of talks in Bangalore and elsewhere to sensitize the business community to this fantastic opportunity to profit while helping to develop this war torn country that is limping back to normal.

It would really help if the Indian Government had a presence in Juba and if we could obtain travel permits to Southern Sudan here in India".

As I had promised to take up the last point, I wrote to the Indian Ambassador in Sudan (who used to be a fellow-student while we were at University) but I had no response - perhaps he was too busy or uninterested? Or is the Indian Embassy there as inefficient as most of our Embassies seem to be? Alternatively, is the topic felt to be such a hot potato that he did not want to even acknowledge receipt of my message?

If the latter, it would be a bit surprising as it is clear that Southern Sudan will opt for independence when the referendum is held in the next few months. Why not anticipate matters for once, and build relations with this emerging new country - with whom, as ourselves a country with experience of being colonised, we should be sympathetic? Sphere: Related Content

Sunday, November 21, 2010

The latest "Commitment to Development Index"

Is available at: http://www.cgdev.org/section/initiatives/_active/cdi/

I have just written to them as follows, and I hope this is self-explanatory>

Sirs/ Mesdames

Your "Commitment to Development Index" is highly useful, but would be even more useful if it did not distort the picture by focusing only on government-to-government aid (which mostly ends up, in any case, in the pockets of corrupt politicians and bureaucrats).

You know of course that many countries, e.g. in Europe, disincentivize private philanthropy by high taxation and/ or not setting off private philanthropy against taxes due.

By contrast, other countries, e.g. the USA, incentivise private philanthropy by low taxation and/or setting off private philanthropy against taxes due.

What philosophy countries follow is entirely their own affair, though we might have our own views about it.

However, both government-to-government largesse and private philanthropy need to be considered together for a proper and complete picture of the field.

For your Index, therefore, kindly consider including both the figures for government aid and the figures for private philanthropy.

ENDS Sphere: Related Content

Thursday, November 18, 2010

Which hotel has the most expensive internet connection in the world?

I don't know, but I would guess that the Intercontinental Hotel in Geneva may be a candidate for that dubious distinction.

First, the hotel allows only two options: one hour and one day. There is no consideration for people who are staying two, three or more nights in the hotel.

Second, the charge is 32 Swiss Francs a day or 11 Swiss Francs an hour. That's something like twice the maximum that I have ever paid anywhere else in the world. Sphere: Related Content

Wednesday, November 10, 2010

Back to the Gold Standard?

Perhaps you were shocked to see news that the Chairman of the Federal Reserve wants the world to consider gold as money again - or something like that.

By contrast, I was quite pleased, as I have been speaking at conferences for some seven years on the need to move currencies back to something more solid than the say-so of governments and central banks. Usually, in order to make my point, I have naturally had to point to the US government's de-linking of gold from the dollar as one root of our current global problems. This has been taken to mean that I am argue for a return to the gold standard. I do not. But a return to the gold standard would certainly be better than the current system where a government or central bank can just print as much money as it likes.

That ability to print as much money as a government wishes, along with the ability to set interest rates (and lesser-used techniques), is supposed to be a key part of the array of "modern monetary policy tools" – and, in the circles that matter, there is widespread skepticism regarding whether anything other than the current system (with tweaks) is realistic, including Zoellick's suggestions.

However, everyone knows and agrees even in public that the current system is not working. The printing of excessive amounts of money since the 1970s by all governments is another root of our global problems.

So the challenges are: How to limit governments, so that they print only an appropriate amount of money? And what is "appropriate"?

For the first: no government can be compelled to do anything except by extreme military force and that is not a favoured "policy tool" at present.

So the only option is to agree that countries and governments which do not abide by whatever international rules are agreed, should barred from trading in the international markets (i.e. those regulated through the World Trade Organization). That would admittedly entail a political process. But, sooner or later, as has become evident in the case of the contretemps over Chinese government policies to keep the Remnimbi artificially low, countries do start applying pressure. The problem is that the only sorts of pressure that they can apply at present are the sorts of pressure they have been applying. Those have not proven very effective so far, because there is no actual sanction available. But if an agree framework for currencies could be part of the World Trade Agreement, we would immediately have a relatively powerful sanction against recalcitrant governments.

That leaves the question of what an "appropriate" framework would be which might enable at least some minimum flexibility to governments/ central banks (so that they can still enable and steer growth) which providing some limits to the unrestrained printing of money.

One possibility is to use gold as the measure of how much money a country can print: the more gold you have, the more money you can print. Silver or platinum or silica (or a basket of such resources) might be another option. The availability of energy could be yet another option, perhaps with double points for non-fossil fuels. Each of these options have the problems associated with the quantity of the resources available (for example, in the case of gold, a sudden discovery of more gold in some country would immediately alter things!).

Now, we must distinguish between a gold "standard" (printing only as many "tokens" or IOUs as you can honour on the basis of the gold actually sitting in your vault) and the new Zoellick proposal which suggests that gold should be merely "an" indicator to help set foreign exchange rates, employing gold as merely "a" reference point for international expectations about inflation, deflation and so on. While Zoellick's system might well accomplish the welcome task of taking us away from the current preoccupation with simply devaluing currencies (the "currency wars") and therefore further away from the threat of protectionism and actual wars, his system is still a house built on sand. If gold is to be "an" indicator, what else will his system consist of? Nothing more than either a basket of currencies - or what the Chinese indicated several months ago: the IMF's Special Drawing Rights, which are themselves based on contributions by different countries of their own currencies.

So what's wrong with that? Simply that, if one rotten apple infects a whole cartload, what we have on hand are several rotten apples from around the world starting with the Remnimbi and ending with the dollar - and with almost everything in between: every country has been printing too much money. We could almost say that we have nothing but rotten apples, though there is a difference between the rottenness of say the dollar on one hand, whose rottenness can be inspected by anyone (including the Chinese), and the rottenness of the Remnimbi on the other, whose rottenness can be inspected by no one (including those Chinese who are outside the relevant small closed inner circle).

However, I must say that the Zoellick proposal is better than the Chinese proposal because it adds one element of solidity (gold) – even if only in terms of the varying value of its price, rather than actual gold, which is of course much more solid.

All that leaves us no wiser about the question: how much money should governments be allowed to print if they want to belong to the world trading system?

Well, let's go back to the beginning (always a very good place to start!). Money is (among other things) a medium of exchange, and that medium needs to be reliable – just as a yard or a meter is a measure of distance and needs to be reliable, rather than simply manipulated to suit.

In order to have a reliable medium of exchange, if one does not want to "go back" to a metal-based standard, it is surely logical to allow and indeed to force countries to print only as much of this medium of exchange as makes sense. What makes sense? That's simple: you cannot exchange more than you produce!

So here's my proposal: countries should be allowed to print each year, as much money as the worth of the total value of their goods and services the previous year.

It is difficult for us to be able to assess that accurately, but we have good methods of getting a rough estimation of that, and a three- or five-year rolling average could be as accurate as necessary.

Naturally, if you are an economist or politician, you can always find grounds to dispute what the "real value" might be of a country's goods and services. But, with my proposal, you would be at least within shouting distance of reality, rather in the sort of dream (or nightmare) world in which we are today. Sphere: Related Content

The G20 blinks

The G20 meeting should be starting in a few hours.

But I am alrady disappointed.

I believe that the G20 is set to defer a decision on whether there should be a globally set capital surcharge for systemically important banks.

That means that such surcharges will vary from country to country, and many countries will not have such surcharges at all - incentivising banks to move their activities to countries with no surcharge. Which, in turn, will create pressure, even in countries which do have surcharges, for doing away with surcharges.

The whole debate about "too big to fail" banks seems to have ended in the creation of banks that are much bigger than they were before the crisis and with no global mechanism for avoidng taxpayer bailouts of such firms.

It looks as if politicians and regulators around the world have abandoned efforts to reform the system.

Of course, things could still change during the summit. But if everything goes as the agenda suggests, look out for even more volatility and vulnerability in the global economy. A huge opportunity for putting at least one key matter in the the global financial system on a sensible basis appears to have been lost. Sphere: Related Content

A fundamental mistake: the G20's two-tier bank plan

According to reports, most Asian banks will be exempted from a global regulatory regime in spite of their size.

As some of the biggest banks in the world are now Asian, this is surprising.

Why would Asian banks be exempted from a global agreement?

Apparently, because of their domestic focus!

This is a fundamental mistake: many Asian banks do operate ENTIRELY domestically (gathering and loaning assets only within their countries). However, there are many banks, specially the larger ones, that may operate MAINLY within their countries, but are involved in all sorts of activities that are international. For example, these apparently domestic banks finance companies involved in international trade. More important, they borrow funds via some route or other from foreign entities.

At a time when Asia and other emerging markets are the engine of whatever growth is taking place, and Western investors are stampeding east, the bankruptcy of a big Asian bank will have the same catastrophic effect on sentiment as the bankruptcy of a big Western bank. Sphere: Related Content

Monday, November 08, 2010


No, not the ship!

Rather the second round of "quantitative easing" (printing more money) by the US Federal Reserve!

To put the matter fully: a friend asked my view about the decision of the Fed to to add $600 billion of fresh liquidity to the USA.

Here is my response:

Isn't it ironic that after the election triumph of the Tea Party, the US public is confronted with yet another splurge of liquidity creation.

However, this splurge is simply another desperate effort to ignite the recovery of the US economy - which will continue to fail to work, for the reasons I outline below (when seen merely in the US national context; when seen in the global context other reasons for the failure of this effort will also become evident).

