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 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] 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: 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: 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:

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