Dear Mr. Gapper,
Thank you for the article on piracy in the FT on 19-Jan-2012.
The point missing from your article is 'what you sow is what you reap' - meaning, you never mention the copyright protection which used to be less than 20 years is now ridiculous to more than 100 years. How can the artists and industry claim to lose out when they are extending the copyright from 20 to 100 years?
The fact is when the industry/artists got greedy, silicon valley came as a boon to the consumers to check the industry's greed using technology.
In the end, what one sows, is what one reaps."
Regards,
Pradeep
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I entirely agree with that - I think it was a fundamental error for corporations to extend copyright protection in that way - not only because it is unjustified but because it clearly divorced the interests of creators from corporations. I've written that in the past.
John G.
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anuary 18, 2012 8:07 pm
Halt the Silicon Valley histrionics
by John Gapper in Financial Times
The internet industry scored a tactical victory this week with Wednesday’s blackout of sites such as Wikipedia and Reddit, and the White House’s decision to oppose parts of two bills intended to curb the file-sharing of films and copyrighted material. “Piracy rules,” tweeted Rupert Murdoch angrily.
I hope not, because Silicon Valley damages itself with its persistent scaremongering over efforts to crack down on piracy. By refusing to engage in a serious effort to prevent it – instead of equating copyright enforcement with censorship, or with “breaking the internet” – it undermines its credibility.
The Digital Millennium Copyright Act of 1998, which it now holds up as a model, was awfully dangerous back then; music companies were stupid to “sue their customers”; governments that halt internet access to persistent file-sharers are breaching their human rights. And now the Stop Online Piracy Act (Sopa) merits a blackout by websites that it isn’t meant to affect.
“Don’t limit your opinion to what’s the wrong thing to do; ask yourself what’s right,” the White House’s internet advisers warned on Monday. So far the industry has ducked that challenge, preferring to stick to its trusty, empty talking point: “Piracy is bad but [fill in the blank] is the wrong solution.”
There are exceptions. Google, despite using its US homepage in protest at Sopa and the Senate’s Protect IP Act – and Mr Murdoch’s tweet that it is a “piracy leader” – has a serious position. It believes that rogue sites should be starved of payments and advertisements.
Mostly, however, the industry’s stance is exemplified by Union Square Ventures, the New York-based venture capital group, which plastered “Stop Censorship” over its logo. Fred Wilson, a partner, argues for ditching Sopa altogether and sticking with the DMCA because internet start-ups “are the golden goose of the economy and we cannot kill the golden goose to protect industries in decline”.
The logical flaw here is that the DMCA is a domestic law that does nothing to halt the abuse targeted by Sopa and Protect IP – mass piracy through foreign rogue sites. From a tactical point of view, Silicon Valley has done a fine job of conflating the two but that is misleading.
Indeed, it is because the DMCA has been effective in limiting the copyright abuse that was once rampant on sites such as Google’s YouTube that pirates have moved offshore. From cyberspace – out of reach of the DMCA or domestic enforcement – torrent sites provide free downloads of others’ films and music, making money through subscriptions and advertising.
Not only is this wrong but it is a scourge on investment in creative work. I don’t trust the statistics thrown around by either side about how precious they are – does the US really lose $58bn in economic output annually from piracy, as the Motion Picture Association of America claims? – but authors, songwriters and film-makers clearly suffer.
Writers and publishers such as Cory Doctorow and Tim O’Reilly argue that they benefit from free distribution of their work as a form of free marketing. That suits them but it should be an individual choice – copyright has existed in the US since 1790 for good reason.
When Maria Pallante, the US register of copyrights, tells Congress that if it does not address offshore piracy “the US copyright system will ultimately fail”, she ought to be taken seriously. It is inadequate for Silicon Valley to dismiss it as the whining of a rival industry, although there is some of that.
Silicon Valley’s biggest rallying cry was that Sopa included (until the provision was withdrawn last week) court-ordered blocking of rogue sites by internet service providers. Civil rights activists such as Rebecca MacKinnon, a New America Foundation fellow, compare this to censorship in China and others claim it would “break” the architecture of the web.
If so, the internet is already broken in the UK, which has blocked child pornography sites through ISPs since 1996. Following a high court ruling last year, Cleanfeed site-blocking technology will be used against foreign pirate sites by BT and other British ISPs.
Indeed, plenty of search engine links are removed and sites blocked in the US, both under the DMCA and anti-counterfeiting and prescription drugs legislation. Go Daddy, a domain name registrar that initially supported Sopa but then retreated, suspended 150,000 sites for illegal or malicious activity in 2010.
The question is not the nature of the technology but whether its use is merited for copyright infringement. That is a fair debate but the UK judge who examined the issue of the right to free speech versus the right to intellectual property protection on the web under the European Convention on Human Rights came down in favour of blocking.
Blocking now appears to have been stripped from Sopa, which leaves other mechanisms such as cutting off payments to rogue sites through credit card companies, and removing US advertisements. If the internet industry wants to demonstrate good faith, it should suggest what might work, not endlessly protest.
Ms MacKinnon rightly points out that overzealous enforcement can harm other liberties – any regime must be balanced. But the absolutist Silicon Valley line that its rights override Hollywood’s – “intellectual property is theft”, tweeted John Perry Barlow of the Electronic Frontier Foundation – is wrong.
The blackouts were a dramatic gesture but curbing piracy does not “destroy the internet as we know it”. It would be wiser for Silicon Valley to cut the histrionics and help to fashion a decent law.
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Wednesday, 22 February 2012
Friday, 11 November 2011
Re: Letter to Netanyahu: time is no longer on Israel’s side
Spot-on analysis. What the author doesn't mention is that America's one-sided middle-east policy controlled by Israel will lead to its unilateral foreign-policy epitaph because very soon China will stamp its authority on the issue by siding with the Palestinians. Chinese have nothing to lose and that single master-stroke will shift the whole middle-east and its oil towards China leaving Israel and Saudi as pariahs.
The two-state solution is simple. And Israel should take it while it is available on platter. After that if the Hamas or any other organisations don't keep their side of bargain, Israel has enough power to protect itself. Isn't it disingenuous to claim that Israel cannot protect itself even with America's Nukes on it doorstep?
But as Mahatma Gandhi demonstrated, success can be achieved by stretching your hand out first. So, as a friend of Israel, I think the long-term peace and stability of the region and Israel's own long term security is in the hands of Israel itself. But does it has the strength to stretch its hand out first? That is the trillion-dollar question.
Regards,
Pradeep
------------------------------------------------------------------------------------------------
Letter to Netanyahu: time is no longer on Israel’s side
By Kishore Mahbubani
Friends of Israel unite! The time has come to send a common message: time is no longer on Israel’s side. Geopolitical forces are moving inexorably against it.
One cardinal mistake no small state should make is to put all its eggs into one basket, even a basket as strong as the US. Despite its huge influence, Israel cannot change the shifting geopolitical tides. America’s power has peaked: its economy will not shrink in absolute terms but it will shrink irresistibly in relative terms. This would have happened naturally but gradually. But the continuing economic crises in the US will hasten the decline in America’s influence. Shrinking budgets will cut defence and aid expenditures. A crippled economic giant with no rockets to launch its astronauts into outer space will lose its “mystique”. Countries will no longer hesitate to vote against American preferences.
This is what happened with the Unesco vote of October 31. The news agencies reported correctly that 107 countries voted in favour of admitting Palestine into Unesco and 14 countries voted against. What they failed to report is that these 107 countries represented 77.5 per cent of the world’s population; the 14 countries just 7.3 per cent. The American founding fathers called in the Declaration of Independence for “a decent respect to the opinions of mankind”. The American decision to suspend Unesco funding clearly showed no such decent respect.
There can be no doubt where the opinion of “mankind” is headed on the Israel-Palestine issue. The world is exasperated with Israeli intransigence on the two-state solution. It is even more exasperated with the continuous increase in illegal Israeli settlements on the West Bank. Some European states voted with Israel but their citizens are clearly sympathising more and more with the Palestinians. The world knows that while Americans and Europeans love to preach the virtue of speaking “truth to power”, they have displayed total cowardice on the Israel-Palestine issue.
This cowardice now poses the greatest existential threat to Israel. Few friends of Israel dare tell it the inconvenient truth that time is no longer on Israel’s side. American power is declining relatively. Europe is becoming progressively irrelevant. Equally important, the power of the Islamic world has troughed. Now the relative influence of the Islamic world can only increase, despite the many challenges it faces. Turkey’s assertiveness, especially on the Israel-Palestine issue, is a sign of the new world order that is emerging.
The democratic revolutions in Egypt and Tunisia also end the era of pro-Israel dictators. Future leaders of these countries will have to reflect their populations’ sentiments. No future Egyptian government can impose sanctions on Hamas as Hosni Mubarak did. Pressure to speak out against Israel will grow. In Saudi Arabia, Prince Turki al-Faisal has warned that, “With most of the Arab world in upheaval, the ‘special relationship’ between Saudi Arabia and the US would increasingly be seen as toxic by the vast majority of Arabs and Muslims, who demand justice for the Palestinian people.”
The 5bn non-American and non-Muslim peoples of the world will have to make a clear choice: between supporting Israel (with lukewarm dividends at best from a declining America) or voting against Israel (buying insurance from a rising tide of anger in a more assertive and democratised Islamic world). Equally important, justice weighs in favour of giving the Palestinian people a right enjoyed by virtually every other people in the world: statehood.
Neither the US Congress nor Israeli nuclear weapons can protect Israel when the balance of geopolitical forces tips against it. And Israel could well trigger such a tipping point with any unilateral military strike against Iran. No one can predict the consequences when Israel becomes totally isolated from the global community. But it will not be a pretty picture. Hence, Israel’s friends should act quickly and send a short letter saying: “Dear Prime Minister Netanyahu, time is no longer on Israel’s side. Please work quickly to implement the two-state solution that President Bill Clinton proposed in January 2001.”
The late Israeli foreign minister Abba Eban once said: “The Palestinians never missed an opportunity to miss an opportunity.” Sadly, the same may some day be said of the Israelis.
The writer is dean of the Lee Kuan Yew School of Public Policy at National University of Singapore, and author of The New Asian Hemisphere
The two-state solution is simple. And Israel should take it while it is available on platter. After that if the Hamas or any other organisations don't keep their side of bargain, Israel has enough power to protect itself. Isn't it disingenuous to claim that Israel cannot protect itself even with America's Nukes on it doorstep?
But as Mahatma Gandhi demonstrated, success can be achieved by stretching your hand out first. So, as a friend of Israel, I think the long-term peace and stability of the region and Israel's own long term security is in the hands of Israel itself. But does it has the strength to stretch its hand out first? That is the trillion-dollar question.
Regards,
Pradeep
------------------------------------------------------------------------------------------------
Letter to Netanyahu: time is no longer on Israel’s side
By Kishore Mahbubani
Friends of Israel unite! The time has come to send a common message: time is no longer on Israel’s side. Geopolitical forces are moving inexorably against it.
One cardinal mistake no small state should make is to put all its eggs into one basket, even a basket as strong as the US. Despite its huge influence, Israel cannot change the shifting geopolitical tides. America’s power has peaked: its economy will not shrink in absolute terms but it will shrink irresistibly in relative terms. This would have happened naturally but gradually. But the continuing economic crises in the US will hasten the decline in America’s influence. Shrinking budgets will cut defence and aid expenditures. A crippled economic giant with no rockets to launch its astronauts into outer space will lose its “mystique”. Countries will no longer hesitate to vote against American preferences.
This is what happened with the Unesco vote of October 31. The news agencies reported correctly that 107 countries voted in favour of admitting Palestine into Unesco and 14 countries voted against. What they failed to report is that these 107 countries represented 77.5 per cent of the world’s population; the 14 countries just 7.3 per cent. The American founding fathers called in the Declaration of Independence for “a decent respect to the opinions of mankind”. The American decision to suspend Unesco funding clearly showed no such decent respect.
There can be no doubt where the opinion of “mankind” is headed on the Israel-Palestine issue. The world is exasperated with Israeli intransigence on the two-state solution. It is even more exasperated with the continuous increase in illegal Israeli settlements on the West Bank. Some European states voted with Israel but their citizens are clearly sympathising more and more with the Palestinians. The world knows that while Americans and Europeans love to preach the virtue of speaking “truth to power”, they have displayed total cowardice on the Israel-Palestine issue.
This cowardice now poses the greatest existential threat to Israel. Few friends of Israel dare tell it the inconvenient truth that time is no longer on Israel’s side. American power is declining relatively. Europe is becoming progressively irrelevant. Equally important, the power of the Islamic world has troughed. Now the relative influence of the Islamic world can only increase, despite the many challenges it faces. Turkey’s assertiveness, especially on the Israel-Palestine issue, is a sign of the new world order that is emerging.
The democratic revolutions in Egypt and Tunisia also end the era of pro-Israel dictators. Future leaders of these countries will have to reflect their populations’ sentiments. No future Egyptian government can impose sanctions on Hamas as Hosni Mubarak did. Pressure to speak out against Israel will grow. In Saudi Arabia, Prince Turki al-Faisal has warned that, “With most of the Arab world in upheaval, the ‘special relationship’ between Saudi Arabia and the US would increasingly be seen as toxic by the vast majority of Arabs and Muslims, who demand justice for the Palestinian people.”
The 5bn non-American and non-Muslim peoples of the world will have to make a clear choice: between supporting Israel (with lukewarm dividends at best from a declining America) or voting against Israel (buying insurance from a rising tide of anger in a more assertive and democratised Islamic world). Equally important, justice weighs in favour of giving the Palestinian people a right enjoyed by virtually every other people in the world: statehood.
Neither the US Congress nor Israeli nuclear weapons can protect Israel when the balance of geopolitical forces tips against it. And Israel could well trigger such a tipping point with any unilateral military strike against Iran. No one can predict the consequences when Israel becomes totally isolated from the global community. But it will not be a pretty picture. Hence, Israel’s friends should act quickly and send a short letter saying: “Dear Prime Minister Netanyahu, time is no longer on Israel’s side. Please work quickly to implement the two-state solution that President Bill Clinton proposed in January 2001.”
The late Israeli foreign minister Abba Eban once said: “The Palestinians never missed an opportunity to miss an opportunity.” Sadly, the same may some day be said of the Israelis.
The writer is dean of the Lee Kuan Yew School of Public Policy at National University of Singapore, and author of The New Asian Hemisphere
Tuesday, 1 November 2011
A message to the new Apple CEO - a humble plea
Dear Mr. Cook,
I'm a Apple consumer and fan. Since Steve Job's death two things bother me:
1. In the keynote you addressed - you mentioned that the overall market share for Apple's iPhone is just 5% and there is a huge scope to grow.
What do we make of this statement. Steve Jobs never ran after market share. He created markets and let consumers come to him.
Does this mean, you are going to run after market share and in the process stop innovating and let the service levels fall?
2. I pre-ordered Steve Jobs Biography from the app store. On the day, when it was due to download, I had loads of problems. Finally, it loads but the front page ironically wouldn't load where Steve Job's photo was on.
After 2 days, I get an email from Apple explaining me to delete the book, logout and login and then re-load it. I did and it worked and I thought it was a one-off glitch and would never happen again.
(incidentally, it never happened in the past) But I was willing to give Apple the benefit of doubt.
Yesterday, after I tried to download The Spectator Magazine again (I had lost it because I had upgraded to iOS 5. Again, losing one's data when upgrading software never happend in the past). While downloading The Spectator, it gave errors atleast 6 times. I tried 30 minutes later and then it finally worked.
What worries me is, will Apple go downhill from here???? both in terms of product innovation and service levels?
Contrary to what some people who have never used Apple products say, I can vouch that using these products has changed my life not just in terms of efficiency or security but in every possible sense.
Please do something before the culture is changed for ever.
I hope Steve Jobs has put in place the systems needed to sustain the high level of innovation and service. Being the immediate CEO after Steve Job's passing away, it is your responsibility to make sure that the culture of innovation and service and the resulting pipeline of products is maintained. Your first responsibility is towards your consumers and not towards market-share or share-holders. If you can keep hold of the existing customers, rest will take care of itself. The only way you can keep hold of them is by continuous product innovation and high-quality service.
Regards,
Pradeep Kabra
I'm a Apple consumer and fan. Since Steve Job's death two things bother me:
1. In the keynote you addressed - you mentioned that the overall market share for Apple's iPhone is just 5% and there is a huge scope to grow.
What do we make of this statement. Steve Jobs never ran after market share. He created markets and let consumers come to him.
Does this mean, you are going to run after market share and in the process stop innovating and let the service levels fall?
2. I pre-ordered Steve Jobs Biography from the app store. On the day, when it was due to download, I had loads of problems. Finally, it loads but the front page ironically wouldn't load where Steve Job's photo was on.
After 2 days, I get an email from Apple explaining me to delete the book, logout and login and then re-load it. I did and it worked and I thought it was a one-off glitch and would never happen again.
(incidentally, it never happened in the past) But I was willing to give Apple the benefit of doubt.
Yesterday, after I tried to download The Spectator Magazine again (I had lost it because I had upgraded to iOS 5. Again, losing one's data when upgrading software never happend in the past). While downloading The Spectator, it gave errors atleast 6 times. I tried 30 minutes later and then it finally worked.
What worries me is, will Apple go downhill from here???? both in terms of product innovation and service levels?