1. The dollar will fall further in international markets. Though this will incentivise some foreigners to invest in the US (as US assets will then be relatively cheaper for foreigners to buy), it will disincentivise others whose existing investments (bonds, equities, et al) will be hurt by the fall of the dollar. No doubt the Fed has done its calculations on this - and one can only hope that its calculations are proved right.

2. While a cheaper currency might be expected to help exports, and may indeed do so, that won't help job-creation because an increasing amount of the output of "American companies" comes from workers abroad.

3. While this QE will continue to provide a floor to the economy itself, it will not create substantial lending to the mass of business and, even if it did so, will not incentivise the mass of such businesses to employ US citizens. Why? Among other things, because most work that needs to be done, whether in manufacturing or in services, can be done much more cheaply in countries, such as China, which do not care for basic environmental and human considerations (whatever their protestations to the contrary, and whatever token gestures they may stage in these directions). That is why so much outsourcing of jobs has gone on - and will continue to go on.

My conclusion:

If the US wants to sustainably improve its economy and sustainably increase employment inside the US, it will have to either withdraw from the WTO, or reform the WTO so that the treaty's rules integrate minimum pay, pensions, holidays, health, safety, and environmental standards - as well as agreed rules regarding how much money can be printed relative to GDP, how bad loans are categorised, calculated and registered, and so on. This will necessitate extending to the whole of the WTO the sort of work that is intended to be undertaken by the newly-established Office of Financial Research which the Dodd/ Frank Act at present implicitly limits to the US.

I am assuming (perhaps wrongly?) that Spencer Bachus or whichever other Republican eventually chairs the new House financial services committee will not "roll back" the few good things that the Dodd/Frank Act has put into place such as the Volcker rule's ban on proprietary trading and the restrictions on banks’ investments in hedge funds and private equity firms.

Given the possibility of such a roll-back, it is perhaps worth revisiting the (still largely-unaddressed) issues at the heart of the current crisis:

- too much liquidity as a result of the delinking of currencies from anything beyond the say-so of a government or central bank (I am interested to see Zoellick's proposal to include gold as an indicator in the global financial system, and will comment on that separately);

- too much (vastly multiplied!) speculation as a result of the elimination of the Glass-Steagall Act and of the possibility of unlimited leverage (which had already led to the LTCM crisis, but we refused to learn from it!)

- too much opacity in the financial system (the creation of the "shadow financial system") following the government's encouragement of non- and near-banks, and then encouraging recognised banks to participate in and emulate their activities, topped by the abolition of the need for the "big boys" to register their financial activities as a result of the Gramm-Leach-Biley Act which led to banks ceasing to trust each other - which is what actually finally caused the crisis triggered by speculation and the resulting sub-prime defaults;

- overly-lax provisions for Special Purpose Vehicles, intended to encourage off-balance-sheet activities (which torpedoed Enron et al - but we refused to learn any lessons from that beyond imposing expensive and only partially necessary SOX on everyone);

- too much reluctance on the part of authorities to impose (and of executives to accept) any system of accounting that will enable right evaluation of risks in companies and in the financial system, such as can easily be done);

- too much short-termism due to the current structure of the "institutions" of exchanges, shares and frequent trading (in relation to which I have already proposed solutions).

If 90% of all "financial innovation" over the last few decades has focused on nothing more than regulatory arbitrage, what we need is global rules covering the crucial matters I mention above.

Global business activity cannot be conducted on a sustainable basis in the absence of sensible minimum global rules that create a level playing field on which the best players can win on the basis of innovation, quality, service and other good things - rather than the present system where those qualities may be rewarded but other rather worse things (such as environmental degradaton and human exploitation) are rewarded even more.

Regrettably, there is so far little sign that most people in the US (or indeed most of their political, economic and cultural leaders) are willing to recognise such basic facts. Sphere: Related Content

Lies, Damned Lies and Statistics

A rather eminent publication has recently published the following:

"Europe's economy has progressed over the past 15 years, but its per-capita GDP is $11,250 lower than that of the United States. A preference for leisure time is one reason, but recent McKinsey research suggests that a widening productivity gap between Europe and the U.S., particularly in services, is more important. Local, business, and professional and financial services accounted for 19 percentage points of gross value-added growth from 1995 to 2005 in the U.S. but for only 10 percentage points in the EU-15."

Note, first, how the first sentence implies that only a little progress has been made in Europe. US publications regularly conduct propaganda against Europe. I can recollect such pieces from as long ago as the Sixties, with talk of "Eurosclerosis", "the European Disease" "Old" and "New" Europe, and so on

Second, the United States has a long history as one country. The EU is only a rather loose grouping of independent countries so far basically for purposes of trade. Comparing Europe with the US is comparing apples and pears.

Third, "per capita GDP" is a meaningless concept in the absence of other comparators - such as quality of life, gap between the poorest and richest, longevity, health, and so on.

Fourth, there are many kinds of capital as we all know (financial, social, relational, institutional, intellectual....). It is alwasys closer to reality if one attempts more well-rounded comparisons.

Fifth, it is a bit dishonest to quote figures from so long ago, and then for only a decade. If took only the ten years from 1998 to 2008, the comparison would be heavily weighted in favour of the EU.

Lastly, what's wrong with a preference for leisure time? Life is not all about work!

However, Northern Europeans (from the Protestant influenced part of the Continent), don't only take their leisure seriously but also work hard, though of course in the Orthodox- and Roman influenced parts of Europe, people are not sufficiently rewarded for their efforts as the elites still continue to rig the system against individual merit and effort, so the poor southern and eastern Europeans are left with little alternative but to enjoy what they can. Sphere: Related Content

China does many good things and this is one of them

My readers know that I can be very caustic in my comments, and that I have more than once taken the Chinese regime to task. If I do deliver brickbats to those I think deserve them, I am very happy to deliver bouquets where those are deserved - and China deserves a bouquet for the following:

A few days ago, China started trading the first Renminbi-denominated credit-default swaps, though it had announced as long ago as September last year that it was going to start doing so.

What China has done right this time is not so much to start doing what it said it was going to do (though that is of course a good think!) but the following:

I understand that the contracts, apparently regulated by China's Central Bank and traded through the Shanghai interbank clearing system, may only be sold to investors in possession of the corresponding underlying assets. In other words, they cannot be used for what I call speculation (where the speculator does not hold the underlying assets, but is only interested in gambling on whether or not the value of the assets is going to go up or down).

Moreover, these contracts cannot be used to insure high-risk securities - another way in which capital enters the speculative frenzy.

Finally, the contracts may not exceed five times the value of the underlying debt. I would have preferred the limitation to be only twice or thrice the value, but the rule that the Chinese have put in place is bolder (stricter) than many other countries that either allow unlimited leverage or allow a significantly higher multiple.

Bravo, China! Sphere: Related Content

Saturday, November 06, 2010

10-point action plan for the USA

NOT mine, but that of a business executive I met recently; here it is without any comments from me, for or against, simply so you see how a lot of Americans are thinking:

1. Close the borders; return “Illegal” persons to country of origin; especially the criminals sitting in our jails.

2. Reform the tax code; move to national sales tax.

3. Term Limits on politicians at all levels.

4. Compulsory National Service (Armed Forces, Peace Corp, Local Community, etc.)

5. Tort Reform. (at present, the system benefits the Medical & Insurance industry; punish frivolous lawsuits)

6. National Skilled Labor Training System – not everyone needs to go to college

7. Reform Welfare – work if you are able, everyone should contribute, stop systematic reward for bad behavior

8. Citizenship not guaranteed by being born on U.S. soil.

9. Amnesty Program for U.S. Citizens and companies to bring cash back on shore.

10. Mandatory Balance of the Budget at Federal, Local & State levels. Sphere: Related Content

Friday, November 05, 2010

Chinese aims

According to one of the most senior Chinese diplomats:

1. The maintenance of power by the Party

2. Maintenance of "national unity"

3. Ensuring adequate food and resource supplies for the world's largest nation

4. In the long run, attaining superpower status.

Interestingly, Americans seize on the last point as if it was the most immediately important.

However, while the world watches the third, we should note much more the first (so don't expect any moves towards democracy) and the second (so Tibet will find it difficult to become free, and the Chinese would like to reintegrate Taiwan as soon as possible). Sphere: Related Content

New Global Economic Governance?

New Global Economic Governance?

Another issue that President Sarkozy would like to put at the heart of the next G20 summit is what he calls " new global economic governance"

Here is his thinking: "what global governance have we got in the economic sphere? We have successfully reformed the World Bank; (and) the IMF reform is clearly at last on the agenda. (But) what role (should) the IMF (have)? What representation in the IMF? What role in the IMF for regions like Africa? . Where are the decisions taken? Who takes them? According to what democratic process?"

All important questions. Which is why they will be subject to plenty of horse trading and to plenty of gambling on the part of the leaders concerned, since every decision means incalculable benefits or disadvantages for the players – and for the world. Sphere: Related Content

Sarkozy's call for creating a "new monetary order"

Sarkozy's call for creating a "new monetary order"

Speaking at the 8th Europe-Asia Summit a few weeks ago, President Sarkozy of France called for a "new monetary order".
This week, he tried to rope in the support of China's President Hu.
At the Europe-Asia Summit, President Sarkozy put it this way: "we live in a world where monetary imbalances are putting all our economies at risk. Let me take two examples: do you know that since 1990 the world has experienced 42 currency crises? 42 times, whole countries in Asia and Europe have been literally drained of their capital. Secondly: 1974 saw the creation of the G7 – which became the G8 – to talk in particular about monetary problems. Today the G7 forum is no longer the legitimate one in which to talk about them. Why? Because, for example, China isn’t a member of the G7. So today, in 2010, we haven’t got a single place where, in the world, we can talk about monetary questions. Every country does what it wants, tries to safeguard its sovereignty, but we are living in the 21st century without a monetary order. We’re living on the basis of the Bretton Woods fiction that there is only one economy and one currency. We clearly need to define a new monetary order. Where do we discuss currency issues? Aren’t currencies a matter of concern to heads of State and government? Does every world region have to accumulate reserves in order to avert a crisis? These are issues we have to address and resolve".