Contrary to what some people who have never used Apple products say, I can vouch that using these products has changed my life not just in terms of efficiency or security but in every possible sense.
Please do something before the culture is changed for ever.
I hope Steve Jobs has put in place the systems needed to sustain the high level of innovation and service. Being the immediate CEO after Steve Job's passing away, it is your responsibility to make sure that the culture of innovation and service and the resulting pipeline of products is maintained. Your first responsibility is towards your consumers and not towards market-share or share-holders. If you can keep hold of the existing customers, rest will take care of itself. The only way you can keep hold of them is by continuous product innovation and high-quality service.
Regards,
Pradeep Kabra
Monday, 15 August 2011
Indian Cricket's 'artificial turf' Moment???
While a billion+ souls in India argue about the cause(s) of the present annihilation of Indian cricket at the hands of the magnificent Strauss & Co's England viz., the illogical scheduling by the BBCI, the over-the-top old legs or the Men Vs Oldies argument, I wonder, if technological change and the resistant to it has anything to do with the future of Indian Cricket?
Once upon a time, in the good old days, Indian Hockey was at the top of the world. Hockey was played on grass and the Indians led by the Legendary Dhyan Chand & Co, won everything in their sight. Then came the 'Western Conspiracy' to overthrow the Indian hegemony. This was 'achieved' by introducing the 'artificial turf'. No matter what the Indians say, the fact is that, the Indians just couldn't or didn't adapt to the new platform and are still playing the catching-up game.
I wonder if the same is true for Indian cricket now? In the longer version of the game, Indian batsmen's technique to survive is to bring the legs forward and block the ball with the pads. The umpire cannot rule LBW because the batsman is too far outside the crease. But now with the introduction of the technology like hotspot and hawkeye, the trajectory and direction of the ball can be accurately projected in time thus negating the front-foot blocking technique of which the Indian batsmen are masters. Now, they will be forced to play every ball on merit. That needs the re-adjustment of technique and they need to un-learn and re-learn pretty quickly.
This 'artificial turf' moment is the real reason why Indian cricketers and BBCI has been resistant to use the hotspot for LBWs. Only after the present crop of veterans including Tendulkar, Dravid and Laxman retire, we will know if the Raina's, Kohli's and Sharma's have it in them to adjust and adapt. That is where the future of Indian cricket lies and not in the present fiasco, whatever the cause for that maybe.
Pradeep Kabra
Once upon a time, in the good old days, Indian Hockey was at the top of the world. Hockey was played on grass and the Indians led by the Legendary Dhyan Chand & Co, won everything in their sight. Then came the 'Western Conspiracy' to overthrow the Indian hegemony. This was 'achieved' by introducing the 'artificial turf'. No matter what the Indians say, the fact is that, the Indians just couldn't or didn't adapt to the new platform and are still playing the catching-up game.
I wonder if the same is true for Indian cricket now? In the longer version of the game, Indian batsmen's technique to survive is to bring the legs forward and block the ball with the pads. The umpire cannot rule LBW because the batsman is too far outside the crease. But now with the introduction of the technology like hotspot and hawkeye, the trajectory and direction of the ball can be accurately projected in time thus negating the front-foot blocking technique of which the Indian batsmen are masters. Now, they will be forced to play every ball on merit. That needs the re-adjustment of technique and they need to un-learn and re-learn pretty quickly.
This 'artificial turf' moment is the real reason why Indian cricketers and BBCI has been resistant to use the hotspot for LBWs. Only after the present crop of veterans including Tendulkar, Dravid and Laxman retire, we will know if the Raina's, Kohli's and Sharma's have it in them to adjust and adapt. That is where the future of Indian cricket lies and not in the present fiasco, whatever the cause for that maybe.
Pradeep Kabra
Thursday, 4 August 2011
Re: China crashes into a middle class revolt
Dear David,
Thanks for this article in today's FT.
Don't you think your article smacks of the western double-standards when dealing with China.
Especially your interpretation that after 40 people were killed in a rail accident in a country of 1.5 billion, will the banking system or the management of the economy to be safe is a stretch.
If you compare the same with India - which is of-course West's darling democracy - more than 40 people die virtually every day in rail accidents. But nobody bothers about it. I haven't seen any articles in any of the Western newspapers including FT when thousands die in major rail accidents in India every year. Why? Because India is a 'democracy' so the Western firms from News Corp to GM can easily do business in India.
But in China, the West and it's companies find it difficult to deal with the Communists who keep them out or in line. That is the real cause of grouse and not the accident.
Four months after the nuclear disaster, the contaminated food is still coming out on super-market shelves. How come there is no major articles on that in the Western press. If it was in China, you guys would have wrote zillion of articles criticising the communist party. I don't see how the democratically elected Japanese parliament is doing a better job than say what the communist party is doing in China managing 1.5 billion people.
Instead of becoming a mouth-piece of corporate interests or be overtly political, why don't we empathise with the tragedy and the affected people, suggest expertise from our experience and help to prevent such disasters in future and move-on instead of displaying such sycophancy?
Regards,
Pradeep Kabra
-----------------------------------
China crashes into a middle class revolt
By David Pilling in Financial Times - published on 04-Aug-2011
When a student asked Sigmund Freud about the meaning of his cigar-smoking habit, the Austrian psychoanalyst is said to have replied: “Sometimes a cigar is just a cigar.” By the same token, sometimes a train crash is just a train crash. But the recent high-speed rail accident in China is not one of those.
For many Chinese, the crash and its subsequent mishandling – including what looked to some like an attempt to bury the evidence – have been a revelation. An outpouring of anger has exposed a profound cynicism about how China is governed.
The death of at least 40 people on a high-speed rail line that had become a totem of China’s sleek progress towards wealth, modernity and national prestige is symbolic on many levels. If the trains are not safe, what of the banking system or the management of the economy itself? The tragedy has become a public relations disaster for a Communist party leadership dominated by engineers and technocrats. Just as Mao Zedong sought to create an industrial revolution by force of will in the Great Leap Forward, so China’s present leaders seem to think they can leapfrog technology through modernising zeal alone.
China’s high-speed rail network, built in less than a decade, is the world’s longest. Its trains were supposed to travel at speeds that would put Japanese technology to shame. Instead, the crash has exposed hubris, incompetence and corruption in a single, tragic crunching of metal. Perhaps not since Tiananmen Square more than 20 years ago has the Communist party looked so naked in the face of public contempt.
Certainly, previous scandals have exposed the rotten governance lurking beneath economic success. In the past few years alone, Chinese people have seen their children crushed by poorly constructed schools and poisoned with tainted milk. Both tragedies resulted from corruption and lack of regulatory control that the state subsequently sought to cover up by suppressing press stories and imprisoning the parents of affected children. The train crash is different in at least two respects. First, high-speed rail was explicitly a national project. The leadership took great pride in China’s ability to “digest” and “improve on” foreign technology. Officials had already laid out ambitious plans to sell the Chinese system to Malaysia, Brazil, the UK and the US.
The national endorsement has made it difficult to pin the problems on local officials. Even before the fatal crash, the government sacked the rail minister on suspicion of corruption. A subsequent decision to lower the maximum speed from 350km per hour to 300km was a tacit admission of dangerous technological over-reach. We don’t yet know the reason for the crash. But pushing the system beyond its technical capacity and cutting corners to free up slush money are plausible factors.
Second, many of the crash victims must have come from China’s new wealthy elites given the, much-criticised, high price of tickets. When school buildings collapsed in Sichuan in the 2008 earthquake, the victims tended to be the children of poorer families. Melamine-tainted baby formula affected a broader cross-section of people. But wealthy urbanites would have had the knowledge and money to buy foreign formula if they chose. That made it slightly easier to quash the story, particularly in an Olympic year when the country was in celebratory mood – or else!
Partly because the victims of this tragedy are members of the new middle class, it has been impossible to keep a lid on the story. Users of Weibo, a Twitter-like microblogging site, have produced an outpouring of contemptuous comment. One posted photos of the rail minister’s fancy watch collection, an indication of his less than modest lifestyle. Weibo alone boasts 140m users, mostly from the urban middle class that the Communist party is supposed to have co-opted into its modernising project.
A middle class revolt is particularly dangerous for the Chinese leadership. It undermines a recent truism of Chinese analysis, sometimes referred to as the Beijing consensus. This contends, among other things, that people don’t worry too much about democracy, freedom of expression and free markets so long as they have a technocratic leadership capable of delivering economic progress.
The cult of GDPism appears no longer to hold. China grew at 10.3 per cent last year, and should clear at least 9 per cent this year. But while taxi drivers riot in Hangzhou over low wages, the revolt over the train crash has been over the more abstract concept of governance. China’s middle class wants a leadership that can contain corruption, ensure safety and not put pride above engineering principles. It wants, in the arresting words of a commentary in the People’s Daily – of all places – economic growth that is not “smeared in blood”.
The anger appears to breathe life into an old argument, all but abandoned in the face of China’s relentless economic progress, that a rising middle class will demand more accountability of its leaders. If that turns out to be true, then, alongside the people who tragically lost their lives on the tracks outside Wenzhou, the Beijing consensus itself may also have perished.
david.pilling@ft.com
Thanks for this article in today's FT.
Don't you think your article smacks of the western double-standards when dealing with China.
Especially your interpretation that after 40 people were killed in a rail accident in a country of 1.5 billion, will the banking system or the management of the economy to be safe is a stretch.
If you compare the same with India - which is of-course West's darling democracy - more than 40 people die virtually every day in rail accidents. But nobody bothers about it. I haven't seen any articles in any of the Western newspapers including FT when thousands die in major rail accidents in India every year. Why? Because India is a 'democracy' so the Western firms from News Corp to GM can easily do business in India.
But in China, the West and it's companies find it difficult to deal with the Communists who keep them out or in line. That is the real cause of grouse and not the accident.
Four months after the nuclear disaster, the contaminated food is still coming out on super-market shelves. How come there is no major articles on that in the Western press. If it was in China, you guys would have wrote zillion of articles criticising the communist party. I don't see how the democratically elected Japanese parliament is doing a better job than say what the communist party is doing in China managing 1.5 billion people.
Instead of becoming a mouth-piece of corporate interests or be overtly political, why don't we empathise with the tragedy and the affected people, suggest expertise from our experience and help to prevent such disasters in future and move-on instead of displaying such sycophancy?
Regards,
Pradeep Kabra
-----------------------------------
China crashes into a middle class revolt
By David Pilling in Financial Times - published on 04-Aug-2011
When a student asked Sigmund Freud about the meaning of his cigar-smoking habit, the Austrian psychoanalyst is said to have replied: “Sometimes a cigar is just a cigar.” By the same token, sometimes a train crash is just a train crash. But the recent high-speed rail accident in China is not one of those.
For many Chinese, the crash and its subsequent mishandling – including what looked to some like an attempt to bury the evidence – have been a revelation. An outpouring of anger has exposed a profound cynicism about how China is governed.
The death of at least 40 people on a high-speed rail line that had become a totem of China’s sleek progress towards wealth, modernity and national prestige is symbolic on many levels. If the trains are not safe, what of the banking system or the management of the economy itself? The tragedy has become a public relations disaster for a Communist party leadership dominated by engineers and technocrats. Just as Mao Zedong sought to create an industrial revolution by force of will in the Great Leap Forward, so China’s present leaders seem to think they can leapfrog technology through modernising zeal alone.
China’s high-speed rail network, built in less than a decade, is the world’s longest. Its trains were supposed to travel at speeds that would put Japanese technology to shame. Instead, the crash has exposed hubris, incompetence and corruption in a single, tragic crunching of metal. Perhaps not since Tiananmen Square more than 20 years ago has the Communist party looked so naked in the face of public contempt.
Certainly, previous scandals have exposed the rotten governance lurking beneath economic success. In the past few years alone, Chinese people have seen their children crushed by poorly constructed schools and poisoned with tainted milk. Both tragedies resulted from corruption and lack of regulatory control that the state subsequently sought to cover up by suppressing press stories and imprisoning the parents of affected children. The train crash is different in at least two respects. First, high-speed rail was explicitly a national project. The leadership took great pride in China’s ability to “digest” and “improve on” foreign technology. Officials had already laid out ambitious plans to sell the Chinese system to Malaysia, Brazil, the UK and the US.
The national endorsement has made it difficult to pin the problems on local officials. Even before the fatal crash, the government sacked the rail minister on suspicion of corruption. A subsequent decision to lower the maximum speed from 350km per hour to 300km was a tacit admission of dangerous technological over-reach. We don’t yet know the reason for the crash. But pushing the system beyond its technical capacity and cutting corners to free up slush money are plausible factors.
Second, many of the crash victims must have come from China’s new wealthy elites given the, much-criticised, high price of tickets. When school buildings collapsed in Sichuan in the 2008 earthquake, the victims tended to be the children of poorer families. Melamine-tainted baby formula affected a broader cross-section of people. But wealthy urbanites would have had the knowledge and money to buy foreign formula if they chose. That made it slightly easier to quash the story, particularly in an Olympic year when the country was in celebratory mood – or else!
Partly because the victims of this tragedy are members of the new middle class, it has been impossible to keep a lid on the story. Users of Weibo, a Twitter-like microblogging site, have produced an outpouring of contemptuous comment. One posted photos of the rail minister’s fancy watch collection, an indication of his less than modest lifestyle. Weibo alone boasts 140m users, mostly from the urban middle class that the Communist party is supposed to have co-opted into its modernising project.
A middle class revolt is particularly dangerous for the Chinese leadership. It undermines a recent truism of Chinese analysis, sometimes referred to as the Beijing consensus. This contends, among other things, that people don’t worry too much about democracy, freedom of expression and free markets so long as they have a technocratic leadership capable of delivering economic progress.
The cult of GDPism appears no longer to hold. China grew at 10.3 per cent last year, and should clear at least 9 per cent this year. But while taxi drivers riot in Hangzhou over low wages, the revolt over the train crash has been over the more abstract concept of governance. China’s middle class wants a leadership that can contain corruption, ensure safety and not put pride above engineering principles. It wants, in the arresting words of a commentary in the People’s Daily – of all places – economic growth that is not “smeared in blood”.
The anger appears to breathe life into an old argument, all but abandoned in the face of China’s relentless economic progress, that a rising middle class will demand more accountability of its leaders. If that turns out to be true, then, alongside the people who tragically lost their lives on the tracks outside Wenzhou, the Beijing consensus itself may also have perished.
david.pilling@ft.com
Tuesday, 26 July 2011
On America's Debt Crisis
It took a Genius like George Bush to achieve this in just 4 years.
When Bush came to power, US had surplus. Bush distributed all that money to rich Americans by means of Tax-Cuts and in his whimsical wars in Iraq and Afganisthan . Then the left over was handed to the bankers as TARP & QE 1,2 all ofcourse in the name of saving the economy from downturn.
Now the Republicans say not just NO to tax rises but insist on only reducing the expenses thereby hitting the poor only.
That's how rich become more rich at the cost of poor. American style.
Pradeep
When Bush came to power, US had surplus. Bush distributed all that money to rich Americans by means of Tax-Cuts and in his whimsical wars in Iraq and Afganisthan . Then the left over was handed to the bankers as TARP & QE 1,2 all ofcourse in the name of saving the economy from downturn.
Now the Republicans say not just NO to tax rises but insist on only reducing the expenses thereby hitting the poor only.
That's how rich become more rich at the cost of poor. American style.
Pradeep
Friday, 10 June 2011
Re: The Swami's Curse
Dear Sir,
Instead of applauding (like the majority of Indians do) the efforts made by Anna Hazare and Swami Ramdev Baba, your article smirks of prejudice.
Corruption is the biggest problem in India along with lack of infrastructure. While it has been proved repeatedly that the 'elected' parliamentarians are themselves corrupt and crooks (if you check out the stats, as of December 2008, 120 of India's 522 parliament members were facing criminal charges) how do you expect them to make honest rules and stick by them?
Regards,
Pradeep Kabra
-----------------------------------------
The swami's curse
A populist yogi ties the government up in knots
Jun 9th 2011 | DELHI | from the print edition of Economist
BUSHY-BEARDED swamis in women’s clothing. Gurus on hunger strike. Anti-corruption sit-ins. You might have thought the Indian government would know how to deal with these, thanks to long practice. Yet this week its bungling of a public protest turned a loony yogi who peddles quack cures for AIDS, cancer and corruption into a rallying figure for an angry public and opposition. The muttering about changing leaders is growing.
This week’s farce involved the saffron-clad Baba Ramdev, whose wealth, popularity on television and delusions of political grandeur led him to call a fast to the death in Delhi at the weekend. His chosen cause is the repatriation of billions of dollars supposedly stashed abroad by the rich and crooked. He says such cash would pay to wipe hunger from the land. Given public anger over food and fuel inflation, such a claim, however bogus, goes down well.
In more confident times Congress’s long-serving leaders would surely have brushed him aside. Pranab Mukherjee, the canny finance minister, has been atop politics for long enough to remember how a much more powerful guru, the “flying swami”, Indira Gandhi’s yoga teacher, adviser and rumoured lover, was swept into obscurity amid scandals over a personal arms factory and crooked aircraft deals.
Today, the government seems to have lost its touch. Beset by accusations of graft, it may soon have to eject a dodgy-looking coalition ally, a Tamil party thumped in a state election in May. Despite softer economic growth and falling investment, India’s rulers have dared launch no reforms or pass any laws of note this year.
Nor has it known how to tackle problems as they flare up. Instead of preventing the guru’s protest, or letting it take its course, the government tried to control it. First, ministers got the guru to give an empty promise that his gathering would be called off. Then, when he breezily broke that, as tens of thousands of supporters converged, they panicked and sent in stick-wielding police, who lobbed tear gas and attacked the sleeping camp on June 4th.
Beating sleeping anti-corruption protesters while television cameras roll is not the most sensible public-relations policy. Many demonstrators are in hospital and one has been paralysed. Nor does it say much for India’s democratic process, since Mr Ramdev had permission to stage an event (though not, the authorities say, for a mass protest). The saving grace was that the hairy-armed guru was arrested—and photographed—trying to escape while dressed in female attire. Unabashed, he said he would raise a force of 11,000 “so that next time we do not lose any battle”.
The gleeful opposition, the Bharatiya Janata Party, says the Congress party is showing all the leadership qualities of a “headless chicken”. That insult may be routine, but even senior Congress insiders privately voice dismay.
In April Manmohan Singh’s government caved in to another hunger-striker, Anna Hazare, who extracted a big concession, winning for his supporters a right to co-draft an anti-corruption bill. That annoyed parliamentarians and others who say elected politicians, not activists, should write laws. On June 8th Mr Hazare launched another protest in Delhi, while his supporters paraded with posters showing the prime minister, Manmohan Singh, as an incarnation of Ravana, a ten-headed demon of Hindu mythology, shouting “these devils are eating the country”.
Perhaps the summer heat is to blame. Perhaps tempers will ease when the monsoon reaches Delhi next month. Yet the bungling shows that Congress’s back-room managers face a long-term problem: finding able, youthful leaders they can promote. Mr Singh was dutifully wheeled out to defend the attack on Mr Ramdev’s camp, but few believe that he takes day-to-day political decisions. He is 78, and is a technocrat with little appetite for political scrapping. He relies on Mr Mukherjee, only slightly more sprightly at 75. Power is yet further divided, since Sonia Gandhi, Congress’s boss, influences political strategy behind the scenes.
For several years, the youthful leader-in-waiting, who was supposed to inject new blood into the tired party, has been Sonia’s son, the 41-year-old Rahul. Yet Mr Gandhi, who was arrested (and released) in May while trying to speak up for farmers who had had their land stolen, failed to make much of an impression in recent local elections and is facing the most sustained criticism of his brief career. Until Congress can provide better leadership, expect the opposition, social activists and nutty gurus to take advantage.
Instead of applauding (like the majority of Indians do) the efforts made by Anna Hazare and Swami Ramdev Baba, your article smirks of prejudice.
Corruption is the biggest problem in India along with lack of infrastructure. While it has been proved repeatedly that the 'elected' parliamentarians are themselves corrupt and crooks (if you check out the stats, as of December 2008, 120 of India's 522 parliament members were facing criminal charges) how do you expect them to make honest rules and stick by them?
Regards,
Pradeep Kabra
-----------------------------------------
The swami's curse
A populist yogi ties the government up in knots
Jun 9th 2011 | DELHI | from the print edition of Economist
BUSHY-BEARDED swamis in women’s clothing. Gurus on hunger strike. Anti-corruption sit-ins. You might have thought the Indian government would know how to deal with these, thanks to long practice. Yet this week its bungling of a public protest turned a loony yogi who peddles quack cures for AIDS, cancer and corruption into a rallying figure for an angry public and opposition. The muttering about changing leaders is growing.
This week’s farce involved the saffron-clad Baba Ramdev, whose wealth, popularity on television and delusions of political grandeur led him to call a fast to the death in Delhi at the weekend. His chosen cause is the repatriation of billions of dollars supposedly stashed abroad by the rich and crooked. He says such cash would pay to wipe hunger from the land. Given public anger over food and fuel inflation, such a claim, however bogus, goes down well.
In more confident times Congress’s long-serving leaders would surely have brushed him aside. Pranab Mukherjee, the canny finance minister, has been atop politics for long enough to remember how a much more powerful guru, the “flying swami”, Indira Gandhi’s yoga teacher, adviser and rumoured lover, was swept into obscurity amid scandals over a personal arms factory and crooked aircraft deals.
Today, the government seems to have lost its touch. Beset by accusations of graft, it may soon have to eject a dodgy-looking coalition ally, a Tamil party thumped in a state election in May. Despite softer economic growth and falling investment, India’s rulers have dared launch no reforms or pass any laws of note this year.
Nor has it known how to tackle problems as they flare up. Instead of preventing the guru’s protest, or letting it take its course, the government tried to control it. First, ministers got the guru to give an empty promise that his gathering would be called off. Then, when he breezily broke that, as tens of thousands of supporters converged, they panicked and sent in stick-wielding police, who lobbed tear gas and attacked the sleeping camp on June 4th.
Beating sleeping anti-corruption protesters while television cameras roll is not the most sensible public-relations policy. Many demonstrators are in hospital and one has been paralysed. Nor does it say much for India’s democratic process, since Mr Ramdev had permission to stage an event (though not, the authorities say, for a mass protest). The saving grace was that the hairy-armed guru was arrested—and photographed—trying to escape while dressed in female attire. Unabashed, he said he would raise a force of 11,000 “so that next time we do not lose any battle”.
The gleeful opposition, the Bharatiya Janata Party, says the Congress party is showing all the leadership qualities of a “headless chicken”. That insult may be routine, but even senior Congress insiders privately voice dismay.
In April Manmohan Singh’s government caved in to another hunger-striker, Anna Hazare, who extracted a big concession, winning for his supporters a right to co-draft an anti-corruption bill. That annoyed parliamentarians and others who say elected politicians, not activists, should write laws. On June 8th Mr Hazare launched another protest in Delhi, while his supporters paraded with posters showing the prime minister, Manmohan Singh, as an incarnation of Ravana, a ten-headed demon of Hindu mythology, shouting “these devils are eating the country”.
Perhaps the summer heat is to blame. Perhaps tempers will ease when the monsoon reaches Delhi next month. Yet the bungling shows that Congress’s back-room managers face a long-term problem: finding able, youthful leaders they can promote. Mr Singh was dutifully wheeled out to defend the attack on Mr Ramdev’s camp, but few believe that he takes day-to-day political decisions. He is 78, and is a technocrat with little appetite for political scrapping. He relies on Mr Mukherjee, only slightly more sprightly at 75. Power is yet further divided, since Sonia Gandhi, Congress’s boss, influences political strategy behind the scenes.
For several years, the youthful leader-in-waiting, who was supposed to inject new blood into the tired party, has been Sonia’s son, the 41-year-old Rahul. Yet Mr Gandhi, who was arrested (and released) in May while trying to speak up for farmers who had had their land stolen, failed to make much of an impression in recent local elections and is facing the most sustained criticism of his brief career. Until Congress can provide better leadership, expect the opposition, social activists and nutty gurus to take advantage.
Tuesday, 7 June 2011
Euro's Confidence or The Ass Trick?
The European Politicians 'mistakenly' view the strong Euro as a sign of confidence in it rather than weakness in the dollar.
This reminds me the story of 'The Ass Carrying the Statue'
The ass was being driven into town to the temple, with a great statue of a god on his back. Before too long, he noticed that everyone was taking off their hats and bowing as he passed by.
Now the foolish ass imagined that the people were bowing out of respect for himself and his head began to swell with conceit.
"Why should I be forced to carry on like this, if I am so important?" he thought to himself, and so he dug in his heels, let out a great bray and refused to take another step.
His driver at first could not make out what was making the ass behave in such a way, but when he realised what the problem was, he hit him very hard with his stick and yelled at him. "You vain and stupid ass, do you really think the people are worshipping you, a mere ass? Be on your way at once!"
Pradeep Kabra
This reminds me the story of 'The Ass Carrying the Statue'
The ass was being driven into town to the temple, with a great statue of a god on his back. Before too long, he noticed that everyone was taking off their hats and bowing as he passed by.
Now the foolish ass imagined that the people were bowing out of respect for himself and his head began to swell with conceit.
"Why should I be forced to carry on like this, if I am so important?" he thought to himself, and so he dug in his heels, let out a great bray and refused to take another step.
His driver at first could not make out what was making the ass behave in such a way, but when he realised what the problem was, he hit him very hard with his stick and yelled at him. "You vain and stupid ass, do you really think the people are worshipping you, a mere ass? Be on your way at once!"
Pradeep Kabra
Tuesday, 24 May 2011
Re: Things That Might Disappear In Our Lifetime.......
I agree with all the items in the list except item no. 5 & 7 viz., The Land Line Telephone & Television
The reasons are as follows:
5. The Land Line Telephone - This is one of the beast which will survive like dot-matrix printer or fax-machines. This is because, majority of the world's broadband is still delivered via the traditional land-lines. The alternative is very expensive fibre optic cable infrastructure. I believe only AT&T/Verizon has done that in America and that too at the cost of competition and long-term price rigging for consumers. Till the satellite technology is mastered - which is going to be very difficult because of the fight for band-width between multiple telecom/technology/house-appliances operators and the military (check-out the fight and the resultant corruption in India's bandwidth auction)
Hence even though nobody uses the Landline for the purpose of making phone calls, it will survive, just as dumb pipes to transmit broadband.
7. Television - The great thing about television is its adaptability. When television first came and started beaming serials and live telecasting sports events in our rooms, it was liberating. It was really revolutionary. But then it followed the American model of privatisation and ads which were supposed to be supplementary became central thereby destroying the whole experience. But in the countries like UK and most of Europe the television is still state sponsored. In UK for example, every family has to pay £145.50 /annum compulsory. That allows BBC to create ad-free wonderful television and survive against the ad-based commercial peers.
But the main reason why TV will survive is not because of this model which is not through-out the world (I wish Indian govt. had taken care of the old Doordarshan) but because of the technology. Due to good broadband facilities in most of the developed world and due to the concept of 'streaming' even in the developing world, TV can be transmitted to your PC and then watched as per your convenience on the TV set using the set-top boxes made by Apple/Google etc., This is already being done via BBC iPlayer in UK, Hulu Player in USA and more.
Regards,
Pradeep
------------------------------------------------------------------
Something to think about.
Whether these changes are good or bad depends in part on how we adapt to
them. But, ready or not, here they come
1. The Post Office. Get ready to imagine a world without the post office.
They are so deeply in financial trouble that there is probably no way to
sustain it long term. e-mail, Fed Ex, and UPS have just about wiped out the
minimum revenue needed to keep the post office alive. Most of your mail every
day is junk mail and bills.
2. The Cheque. Britain is already laying the groundwork to do away with
checks by 2018. It costs the financial system billions of dollars a year to
process checks. Plastic cards and online transactions will lead to the
eventual demise of the check. This plays right into the death of the post
office. If you never paid your bills by mail and never received them by mail, the
post office would absolutely go out of business.
3. The Newspaper. The younger generation simply doesn't read the
newspaper. They certainly don't subscribe to a daily delivered print edition. That
may go the way of the milkman and the laundry man. As for reading the paper
online, get ready to pay for it. The rise in mobile Internet devices and
e-readers has caused all the newspaper and magazine publishers to form an
alliance. They have met with Apple, Amazon, and the major cell phone companies
to develop a model for paid subscription services.
4. The Book. You say you will never give up the physical book that you
hold in your hand and turn the literal pages. I said the same thing about
downloading music fromiTunes. I wanted my hard copy CD. But I quickly changed
my mind when I discovered that I could get albums for half the price without
ever leaving home to get the latest music. The same thing will happen with
books. You can browse a bookstore online and even read a preview chapter
before you buy. And the price is less than half that of a real book. And
think of the convenience! Once you start flicking your fingers on the screen
instead of the book, you find that you are lost in the story, can't wait to
see what happens next, and you forget that you're holding a gadget instead
of a book.
5. The Land Line Telephone. Unless you have a large family and make a lot
of local calls, you don't need it anymore. Most people keep it simply
because they've always had it. But you are paying double charges for that extra
service. All the cell phone companies will let you call customers using
the same cell provider for no charge against your minutes
6. Music. This is one of the saddest parts of the change story. The music
industry is dying a slow death. Not just because of illegal downloading.
It's the lack of innovative new music being given a chance to get to the
people who would like to hear it. Greed and corruption is the problem. The
record labels and the radio conglomerates are simply self-destructing. Over 40%
of the music purchased today is "catalog items," meaning traditional music
that the public is familiar with. Older established artists. This is also
true on the live concert circuit. To explore this fascinating and
disturbing topic further, check out the book, "Appetite for Self-Destruction" by
Steve Knopper, and the video documentary, "Before the Music Dies."
7. Television. Revenues to the networks are down dramatically. Not just
because of the economy. People are watching TV and movies streamed from their
computers. And they're playing games and doing lots of other things that
take up the time that used to be spent watching TV. Prime time shows have
degenerated down to lower than the lowest common denominator. Cable rates are
skyrocketing and commercials run about every 4 minutes and 30 seconds. I
say good riddance to most of it. It's time for the cable companies to be put
out of our misery. Let the people choose what they want to watch online and
through Netflix.
8. "Things" That You Own. Many of the very possessions that we used to own
are still in our lives, but we may not actually own them in the future..
They may simply reside in "the cloud." Today your computer has a hard drive
and you store your pictures, music, movies, and documents. Your software is
on a CD or DVD, and you can always re-install it if need be. But all of
that is changing. Apple, Microsoft, and Google are all finishing up their
latest "cloud services." That means that when you turn on a computer, the
Internet will be built into the operating system. So, Windows, Google, and the
Mac OS will be tied straight into the Internet. If you click an icon, it
will open something in the Internet cloud.. If you save something, it will be
saved to the cloud. And you may pay a monthly subscription fee to the cloud
provider. In this virtual world, you can access your music or your books,
or your whatever from any laptop or handheld device. That's the good news.
But, will you actually own any of this "stuff" or will it all be able to
disappear at any moment in a big "Poof?" Will most of the things in our lives
be disposable and whimsical? It makes you want to run to the closet and
pull out that photo album, grab a book from the shelf, or open up a CD case
and pull out the insert.
9. Privacy. If there ever was a concept that we can look back on
nostalgically, it would be privacy. That's gone. It's been gone for a long time
anyway. There are cameras on the street, in most of the buildings, and even
built into your computer and cell phone. But you can be sure that 24/7, "They"
know who you are and where you are, right down to the GPS coordinates, and
the Google Street View. If you buy something, your habit is put into a
zillion profiles, and your ads will change to reflect those habits.. And
"They" will try to get you to buy something else. Again and again.
All we will have that can't be changed are Memories.!!!!
The reasons are as follows:
5. The Land Line Telephone - This is one of the beast which will survive like dot-matrix printer or fax-machines. This is because, majority of the world's broadband is still delivered via the traditional land-lines. The alternative is very expensive fibre optic cable infrastructure. I believe only AT&T/Verizon has done that in America and that too at the cost of competition and long-term price rigging for consumers. Till the satellite technology is mastered - which is going to be very difficult because of the fight for band-width between multiple telecom/technology/house-appliances operators and the military (check-out the fight and the resultant corruption in India's bandwidth auction)
Hence even though nobody uses the Landline for the purpose of making phone calls, it will survive, just as dumb pipes to transmit broadband.
7. Television - The great thing about television is its adaptability. When television first came and started beaming serials and live telecasting sports events in our rooms, it was liberating. It was really revolutionary. But then it followed the American model of privatisation and ads which were supposed to be supplementary became central thereby destroying the whole experience. But in the countries like UK and most of Europe the television is still state sponsored. In UK for example, every family has to pay £145.50 /annum compulsory. That allows BBC to create ad-free wonderful television and survive against the ad-based commercial peers.
But the main reason why TV will survive is not because of this model which is not through-out the world (I wish Indian govt. had taken care of the old Doordarshan) but because of the technology. Due to good broadband facilities in most of the developed world and due to the concept of 'streaming' even in the developing world, TV can be transmitted to your PC and then watched as per your convenience on the TV set using the set-top boxes made by Apple/Google etc., This is already being done via BBC iPlayer in UK, Hulu Player in USA and more.
Regards,
Pradeep
------------------------------------------------------------------
Something to think about.
Whether these changes are good or bad depends in part on how we adapt to
them. But, ready or not, here they come
1. The Post Office. Get ready to imagine a world without the post office.
They are so deeply in financial trouble that there is probably no way to
sustain it long term. e-mail, Fed Ex, and UPS have just about wiped out the
minimum revenue needed to keep the post office alive. Most of your mail every
day is junk mail and bills.
2. The Cheque. Britain is already laying the groundwork to do away with
checks by 2018. It costs the financial system billions of dollars a year to
process checks. Plastic cards and online transactions will lead to the
eventual demise of the check. This plays right into the death of the post
office. If you never paid your bills by mail and never received them by mail, the
post office would absolutely go out of business.
3. The Newspaper. The younger generation simply doesn't read the
newspaper. They certainly don't subscribe to a daily delivered print edition. That
may go the way of the milkman and the laundry man. As for reading the paper
online, get ready to pay for it. The rise in mobile Internet devices and
e-readers has caused all the newspaper and magazine publishers to form an
alliance. They have met with Apple, Amazon, and the major cell phone companies
to develop a model for paid subscription services.