Reading between the lines, Sarkozy may be leaning towards the creation of a single global currency.

If so, it would lead to huge concentration of power with attendant abuse - and therefore a disaster for civilization.

Far better to let currencies (and, by implication, governments) compete.

How then to address global imbalances? By addressing them at the level of the root cause. And that is a world trading rules which exclude environmental and human concerns, thereby tilting the board towards countries such as China which pay no attention to such concerns. Include environmental and human concerns in the WTO's rules, and we would not only sort out global imbalances but also lay the foundation for a genuinely humane global civilisation for the first time in history. Sphere: Related Content

President Sarkozy says we need commodity price regulation because of speculators

In his speech at the 8th Europe-Asia Summit, French President Nicolas Sarkozy is reported to have drawn attention to "the terrifying volatility of commodity prices. In one year, oil has risen from $40 to $140... There have only to be catastrophic fires in our Russian friends’ country and the cereal price rises 65% in two months".

He went on to ask "Who can accept that?"

And he argued that, as governments have made efforts to regulate derivatives in the financial arena, so we must regulate commodity prices: "is the existence of commodity derivatives acceptable ...? I’m in favour of the market, but there must be no lies: the market doesn’t set commodity prices today, it’s the speculators. We must regulate".

Well, as the last option, regulation may be inevitable. But if the French President really believes in markets, he should first use financial mechanisms to try to limit speculation.

Speculation can be constrained by limiting the amount of money available for speculation (which was essentially the strategy of the Glass-Steagall Act), by limiting the amount of leverage allowed (e.g. by substantially increasing "skin in the game"), by disproportionately large taxation of speculative trading , and so on. Sphere: Related Content

Sunday, October 10, 2010

My questions to a Chinese speaker at a recent international conference

* The Western view is that the financial crisis was caused by a combination of excessive debt, huge leverage and non-transparency. What is the Chinese view of the causes of the crisis?

* The Americans accuse the Chinese of keeping artificially low the exchange value of their currency, the Remnimbi: what is your view? If the value of the currency rises, will that harm the economy? If not, why does China not allow the value of the currency to rise?

* China has produced several economic miracles since it started liberalisation. Now it is trying to encourage its domestic consumption to grow and we know from economic history that such a process has always till now taken decades. Will China be able to produce another miracle and speed this up too?

* China is very financially NON-transparent. What group of people in China benefits by such non-transparency?

* Will the greying (ageing) of China slow down the economy?

* What about the environmental pressures on China?

* People in the West are very concerned about the suppression of human rights in China and the suppression of non-Han peoples such as the Tibetans, and therefore do not trust China's huge military expenditure specifically in view of disputed territories ranging from Japan to India. What do you feel about this matter?

Not surprisingly, none of the questions were answered with any degree of transparency or comprehensibility...except the first: clearly, at least in this Chinese speaker's view, the crisis was entirely America's fault. Sphere: Related Content

Thursday, October 07, 2010

On China's currency, the Remnimbi

I see with regret that i was partly wrong in my post of March 24 this year.

My impression was that China's trade figures would unravel fast - they have not yet unravelled!

Meanwhile, I am also happy to note that I was at least partially right!: Today's news is that Premier Wen has pushed back against international criticism of China’s currency policy, saying that acceding to demands for a faster rise in the renminbi could cause social unrest in China - exactly what I had said in that post.

It seems that understanding at least some economic fundamentals does not help you to understand the time-frame in which things are going to happen! Sphere: Related Content

Monday, September 20, 2010

Stiglitz lecture in Zurich

Perhaps as many as 800 people attended this Monday morning lecture by the Nobel Laureate - which is a bit of a cultural revolution for Zurich - as far as I am aware, this is the first time that a major lecture has ever been scheduled on a Momday at 8.15 a.m.!

Apart from the inadequacy of the facilities (the slides were apparently very difficult to see for people at the back) it went well and the hall was almost completely full

Stiglitz said more or less what one expects him to say, given his publications and other public speeches, but what struck me once again was the entire irrelevance of whatever little is "scientific and mathematical" (or even of the small consensus among economists) to the discussions and decisions of the people who matter in real-life economics - i.e. lawmakers, regulators and central bankers

This is an "irrationality" that economics, which has tried very hard to be more and more "rational" and "mathematical", has no explanation for - and no means of taking into account!

As long as that continues to be the situation, will the whole enterprise of a "mathematical and rationalistic" economics not be itself irrelevant and doomed to failure? Sphere: Related Content

Thursday, September 09, 2010

China's unemployed millions of graduates

According to a report in Bloomberg Businessweek, more than one-quarter of this year's 6.3 million college graduates in China are unemployed, despite shortages of workers in manufacturing.

Why? Becasue the number of college graduates in China has tripled since 1998 and the Chinese economy simply isn't creating that number of jobs.

This is the problem with a state-controlled economy (as China's still is).

Reminds me of my time as an undergrad, when many of us worried about what the point of studying was when there were so many unemployed graduates in our country. If I recollect aright, in my first year, newspapers reported 60,000 unemployed doctors. In my second year, they reported 70,000 unemployed engineers. The situation for arts graduates was so bad that no one was even keeping track!

However, India was able basically to sort out that problem of over-supply by liberalising its economy (that is, loosening state control - and, in India, the economy was always less controlled than China's) as well as by encouraging entrepreneurialism (even though we still have a less-than-ideal environment for entrepreneurialism).

Three lessons for China, then:

1. There is a good basis for hope that these unemployed graduates can find gainful activity.

2. Liberalise the economy properly - stop privileging outfits of the People's Liberation Army and so-called private commpanies which are actually controlled by members of the Communist Party - grant them economic privileges only equal to those for non-members as well as for opponents of the Party.

3. Ensure that every undergrad learns entrepreneurial skills - though that will by itself produce nothing if there is not the ecosystem for encouraging entrepreneurialism (and we know all about that from the studies that have been done, for example of Silicon Valley - the ingredients consist of the right legislative environment and the availability of seed funding as well as mezzanine and further funding on a market basis, not a political basis) Sphere: Related Content

Wednesday, September 08, 2010

Is "the cult of equity" really over?

Today's buzz is about an apparent declaration that "the cult of equity is dead". That is a quote from Robert Buckland, Citigroup Inc.’s global strategist - at least according to reports in Bloomberg, Financial Times, and so on.

What is the significance of that? Well, as you know, you can invest, in no particular order, in (a) real estate, (b) gold and other metals or commodities, (c) so-called alternative investments (antiques, art, stamps, and so on), (d) bonds or (e) shares (Americans call the last "stocks").

The received wisdom has been that, in the long run, investment in shares outperforms investment in the other categories, specifically bonds.

However, the problem is that in the long run we are all dead!

So the question is never what is or isn't good in the long run, the question is WHEN do you want to get back your cash by selling your investments and what is the relative valuation of each of these categories and of your choices within those categories!

The fact is that, in the last three years, bonds have not only outperformed stocks, they may well continue outperform shares in the next decade (assuming current trends continue, which is of course never a safe assumption!).

So what should you do? If you are in stocks, is this a good time to get out, when the value of your shares is low? Perhaps, if by cutting your losses on your current shares you can switch them into other shares - or indeed into bonds which you may expect will go much higher following the assertion by Mr Buckland of Citigroup.

However, bonds are currently overpriced - and you can expect much greater volatility in bond prices - not least following Mr Buckland's declaration.

If only by contrast, shares are relatively reasonably priced.

So my recommendation is that, IF you want to stick to shares, find one or more companies that have low leverage and a stable dividend.

However, the best is to invest, as I have said earlier, in smaller companies where you can walk around the premises, sniff out what is going on by talking to employees, and ask straight questions of the CEO or senior executives.

You can't, in a similar way, find out what is going on big companies or in big governments, whether in China or in the USA.

Since investing is, at the end of the day, a matter of trust, I prefer to have as solid grounds as possible for any trust that I may choose to place in a company or government. Sphere: Related Content

Tuesday, September 07, 2010

Comment on my post "How many American families are losing their homes?"

I don't usually publish anonymous comments but, as the following throws interesting and unusual light on the situation, here it is:

"I am an American who lost our home due to foreclosure. My husband changed jobs to a job with a lower salary but which offered health insurance for our family of four and a two week paid vacation. Previously, he had earned slightly more but had neither of these benefits. Additionally, the job was very demanding and stressful. The new job, with a German company, was much more 'worker friendly.' This worked well for my husband, who is Italian and who was raised in Switzerland. We put $30,000 of our savings into the house. Everyone told us that here in the states, your house is your savings, it is your security. Unfortunately, because of the job change we were rapidly accumulating debt affording the mortgage payments. We could not sell the house because of the dismal market. We would have had to pay around $50,000 to the bank in order to sell it and make up the difference of what we owed. In the end, we decided to foreclose.