4. The Book. You say you will never give up the physical book that you
hold in your hand and turn the literal pages. I said the same thing about
downloading music fromiTunes. I wanted my hard copy CD. But I quickly changed
my mind when I discovered that I could get albums for half the price without
ever leaving home to get the latest music. The same thing will happen with
books. You can browse a bookstore online and even read a preview chapter
before you buy. And the price is less than half that of a real book. And
think of the convenience! Once you start flicking your fingers on the screen
instead of the book, you find that you are lost in the story, can't wait to
see what happens next, and you forget that you're holding a gadget instead
of a book.
5. The Land Line Telephone. Unless you have a large family and make a lot
of local calls, you don't need it anymore. Most people keep it simply
because they've always had it. But you are paying double charges for that extra
service. All the cell phone companies will let you call customers using
the same cell provider for no charge against your minutes
6. Music. This is one of the saddest parts of the change story. The music
industry is dying a slow death. Not just because of illegal downloading.
It's the lack of innovative new music being given a chance to get to the
people who would like to hear it. Greed and corruption is the problem. The
record labels and the radio conglomerates are simply self-destructing. Over 40%
of the music purchased today is "catalog items," meaning traditional music
that the public is familiar with. Older established artists. This is also
true on the live concert circuit. To explore this fascinating and
disturbing topic further, check out the book, "Appetite for Self-Destruction" by
Steve Knopper, and the video documentary, "Before the Music Dies."
7. Television. Revenues to the networks are down dramatically. Not just
because of the economy. People are watching TV and movies streamed from their
computers. And they're playing games and doing lots of other things that
take up the time that used to be spent watching TV. Prime time shows have
degenerated down to lower than the lowest common denominator. Cable rates are
skyrocketing and commercials run about every 4 minutes and 30 seconds. I
say good riddance to most of it. It's time for the cable companies to be put
out of our misery. Let the people choose what they want to watch online and
through Netflix.
8. "Things" That You Own. Many of the very possessions that we used to own
are still in our lives, but we may not actually own them in the future..
They may simply reside in "the cloud." Today your computer has a hard drive
and you store your pictures, music, movies, and documents. Your software is
on a CD or DVD, and you can always re-install it if need be. But all of
that is changing. Apple, Microsoft, and Google are all finishing up their
latest "cloud services." That means that when you turn on a computer, the
Internet will be built into the operating system. So, Windows, Google, and the
Mac OS will be tied straight into the Internet. If you click an icon, it
will open something in the Internet cloud.. If you save something, it will be
saved to the cloud. And you may pay a monthly subscription fee to the cloud
provider. In this virtual world, you can access your music or your books,
or your whatever from any laptop or handheld device. That's the good news.
But, will you actually own any of this "stuff" or will it all be able to
disappear at any moment in a big "Poof?" Will most of the things in our lives
be disposable and whimsical? It makes you want to run to the closet and
pull out that photo album, grab a book from the shelf, or open up a CD case
and pull out the insert.
9. Privacy. If there ever was a concept that we can look back on
nostalgically, it would be privacy. That's gone. It's been gone for a long time
anyway. There are cameras on the street, in most of the buildings, and even
built into your computer and cell phone. But you can be sure that 24/7, "They"
know who you are and where you are, right down to the GPS coordinates, and
the Google Street View. If you buy something, your habit is put into a
zillion profiles, and your ads will change to reflect those habits.. And
"They" will try to get you to buy something else. Again and again.
All we will have that can't be changed are Memories.!!!!
Saturday, 21 May 2011
The 'mayavi' World of BrandZs!!!
The biggest mis-fortune of the liberalized media is the mis-management of conflict of interests. The best example is the recent publication of BrandZ Top 100.
http://www.millwardbrown.com/libraries/optimor_brandz_files/2011_brandz_top100_chart.sflb.ashx
Ofcourse, the methodology will be given, after-all we live in a democracy in the West. But once you start reading the fine-print including the people behind the publication, things start getting bit more fuzzy. In this specific case of BrandZ Top 100, it is published by a branch of WPP. Now, WPP will have huge interest in the concept of branding because they deal in advertising for the same brands. Isn't it a conflict of interest then. As usual regulators are either sleeping or have been made to look other way in the name of 'small government', 'pro-business policies' blah-blah-blah.
Coming to the specifics, after we cross the management jargon, the list is still mis-leading because of at-least three obvious reasons:
1. The inclusion of Utilities where competition and choice doesn't matter.
2. The Distribution Models which restricts competition and choice.
3. Non-inclusion of Aspirations for brand-story.
1. The inclusion of Utilities: What are Utilities doing in a branding exercise. The nature of utilities is distribution of 'scarce' resources. People have no choice but to go with them. The selection is based on availability and price, not on brand. Whether one buys fuel or go to bank for a loan, the same principal applies.
2. Restrictive distribution models: Again, the way the regulation works is people do not have a choice. Without choice there is no brand. For instance you go to a restaurant, you get either Pepsi or Coke. But not both. Similarly, you go to a petrol station and do we have a choice of fuel from 5 different companies? When the distribution models are masked under protectionism, does brand matters there?
3. Non-inclusion of Aspirations: Clearly, a brand is not just about buying the products but being associated with it not just in the present but in future. What about the aspirations to join the team behind the brands?
The simple questionnaire to define brand loyalty is: Are you happy with the product and will you come-back and recommend it to others?
Covering the methodology under gobbledock of company's earnings to brand-equity makes no sense. It just complicates the matter so that the marketing departments of these companies run to the same people for consultancy services.
The best way of doing a branding survey is:
a) restricting it to products where there is competition and people have choice (automotive/tablets/mobile phones are very good example(s), Banks/Oil Companies are bad examples)
b) capturing not just the present purchase but aspiration to buy the brand's products in future.
c) capturing the aspiration of not just buying the products but to join the team to create future great products.
The irony here is the top-ranked Apple. It's marketing and brand management is based on the company's strategies and not on the consultancy provided to WPP or it's marketing spend. For example, as soon as Steve Jobs declared on the Apple Keynote Presentation that Apple deals and leads in POST-PC products, they pulled the plug from the wonderfully creative 'get a mac' ads. That is how brands are created not just by increasing marketing spend.
To put is simple, the Brand is a representation of not just the products sold but also the culture of the company behind it, the creative team's skills, the aspiration of the students/prospective employees to join that team, the aspiration of the people to buy those products in future etc.,
If all this looks subjective, then of-course it is because the brands are felt by HEART not analyzed by minds and definitely not by company's earnings.
Pradeep Kabra
http://www.millwardbrown.com/libraries/optimor_brandz_files/2011_brandz_top100_chart.sflb.ashx
Ofcourse, the methodology will be given, after-all we live in a democracy in the West. But once you start reading the fine-print including the people behind the publication, things start getting bit more fuzzy. In this specific case of BrandZ Top 100, it is published by a branch of WPP. Now, WPP will have huge interest in the concept of branding because they deal in advertising for the same brands. Isn't it a conflict of interest then. As usual regulators are either sleeping or have been made to look other way in the name of 'small government', 'pro-business policies' blah-blah-blah.
Coming to the specifics, after we cross the management jargon, the list is still mis-leading because of at-least three obvious reasons:
1. The inclusion of Utilities where competition and choice doesn't matter.
2. The Distribution Models which restricts competition and choice.
3. Non-inclusion of Aspirations for brand-story.
1. The inclusion of Utilities: What are Utilities doing in a branding exercise. The nature of utilities is distribution of 'scarce' resources. People have no choice but to go with them. The selection is based on availability and price, not on brand. Whether one buys fuel or go to bank for a loan, the same principal applies.
2. Restrictive distribution models: Again, the way the regulation works is people do not have a choice. Without choice there is no brand. For instance you go to a restaurant, you get either Pepsi or Coke. But not both. Similarly, you go to a petrol station and do we have a choice of fuel from 5 different companies? When the distribution models are masked under protectionism, does brand matters there?
3. Non-inclusion of Aspirations: Clearly, a brand is not just about buying the products but being associated with it not just in the present but in future. What about the aspirations to join the team behind the brands?
The simple questionnaire to define brand loyalty is: Are you happy with the product and will you come-back and recommend it to others?
Covering the methodology under gobbledock of company's earnings to brand-equity makes no sense. It just complicates the matter so that the marketing departments of these companies run to the same people for consultancy services.
The best way of doing a branding survey is:
a) restricting it to products where there is competition and people have choice (automotive/tablets/mobile phones are very good example(s), Banks/Oil Companies are bad examples)
b) capturing not just the present purchase but aspiration to buy the brand's products in future.
c) capturing the aspiration of not just buying the products but to join the team to create future great products.
The irony here is the top-ranked Apple. It's marketing and brand management is based on the company's strategies and not on the consultancy provided to WPP or it's marketing spend. For example, as soon as Steve Jobs declared on the Apple Keynote Presentation that Apple deals and leads in POST-PC products, they pulled the plug from the wonderfully creative 'get a mac' ads. That is how brands are created not just by increasing marketing spend.
To put is simple, the Brand is a representation of not just the products sold but also the culture of the company behind it, the creative team's skills, the aspiration of the students/prospective employees to join that team, the aspiration of the people to buy those products in future etc.,
If all this looks subjective, then of-course it is because the brands are felt by HEART not analyzed by minds and definitely not by company's earnings.
Pradeep Kabra
Tuesday, 29 March 2011
Re: On airlines, snow excuses and gobbledygook
Dear Mr. Skapinker,
You mention that the report lays out 4 important lessons. The main lesson the report misses is this:
Public Utilities should never be privatised. The purpose of a utility in an economy is to serve its consumers only. It is diametrically opposite to the profit-only motive of the private debt-laden over-leveraged companies.
That is the biggest lesson. But unfortunately, in the Ango-American form of Capitalism, nothing can be done about it. After each disaster, Committees will be formed, Reports will be generated. But nothing will happen.
Regards,
Pradeep Kabra
------------------
Dear Pradeep,
Many thanks for your email. Of course, public utilities do have their problems too.
Regards,
Michael
------------------------------
On airlines, snow excuses and gobbledygook
By Michael Skapinker
Published in FT on 29-Mar-201
It took an hour for the spring sunshine to burn away the early morning fog in London on Thursday – too long to prevent a clutch of flight cancellations. There was a queue at the Swiss International Air Lines desk at London City airport and, in the absence of any apparent alternative, I joined it.
An airline employee called out some passengers’ names. I asked whether he could tell the rest of us what was happening. Apparently not. Eventually, one of his colleagues passed along the line, handing out a telephone number. “Can I still get to Basel today?” I asked the not-particularly-interested person who eventually answered my call. He could get me on to a Lufthansa flight via Frankfurt, but I would need to be at Heathrow in an hour.
It was 7.20am, the traffic was thick, so I sent apologies to the five companies I was meant to be seeing and headed to the office, wondering why no one had said: “Ladies and gentlemen, we will try to sort you out, but we are unlikely to get you away before early afternoon. If that doesn’t work for you, please accept our apologies. This is the number to call to arrange your refunds.”
Why don’t companies do the simple things? Because they do not think the problem is their fault (true, in this case), because their staff do not have enough training, information or authority, or because, as organisations, they lack “situational awareness”.
I picked up this bit of jargon in a 76-page report that appeared on the day I missed my meetings. The report came from an inquiry into a far more consequential weather-related snarl-up: the snow that almost shut Heathrow for two days in December, exposing Europe’s busiest airport to worldwide ridicule.
The inquiry was an internal one, headed by David Begg, a transport expert and non-executive director of BAA, Heathrow’s owner. But this was no snow job: BAA invited former airport chief executives from Montreal, Zurich and Chicago to join the inquiry, as well as Roy Williams, who was head of New Orleans International airport when hurricane Katrina struck in 2005.
The report provides an illuminating insight into BAA’s inadequacies, but the lessons extend beyond airports. The principal one is how vital “situational awareness” is. It means more than knowing what is happening. It means having the organisational ethos and systems to anticipate and deal with problems before they get out of hand, whether the threat comes from storms, product failures, consumer dissatisfaction or political upheaval. Companies that lack situational awareness often know a problem is coming, but appear unable to deal with it until it has damaged their business and reputation.
Heathrow knew bad weather was on the way; forecasters had said so. It also knew the snow would strike at the busiest time of the year – the weekend before Christmas. Indeed, with almost every seat sold, the airport was heading for the busiest weekend in its 64-year history.
Measured over that period, the storm was not remarkable – the kind of snow London can expect every five years. It did fall particularly fast, but it did so over the rest of Europe too. On the worst day, Sunday December 19, when Heathrow ran only 5 per cent of its flights, Paris Charles de Gaulle managed 44 per cent, Frankfurt 48 per cent and Amsterdam, recovering from a poor performance two days previously, reached 81 per cent.
There were almost no flights for the 9,500 passengers who spent the Saturday night at Heathrow without enough blankets and water. BAA tried to bring in more blankets, but the lorry could not get through. It was only two days later that Heathrow opened heated marquees with toilets and information screens.
The report lays out the lessons. The first is to have an ambitious, overarching goal: in Heathrow’s case, that it should never close, except for safety or other emergency reasons. Every organisation should have its equivalent. A second lesson is to have a crisis team from key parts of the organisation (including, in Heathrow’s case, passenger welfare). A third is that it have a roster of on-call trained staff.
Fourth, and most important, is to have a single, authoritative source of information to relay to staff and then to customers. The most common complaint in these situations is that no one seems to know what is happening. Heathrow had some barely believable communication barriers: for example, the “crisis support team” could not see the airfield and relied on telephone or handheld radio reports from snow-clearing squads.
Once an organisation has the right processes in place, it should be applying them every day, starting with the smallest problems. I am sure the Swiss airline people are used to snow. But having watched them at work last week, I am not sure I would like to be in their hands in a real crisis.
michael.skapinker@ft.com
---------------
You mention that the report lays out 4 important lessons. The main lesson the report misses is this:
Public Utilities should never be privatised. The purpose of a utility in an economy is to serve its consumers only. It is diametrically opposite to the profit-only motive of the private debt-laden over-leveraged companies.
That is the biggest lesson. But unfortunately, in the Ango-American form of Capitalism, nothing can be done about it. After each disaster, Committees will be formed, Reports will be generated. But nothing will happen.
Regards,
Pradeep Kabra
------------------
Dear Pradeep,
Many thanks for your email. Of course, public utilities do have their problems too.
Regards,
Michael
------------------------------
On airlines, snow excuses and gobbledygook
By Michael Skapinker
Published in FT on 29-Mar-201
It took an hour for the spring sunshine to burn away the early morning fog in London on Thursday – too long to prevent a clutch of flight cancellations. There was a queue at the Swiss International Air Lines desk at London City airport and, in the absence of any apparent alternative, I joined it.
An airline employee called out some passengers’ names. I asked whether he could tell the rest of us what was happening. Apparently not. Eventually, one of his colleagues passed along the line, handing out a telephone number. “Can I still get to Basel today?” I asked the not-particularly-interested person who eventually answered my call. He could get me on to a Lufthansa flight via Frankfurt, but I would need to be at Heathrow in an hour.
It was 7.20am, the traffic was thick, so I sent apologies to the five companies I was meant to be seeing and headed to the office, wondering why no one had said: “Ladies and gentlemen, we will try to sort you out, but we are unlikely to get you away before early afternoon. If that doesn’t work for you, please accept our apologies. This is the number to call to arrange your refunds.”
Why don’t companies do the simple things? Because they do not think the problem is their fault (true, in this case), because their staff do not have enough training, information or authority, or because, as organisations, they lack “situational awareness”.
I picked up this bit of jargon in a 76-page report that appeared on the day I missed my meetings. The report came from an inquiry into a far more consequential weather-related snarl-up: the snow that almost shut Heathrow for two days in December, exposing Europe’s busiest airport to worldwide ridicule.
The inquiry was an internal one, headed by David Begg, a transport expert and non-executive director of BAA, Heathrow’s owner. But this was no snow job: BAA invited former airport chief executives from Montreal, Zurich and Chicago to join the inquiry, as well as Roy Williams, who was head of New Orleans International airport when hurricane Katrina struck in 2005.
The report provides an illuminating insight into BAA’s inadequacies, but the lessons extend beyond airports. The principal one is how vital “situational awareness” is. It means more than knowing what is happening. It means having the organisational ethos and systems to anticipate and deal with problems before they get out of hand, whether the threat comes from storms, product failures, consumer dissatisfaction or political upheaval. Companies that lack situational awareness often know a problem is coming, but appear unable to deal with it until it has damaged their business and reputation.
Heathrow knew bad weather was on the way; forecasters had said so. It also knew the snow would strike at the busiest time of the year – the weekend before Christmas. Indeed, with almost every seat sold, the airport was heading for the busiest weekend in its 64-year history.
Measured over that period, the storm was not remarkable – the kind of snow London can expect every five years. It did fall particularly fast, but it did so over the rest of Europe too. On the worst day, Sunday December 19, when Heathrow ran only 5 per cent of its flights, Paris Charles de Gaulle managed 44 per cent, Frankfurt 48 per cent and Amsterdam, recovering from a poor performance two days previously, reached 81 per cent.
There were almost no flights for the 9,500 passengers who spent the Saturday night at Heathrow without enough blankets and water. BAA tried to bring in more blankets, but the lorry could not get through. It was only two days later that Heathrow opened heated marquees with toilets and information screens.
The report lays out the lessons. The first is to have an ambitious, overarching goal: in Heathrow’s case, that it should never close, except for safety or other emergency reasons. Every organisation should have its equivalent. A second lesson is to have a crisis team from key parts of the organisation (including, in Heathrow’s case, passenger welfare). A third is that it have a roster of on-call trained staff.
Fourth, and most important, is to have a single, authoritative source of information to relay to staff and then to customers. The most common complaint in these situations is that no one seems to know what is happening. Heathrow had some barely believable communication barriers: for example, the “crisis support team” could not see the airfield and relied on telephone or handheld radio reports from snow-clearing squads.
Once an organisation has the right processes in place, it should be applying them every day, starting with the smallest problems. I am sure the Swiss airline people are used to snow. But having watched them at work last week, I am not sure I would like to be in their hands in a real crisis.
michael.skapinker@ft.com
---------------
Monday, 31 January 2011
Re: Economic growth is not a race to the moon
Dear Clive,
Thanks for this article in today's FT.
The fact is, the secret of America's success in the post-war period was lack of competition more than productivity and other things you mention.
With Japan and Germany (including most of Western Europe) out of the way and Russia closed, America had the whole pie to itself. Hence the un-hindered growth and great life-style for the next 6 decades.
Now, most of the Europe is definitely back on track. But with the China and partly India joining the race, no matter how much productivity America tries to improve, it is not going to help.
The only solution for America is to adapt with lower expectations.
Regards,
Pradeep Kabra
----------------------------------------
Economic growth is not a race to the moon
By Clive Crook
Published: January 30 2011 21:30 | Last updated: January 30 2011 21:30
My first take on Barack Obama’s State of the Union address was to find it disappointing. The US president missed the perfect opportunity, I thought, to prepare the US for the fiscal squeeze that must come. Having read the speech more carefully, I feel I was unfair. I was too kind.
Not that I retract everything. The lack of fiscal specifics was the biggest failing. (Next month we shall see whether Mr Obama puts it right in his budget.) And this was partly balanced by some stirring stuff about unity and optimism and American exceptionalism and so forth. But I was too indulgent of the president’s main theme: jobs, innovation and competitiveness.
How could anyone object to that? In 1994, back when he cared more about demystifying economics than scourging conservatives, Paul Krugman wrote a wonderful essay on competitiveness for Foreign Affairs. He was rebutting – too mild a word – the then-prevailing Clintonian orthodoxy, as advanced by Robert Reich and others, which held that competitiveness was the key to prosperity. This myth has never gone out of fashion with business leaders. Mr Obama, in his turn, has now taken it up.
Mr Krugman’s point is not hard to grasp. The ultimate source of higher living standards is growth in productivity, and growth in US productivity has little to do with whether Japan, or China, or any other country is growing quickly or slowly. Admittedly, his own thinking has since evolved. Last week he wrote a column on competitiveness that did not even mention productivity. Never mind, he got it right the first time.
The metaphor of growth as a race with winners and losers – all that stuff in the speech about Sputnik moments, falling behind, winning the 21st century – is nonsense. Over the long haul, if US productivity rises, so will US living standards. Why should growth in China or India hold back US productivity? No reason at all.
Once conditioned to think “productivity” whenever a politician says “competitiveness”, you look at economic policy differently. Winning begins to seem overrated. What exactly do we win, you wonder? Being number one in worldwide production of solar panels would be nice, but how would that raise economy-wide productivity? The key to improving living standards lies not in winning the race to develop showcase technologies, but in accumulating capital, diffusing knowledge and accommodating the disruption that this entails.
Granted, this is a bit of a simplification. Skills tend to cluster. The literature on research and development suggests that social returns are higher than private returns, so the case for subsidising it is strong. The link between productivity and wages has weakened in the US in recent years, partly because health costs have driven a wedge between the two. All such caveats aside, productivity is still the key, and you do not raise it by putting men on the moon (even if you get pens that can write upside-down as a spin-off). Productivity is about doing boring things well.
Educate your workers. Build roads and bridges (high-speed trains, optional). Don’t punish savers. Don’t overregulate. Let good businesses flourish and bad ones fail. “Higher productivity” is another way of saying “lower costs” – so let companies strive to lower them. Welcome cheap imports: they raise real incomes.
What use is that, you might say, if the jobs all go? The jobs don’t all go. Unemployment is high in the US today because demand collapsed, not because the US is “uncompetitive”. Eventually, demand will revive and employment will recover.
Even in good times, foreign competition forces workers to find new jobs. If you are going to object to that, complain about labour-saving innovation as well. A successful economy is not one that avoids displacing workers, but one that speeds them back into good jobs.
Assisting this transition is a proper role for economic policy. In the end, though, the pay these jobs command will depend on physical and human capital – that is, on productivity.
Aside from the muddle over competitiveness, the president also seems confused about innovation and jobs. They rarely go together, at least in the first instance. The desire to cut costs, including labour costs, is why most innovation happens.
The president envisages a surge of investment and employment in clean energy. You can justify this on environmental and national security grounds; you can justify it as stimulus spending, too, which might boost aggregate employment. But clean energy is a disruptive technology: go to West Virginia and ask a miner. At full employment – or as part of a revenue-neutral package, which the president seems to have in mind – it would destroy as many jobs as it created.
The US is a remarkably rich country because it has a remarkably productive economy. Mainly, I credit its daunting work ethic, its appetite for economic dislocation and its post-1945 surge of investment in education.
The work ethic is unimpaired. By European standards, economic dislocation is still tolerated. But the US education system, despite the country’s pre-eminent universities, is failing. I don’t doubt that this is the biggest threat to future US living standards. The president mentioned it in his speech. That part, I loved.
clive.crook@gmail.com
Thanks for this article in today's FT.
The fact is, the secret of America's success in the post-war period was lack of competition more than productivity and other things you mention.
With Japan and Germany (including most of Western Europe) out of the way and Russia closed, America had the whole pie to itself. Hence the un-hindered growth and great life-style for the next 6 decades.
Now, most of the Europe is definitely back on track. But with the China and partly India joining the race, no matter how much productivity America tries to improve, it is not going to help.
The only solution for America is to adapt with lower expectations.
Regards,
Pradeep Kabra
----------------------------------------
Economic growth is not a race to the moon
By Clive Crook
Published: January 30 2011 21:30 | Last updated: January 30 2011 21:30
My first take on Barack Obama’s State of the Union address was to find it disappointing. The US president missed the perfect opportunity, I thought, to prepare the US for the fiscal squeeze that must come. Having read the speech more carefully, I feel I was unfair. I was too kind.
Not that I retract everything. The lack of fiscal specifics was the biggest failing. (Next month we shall see whether Mr Obama puts it right in his budget.) And this was partly balanced by some stirring stuff about unity and optimism and American exceptionalism and so forth. But I was too indulgent of the president’s main theme: jobs, innovation and competitiveness.
How could anyone object to that? In 1994, back when he cared more about demystifying economics than scourging conservatives, Paul Krugman wrote a wonderful essay on competitiveness for Foreign Affairs. He was rebutting – too mild a word – the then-prevailing Clintonian orthodoxy, as advanced by Robert Reich and others, which held that competitiveness was the key to prosperity. This myth has never gone out of fashion with business leaders. Mr Obama, in his turn, has now taken it up.
Mr Krugman’s point is not hard to grasp. The ultimate source of higher living standards is growth in productivity, and growth in US productivity has little to do with whether Japan, or China, or any other country is growing quickly or slowly. Admittedly, his own thinking has since evolved. Last week he wrote a column on competitiveness that did not even mention productivity. Never mind, he got it right the first time.
The metaphor of growth as a race with winners and losers – all that stuff in the speech about Sputnik moments, falling behind, winning the 21st century – is nonsense. Over the long haul, if US productivity rises, so will US living standards. Why should growth in China or India hold back US productivity? No reason at all.
Once conditioned to think “productivity” whenever a politician says “competitiveness”, you look at economic policy differently. Winning begins to seem overrated. What exactly do we win, you wonder? Being number one in worldwide production of solar panels would be nice, but how would that raise economy-wide productivity? The key to improving living standards lies not in winning the race to develop showcase technologies, but in accumulating capital, diffusing knowledge and accommodating the disruption that this entails.
Granted, this is a bit of a simplification. Skills tend to cluster. The literature on research and development suggests that social returns are higher than private returns, so the case for subsidising it is strong. The link between productivity and wages has weakened in the US in recent years, partly because health costs have driven a wedge between the two. All such caveats aside, productivity is still the key, and you do not raise it by putting men on the moon (even if you get pens that can write upside-down as a spin-off). Productivity is about doing boring things well.
Educate your workers. Build roads and bridges (high-speed trains, optional). Don’t punish savers. Don’t overregulate. Let good businesses flourish and bad ones fail. “Higher productivity” is another way of saying “lower costs” – so let companies strive to lower them. Welcome cheap imports: they raise real incomes.
What use is that, you might say, if the jobs all go? The jobs don’t all go. Unemployment is high in the US today because demand collapsed, not because the US is “uncompetitive”. Eventually, demand will revive and employment will recover.
Even in good times, foreign competition forces workers to find new jobs. If you are going to object to that, complain about labour-saving innovation as well. A successful economy is not one that avoids displacing workers, but one that speeds them back into good jobs.
Assisting this transition is a proper role for economic policy. In the end, though, the pay these jobs command will depend on physical and human capital – that is, on productivity.
Aside from the muddle over competitiveness, the president also seems confused about innovation and jobs. They rarely go together, at least in the first instance. The desire to cut costs, including labour costs, is why most innovation happens.
The president envisages a surge of investment and employment in clean energy. You can justify this on environmental and national security grounds; you can justify it as stimulus spending, too, which might boost aggregate employment. But clean energy is a disruptive technology: go to West Virginia and ask a miner. At full employment – or as part of a revenue-neutral package, which the president seems to have in mind – it would destroy as many jobs as it created.
The US is a remarkably rich country because it has a remarkably productive economy. Mainly, I credit its daunting work ethic, its appetite for economic dislocation and its post-1945 surge of investment in education.
The work ethic is unimpaired. By European standards, economic dislocation is still tolerated. But the US education system, despite the country’s pre-eminent universities, is failing. I don’t doubt that this is the biggest threat to future US living standards. The president mentioned it in his speech. That part, I loved.
clive.crook@gmail.com
Thursday, 23 December 2010
Economic Solution is a must. Political Solution can only be a start...
This is an insightful and practical article from Mr. Hastings.
But it would have been nice to add another element apart from political strategy i.e., financial independence or economic base for Afganistan. No economy can survive only on politics nor can any conflict be resolved with just political reconciliation.
With just poppy as a source of revenue, it is very difficult to move Afganistan away from it dependency which leads to crime and terrorism - which is very well exploited by the Taliban & ISI aka Pakistan.
Building infrastructure helps, but an economy needs to have a central core.
I don't know what that can be for Afgans.
Regards,
Pradeep Kabra
------------------------------------
Heroism is no substitute for an Afghan strategy
By Max Hastings
Published: in Financial Times on December 20 2010
President Barack Obama’s year-end review of the Afghan war asserted cautiously that General David Petraeus’s operations are going quite well so far, which caused cynics to say that this is a 20-storey building, and we still have 10 to fall. All parties to the conflict save the Taliban perceive themselves as prisoners of an unhappy predicament. The only issue is whether some outcome can be contrived which is “just good enough”, to borrow one of the military’s favourite clichés.
Both the US and British armies enthuse about progress made in Helmand and Kandahar – markets flourishing, new schools opened, civil aid projects completed, and the Highway 1 main arterial road relatively secure. Special forces’ night raids on local Taliban leaderships have achieved impressive successes. An insider often sceptical about military operations applauds the SAS, especially, as “best of British”.
The phrase most popular among commanders is “bottom up”: having almost abandoned the attempt to empower President Hamid Karzai’s government, they are now focused upon building local institutions in spite of Kabul.
Where General Stanley McChrystal enjoyed an amicable, even close relationship with Mr Karzai, his successor Gen Petraeus has almost none. He regards the president with contempt, and is bent upon sorting out the country without much help from its leader, a doubtful proposition. Gen Petraeus’s efforts are focused upon showing sufficient progress by summer to persuade Mr Obama and the American people to stay the distance, to accept a token summer troop cut in place of beginning a wholesale withdrawal.
The towering irony about Afghanistan is that almost everyone who knows the region perceives its problems as political, and thus requiring political remedies. But, because western diplomacy seems paralysed, soldiers are left to find all the solutions.
Admiral Mike Mullen, chairman of the joint chiefs of staff, said in March this year: “US foreign policy is still dominated by the military, too dependent upon the generals and admirals who lead our overseas commands. It is one thing to be able and willing to serve as emergency responders: quite another to always have to be the fire chief.”
This seems a profound and important observation. Some of the west’s finest soldiers are serving in Afghanistan; but whatever new-age gloss is put upon their role, their professional business is to fight, which must skew their vision. I have always worried that the British army’s attitude to the conflict is distorted first by its admirable “can-do” spirit, which has prompted persistent unfounded optimism; and second, by a desperate desire to be seen to win a campaign, to escape a humiliating retreat to Britain, where new cuts threaten the regiments as soon as they are no longer engaged.
However enthusiastically armies profess commitment to winning hearts and minds, finding “kinetic solutions” – killing people – is what they are chiefly structured to do. The Americans and British are doing their utmost to defeat the Taliban, and achieving considerable tactical success in limited areas. But it seems implausible this will suffice to resolve the underlying problems. An officer wrote to me recently: “There is a sense of momentum that we never had in Helmand and Kandahar this time a year ago, and if only the Afghan government would step up to the plate, we might prevail.”
But his conditional is the part that matters, and is unlikely to be fulfilled. Almost everything in Afghanistan is about tribal relationships, sands shifting constantly as Alikozai elders think themselves denied patronage conceded to Ghilzai, or different branches of the Alikozai vie for cash and favours. Yet many soldiers pay insufficient heed to this issue, and it is almost impossible to master tribal complexities in a limited tour of duty.
The CIA has a vast Afghan station of some 800 officers. Electronically gathered intelligence is good, but political intelligence remains weak. The US government appears baffled about what to do with Pakistan. Of course it would be admirable if the border could be closed to insurgents and the country’s Inter-Services Intelligence (ISI) abandoned its traditional double game, aiding the Taliban.
But there seems no realistic prospect this is going to happen, that the west can either bludgeon Islamabad into compliance or exercise short-term leverage on Pakistan’s tottering institutions. US drone attacks are killing a steady stream of Taliban and al-Qaeda leaders in their Pakistani sanctuaries, but this is an expedient rather than a policy.
Many thoughtful westerners believe it is impossible to achieve regional progress without defusing the Kashmiri confrontation, the cause of so much mutual hatred between India and Pakistan, but there seems little will on either side to do this. Delhi regards itself as having legitimate strategic interests in Afghanistan, which under Taliban rule became a base for many terrorist incursions into India. This, in turn, feeds Pakistan’s paranoia.
The new road built with $136m of Indian aid money from the Iranian border to the Afghan heartland will enable India to ship goods by sea to Afghanistan, strengthening an important trading relationship while weakening Pakistan’s. When it is suggested to Delhi that its activism in Afghanistan is mischievous in its consequences if not intent, Indians respond that they have vital security interests that will have to be protected long after the west has folded its tents and gone home. Meanwhile, Iranian meddling in Afghanistan is becoming more noticeable and injurious to western interests.
These are among the important issues that soldiers cannot resolve, but which the political leaderships of America and its allies seem incapable of addressing. Of course military operations form a critical element in stabilisation, but I suggest that for too long soldiers have been left to do as they think best, because the politicians are baffled.
Hew Strachan, Chichele professor of the study of war at Oxford university, wrote recently that there has been a strategic default both in Iraq and Afghanistan: “The result has often been war shaped by platoon and company commanders, a series of ill-considered tactical actions where killing and casualties define success.”
Western commanders are today enthusiastic about progress in training Afghan soldiers and policemen. Yet almost all army recruits are drawn from the north of the country, and are seen as foreigners in the Pashtun south. Despite annual expenditures of $12.6bn on the security forces, desertions are still running at 18 per cent, which means recruiting an additional 25,000 men a year merely to maintain strength.
The most likely course for Afghanistan in 2011 is that the military will continue to proclaim progress; and that Mr Obama will accept a token summer troop reduction, because he is in thrall to Gen Petraeus, the most celebrated American soldier of his time, and because he fears the political cost of quitting, allowing Republicans to brand him “the man who lost the Afghan war”. The struggle will go on, simply because a lot of people have vested interests in avoiding explicit recognition of failure.
But it seems to some of us impossible that real headway can be made with a broken-backed Kabul government and regional political stagnation. For all the talk about reconciliation with the Taliban, why should they deal when they think they are winning, and when they prosper in large areas where Nato does not? I defer to no one in my respect for soldiers, but nobody should fool themselves that the Afghan war can have a happy ending as long as the military are left to run it on their own.
The writer is an FT contributing editor
But it would have been nice to add another element apart from political strategy i.e., financial independence or economic base for Afganistan. No economy can survive only on politics nor can any conflict be resolved with just political reconciliation.
With just poppy as a source of revenue, it is very difficult to move Afganistan away from it dependency which leads to crime and terrorism - which is very well exploited by the Taliban & ISI aka Pakistan.
Building infrastructure helps, but an economy needs to have a central core.
I don't know what that can be for Afgans.