I thought you might be interested in a real life experience of someone who has foreclosed. It's a little different froom the ones in a lot of magazines because it isn't related to changing interest rates or a medical emergency of some kind. I think there are more people like us than people realize. It's difficult to share because it is a morally complicated decision. We backed out of an agreement we made with the bank ultimately because we made a decision to change jobs. But in doing so we got healthcare for our kids! Ideally, we would have sold the house and moved to one we could afford.

Anyway, I'm new to your blog and I'm enjoying it!" Sphere: Related Content

Monday, September 06, 2010

EVIL: How defined? To be Accepted or Fought?

As I am preparing to give a lecture on this topic, and I have never earlier spoken or written on it, I thought I might post the outline to get the benefit of your thoughts:

EVIL: How defined? To be Accepted or Fought?
A Cross-cultural and Inter-religious Comparison
by Professor Prabhu Guptara


1. There is nothing which is essentially or intrinsically "evil" (Vedanta, Yin-Yang philosophies, Buddhism, Evolutionism, Existentialism, Hedonism, and other philosophies from some of the most modern to some of the oldest)

2. Evil can only be defined in relation to society (Confuicius, Manu, Nietzche, the Utilitarians, Ayn Rand...)

3. Evil is defined in relation to God's will or to the nature of the universe (Islam, "Karma"...)

4. Evil is defined in relation to the nature or character of God's own self (Jewish Bible, New Testament)

B. WHAT is evil?

Those who accept that there is anything "evil" usually think of a range or spectrum, from a good or ideal to desirable, going on to a marginal evil and then to profound evil. In the case of evil, the traditional classification is "venal" versus "cardinal" sins.


i. Just accept it (Buddhism, Vedanta, Yin-Yang philosophies, some Evolutionists and Existentialists...)

ii. Fight it when convenient/ possible at no great cost to yourself

iii. Fight it with all you have (Jewish Bible, Koran, New Testament, some Existentialists, some Humanists, Ayn Rand...)


a. Because you will be rewarded for it (Koran and other ...)

b. Because fighting evil is worth doing in itself (Jewish Bible, New Testament, some humanists, Ayn Rand...)

c. Because your character will be transformed, as it should be, into the likeness of God (Jewish Bible, New Testament)

ENDS Sphere: Related Content

Sunday, August 22, 2010

On the second anniversary of the Kandhamal massacre

You may recollect that it is two years since the massacres took place in Orissa, India.

Though the official figures do not add up, they do provide a picture of how little has been done in terms of justice (the picture is similar in terms of actual help to the victims):

Number of complaints lodged: 3232
Number of cases actually registered by the police: 831

Cases committed to so-called "fast track courts": 193
Number of cases actually being tried in court at present: 95

Number of cases which have been closed: 91

Number of persons convicted 176
Life imprisonment sentences 5

Persons arrested so far 794
Persons acquitted 653 Sphere: Related Content

What you can do today to defend freedom of thought

What you can do today is to spend a few minutes to understand the Defamation of Religions Resolution at the UN.

Then say NO to the Resolution, and say YES to the right to freedom of thought.

What's it all about?

In the United Nations, the Defamation of Religions Resolution will be voted on again this year. Its supporters claim that it protects freedom. In reality it does the exact opposite. It gives governments the power to determine which views can and can’t be expressed in their country, and it gives the state the right to punish those who express ‘unacceptable’ views.

In effect, the bill makes it legal for governments to oppose and persecute free thought.

Incredibly, many countries have backed this annual resolution in the past, but some are now changing their minds, so that it has decreasing support. This year, there is a real possibility the Resolution could be defeated. And you can help. That is why you are urged to sign the petition above.

For a quick view of the background, see: http://www.centerforinquiry.net/blogs/entry/un_passes_defamation_of_religions_resolution

For a much fuller explanation, see: www.becketfund.org/files/87155.pdf

So HOW do you say "NO" to this Resolution?

Simple: write to your government (address it to your country's Head of State, with copies to the Foreign Minister and the Home Minister) and give the reasons why you believe that your government should oppose the Resolution.

There are also several internet campaigns against the Resolution, some from religiouis bodies, and some from secular, atheistic, agnostic and humanitarian bodies. Sign on to whichever most appeals to you.

In any case, do get behind the campaign to defeat the most pernicious attack on free thought in the whole of recorded history. Sphere: Related Content

Saturday, August 21, 2010

Reflections on World Humanitarianism Day (19 August)

My friend Iqbal Alimohamed has published a moving and well-crafted piece reflecting on World Humanitarian Day: D:\Documents and Settings\t850632\Local Settings\Temp\alimohamed190810 htm.html

Basically, Iqbal sets forth the usual view that humanitarianism consists of two aspects: volunteering and philanthropy.

Naturally I agree with his view.

However, in addition to volunteerism and philanthropy, my view is that humanitarianism today demands the even more important matter of working for a humanitarian world system (rather than elitist world system as we currently have).

By the way, in my view, a humanitarian world system necessarily also involves ecological responsibility (rather than the sort of ecological irresponsibility which is structured into our current world system). Sphere: Related Content

Thursday, August 19, 2010

The key to making sense out of the contradictory trends in the global economy

The Financial Times reports today that, on the one hand, that there has been a sharp upturn in use of shipping containers (which should indicate a sharp upturn in trade, and in traffic of goods http://link.ft.com/r/YIQXNN/TP2DW9/F39A/RN28LX/PRTU93/JY/t

On the other hand, today's FT also reaports that oil prices have been pushed below $75 due to massive stockpiles of crude oil and refined products - actually the most massive since weekly records began in 1990 http://link.ft.com/r/YIQXNN/TP2DW9/F39A/RN28LX/TP8HR4/JY/t

The key is that most of the "trade" is speculative!

Real consumers are keeping a tight fist on consumption, not only in the West but also in the East (about the only place where real consumption appears to have risen in the last 12 months appears to be Malaysia - perhaps there is a secret there worht discovering, but I haven't got around to it yet).

In any case, the people putting money around are speculators - and as there is too much money in the world anyway, with central banks ready to print plenty more at the slightest provocation, this game will last some time yet.

But the denoument of the 2008 crisis has only been put off, even if it looks now as if it will come in the form of much more serious government bankruptcies than in the form in which it initially appeared it was going to come: of (slightly) less serious bankruptcies of banks, or indeed the (much) less serious bankruptcies of non-financial companies. Sphere: Related Content

Sunday, August 15, 2010

Guptara Garamagaram (which, being interpreted, means "HOT"!)

This series has been published for several months now in The International Indian magazine (Dubai).

The latest instalment, "Governance: Swiss versus Indian", is available at: http://bit.ly/beXdax Sphere: Related Content

Friday, August 13, 2010

Should you invest in unlisted companies ("penny stocks")?

In today's FT, I see that FundingCircle.com is offering small businesses the chance to sidestep banks and borrow directly from individual savers, using an online marketplace http://link.ft.com/r/4RNQTT/9ZSQM0/042P/JIBIQW/RNHR8O/HK/t

Is it a good idea to sidestep banks and so on, and to invest directly in small companies?

From the perspective of FundingCircle, yes. They should make a lot of money out of it.

From the perspective of an investor, the matter is more doubtful.

I maintain that you should invest:
- either in listed companies (where the system is doing at least some due diligence for you)

- or in those small companies regarding which you can do the due diligence yourself - i.e. you can visit the factory or office and judge the mood as well as the state of affairs for yourself, look the proprietor(s) or manager(s) in the eye and ask questions, and so on.

In fact, at present, my preference is definitely for the second option.

No one knows how the rules will change, and therefore how the profit/ loss for listed companies will change following the impact of current legislative changes, as well as the impact of global changes which may start as early as November this year. Sphere: Related Content

Thursday, August 12, 2010

the U.S. continues to tilt at windmills

Actually, to be precise, the right wing in the USA continues to tilt at windmills, while the left wing continues to sing in praise of public expenditures, deficits and debts cannot be sustained.

But neither wing seems interested in recognising reality.

Here is one example of right wing cant, that I received recently: "the US trade deficit widen(ed) at the quickest pace since October 2008. The shortfall jumped almost $50 billion from May to June, an 18.8% increase, as US exports declined across the board and imports rose to just over $200 billion....Even before the (Troubled Asset Relief Program) and the expansion of the Fed's balance sheet, total US public and private debt as a percentage of GDP...stood at 290 percent...". SO WHAT IS THE SOLUTION PROPOSED?: "Congressional Republicans want to cancel the across-the-board increase (1.4%, proposed for apparently overpaid federal workers) in 2011, which would save $2.2 billion".

Even if it is universally agreed that federal workers are overpaid, and that the increase ought not to be granted, will a saving of $2.2 billion address a public debt that has been going up at an average of 4.12 billion PER DAY since September 28, 2007? (that's according to the US National Debt Clock:

Perhaps you argue that it is better to save SOMETHING rather than nothing?

True. But if saving only 2.2 billion is going to take legislative time, and you have the option of using that time to save let's say 25 billion instead, wouldn't that be a better use of the time?

So what ought the US to do?

There is only way to bring public debt and the balance of payments under control: reduce expenditure and consumption, while increasing savings as well as exports (i.e.manufacturing, not only services).

The reduction may be helped by legislative measures such as those proposed.

However, the increase in savings will only happen as individuals and households change their lifestyles, and as laws, rules, regulations, custom and culture also changes to enable and support a "savings-oriented lifestyle" for Americans.

However, any increase in manufacturing is not going to happen (in spite of gimmicks such as Obama's recent government support for Ford exports) as long as the current WTO rules continue to tilt the entire field against the USA and in favour of China and other "cheap" countries which are prepared to turn a blind eye to human and environmental considerations.