Regards,
Pradeep Kabra
------------------------------------
Heroism is no substitute for an Afghan strategy
By Max Hastings
Published: in Financial Times on December 20 2010
President Barack Obama’s year-end review of the Afghan war asserted cautiously that General David Petraeus’s operations are going quite well so far, which caused cynics to say that this is a 20-storey building, and we still have 10 to fall. All parties to the conflict save the Taliban perceive themselves as prisoners of an unhappy predicament. The only issue is whether some outcome can be contrived which is “just good enough”, to borrow one of the military’s favourite clichés.
Both the US and British armies enthuse about progress made in Helmand and Kandahar – markets flourishing, new schools opened, civil aid projects completed, and the Highway 1 main arterial road relatively secure. Special forces’ night raids on local Taliban leaderships have achieved impressive successes. An insider often sceptical about military operations applauds the SAS, especially, as “best of British”.
The phrase most popular among commanders is “bottom up”: having almost abandoned the attempt to empower President Hamid Karzai’s government, they are now focused upon building local institutions in spite of Kabul.
Where General Stanley McChrystal enjoyed an amicable, even close relationship with Mr Karzai, his successor Gen Petraeus has almost none. He regards the president with contempt, and is bent upon sorting out the country without much help from its leader, a doubtful proposition. Gen Petraeus’s efforts are focused upon showing sufficient progress by summer to persuade Mr Obama and the American people to stay the distance, to accept a token summer troop cut in place of beginning a wholesale withdrawal.
The towering irony about Afghanistan is that almost everyone who knows the region perceives its problems as political, and thus requiring political remedies. But, because western diplomacy seems paralysed, soldiers are left to find all the solutions.
Admiral Mike Mullen, chairman of the joint chiefs of staff, said in March this year: “US foreign policy is still dominated by the military, too dependent upon the generals and admirals who lead our overseas commands. It is one thing to be able and willing to serve as emergency responders: quite another to always have to be the fire chief.”
This seems a profound and important observation. Some of the west’s finest soldiers are serving in Afghanistan; but whatever new-age gloss is put upon their role, their professional business is to fight, which must skew their vision. I have always worried that the British army’s attitude to the conflict is distorted first by its admirable “can-do” spirit, which has prompted persistent unfounded optimism; and second, by a desperate desire to be seen to win a campaign, to escape a humiliating retreat to Britain, where new cuts threaten the regiments as soon as they are no longer engaged.
However enthusiastically armies profess commitment to winning hearts and minds, finding “kinetic solutions” – killing people – is what they are chiefly structured to do. The Americans and British are doing their utmost to defeat the Taliban, and achieving considerable tactical success in limited areas. But it seems implausible this will suffice to resolve the underlying problems. An officer wrote to me recently: “There is a sense of momentum that we never had in Helmand and Kandahar this time a year ago, and if only the Afghan government would step up to the plate, we might prevail.”
But his conditional is the part that matters, and is unlikely to be fulfilled. Almost everything in Afghanistan is about tribal relationships, sands shifting constantly as Alikozai elders think themselves denied patronage conceded to Ghilzai, or different branches of the Alikozai vie for cash and favours. Yet many soldiers pay insufficient heed to this issue, and it is almost impossible to master tribal complexities in a limited tour of duty.
The CIA has a vast Afghan station of some 800 officers. Electronically gathered intelligence is good, but political intelligence remains weak. The US government appears baffled about what to do with Pakistan. Of course it would be admirable if the border could be closed to insurgents and the country’s Inter-Services Intelligence (ISI) abandoned its traditional double game, aiding the Taliban.
But there seems no realistic prospect this is going to happen, that the west can either bludgeon Islamabad into compliance or exercise short-term leverage on Pakistan’s tottering institutions. US drone attacks are killing a steady stream of Taliban and al-Qaeda leaders in their Pakistani sanctuaries, but this is an expedient rather than a policy.
Many thoughtful westerners believe it is impossible to achieve regional progress without defusing the Kashmiri confrontation, the cause of so much mutual hatred between India and Pakistan, but there seems little will on either side to do this. Delhi regards itself as having legitimate strategic interests in Afghanistan, which under Taliban rule became a base for many terrorist incursions into India. This, in turn, feeds Pakistan’s paranoia.
The new road built with $136m of Indian aid money from the Iranian border to the Afghan heartland will enable India to ship goods by sea to Afghanistan, strengthening an important trading relationship while weakening Pakistan’s. When it is suggested to Delhi that its activism in Afghanistan is mischievous in its consequences if not intent, Indians respond that they have vital security interests that will have to be protected long after the west has folded its tents and gone home. Meanwhile, Iranian meddling in Afghanistan is becoming more noticeable and injurious to western interests.
These are among the important issues that soldiers cannot resolve, but which the political leaderships of America and its allies seem incapable of addressing. Of course military operations form a critical element in stabilisation, but I suggest that for too long soldiers have been left to do as they think best, because the politicians are baffled.
Hew Strachan, Chichele professor of the study of war at Oxford university, wrote recently that there has been a strategic default both in Iraq and Afghanistan: “The result has often been war shaped by platoon and company commanders, a series of ill-considered tactical actions where killing and casualties define success.”
Western commanders are today enthusiastic about progress in training Afghan soldiers and policemen. Yet almost all army recruits are drawn from the north of the country, and are seen as foreigners in the Pashtun south. Despite annual expenditures of $12.6bn on the security forces, desertions are still running at 18 per cent, which means recruiting an additional 25,000 men a year merely to maintain strength.
The most likely course for Afghanistan in 2011 is that the military will continue to proclaim progress; and that Mr Obama will accept a token summer troop reduction, because he is in thrall to Gen Petraeus, the most celebrated American soldier of his time, and because he fears the political cost of quitting, allowing Republicans to brand him “the man who lost the Afghan war”. The struggle will go on, simply because a lot of people have vested interests in avoiding explicit recognition of failure.
But it seems to some of us impossible that real headway can be made with a broken-backed Kabul government and regional political stagnation. For all the talk about reconciliation with the Taliban, why should they deal when they think they are winning, and when they prosper in large areas where Nato does not? I defer to no one in my respect for soldiers, but nobody should fool themselves that the Afghan war can have a happy ending as long as the military are left to run it on their own.
The writer is an FT contributing editor
Thursday, 16 December 2010
Re: Europe cannot default its way back to health
The real problem here is the nature of democracy in US and UK and to a certain extent in the Europe. Since the democracy is run without centralised funding aka democracy tax, elections are funded by big business including banks. So, even though people think there is universal suffrage, the real pay-masters i.e., political donors control the politicians.
Just look at Ireland. Even an illiterate person would make bond-holders take hair-cuts. Instead, Brian&Brian have 'mortgaged' not just this generation of tax-payers income but also future generations.
Another example, when AIG was going down, the Fed Reserve under honorary Hank 'GOLDMAN' Paulson made sure that tax-payers booty was distributed to Goldman Sachs at 100% against their CDS's.
The same happened with the bond-holders of Northern Rock.
One can go on and on on this with examples across the 'democratic' world.
How can one justify this kind of day-light robbery? The only answer is, we live in a SHAM DEMOCRACY. The politicians are just the front-end. The real control lies with bankers and corporate honchos.
Pradeep Kabra
------------------------------------
Europe cannot default its way back to health
By Lorenzo Bini Smaghi
Published: December 16 2010 20:59 in Financial Times
Among the many things we have learnt from this crisis is that governments and financial markets find it difficult to understand each other. Governments cannot grasp why the markets lose confidence in the state of public finances so quickly and regain it so slowly, after a long period of fiscal consolidation. The markets, for their part, are mystified by the failure of governments to take simple and timely steps to sort out the problems they face.
To tackle the problems of public finance, one of the measures that many believe should be adopted in some developed countries, particularly in Europe, is to default on or restructure public debt. Not a day passes without a suggestion of that kind being made by market participants, economists and commentators.
Such a measure is considered effective because it allows – according to those who propose it – a rapid reduction in the debt burden, making it more sustainable. It enables a country to avoid implementing an overly restrictive fiscal policy, which may further hamper growth and lead to social tensions. It spares taxpayers from having to pay for mistakes made by investors, especially foreign ones, who have lent too eagerly to the country. More generally – they argue – the default of a sovereign state allows the financial markets to function better and to incorporate the risk premium appropriately.
Given all these apparent advantages, you may wonder why countries currently experiencing financial distress, starting with the European ones, have so far refused to follow this advice. Why are democratically elected governments so reluctant to default on their debt and follow the path taken in the past decade by countries such as Ivory Coast, Pakistan, Nigeria, Ukraine, Venezuela and Zimbabwe?
One hypothesis is that our democracies are incapable of handling sovereign crises such as the one we currently face. An alternative view is that the recommendations made by economists are – at best – based on simplistic models that do not allow the complexity of the situation to be grasped and thus lead to mistaken conclusions. In other words, the cure could do more harm than the disease.
An oft-made assumption is that governments can renegotiate with their creditors the terms and conditions of their debt instruments without this having major repercussions on the rest of the economic and financial system. This assumption is largely based on the experience of developing countries with underdeveloped financial systems and mainly foreign creditors. What is generally not well understood is that, in advanced economies, public debt is the cornerstone of the financial system and an important component of the savings held by citizens.
As recent events have shown, the simple fear of a default or of a restructuring of public debt would endanger the soundness of the financial system, triggering capital flight. Without public support, the liabilities of the banking system would ultimately have to be restructured as well, as was done for example in Argentina with the corralito (freezing of bank accounts). This would lead to a further loss of confidence and make a run on the financial system more likely. Administrative control measures would have to be taken and restrictions imposed. All these actions would have a direct effect on the financial wealth of the country’s households and businesses, producing a collapse of aggregate demand. Taxpayers, instead of having a smaller burden of public debt to bear, would end up with an even heavier one.
Many commentators fail to realise that the main impact of a country’s default is not on foreign creditors, but on its own citizens, especially the most vulnerable ones. They would suffer the consequences most in terms of the value of their financial and real assets.
The economic and social impact of such an event is difficult to predict. The democratic foundations of a country could be seriously threatened. Attentive observers will not fail to notice that sovereign defaults tend to occur in countries where democracy has rather shallow roots.
Europeans have not forgotten the devastating effects that the expropriation of wealth, such as that carried out during the two world wars by way of inflation or defaults, may have on the economic and social fabric. There is awareness that, in the end, it may be less costly to tackle excessive public debt with the traditional remedies – that is, achieving an adequate level of primary surplus – rather than looking for quick fixes. There is also awareness that, without restoring economic growth, the debt burden cannot be reduced over time. This requires major structural reforms aimed at improving the functioning of the labour, capital and goods markets.
That is why, even if belatedly and reluctantly, governments and parliaments in Greece, Ireland and several other European countries have adopted tough recovery programmes and radical reforms. And that is why the other European countries are supporting them. They know that the alternative is much worse for their citizens.
To understand what is happening in Europe, economics textbooks are useful but the history ones even more so.
The writer is a member of the Executive Board of the European Central Bank
Just look at Ireland. Even an illiterate person would make bond-holders take hair-cuts. Instead, Brian&Brian have 'mortgaged' not just this generation of tax-payers income but also future generations.
Another example, when AIG was going down, the Fed Reserve under honorary Hank 'GOLDMAN' Paulson made sure that tax-payers booty was distributed to Goldman Sachs at 100% against their CDS's.
The same happened with the bond-holders of Northern Rock.
One can go on and on on this with examples across the 'democratic' world.
How can one justify this kind of day-light robbery? The only answer is, we live in a SHAM DEMOCRACY. The politicians are just the front-end. The real control lies with bankers and corporate honchos.
Pradeep Kabra
------------------------------------
Europe cannot default its way back to health
By Lorenzo Bini Smaghi
Published: December 16 2010 20:59 in Financial Times
Among the many things we have learnt from this crisis is that governments and financial markets find it difficult to understand each other. Governments cannot grasp why the markets lose confidence in the state of public finances so quickly and regain it so slowly, after a long period of fiscal consolidation. The markets, for their part, are mystified by the failure of governments to take simple and timely steps to sort out the problems they face.
To tackle the problems of public finance, one of the measures that many believe should be adopted in some developed countries, particularly in Europe, is to default on or restructure public debt. Not a day passes without a suggestion of that kind being made by market participants, economists and commentators.
Such a measure is considered effective because it allows – according to those who propose it – a rapid reduction in the debt burden, making it more sustainable. It enables a country to avoid implementing an overly restrictive fiscal policy, which may further hamper growth and lead to social tensions. It spares taxpayers from having to pay for mistakes made by investors, especially foreign ones, who have lent too eagerly to the country. More generally – they argue – the default of a sovereign state allows the financial markets to function better and to incorporate the risk premium appropriately.
Given all these apparent advantages, you may wonder why countries currently experiencing financial distress, starting with the European ones, have so far refused to follow this advice. Why are democratically elected governments so reluctant to default on their debt and follow the path taken in the past decade by countries such as Ivory Coast, Pakistan, Nigeria, Ukraine, Venezuela and Zimbabwe?
One hypothesis is that our democracies are incapable of handling sovereign crises such as the one we currently face. An alternative view is that the recommendations made by economists are – at best – based on simplistic models that do not allow the complexity of the situation to be grasped and thus lead to mistaken conclusions. In other words, the cure could do more harm than the disease.
An oft-made assumption is that governments can renegotiate with their creditors the terms and conditions of their debt instruments without this having major repercussions on the rest of the economic and financial system. This assumption is largely based on the experience of developing countries with underdeveloped financial systems and mainly foreign creditors. What is generally not well understood is that, in advanced economies, public debt is the cornerstone of the financial system and an important component of the savings held by citizens.
As recent events have shown, the simple fear of a default or of a restructuring of public debt would endanger the soundness of the financial system, triggering capital flight. Without public support, the liabilities of the banking system would ultimately have to be restructured as well, as was done for example in Argentina with the corralito (freezing of bank accounts). This would lead to a further loss of confidence and make a run on the financial system more likely. Administrative control measures would have to be taken and restrictions imposed. All these actions would have a direct effect on the financial wealth of the country’s households and businesses, producing a collapse of aggregate demand. Taxpayers, instead of having a smaller burden of public debt to bear, would end up with an even heavier one.
Many commentators fail to realise that the main impact of a country’s default is not on foreign creditors, but on its own citizens, especially the most vulnerable ones. They would suffer the consequences most in terms of the value of their financial and real assets.
The economic and social impact of such an event is difficult to predict. The democratic foundations of a country could be seriously threatened. Attentive observers will not fail to notice that sovereign defaults tend to occur in countries where democracy has rather shallow roots.
Europeans have not forgotten the devastating effects that the expropriation of wealth, such as that carried out during the two world wars by way of inflation or defaults, may have on the economic and social fabric. There is awareness that, in the end, it may be less costly to tackle excessive public debt with the traditional remedies – that is, achieving an adequate level of primary surplus – rather than looking for quick fixes. There is also awareness that, without restoring economic growth, the debt burden cannot be reduced over time. This requires major structural reforms aimed at improving the functioning of the labour, capital and goods markets.
That is why, even if belatedly and reluctantly, governments and parliaments in Greece, Ireland and several other European countries have adopted tough recovery programmes and radical reforms. And that is why the other European countries are supporting them. They know that the alternative is much worse for their citizens.
To understand what is happening in Europe, economics textbooks are useful but the history ones even more so.
The writer is a member of the Executive Board of the European Central Bank
Wednesday, 15 December 2010
Hail Silvio...
Dear Sir,
In the business life section of financial times, Luke Johnson aptly quotes Plato "One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors". Further in the article he explains how different are the professions of business and politics which makes it all the more difficult for a businessman to join politics.
In this background, FT's Lex Column is the only newspaper in UK which objectively analyses Silvio Berlusconi's political life. I say objectively because the failures like political corruption, weak growth in South of Italy, too much tax-evasion and organised crime are mentioned. In the same breath, it mentions the positives like, "the country has held together, Italian banks avoided the worst of the credit bubble, growth of gross domestic product has remained slow but fairly steady, inflation has been moderate, the ratio of government debt to GDP has increased less than in most rich countries and Italians are still buying almost all of the government’s debt". Most of all, during tough times, he did not resorted to budget populism.
The fact of the matter is, Silvio Berlusconi has achieved politically more than Tony Blair or Maggie Thatcher in the UK and in business more success than Rupert Murdoch.
But the biggest fact missed by or mis-represented by the media in the UK is that he has been democratically elected not once or twice but thrice by the Italians, has been ruling Italy for almost 8 of last 11 years and has been the premier 3 times. That itself deserves some respect.
Hail FT, where even publications like Economist have failed not to mention the disappointing BBC and tabloid(ish) Murdoch stable.
Regards,
Pradeep Kabra
In the business life section of financial times, Luke Johnson aptly quotes Plato "One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors". Further in the article he explains how different are the professions of business and politics which makes it all the more difficult for a businessman to join politics.
In this background, FT's Lex Column is the only newspaper in UK which objectively analyses Silvio Berlusconi's political life. I say objectively because the failures like political corruption, weak growth in South of Italy, too much tax-evasion and organised crime are mentioned. In the same breath, it mentions the positives like, "the country has held together, Italian banks avoided the worst of the credit bubble, growth of gross domestic product has remained slow but fairly steady, inflation has been moderate, the ratio of government debt to GDP has increased less than in most rich countries and Italians are still buying almost all of the government’s debt". Most of all, during tough times, he did not resorted to budget populism.
The fact of the matter is, Silvio Berlusconi has achieved politically more than Tony Blair or Maggie Thatcher in the UK and in business more success than Rupert Murdoch.
But the biggest fact missed by or mis-represented by the media in the UK is that he has been democratically elected not once or twice but thrice by the Italians, has been ruling Italy for almost 8 of last 11 years and has been the premier 3 times. That itself deserves some respect.
Hail FT, where even publications like Economist have failed not to mention the disappointing BBC and tabloid(ish) Murdoch stable.
Regards,
Pradeep Kabra
Monday, 6 December 2010
Re: A Europe doomed by design flaws
Dear Mr. Münchau,
I'm sorry to say that a) there are loads of assumptions and inconsistencies in your article b) your proposed solution of backing Euro Bonds, is a one more stop-gap / ad-hoc arrangement rather than a long-term solution.
a) there are loads of assumptions and inconsistencies in your article:
Firstly, you assume a lot about the investors viz., a) if the Eurozone was such a noodle, did they not went to sleep before investing especially the 'smart' bond-holders who unlike equity holders can lose their capital as well and whose upside is very small compared to the 'unlimited' upside of the equity holders? b) You mention that "These are fairly normal investors who are pulling out..." - do you know the break-down of these investors? For instance, what is the percentage of hedge-funds investment on these bonds?
b) your proposed solution of backing Euro Bonds, is a one more stop-gap / ad-hoc arrangement rather than a long-term solution.
How can Euro Bonds concept work when fiscal management is divorced from monetary management? This is basics. Centralising the fiscal management without political franchise will never work. So, basically this is a political issue which will take time to resolve either way. The fault lies in the basic design of Euro where fiscal-political-monetary policies are controlled by different agencies with different masters.
Finally,
The fact of the matter is, in good times, nobody wanted to look at fundamentals before making investment decisions. Now in the bad times, everybody is using their leverage to cover their positions.
If Germany is talking about private investors taking hair-cuts, it is being prudent unlike the 'idiots' in Ireland who passed on the whole debt on to their own population (including un-born grand-children) and bailed out all the bond investors mostly from outside Ireland. What these bond-holders are doing by pulling out is just a negotiating stunt. Whoever blinks first will lose. In case of Ireland, we have seen what happens when you blink first. Obviously Germany is too strong to do that. So, to make the Germans blink use the break of Euro as a threat. I'm sure Germans are too mature and smart to fall for that trap even if you try to subterfuge it with a stupid idea like Euro Bonds.
Regards,
Pradeep Kabra
--------------------------------------------
A hopeless Europe, unable to cope
By Wolfgang Münchau
Published: in Financial Times on December 5 2010 18:54
Usually I stay clear of connotation-rich German words that have no real equivalent in other languages. Their purpose is to obfuscate. But there is one that describes the eurozone’s crisis management rather well. It is überfordert. The nearest English translation is “overwhelmed”, or “not on top of something”, but those are not quite the same. You can be overwhelmed one day, and on top the next. Überfordert is as hopeless as Dante’s hell. It has an intellectual and an emotional component. If you are it today, you are it tomorrow.
I am not saying that every policymaker in the eurozone is hopeless. There are a few exceptions. My point is that the system is überfordert, unable to cope. This inability has several dimensions. I have identified six.
The first, and most important, is a tendency to repeat the same mistakes. The biggest of these is the repeated attempt to address solvency problems through liquidity policies. It happened in October 2008 with bank guarantees. The European Central Bank’s never-ending liquidity support is another example. So is the Greek bail-out. And so is the European Financial Stability Facility, the €440bn ($588bn) bail-out fund. Set up in May as a mechanism to resolve financial crises, it became a cause of the Irish crisis in November. What triggered last week’s panic was the sudden realisation by investors that, with an interest rate of 6 per cent and an ongoing no-default guarantee to bank bondholders, Ireland is insolvent.
The second is a lack of political co-ordination. All the decisions taken have one thing in common: no one takes political ownership of the whole system. Everybody inside the system is optimising their corner. International investors, by contrast, are looking at the system as a whole and cannot make sense of the cacophony. Germany’s motivation in the debate on the European Stability Mechanism (ESM), the anti-crisis mechanism from 2013, was to safeguard its financial interest. That is legitimate, but the way it is done offers no solution feasible for the eurozone as a whole.
The third is a breakdown of communication. The EU has a tendency to hype whatever it agrees. The markets first react with euphoria to the announcement, then with disappointment once they have read the small print. When Germany raised the issue of a permanent anti-crisis mechanism, it gave few details. The markets were spooked. When news came out that Germany had climbed down over the question of automatic bondholder haircuts, the markets were euphoric. Details that have come out since are again more alarming. The way the ESM is constructed will make a debt default in the eurozone dramatically more probable. There is a good case to be made for limiting taxpayers’ liability. But the scope and the details must be conveyed much more clearly.
A fourth aspect is a tendency by governments to blame investors when something goes wrong, rather than solve the problem. The prevailing view in Paris and Berlin is that last week’s crisis was the work of nasty speculators. It is not the first time. Remember the ban on short-selling of equities? Or the “locust” debate about private equity a few years back? The point is that this time there is no George Soros-like speculator attacking the system. These are fairly normal investors who are pulling out, or regrouping. They have lost confidence in the eurozone’s crisis management.
Fifth is the tendency to blame each other. In the spring, the Germans had a go at the Greeks. Now the Spanish and the Irish blame the Germans. Readers of this column know that I have been a frequent critic of German policy, but I think it unjustified to blame Berlin for causing the current problems. The cause of the crisis in the European periphery was the bursting of a credit bubble, and that bubble was not the work of the German government. The blame game is not a constructive way out of this crisis.
Finally, a sixth aspect is the tendency to appeal to a deus ex machina when all else fails. That would be the European Central Bank. Last week, several European politicians beseeched the ECB to act as defender of last resort. Market commentators raised expectations that the existing securities market programme would be extended from a volume of close to €70bn to €1,000bn or even €2,000bn.
It did not happen. Or did it? It is hard to say. Jean-Claude Trichet, president of the ECB, said little, but the ECB nevertheless bought hundreds of millions of euros worth of Irish and Portuguese debt that day. Mr Trichet knows that he can prevent contagion but also that he cannot save the eurozone alone.
I do not want to play down the ECB’s role. Its liquidity policies prevented a calamity in August 2007, and later in the autumn of 2008. But it also delayed a resolution to the political crisis. Europe’s bank resolution policy is the ECB, and only the ECB. That is why this crisis is lasting so long.
The euro is currently on an unsustainable trajectory. The political choice is either to retreat into a corner, and hope for some miracle, or to agree a big political gesture, such as a common European bond. What I hear is that such a gesture will not happen, for a very large number of very small reasons. The system is genuinely überfordert.
munchau@eurointelligence.com
I'm sorry to say that a) there are loads of assumptions and inconsistencies in your article b) your proposed solution of backing Euro Bonds, is a one more stop-gap / ad-hoc arrangement rather than a long-term solution.
a) there are loads of assumptions and inconsistencies in your article:
Firstly, you assume a lot about the investors viz., a) if the Eurozone was such a noodle, did they not went to sleep before investing especially the 'smart' bond-holders who unlike equity holders can lose their capital as well and whose upside is very small compared to the 'unlimited' upside of the equity holders? b) You mention that "These are fairly normal investors who are pulling out..." - do you know the break-down of these investors? For instance, what is the percentage of hedge-funds investment on these bonds?
b) your proposed solution of backing Euro Bonds, is a one more stop-gap / ad-hoc arrangement rather than a long-term solution.
How can Euro Bonds concept work when fiscal management is divorced from monetary management? This is basics. Centralising the fiscal management without political franchise will never work. So, basically this is a political issue which will take time to resolve either way. The fault lies in the basic design of Euro where fiscal-political-monetary policies are controlled by different agencies with different masters.
Finally,
The fact of the matter is, in good times, nobody wanted to look at fundamentals before making investment decisions. Now in the bad times, everybody is using their leverage to cover their positions.
If Germany is talking about private investors taking hair-cuts, it is being prudent unlike the 'idiots' in Ireland who passed on the whole debt on to their own population (including un-born grand-children) and bailed out all the bond investors mostly from outside Ireland. What these bond-holders are doing by pulling out is just a negotiating stunt. Whoever blinks first will lose. In case of Ireland, we have seen what happens when you blink first. Obviously Germany is too strong to do that. So, to make the Germans blink use the break of Euro as a threat. I'm sure Germans are too mature and smart to fall for that trap even if you try to subterfuge it with a stupid idea like Euro Bonds.
Regards,
Pradeep Kabra
--------------------------------------------
A hopeless Europe, unable to cope
By Wolfgang Münchau
Published: in Financial Times on December 5 2010 18:54
Usually I stay clear of connotation-rich German words that have no real equivalent in other languages. Their purpose is to obfuscate. But there is one that describes the eurozone’s crisis management rather well. It is überfordert. The nearest English translation is “overwhelmed”, or “not on top of something”, but those are not quite the same. You can be overwhelmed one day, and on top the next. Überfordert is as hopeless as Dante’s hell. It has an intellectual and an emotional component. If you are it today, you are it tomorrow.
I am not saying that every policymaker in the eurozone is hopeless. There are a few exceptions. My point is that the system is überfordert, unable to cope. This inability has several dimensions. I have identified six.
The first, and most important, is a tendency to repeat the same mistakes. The biggest of these is the repeated attempt to address solvency problems through liquidity policies. It happened in October 2008 with bank guarantees. The European Central Bank’s never-ending liquidity support is another example. So is the Greek bail-out. And so is the European Financial Stability Facility, the €440bn ($588bn) bail-out fund. Set up in May as a mechanism to resolve financial crises, it became a cause of the Irish crisis in November. What triggered last week’s panic was the sudden realisation by investors that, with an interest rate of 6 per cent and an ongoing no-default guarantee to bank bondholders, Ireland is insolvent.
The second is a lack of political co-ordination. All the decisions taken have one thing in common: no one takes political ownership of the whole system. Everybody inside the system is optimising their corner. International investors, by contrast, are looking at the system as a whole and cannot make sense of the cacophony. Germany’s motivation in the debate on the European Stability Mechanism (ESM), the anti-crisis mechanism from 2013, was to safeguard its financial interest. That is legitimate, but the way it is done offers no solution feasible for the eurozone as a whole.
The third is a breakdown of communication. The EU has a tendency to hype whatever it agrees. The markets first react with euphoria to the announcement, then with disappointment once they have read the small print. When Germany raised the issue of a permanent anti-crisis mechanism, it gave few details. The markets were spooked. When news came out that Germany had climbed down over the question of automatic bondholder haircuts, the markets were euphoric. Details that have come out since are again more alarming. The way the ESM is constructed will make a debt default in the eurozone dramatically more probable. There is a good case to be made for limiting taxpayers’ liability. But the scope and the details must be conveyed much more clearly.
A fourth aspect is a tendency by governments to blame investors when something goes wrong, rather than solve the problem. The prevailing view in Paris and Berlin is that last week’s crisis was the work of nasty speculators. It is not the first time. Remember the ban on short-selling of equities? Or the “locust” debate about private equity a few years back? The point is that this time there is no George Soros-like speculator attacking the system. These are fairly normal investors who are pulling out, or regrouping. They have lost confidence in the eurozone’s crisis management.
Fifth is the tendency to blame each other. In the spring, the Germans had a go at the Greeks. Now the Spanish and the Irish blame the Germans. Readers of this column know that I have been a frequent critic of German policy, but I think it unjustified to blame Berlin for causing the current problems. The cause of the crisis in the European periphery was the bursting of a credit bubble, and that bubble was not the work of the German government. The blame game is not a constructive way out of this crisis.
Finally, a sixth aspect is the tendency to appeal to a deus ex machina when all else fails. That would be the European Central Bank. Last week, several European politicians beseeched the ECB to act as defender of last resort. Market commentators raised expectations that the existing securities market programme would be extended from a volume of close to €70bn to €1,000bn or even €2,000bn.
It did not happen. Or did it? It is hard to say. Jean-Claude Trichet, president of the ECB, said little, but the ECB nevertheless bought hundreds of millions of euros worth of Irish and Portuguese debt that day. Mr Trichet knows that he can prevent contagion but also that he cannot save the eurozone alone.
I do not want to play down the ECB’s role. Its liquidity policies prevented a calamity in August 2007, and later in the autumn of 2008. But it also delayed a resolution to the political crisis. Europe’s bank resolution policy is the ECB, and only the ECB. That is why this crisis is lasting so long.
The euro is currently on an unsustainable trajectory. The political choice is either to retreat into a corner, and hope for some miracle, or to agree a big political gesture, such as a common European bond. What I hear is that such a gesture will not happen, for a very large number of very small reasons. The system is genuinely überfordert.
munchau@eurointelligence.com
Wednesday, 27 October 2010
What is Manchester United's problem this season?
Upfront, Berbatov & Rooney are solid.
Hernandez & Valencia/Nani are addictive.
Giggsy & Scholsey are Vintage.
The real problem is back 5.
Rafael is inexperienced.
Vidic hasn't warmed up to captaincy.
Evra is out of track since the world cup.
Neville is over the top.
Ferdinand is always injured.
Van Der Sar is ripe for retirement.
Hernandez & Valencia/Nani are addictive.
Giggsy & Scholsey are Vintage.
The real problem is back 5.
Rafael is inexperienced.
Vidic hasn't warmed up to captaincy.
Evra is out of track since the world cup.
Neville is over the top.
Ferdinand is always injured.
Van Der Sar is ripe for retirement.
Re: Why US voters are suing Dr Obama
Dear Mr. Wolf,
You mention the policy mistakes by Obama as 'failure to address labour market directly' and 'the mild effort to reduce the overhang of household debt'
But what you don't mention is the lack of action by Obama on the housing market reforms (read Fannie & Freddie). This was the opportunity to use the sledge-hammer reforms on the same.
Ditto for the mild action on Banking reforms.
The real government debt chart exposes both these short-falls.
a) It shows US real govt. debt rise as about 44% but it doesn't includes the actual loss on Fannie & Freddie (appx. $300 bn) and the leverage of about $1.5 trillion which is about 15% of GDP. Isn't that off-government balance-sheet?
b) It shows the huge rise in US (and UK) govt. debt is the result of subsidizing and saving the banking sector.
Regards,
Pradeep
--------------------------------------------------------------------
Obama did many things. That is already impressive.
I agree that there is much to do on housing. But there is no gigantic urgency. There won't be another housing bubble for a long time. Let the Republicans do that!
Martin Wolf
-------------------------------------------------
Why US voters are suing Dr Obama
By Martin Wolf
Published: October 26 2010 22:28 | Last updated: October 26 2010 22:28
An ambulance stops by the roadside to help a man suffering from a heart attack. After desperate measures, the patient survives. Brought into hospital, he then makes a protracted and partial recovery. Then, two years later, far from feeling grateful, he sues the paramedics and doctors. If it were not for their interference, he insists, he would be as good as new. As for the heart attack, it was a minor event. He would have been far better off if he had been left alone.
That is the situation in which Dr Barack Obama finds himself. A large part of the American public has long since forgotten the gravity of the financial heart attack that hit the US in the autumn of 2008. The Republicans have convinced many voters that the intervention by the Democrats, not the catastrophe George W.Bush bequeathed, explains the malaise. It is a propaganda coup.
Does President Obama deserve blame for this outcome? No and yes. No, because his treatment was right, in principle; yes, because it was too cautious, in practice.
It is essential to remember the context. Large financial crises do long-lasting damage. As the University of Maryland’s Carmen Reinhart and Harvard University’s Kenneth Rogoff note in an update of previous work: “More often than not, the aftermath of severe financial crises shares three characteristics. First, asset market collapses are deep and prolonged ... Second, [it] is associated with profound declines in output and employment ... Third, the real value of government debt tends to explode.” As ever, the risks built up, disregarded, in the boom and materialised in the bust.
As Prof Reinhart and Vincent Reinhart of the American Enterprise Institute note in a paper presented at this year’s economic policy symposium at Jackson Hole, the US shared with several other high-income countries (notably, Spain, the UK and Ireland) a massive rise in house prices, credit and the financial sector’s balance sheet: between 1997 and 2007, real US house prices rose by 87 per cent, the ratio of US financial sector debt to gross domestic product rose by 52 per cent and the ratio of total private debt to GDP rose by 101 per cent. This was a disaster waiting to happen. What has made managing the bust far more difficult is the fact, demonstrated in the Reinhart and Reinhart paper, that this has been by far the biggest global financial crisis since the second world war (see chart).
So how well has the US economy done in this crisis? Quite well, in some respects, above all on overall economic output; less well, in others, notably unemployment. On average, real GDP per head (at purchasing power parity) fell by 9.3 per cent in the previous crises studied by Profs Reinhart and Rogoff. This time it fell by 5.4 per cent in the US. The unemployment rate rose by 7 percentage points in previous crises, on average. This time, US unemployment rose by 5.7 percentage points. (See charts.)
This contrast between poor US performance on unemployment and better performance on output, by historical standards, carries over to comparisons between the US and other large high-income countries. Despite being at the epicentre of the crisis, the US experienced a smaller proportional decline in output per head than other large high-income countries, except France. But unemployment rose far faster in the US than elsewhere. The explanation is that US productivity growth was exceptionally fast, above all in 2009.
What, then, does this performance tell us about US policy? The answer is that it did well in terms of what it did address, but far less so in terms of what it did not address.