On the other hand, if the WTO rules were amended to create a genuinely level global playing field, there would be a chance for everyone to show what they are really worth, without benefiting from the tilt in the playing field.

My advice to Americans: please stop titlting at windmills! Change instead the tilt against you in the global trade rules! Sphere: Related Content

Wednesday, August 04, 2010

US philanthropy suffers only a 3.6% drop inspite of worst financial crisis since the Great Depression

The GivingUSA report for the calendar year 2009 shows that, in spite of this being the worst year since the Great Depression, with unemployment at massive levels and discretionary spending at a low, America's giving to philanthropic causes declined only 3.6% (or 3.2% when adjusted for inflation.

And this is not the steepest drop in giving, in real terms: in 1974, for example, giving fell by 5.5 percent.

It is absolutely astonishing that Americans gave away more than $300 billion during such a tough year.

This is the first decline in giving (in current dollars) since 1987, and only the second since Giving USA began publishing annual reports in 1956.

In other words, as American prosper, they give away more and more, and when they stop prospering, they still continue to give as much as they can. In 1974, giving
averaged $1,323 per household (including non-donors) which was 1.8% of GDP whereas, in 2009, it averaged $1,940 per household (including non-donors) or 2.1% of GDP.

It is fascinating that 75% of the giving is by individuals, whereas only 4% is by companies, while 13% is by foundations, and 8% is from bequests.

Even more fascinating: while corporate giving rose 5.5 percent, charitable bequests fell 23.9 percent in 2009 and foundation grantmaking fell by 8.9 percent. However, individual giving fell only 0.4 percent.

Well, you can argue against America all you like (and some of its government's policies have been and are horrible and immoral).

But you can't argue against the fact that America produces the most generous people in the world. Sphere: Related Content

Saturday, July 31, 2010

Improving One's Ability to Lead Cultural Organisations

(The following constitute the speaking notes for Professor Guptara's day-long seminar for Leaders of Cultural Organisations, arranged by Sampad, in Birmingham, U.K., in 2009 and 2010. The talk was interspersed with group work and exercises intended to apply the dry ideas and principles to improving our life and practice as leaders)

In my experience over some 30 years, leaders of cultural organisations in the UK are highly motivated and idealistic. Of course, there are always some exceptions, but our performance as leaders can be improved by paying attention to the gaps between our innate idealism and motivation on one hand and, on the other hand, the performance level desired or required.

Some of these gaps are what might be called internal, while others are external.

The external dimension consists of understanding the political, economic, social and technological environment - though it will also be referred to repeatedly below.

(Extensive discussion of global trends in politics, economics, society and technology)

The internal dimension relates to personal qualities of leadership. One must have an honest understanding of oneself in terms of what one knows and does not know, and what one can do and what one cannot do. That is not easy or simple, because it usual to over-estimate or under-estimate each of these things. There are many things that "one does not know that one does not know", and there are things that we think we know adequately till bitter experience reveals the contrary to us.

In fact, which of us can say that he or she really understands, for example, even what drives us to be leaders? For non-leaders the question of what motivates them may be important in an exclusively psychological or spiritual sense. For us leaders the question of motivation is important also in a practical sense: the clearer one is about one's motivations (what the motivations are, versus what they should be), the better it is for the leader. That is a huge subject, and we could spend all day exploring it but, for the moment, let me simply recommend it to you as something to examine in yourself. Exercising one's ability to look into oneself honestly is important. Individuals who become great leaders make it a regular practice to spend time examining themselves before whatever God they believe in, whether that be money, pleasure, power, popularity, or (more desirably) some ideal, principle or Person. So that is my first practical suggestion for us if we wish to improve as leaders: let us systematically examine ourselves, our motivations and abilities, our areas of knowledge and ignorance – begin to get a clearer picture of where we are strong and where we are weak. That takes a degree of honesty with oneself that can be painful but is always worthwhile.

The next thing I want to raise with you is that, because we leaders are energetic people, it is easy for us to ignore (or never even realise) the following fact: it is our followers who determine if we are successful as leaders. Obviously, followers will be uninspired if they do not trust, or otherwise lack confidence in us as leaders. To be successful we have to somehow "convince without trying to convince" our followers that we are worthy of being followed. Instead, too many of us find our attention diverted to trying to impress ourselves, our peers or our superiors.

Moreover, even if we are actually worthy of being followed, we have to have the technical ability to hold and to guide our followers. There is a lot there to chew on, so let's think about that a little. Followers are of different sorts, and therefore require different styles of leadership. For example, a new follower requires more supervision than an experienced follower. Moreover, followers can be poorly motivated or easily discouraged, and these require a different approach compared to those who are self-starters or those who are naturally persistent, optimistic or have greater stamina. Hershey & Blanchard's suggested the following guide to interactions with followers:
- highly immature?: Tell
- moderately immature?: Sell
- moderately mature?: Discuss
- highly mature?: Delegate.

So that is my second point. To be a good leader, you need deal with people according to their own personalities – and to do that, you need to have a good understanding of your people, their needs, emotions, and motivation. I hope you see how that is linked to the first point: your ability to understand yourself is intimately linked to your ability to understand others.

Another technical ability is communication, and that is not simply the messages you send out but also the messages which others in your leadership team send out. Much of this is non-verbal: how you behave is as much part of communication as what you say. What you do "sets the example". Your behaviour and actions either build up or weaken the relationship between you and your subordinates. We will come back to this matter later in the day.

Yet another matter to think about is the situation in which you are, the overall situation in which communication is taking place. Since all situations are different, what you do in one leadership situation will not always work in another situation. You have to decide not only the best course of action but also the leadership style needed for each situation. For example, you may need to confront a employee for inappropriate behaviour, but if the confrontation is too late or too early, too harsh or too weak, then the results may prove ineffective or even counter-productive.

Well, that is quite a lot to keep in mind. Let's backtrack a little and ask ourselves what leadership actually is – how would you define leadership? One reasonably good definition of leadership is that it is the ability to exercise influence for the purpose of achieving one or more goals by applying one's beliefs, values, ethics, character, knowledge and skills.

People exercise leadership in two principal ways:
1. by shaping their organisation to make it more cohesive and coherent, and/or
2. by influencing individuals to accomplish a mission, task or objective.

Again, there is a lot to think about and indeed to apply here. My guess is that most of us focus on the second matter, and don't do enough in the first area.

That is linked with a deeper point. Are we actually managers or are we leaders? MANAGERS assess tasks & develop strategies to accomplish those tasks, focusing on day -to-day operations and issues, while LEADERS look more to the future (are "visionary"); they interpret the environment and shape the organisation in order to try to secure a more successful future for the organisation.

Look at it this way: if you appointed to a leadership position, you are clearly a "designated leader". But that does not by itself make you a real leader. The question is: have you won, or are you winning or earning recognition from your juniors as a leader on the basis of your ability and/or other characteristics?

Although your position as a manager, supervisor, et. al., gives you the authority to accomplish certain tasks and objectives in the organization, such power does not make you a leader...it simply makes you the boss.

Leadership makes people want to achieve high goals and objectives, while bosses tell people to accomplish a task or objective. A good phrase to keep in mind is that "leaders unleash the optional energy of their followers". What is "optional energy"? That energy which followers do not need to spend in order to retain their jobs. That energy which takes them beyond their job descriptions, beyond the call of duty. And as you know, that is what makes the difference between an organisation that is merely managing to exist versus an organisation that is making real impact.

Some of us become leaders because of our personality traits; others may find that a crisis or important event has caused us to rise to the occasion, which has brought out previously-unknown or even extraordinary qualities in what was, earlier, an apparently ordinary person. But some people choose to become leaders by learning leadership skills. And the truth is that, if you have the desire and willpower, you can become an effective leader at your own highest level. You can rise to your full potential through a continuous process of self-study and training - but most importantly, experience and mentoring. That is of course partly what your course is about.

Let us return to the matter of followers. They observe what you do and deduce from that some ideas of who you really are. For example, they decide whether you are competent or incompetent, and whether you are honourable and trust worthy, or only a self-serving person who uses authority to look good and get promoted. Self-serving leaders may well be effective in the short run, because their employees have to obey them. Self-serving leaders succeed in many areas, at least for some time, because they present a good image to their superiors at the expense of their colleagues. But self-serving leaders are not successful in the long term, because they have merely employees, not true followers.

In your subordinate's eyes, your leadership consists of everything you do that effects the organisation's objectives and their well being. That includes: competence, ability, character and dedication to your organisation's goals.

Respected leaders not only have clear beliefs and character, but also an understanding of their people and of the tasks that need to be done; on that basis, they implement, provide direction and motivate.

It is probably time now to turn the hourglass around and look at the entire subject from the bottom up by asking the question: What makes us follow leaders?

If we analyse why we have ourselves followed leaders, we will probably conclude that it is our perception of three things:
(a) their level of competence and ability,
(b) their values-in-action, and
(c) their sense of direction.

What do I mean by "a sense of direction"? Well, that again consists, I think, in three things:
(i) the ability to convey
(ii) a believable vision of the future, as well as
(iii) a convincing view of how to get there.

Let's put it this way: leaders are in fact social architects. It is their job to analyse the environment, and then design strategy and structure, so that things can actually take place and make an impact, while maintaining room for experimentation and adaptation. By contrast, if leaders drop their vision too much to detail, they end up becoming petty tyrants and de-motivating followers. The challenge is that some attention to detail is always needed – because the devil is always in the detail.

So if you want to be effective as a leader, you have to be neither a pushover nor an abdicator. Think of yourself rather as a catalyst, as a servant who supports, advocates and empowers. What does that mean in practice? Not merely believing in your people, but communicating that belief effectively (that is particularly important because many of your followers may lack self-confidence and even believe that they do not have abilities that they actually do have); further, being a catalyst and servant means visibility and accessibility; it means finding ways of increasing participation by everyone, sharing information, and moving decision making down to lower levels in your organisation.

Effective leaders build coalitions by clarifying what they want and what they can get; by assessing the distribution of power and interests; by building linkages to other stakeholders; by using persuasion first, and using negotiation and coercion only if necessary. Regretfully, applying pressure and attempting manipulation are common tactics, but lead in the long term to ineffectiveness.

Effective leaders are prophetic, inspirational. They understand that an organisation is a stage to play certain roles and give impressions; that they have to use symbols to capture attention; and they have to try to frame experience by providing plausible interpretations of experiences.

Ineffective leaders either do not understand the partially-theatrical nature of organisations, or come across as fanatics or fools, or people merely using smoke and mirrors.

Fred Fiedler proposed three areas to think about:
* Leader-Member Relations (Good/Poor)
* Task Structure (Structured/Unstructured)
* Leader Position Power (Strong/Weak)

This is somewhat similar to, but also dissimilar from, the 3 overlapping circles proposed by Professor John Adair, the world's first Professor of Leadership, who describes leadership as a functional relationship between the three basic variables: task, individual, team. In brief, his point is that if the task needs a team to accomplish it, then building and maintaining the team is an essential component of accomplishing the goal. If the team needs are not met the task will suffer and the individuals will not be satisfied. But a team, in turn, cannot be maintained or built up if the needs of the individuals in the team are not met. We can learn a lot about improving our effectiveness if we look at how we do our job as leaders by viewing it in turn from the perspective of the task, the team and the individual.

My next point is that, too often, we tend to choose people with the same type of personality as ourselves, or to go for our favourite person, but this weakens a team's ability to approach problems and implementation-questions holistically. It would take too long to go into this in detail today; the best work on how to provide balance in teams has been done by Dr Meredith Belbin, and I recommend his work on team roles to you.

I now want to get on to the question of organisational and national cultures, where I think we will cover territory which may be of surprising novelty to you, given the fact that we are ourselves from the field of culture, but we are of course looking here at culture in a wider sense than is usual for us. There are difference in culture (or in "how things are done around here") in ethics and religion, but also in work-related matters.

Let me put it to you that one way of classifying the world cultures is into Green, Black, Red and White.

Green cultures are oriented to "pie in the sky when you die" and tend to make no substantial "material progress" (examples are India and Indian-influenced civilisations, such as Bali, through many, though not all, phases of history).

Black cultures can be thought of as traditional cultures round the world which lived so much in fear of the unknown and/or awe of nature and/ or awe of the supernatural that they also tended to live in a highly sustainable mode but without making what we today call material progress.

By contrast, Red cultures have an almost pathological lack of fear of the unknown and make - untrammelled "progress"- e.g. Western/Global society since about 1990.

White cultures were or are marked by love of humans, God and nature, and drive toward balanced progress even if they never achieve it of course (examples are Reformation societies, the Methodist movement, the Clapham Group/Victorian England).

A quicker way of classifying societies is in terms of Task Cultures vs Relationship Cultures. Some cultures are relatively task-focused (e.g. northern Europe and North America) while others, basically the rest of the world, is relationship-focused. I do not mean that the rest of the world gets nothing done, or that there are no relationships in northern Europe or northern America – but there is a difference of emphasis. In one case, for example, you can easily do business with people you do not know or may not even like ("business is business"); in the other case, you only do business with people you like and trust ("how can you do dream of doing business with someone you don't know?).

Still another way of distinguishing between cultures is on the basis of the degree to which they are guilt-oriented versus the degree to which they are shame-oriented. This influences the degree to which the culture is committed to penalties that are perceived to be proportionate to an offense, in contrast to the degree to which the culture is committed to penalties are tokenistic or disproportionately huge. This is really the difference between cultures that believe, when you do something wrong, that you should “pay and go free” versus those that believe that, if you do something wrong, it can basically never be paid off because you have what is sometimes described as “a black face”. It is also interesting that there is an emerging international acceptance of Biblical ethics. Something in the human heart recognises what is right, regardless of the system of belief in which one is brought up. As India's first Prime Minister, Jawaharlal Nehru put it: "I am a Hindu by birth, a Buddhist by philosophy, a Muslim by culture, and a Christian in ethics".

Yet another way to think about these matters is to think of the degree to which cultures are built on absolutes versus relativism. In some, the absolute tends to dominate (think of Iran today) while, in others, the relativistic or pragmatic tends to dominate (e.g. in the USA). I am not saying that no one in Iran is pragmatic, nor am I saying that no one in the USA believes in absolute standards for example of morality! Still less am I recommending either alternative! I am simply trying to draw your attention to ways in which we can think of cultural differences. By the way, it is interesting that, as cultures lose belief in their Absolute (whatever that is), they also lose cultural cohesion, producing sub-cultures that are mutually uncomprehending and opposed to each other - as is happening in the USA today.

Well, dear colleagues, our time is nearly up. We have covered a wide variety of topics, and I hope that you have found some of them useful. May I conclude by wishing all of us the best as we seek to apply some of the insights which I hope that we have gained today, so that we can actually improve our performance as leaders.

ENDS Sphere: Related Content

Thursday, July 29, 2010

So are we looking towards the last of the bull fights in Spain?

How the world changes!

Will the banning of bullfighting by the Catalonia region of Spain lead to a ban on bull-fighting throughout Spain?

Not likely any time soon, apparently.

At least according to Spain-watchers.

But I wouldn't be too sure. One sparrow doesn't make a summer, true, but there are things called straws in the wind. Think of how quickly smoking has been banned in most public spaces in the developed world. Sphere: Related Content

Did someone say sanctions don't work?

As a result of UN Security Council sanctions against Iran in June, followed now by the European Union's even tougher restrictions on Iran's energy, banking and insurance sectors, Iran has now apparently not only offered to resume nuclear talks but also indicated its willingness to suspend part of its nuclear-enrichment programme.

Engagement works with some people. With others, even "light sanctions" do not work. Had these "tougher sanctions" not worked, the world would have been faced with tough choices.

On the other hand, if the world had been tougher with Iran ten years ago, we would not be facing the problem that we are facing there now. Sphere: Related Content


A news release with the above title has come to my attention, which I include in its entirety below. Abuse of power by bureaucrats and politicians is a huge problem in India. My advice to Mr Nath is to start a movement aimed at eliminating such abuses.



A respected South Asian military historian, scholar and author is being unjustly harassed, maligned and threatened by Indian authorities. Mr Ashok Nath is of Indian origin, has been based in Europe for the last thirty years and, earlier, served in an elite cavalry regiment of the Indian Army. He is the author of a monumental work on the history of the Indian and Pakistan cavalry, whose research and publication he has financed largely from his own resources. The work has been widely acclaimed - for example in the UK by Oxford University's eminent Professor of the History of War, Hew Strachan, by the Indian Military Historical Society, and by others.

The story begins in August 2000, when he purchased in Delhi a post-WWII George Cross medal group in good faith for his private collection, with documents and a video confirming its legal title.

To raise funds for his research on the next series of volumes he is writing, he decided to sell his medal collection, and offered the George Cross to a well known military auction house in London in 2009. The auction house, doing some research, discovered that the medal was listed as having been reported stolen and asked him for proof to the contrary, which he provided to its satisfaction and to the satisfaction of Scotland Yard to which the case was later referred.

For unknown reasons, the widow of the George Cross awardee denied selling the medal and reported that it had been stolen on a date well after it had been sold. This created a politically-motivated hue and cry in the Indian state of Himachal Pradesh. The local politicians instructed an official to secure the return of the medal so that they could claim credit for the return of the medal to the state.

The George Cross is not an antique according to Indian law, nor was it registered as a national treasure in India, so its sale was valid and there was nothing illegal about its being taken out of the country. It has been purchased in good faith with valid documents and there is indeed a video recording which demonstrates beyond a shadow of doubt that the medal was given by the widow, to the person who then sold it on.

The scholar is being bullied by threats, false charges and public maligning by the authorities. After voluntarily withdrawing the medal from the auction, he called for a thorough and impartial investigation, and has cooperated with the police, both in the UK and India. However, the Indian State police are known for being corrupt, and have been twisting evidence to suit their own agenda. He feels therefore that they cannot be trusted.

Harassment by Indian government officials is a sad reality in India. It is unacceptable that Indian authorities should seek to browbeat a European citizen who is pursuing his own scholarly interests. If the Indian authorities are allowed to get away with such actions it will be a sad day for collectors worldwide.

Mr. Nath can be contacted on telephone +373 22 73 20 23 or by email on: anath53[AT]gmail.com Sphere: Related Content

Monday, July 26, 2010

Best practice for Executives' decisions about Technology

Several years ago, I published a piece of research into the top 100 Company Boards and the relationship with technology-related matters. The results were "shocking but not surprising": none of the Boards had any definition for technology competence, and none of them assessed their own competence about technological matters. Moreover, very few of the Boards did anything to nurture or reward technology competence at Board level.

I regret to say that the situation does not appear to have changed much.

At least that is what I deduce from an excellent article which sets out what I regard as best practice in the matter of executive decisions about technology:
http://ethix.org/2007/02/01/executive-decisions-about-technology Sphere: Related Content

Where can you find the worst exhange rate in the world?

First, I should explain what I mean by the question. By "exchange rate" I mean: the rate for exchanging one currency into another. And by "worst" I mean: that which is most DISadvantageous to the customer.

So what is my nomination for the worst exchange rate in the world?

The See Buy Fly shop at Schiphol Airport in Amsterdam: I bought something worth Euros 5.75, and thoughtlessly proferred some Swiss Francs. I was charghed CHF 12.74 !!! Sphere: Related Content

Friday, July 23, 2010

How soon will India's growth rate exceed China's?

It is not clear that the Indian government is going to do much any time soon to change the things that impede growth in the country (think infrastructure, think bureaucracy and corruption....)

However, it is now clear that India's growth rate will, at some point, overtake China's growth rate.

The question is: when?

I think it oculd be as early as next year, and at the latest by 2015.

Why? Because in a slowing global economy, export-based "emerging economies" such as China's are going to be hit more than "emerging economies" which are not as much based on exports - e.g. India's.

Moreover, as China's economy slows and approaches India's rate of growth, investors' current risk-reward perception regarding the two countries will rapidly reverse, specially given the negative experiences of Western companies in China - which at least a few multinationals are beginning to express, having got fed up of the games that China has been playing.

And there is a further factor: China's "demographic dividend" is set to stabilise somewhere around 2015, while India's "demographic dividend" is set to continue expanding for perhaps 30 years longer. By around 2015 at the latest, that fact will begin to weigh on the calculations of investors.

Naturally, the above does not include scenarios such as political collapse in either country, which is possible if China and India do not make much more vigorous moves in the direction of human rights, democracy, genuine liberalisation, actual care for the environment and social justice, and so on.

At present, keeping growth going is a "no brainer" in both countries. But, even at present, what is not a "no brainer" is how to focus on human rights, democracy, genuine liberalisation, actual care for the environment and social justice, and so on, in such a way as to avoid disadvantaging the current elite too much.

That is not impossible.

However, it does require articulation, conceptualisation and, more important, implementation - which neither country has done in a sufficiently substantial way, so far. Sphere: Related Content

Thursday, July 15, 2010

Further evidence that we are already in another bubble: U.S. Retail Sales

Why is the market still relatively so high when, following the disappearance of the temporary boost to incomes provided by government "stimulus packages", wages and asset income are low, revolving consumer credit is flat if not down, consumer confidence is pretty absent, and unemployment is up?

Is this not evidence of over-liquidity producing "animal spirits" (i.e. a bubble)?

For those who like to know such things, nominal retail sales fell for the second consecutive month in June, down 0.5% compared to the same month last year. This followed a 1.1% correction in May. Core retail sales—sales (excluding gasoline, building supplies and autos) remained more of less flat, with a negligible 0.2% gain, after being revised to marginally negative in May. Sphere: Related Content

Wednesday, July 14, 2010

Impact of the Recession on the US

The recession has added, over the last 2 years or so, some 2.4 million people to the category of people who may not be able to repay any new loans (and possibly some existing loans as well).

The total of such people in the US is now over 43 million people.

That's 25.5% of U.S. consumers!

The figures above have been produced by a credit-score firm, Fair Isaac, according to a report by AP.

So much for the US growth engine returning to full power any time soon - which has implications also for developing countries, specifically export-dependent countries such as China. Sphere: Related Content

Tuesday, July 13, 2010

It Can Be Done!

For all our encouragement, I post here a News Release that I have just received from a friend - and I do it because it shows that efforts to reform society still produce results, even though it still requires the willingness to stick out one's neck, to take risks and to be persistent. The following effort took 2 years on the part of 2 individuals - but just think of the benefits to thousands of poor workers right across the UK!:

"Health & Safety Investigation at BBC Television Centre will Oblige Retail Companies to Introduce Chairs for all Shop Till Workers

"Employers across Britain who refuse to provide chairs for their staff who work on sales tills may soon have to do so, following action taken by two Christian trade union activsts at the BBC's main broadcast studios at Television Centre in White City. The Health and Safety Executive have concluded an 8 month investigation into contract catering company, Aramark, who run the BBC teabar concessions used by newsroom journalists and technicians. In 2008 the company had ordered the removal of chairs from some of their catering outlets, obliging staff using the tills to stand for hours without a break. Following the refusal of BBC management to intervene, NUJ rep, David Campanale and BECTU activist, Brian Dale reported the matter to the HSE. The HSE inspector leading the inquiry has now told them that following their action, chairs will not only have to be restored to catering staff in the BBC, but in all retail and catering outlets across Britain, saying "the same principle applies to other workplaces."

"Andrew Verrall-Withers is the HSE inspector who led the inquiry. Together with the HSE Special Inspector for Ergonomics, Ed Milne, he established that caterers Aramark could not evade their legal duty to provide chairs for their staff, because of workplace regulations from 1992, which state that " If work can or must be done sitting, seats which are suitable for the people using them and for the work they do should be provided." (Workplace (Health Safety and Welfare) Regulations 1992, Reg 11 (3).

"Commenting on the outcome of the case, which could see chairs at till-points restored in thousands of retail and catering outlets, Brian Dale of the BBC BECTU branch, who attends the Community Church, Surbiton, said:

"'We wanted to speak up for those who were being exploited. As Christian trade unionists, we were angry at the injustice, especially as some till-staff were standing for 8 hour double-shifts. It took 2 years but the result now has national ramifications for similar workers exploited in the same way by their employers.'

"David Campanale also attends the Community Church and is NUJ Father-of-Chapel in BBC World News. He was given the news of the outcome of the inquiry by Andrew Verrall-Withers, who told him:

"'This was a very strange, frustrating but useful experience around the simple issue of whether Aramark would provide chairs for their staff. In the end, I had to take action against Aramark and to his credit, Chief Executive Andew May resolved this the moment it reached his level. I took the line that to get a result - when push came to shove - I was prepared to take this to court even if it risked £50,000 in court costs. I was prepared to prosecute over a chair. There was no chance I was going to walk away from doing this. I congratulate you for your effort. Would this outcome have happened without you? No. You have been the first cog turning in the machine.'"

"The BBC's Head Of Production Safety, Stephen Gregory, had told the NUJ last year he would not take action over enforcing the legislation as "Aramark are a sub-contractor and that BBC have no direct operational or management control". After a joint BECTU and NUJ petition organised by Brian Dale and David Campanale and signed by newsroom staff, presenters and technicians was ignored, the pair called in the HSE on behalf of their unions.

"According to Andrew Smith-Withers, the investigation has wide ramifications across a range of industries. An unwritten 'rule' had been sneaked in by companies such as Sainsburys, M&S and others that till-workers will not be provided with chairs if they 'only' stood up to 4 hours. He said this has now been scrapped as a result of the HSE's enquiry into practise at the BBC and that his conclusions about the law on provision of chairs will have to be observed nationally. Companies, he said, "cannot now choose not to provide chairs for their workers". "This enquiry", he said, "does establish a precedent across industry."


More information:

Contact NUJ David Campanale 07873 625396

Contact HSE Andrew Verrall-Withers 07903830200

1. Workplace (Health Safety and Welfare) Regulations 1992, Reg 11 (3) :
"Workstations should be suitable for the people using them and for the work they do. ... If work can or must be done sitting, seats which are suitable for the people using them and for the work they do should be provided. Seating should give adequate support for the lower back, and footrests should be provided for workers who cannot place their feet flat on the floor.

2. Research shows that complaints of aches or discomfort in the muscles and joints are common in supermarket cashiers - just as they are in many other occupational groups. Cashiers usually work part-time, yet they still get problems and some aspects of checkout work can contribute to these. Most cashiers will feel pain in their arms, legs or back at some time during a year. A few will feel some pain each day. Both back pain and neck/arm pain are common - over half of all cashiers will report one or both. More at H&S specialists: http://www.healthandsafety.co.uk/hscd.html Sphere: Related Content

Tuesday, July 06, 2010

"Economic Disaster to Strike Again Unless Governments Change Course"

Above is the sort of slogan which is now being popularised by right-wing "celebrities, personalities and authorities".

It is true that expansionary economic policies, which were called for by some global leaders last month, can lengthen the financial debacle which started in 2007 and which is not yet at an end.

It is also true that the G-20 participants who called for fiscal restraint are at lesat partially correct: governments cannot indefinitely and endlessles spend, nor can they infinitely expand money supply.

However, it was not government deficits and debts that caused the current crisis. It was the nature and current structure of the financial system. Specifically, it was "the Shadow Financial System" that caused the crisis.

So the problem is not what one commentator calls "the national howling we have seen against pension-fund reform in France or spending cuts in Greece and Spain". (Apparently, according to such commentators, governments can and should bail out rich stockholders when their stocks run into trouble, but governments should not do anything to help the poor).

The actual problem is rather that nothing substantial has been done so far about the shadow financial system, and nothing subtantial now looks as if it is going to be done any time soon.

Regretfully, the G-20, meeting in Toronto last month, copped out of any attempt to reform the system.

That is the real reason that we are seeing the economy teetering between mini-rallies and aversion to speculation, leverage and risk-taking.

Given time, governments are apparently hoping that the risk-takers will come back into the market.

If they do, there will be another real boom.

Follwed by another bust - which naturally therefore will be worse than the current one. Sphere: Related Content

Monday, July 05, 2010

Mary Kaldor on the role of the USA in the world

A friend draws my attention to a somewhat old piece written by this outstanding scholar: http://bostonreview.net/BR30.1/kaldor.php

He asks what I think of the article.

Here is my response:

"My points of disagreement with her relate to her apparent belief that anyone can bring about peace in the Middle East: apart from the Israelis and Palestinians themselves, who have rarely shown any great interest in peaceful co-existence, there are all the nearby and faraway powers who have a vested interest ....

And her notion of not American but multilateral interventions in support of individual and "“human security” is theoretically interesting, but unlikely to get very far in view of the fact that multilateralism has historically not got us very far in any conflict in the 60 years or so after WWII - the interests of nations are simply too diverse.

She is closer to what should be achievable globally when she speaks about global rules but, as the G-20 summit in Toronto demonstrated at the end of last month, even that is extremely difficult to achieve given the lack of commitment by political leaders to any real global leadership". Sphere: Related Content

Thursday, July 01, 2010

Will the EU's "tough" new rules for bonuses actually reduce excessive risk-taking?

The brief answer is: No.


Because the bonus rules say nothing about how much risk is taken or the context in which it is taken. Nor do the rules limit the quantity of the bonuses that may be given!

The rules simply say that between 40 and 60 per cent of bonuses will have to be deferred for three to five years, and that half the bonus actually paid out will have to be paid in shares or in other securities linked to the bank’s future mid-term performance.

In addition to simply delaying a proportion of the bonus money getting to them (how much of a disincentive is that?) the move forces all EU financial services companies to link 20-30% of a year's bonus to medium-term performance of the companies concerned.

That percentage is too small to act as a material disincentive to excessive risk-taking in the short term.

Assuming the same overall bonus as earlier, all that the EU move means is that the immediate reward for risk-taking is going to be less now than it used to be, in terms of the proportion available to the person at the end of year concerned.

The only really good thing about the proposed legislation is that any banks bailed out by taxpayers are going to have to rebuild their capital first and repay those funds before being able to give any bonuses to employees.

The EU move may be only a very small move in the right direction but, unless that is matched by Asia and the USA, it will mean merely that the most mobile and brilliant of risk-takers will move to those locations. Sphere: Related Content

Friday, June 25, 2010

Ideas of what constitutes "prompt payment"

I have just had sight of a potential contract which offers, in case of overpayment to a party in Italy, a "prompt refund".

Well, having a penchant for asking awkward questions, I wondered "What constitutes 'prompt'?".

The answer was "180 days maximum".


However, I guess that is more prompt than never getting repaid at all :) Sphere: Related Content
A post from "Anonymous" says: "I say thank God for those entreprenuers and business people who take risks and conquer challenges that create jobs, jobs, and jobs. Rather than judge the motives of business people why not judge the fruit of what they produce and the impact on society. What about the large foundations that are founded by very successful business people? Perhaps there is the real answer as to what they value and why they work so hard to fulfill their pledge to shareholders. By the way, I am broke after trying to create a business but I hold no animosity to those who have been successful. Just a thought."

Dear Anonymous

Many thanks for your thought. The question of whether we should thank God or the entrepreneurs concerned is a moot one. And I find nothing to "judge" in the motivations of businesspeople, as the motivation is simple: to make money.

One hopes that they want to make money within the law. But the evidence worldwide is mixed.

Because businesses always seek to remake the law to suit themselves (the latest evidence of this is in today's newspapers, which report that companies from one sector are winning the battle to shape the new regulations which will govern that sector of business).

Note that the business which tries to influence laws and regulations so that laws and rules suit society as a whole is rare.

You also ask: "What about the large foundations that are founded by very successful business people?". Well, what about them? No doubt they do good. But they do good with money that may have been earned (as in the case of Andrew Carnegie, the first great "philanthropist" of modern times) by paying his workers and his suppliers less than he should have....

So in order to make a moral judgement, we have to look not only at the uses that the profit is being put to, but also at what that profit was originally made in a legal, ethical, humane and environmentally responsible way. Otherwise the consequences of the business activity as a whole generate more negative effects than positive ones.

Specially when one considers the lifestyle to which the business person or family treated themselves while running their business.

So there are many aspects to take into consideration.

Please note what I am NOT saying. I am NOT saying that there exists no single business which obtains its profits according to the criteria mentioned above. Only that such businesses are fewer than we would like to believe.

My commiserations that your business venture failed. But I hope that you will have the time and the inclination (and the advice, if that is relevant) to reflect on the reasons that your business collapsed, and that, having learned your lessons, you will go on to build one or more really successful businesses.

As someone who has been involved in business for some 30 years, I know that success takes extremely hard work and infinite attention to detail, combined the capacity to maintain an overall perspective of the business, as well as a wider sight of what is happening in politics, economics, society and technology. Not easy at all....

And yes, if you can create a successful business on a moral basis, live modestly and use your profits for the public good, you will have done a wonderful job. You will in fact belong to the real elite of the world - people such as the Quaker business families which originally built up Cadburys and Wrigleys and Rowntree and
Very best wishes Sphere: Related Content

Wednesday, June 23, 2010

"global warming’s six americas 2009" study by the Yale Project on Climate Change and George Mason University's Center for Climate Change Communication

A nationally-representative survey of American adults was conducted covering such topics as: climate change beliefs, attitudes, risk perceptions, motivations, values, policy preferences, behaviours, and underlying barriers to action

The analysis of the responses segmented the US public into six ("The Six Americas").

Each displays display very different levels of engagement with climate change, and the segments vary in size from 7% to 33% of the surveyed population.

The Alarmed (18%) are fully convinced of the reality and seriousness of climate change and are already taking individual, consumer, and political action to address it. The Concerned (33%) – the largest of the six Americas – are also convinced that global warming is happening and a serious problem, but have not yet engaged the issue personally. Three other Americas – the Cautious (19%), the Disengaged (12%) and the Doubtful (11%) – represent different stages of understanding and acceptance
of the problem, and none are actively involved. The final America – the Dismissive (7%) – are very sure it is not happening and are actively involved as opponents of a national effort to reduce greenhouse gas emissions.

My attention has been drawn to the survey (though it was published just over a year ago, and the actual interviews with surveyed respondents took place in Autumn 2008) in the context of the discussions surrounding the BP oil rig/ spill disaster.

Some people are suggesting that, as a result of the financial crisis, climate change has become very much LESS of a concern in the USA (at least in comparison to financial and employment issues). Others suggest that, as a result of the disaster, climate change and related environmental issues have become MORE prominent in public concern.

Time will tell - though, as always, surveys take a narrow slice to examine and in real life no doubt everything relating to the disaster will get mixed up with the public reaction to President Obama's handling of the issue politically, to whether whatever amount is finally given by BP is considered adequate, and the long-term consequences for the Gulf of Mexico and wider. Sphere: Related Content

The UK's "kill or cure" budget

George Osborne, the UK Chancellor (or Finance Minister) has asked that his first Budget be judged by two yardsticks: its success in reducing the deficit and the proof it offered to the nation that “we are all in this together”.

By the second yardstick, he will certainly fall short because it is widely acknowledged that his budget will disproportionately affect the poor and advantage the rich.

Whether he will be successful in the first (reducing the deficit) remains to be seen. The budget savagely cuts public spending, with most government departments threatened with a 25 per cent by 2014-15. Now that the government accounts for as much as 48% of GDP, that may slash perhaps as few as 50 thousand jobs or – depending on developments – overall unemployment rising as high as 3 million. The budget has welfare reductions and tax increases that grows every year until it hits £40bn in 2014-15. Briefly, this is one of the most drastic spending squeezes in any advanced economy since World War II.

In addition, consumption taxes will be raised (VAT will go up from next January to 20 per cent). That amounts to a UKP 5000 hit for the average family in the UK – though of course any flat tax hurts the poor much more than the rich.

On the other hand, income tax allowances will rise by £1,000 (taking an estimated 880,000 people out of the income tax system - though how many of them will still be in jobs is not clear), the basic state pension will increase in line with earnings from 2011, and £2bn will be spent on children in the poorest families.

Then there is the £2bn tax on banks, which will give him some additional income but I wonder if that will not further constrain the principal growth engine of the UK economy (financial services).

Oh and I should mention some measly measures that the Chancellor has taken which are meant to encourage small businesses.

As Mr Osborne is reported to have said: “Our policy is to raise from the ruins of an economy built on debt a new, balanced economy where we save, invest and export”. Saving and investing might perhaps be possible (though it is difficult to see how that will be within the reach of most people in the UK). What we can definitely say is that export will be a chimera, because the UK really manufactures very little and most of its professional services (which form the bulk of its exports) may be in less demand if one considers that the reputation of professional services derives partly from the overall success of the economy of which it is a part.

So will this budget signal “the start of a period of painfully slow growth, falling living standards, and prolonged high unemployment” (in the words of one commentator) or whether what we have is a "a reckless budget that pulls the rug out from under the economy” (as Harriet Harman, the acting Opposition Leader put it)?

At its best, it is an optimistic budget which leans heavily on inflation and interest rates remaining low – which is probably unrealistic given the volatility of the world economy.

The key matter is whether the budget can prevent a bond market crisis. In other words, it is not governments, nor is it voters, but rather bond market traders, who will eventuallydetermine whether or not the budget will be a success eventually – and that reaction will be based on the bond markets evaluation of whether the UK can create a successful recovery, which in turn depends at least partly on how the whole of the UK responds to the cuts and increased taxes.

Champagne, folks? Or Molotovs? Sphere: Related Content