As Lawrence Summers, the president’s chief economic adviser, noted at the FT’s “View from the Top” conference in New York on October 7, the administration’s focus was on “the return of stability, confidence and the flow of credit to support strong recovery”. The elements were: support for the financial system – through the troubled asset relief programme, inherited from the previous administration, financial guarantees and “stress tests” on banking institutions; the fiscal stimulus; and the actions of the Federal Reserve to sustain the flow of credit.
By their nature, such policies work by sustaining demand and so output. Their impact on employment (and unemployment) is indirect. As it turned out, productivity growth was so strong that not too bad a performance, in terms of output, failed to prevent the surge in unemployment. One would have expected supporters of the free market to conclude that the US economy and, particularly, its labour market, remains flexible, under this “socialist” president. One would have expected them to conclude, too, that more stimulus was needed. After all, it was quite modest: fiscal stimulus was less than 6 per cent of GDP and so accounts for less than a fifth of the cumulative deficits of 2009, 2010 and 2011, while monetary policy is caught in a liquidity trap.
The truth is not that policy was foolhardy and failed, but that it was too timid and so could not succeed. A big mistake was the failure to address the labour market directly, perhaps by temporarily slashing payroll taxation. There were other mistakes, too: the effort to reduce the overhang of household debt should have been stronger.
Yet even the hated Tarp looks remarkably effective in hindsight. As Mr Summers noted, its cost to the taxpayer looks likely to be ⅓ per cent of GDP. This is far less than the cost of the bail-out of the savings and loans institutions in the 1980s. It is also far less than the direct fiscal cost of comparable crises elsewhere.
Unfortunately, the Republicans have succeeded in persuading a large enough portion of the American public that if the patient had been left entirely alone, he would be in perfect health today. This is surely a fairy story. But voters naturally pay little attention to calamities averted. They focus only on how far experience falls short of what they desire. Mr Obama gains no credit for the former and much blame for the latter. His aspirational rhetoric no doubt worsened the disappointment.
The president’s willingness to ask for too little was, it turns out, a huge strategic error. It allows his opponents to argue that the Democrats had what they wanted, which then failed. If the president had failed to get what he demanded, he could argue that the outcome was not his fault. With a political stalemate expected, further action will now be blocked. A lost decade seems quite likely. That would be a calamity for the US – and the world.
martin.wolf@ft.com
You mention the policy mistakes by Obama as 'failure to address labour market directly' and 'the mild effort to reduce the overhang of household debt'
But what you don't mention is the lack of action by Obama on the housing market reforms (read Fannie & Freddie). This was the opportunity to use the sledge-hammer reforms on the same.
Ditto for the mild action on Banking reforms.
The real government debt chart exposes both these short-falls.
a) It shows US real govt. debt rise as about 44% but it doesn't includes the actual loss on Fannie & Freddie (appx. $300 bn) and the leverage of about $1.5 trillion which is about 15% of GDP. Isn't that off-government balance-sheet?
b) It shows the huge rise in US (and UK) govt. debt is the result of subsidizing and saving the banking sector.
Regards,
Pradeep
--------------------------------------------------------------------
Obama did many things. That is already impressive.
I agree that there is much to do on housing. But there is no gigantic urgency. There won't be another housing bubble for a long time. Let the Republicans do that!
Martin Wolf
-------------------------------------------------
Why US voters are suing Dr Obama
By Martin Wolf
Published: October 26 2010 22:28 | Last updated: October 26 2010 22:28
An ambulance stops by the roadside to help a man suffering from a heart attack. After desperate measures, the patient survives. Brought into hospital, he then makes a protracted and partial recovery. Then, two years later, far from feeling grateful, he sues the paramedics and doctors. If it were not for their interference, he insists, he would be as good as new. As for the heart attack, it was a minor event. He would have been far better off if he had been left alone.
That is the situation in which Dr Barack Obama finds himself. A large part of the American public has long since forgotten the gravity of the financial heart attack that hit the US in the autumn of 2008. The Republicans have convinced many voters that the intervention by the Democrats, not the catastrophe George W.Bush bequeathed, explains the malaise. It is a propaganda coup.
Does President Obama deserve blame for this outcome? No and yes. No, because his treatment was right, in principle; yes, because it was too cautious, in practice.
It is essential to remember the context. Large financial crises do long-lasting damage. As the University of Maryland’s Carmen Reinhart and Harvard University’s Kenneth Rogoff note in an update of previous work: “More often than not, the aftermath of severe financial crises shares three characteristics. First, asset market collapses are deep and prolonged ... Second, [it] is associated with profound declines in output and employment ... Third, the real value of government debt tends to explode.” As ever, the risks built up, disregarded, in the boom and materialised in the bust.
As Prof Reinhart and Vincent Reinhart of the American Enterprise Institute note in a paper presented at this year’s economic policy symposium at Jackson Hole, the US shared with several other high-income countries (notably, Spain, the UK and Ireland) a massive rise in house prices, credit and the financial sector’s balance sheet: between 1997 and 2007, real US house prices rose by 87 per cent, the ratio of US financial sector debt to gross domestic product rose by 52 per cent and the ratio of total private debt to GDP rose by 101 per cent. This was a disaster waiting to happen. What has made managing the bust far more difficult is the fact, demonstrated in the Reinhart and Reinhart paper, that this has been by far the biggest global financial crisis since the second world war (see chart).
So how well has the US economy done in this crisis? Quite well, in some respects, above all on overall economic output; less well, in others, notably unemployment. On average, real GDP per head (at purchasing power parity) fell by 9.3 per cent in the previous crises studied by Profs Reinhart and Rogoff. This time it fell by 5.4 per cent in the US. The unemployment rate rose by 7 percentage points in previous crises, on average. This time, US unemployment rose by 5.7 percentage points. (See charts.)
This contrast between poor US performance on unemployment and better performance on output, by historical standards, carries over to comparisons between the US and other large high-income countries. Despite being at the epicentre of the crisis, the US experienced a smaller proportional decline in output per head than other large high-income countries, except France. But unemployment rose far faster in the US than elsewhere. The explanation is that US productivity growth was exceptionally fast, above all in 2009.
What, then, does this performance tell us about US policy? The answer is that it did well in terms of what it did address, but far less so in terms of what it did not address.
As Lawrence Summers, the president’s chief economic adviser, noted at the FT’s “View from the Top” conference in New York on October 7, the administration’s focus was on “the return of stability, confidence and the flow of credit to support strong recovery”. The elements were: support for the financial system – through the troubled asset relief programme, inherited from the previous administration, financial guarantees and “stress tests” on banking institutions; the fiscal stimulus; and the actions of the Federal Reserve to sustain the flow of credit.
By their nature, such policies work by sustaining demand and so output. Their impact on employment (and unemployment) is indirect. As it turned out, productivity growth was so strong that not too bad a performance, in terms of output, failed to prevent the surge in unemployment. One would have expected supporters of the free market to conclude that the US economy and, particularly, its labour market, remains flexible, under this “socialist” president. One would have expected them to conclude, too, that more stimulus was needed. After all, it was quite modest: fiscal stimulus was less than 6 per cent of GDP and so accounts for less than a fifth of the cumulative deficits of 2009, 2010 and 2011, while monetary policy is caught in a liquidity trap.
The truth is not that policy was foolhardy and failed, but that it was too timid and so could not succeed. A big mistake was the failure to address the labour market directly, perhaps by temporarily slashing payroll taxation. There were other mistakes, too: the effort to reduce the overhang of household debt should have been stronger.
Yet even the hated Tarp looks remarkably effective in hindsight. As Mr Summers noted, its cost to the taxpayer looks likely to be ⅓ per cent of GDP. This is far less than the cost of the bail-out of the savings and loans institutions in the 1980s. It is also far less than the direct fiscal cost of comparable crises elsewhere.
Unfortunately, the Republicans have succeeded in persuading a large enough portion of the American public that if the patient had been left entirely alone, he would be in perfect health today. This is surely a fairy story. But voters naturally pay little attention to calamities averted. They focus only on how far experience falls short of what they desire. Mr Obama gains no credit for the former and much blame for the latter. His aspirational rhetoric no doubt worsened the disappointment.
The president’s willingness to ask for too little was, it turns out, a huge strategic error. It allows his opponents to argue that the Democrats had what they wanted, which then failed. If the president had failed to get what he demanded, he could argue that the outcome was not his fault. With a political stalemate expected, further action will now be blocked. A lost decade seems quite likely. That would be a calamity for the US – and the world.
martin.wolf@ft.com
Monday, 18 October 2010
Re: Microsoft Windows Phone 7 OS Review
The reason it will not succeed is because:
a) No apps network - as MS itself knows, the reason for its dominance in Office applications and windows is because it got the apps & user-threshhold surrounding it. Right now, apps are with Apple for stand-alone and Android for multi-device options
b) It is not open-source - Loads of development costs and incompatibility issues on multiple hardware platforms. Who wants to go through that head-ache when one can develop the same stuff on Android and get on all devices across the world in a jiffy.
c) It costs - Unlike Android which is free or Apple which is free but runs only on apple device, the developers/device manufacturers have to pay to Microsoft. Who in his right mind want to pay when you have free options which are excellent with ready-made market.
d) It doesn't cater to niche applications either - Unlike say Blackberry, MS is in the camp of Nokia. In no man's land. Nobody knows what it is for, what it is pushing or what its priorities are in mobile space. It is just following and hoping.
e) Finally, it cannot crush competitors as in the past - Apple is bigger than Microsoft and Google is almost big if not bigger. Unlike in the past when it could crush Netscape to Lotus, that time is gone now. These new competitors have cast-flow of more than $25 billion.
As I said before, the days of easy money is over for Microsoft. Yes, it still raised loads of cash-flow every year, but as Apple and its launch of new innovative products have shown the door for so many well-run, well-established companies from Nokia to Blackberry to Amazon, the disruption caused by innovation leads to a killer-blow when least expected.
I look forward to the launch of touch-screen apple mac. That is when the real blow to Microsoft Cash-Cow of Windows will land. Last year Mr. Ballmer was lucky when $44 billion on Yahoo would have wiped out his company's complete cash reserve. But lady-luck is not like the postman who always rings twice!!!
Pradeep Kabra
a) No apps network - as MS itself knows, the reason for its dominance in Office applications and windows is because it got the apps & user-threshhold surrounding it. Right now, apps are with Apple for stand-alone and Android for multi-device options
b) It is not open-source - Loads of development costs and incompatibility issues on multiple hardware platforms. Who wants to go through that head-ache when one can develop the same stuff on Android and get on all devices across the world in a jiffy.
c) It costs - Unlike Android which is free or Apple which is free but runs only on apple device, the developers/device manufacturers have to pay to Microsoft. Who in his right mind want to pay when you have free options which are excellent with ready-made market.
d) It doesn't cater to niche applications either - Unlike say Blackberry, MS is in the camp of Nokia. In no man's land. Nobody knows what it is for, what it is pushing or what its priorities are in mobile space. It is just following and hoping.
e) Finally, it cannot crush competitors as in the past - Apple is bigger than Microsoft and Google is almost big if not bigger. Unlike in the past when it could crush Netscape to Lotus, that time is gone now. These new competitors have cast-flow of more than $25 billion.
As I said before, the days of easy money is over for Microsoft. Yes, it still raised loads of cash-flow every year, but as Apple and its launch of new innovative products have shown the door for so many well-run, well-established companies from Nokia to Blackberry to Amazon, the disruption caused by innovation leads to a killer-blow when least expected.
I look forward to the launch of touch-screen apple mac. That is when the real blow to Microsoft Cash-Cow of Windows will land. Last year Mr. Ballmer was lucky when $44 billion on Yahoo would have wiped out his company's complete cash reserve. But lady-luck is not like the postman who always rings twice!!!
Pradeep Kabra
Tuesday, 21 September 2010
Re: Words to describe the glory of Apple
Dear Lucy,
Thanks for the insightful article on Apple & Words.
But the fact is "There has hardly ever been a fortune created without a monopoly of some sort, or at least an oligopoly. This is the natural path of industrialization: invention, propagation, adoption, control" - Wired Magazine.
The reason why Microsoft and others of its ilk do not bother, inspite of their shoddy products is because they are monopoly or oligopoly. Why bother. On the other hand Apple is unique because a) Steve Jobs b) it deals in the niche market c) To survive & succeed against the oligopoly like Microsoft, it needs to constantly and creatively innovate.
That is why Apple's achievement is nothing short of a 'black swan' event. We should celebrate while it lasts.
Then you may ask, why is that an exception rather than rule?
Unfortunately, that is because CAPITALISM is all about Monopoly or Oligopoly not Competition or Choice. From Murdoch's Sky to Microsoft's Window, it is Monopoly all the way...Who has the time for Words......when cash register is ringing...
Regards,
Pradeep Kabra
----------------
Sent at 09:00 (GMT+01:00). Current time there: 11:57. ✆
to pradeepkabra@gmail.com
date 23 September 2010 09:00
subject Re: Words to describe the glory of Apple
mailed-by ft.com
Dear Pradeep
Thanks for your wise message. I fear you are quite right.
Lucy Kellaway
--------------
Words to describe the glory of Apple
By Lucy Kellaway
Published: September 19 2010 19:26 | Last updated: September 19 2010 19:26
Like most Brits, I find success in others pretty hard to cope with. When that success is combined with good looks, I can’t tolerate it at all.
Apple’s continued glory eats away at me like a maggot at my core. I long for it to pick up some bruises. When the iPad came out, I prayed that it would be awful. My prayers were not heard: like all Apple products, it is sleek and gorgeous, and in due course I shall go to one of its wondrous temples of consumption and grumpily buy one.
Now I find that Apple has succeeded in an area even more revolutionary than designing beautiful products that are easy to use. This time, though, I feel no discomfort. Apple has discovered something that other companies have long forgotten, if they ever knew: language can also be beautiful and easy to use. Words can be fun to read. They can look elegant. They can make you laugh.
Earlier this month it published a set of guidelines for apps sold at its App Store. According to the laws that govern this sort of thing, this document should have been doubly unreadable. It was a list of legal requirements and was aimed at techies. Instead, it was funny and clear, and I found myself reading it effortlessly, even though I barely know what an “app” is.
“We have over 250,000 apps in the App Store. We don’t need any more Fart apps. If your app doesn’t do something useful or provide some form of lasting entertainment, it may not be accepted.”
The tone is direct, comic and elegantly threatening.
“We will reject apps for any content or behaviour that we believe is over the line. What line, you ask? Well, as a Supreme Court Justice once said, I’ll know it when I see it. And we think that you will also know it when you cross it.”
Now compare this to the standard stuff on the Microsoft website. The brand new browser, it says, “delivers a richer, faster, and more business-ready Web experience. Architected to run HTML 5, the beta enables developers to utilise standardised mark-up language across multiple browsers”. Well I never. Reading this, I’m bored and restless, irritated and alienated.
Given the towering superiority of the first linguistic style over the second, will it catch on? Will other companies copy Apple’s language just as they have copied its design?
You might think so. You might think there was a clear commercial advantage to be had in writing clearly and stylishly. But you would be wrong. There is no sign that Microsoft has been suffering from its stolid, dodgy way with words. Indeed it is one of the great mysteries of capitalism that there is no invisible hand that joins good language and good profits. If anything, the hand pushes the two apart.
Even in industries that make their money by selling messages there is no appetite for clarity. Just last week a reader sent me the following sentence from the blog of Bob Jeffrey, the head of JWT, in which he describes what his vast and successful advertising agency does: “Global consumers are rapidly re-evaluating and readjusting their value paradigms and purchasing decisions. Our job is to keep our ear to the ground with these consumers, providing relevant real-time insight to our clients that inspires cutting-edge, cost-efficient solutions.”
The Apple version of this would be something like: “Consumers can change so we try to keep up.” This version reads better, but it is not hard to see why Mr Jeffrey didn’t put it that way. “A relevant real-time insight” sounds like something that a befuddled client might pay more money for.
An even better example of the link between high profits and low language was on the appointments pages in the Financial Times 10 days ago. It was an advertisement from “one of the largest and most trusted banking and financial services organisations in the world” which was hoping to hire a “customer journey re-engineering manager”.
This title contains three layers of obfuscation: the ludicrous yet ubiquitous idea that a banking customer is on a journey; the idea that this journey needs re-engineering; the notion that this needs managing. There is only one conclusion to be drawn: surplus profits generate bonuses and bullshit in equal measure.
The only customers who are really on a journey are those of the transport sector. And as I looked at a collection of them chugging along into Moorgate station last week I thought of another reason why Apple’s brave effort to rehabilitate language won’t catch on. Words are finished. Customers on journeys don’t read. They watch videos on their iPads, iPhones and iPods.
lucy.kellaway@ft.com
-----------
Thanks for the insightful article on Apple & Words.
But the fact is "There has hardly ever been a fortune created without a monopoly of some sort, or at least an oligopoly. This is the natural path of industrialization: invention, propagation, adoption, control" - Wired Magazine.
The reason why Microsoft and others of its ilk do not bother, inspite of their shoddy products is because they are monopoly or oligopoly. Why bother. On the other hand Apple is unique because a) Steve Jobs b) it deals in the niche market c) To survive & succeed against the oligopoly like Microsoft, it needs to constantly and creatively innovate.
That is why Apple's achievement is nothing short of a 'black swan' event. We should celebrate while it lasts.
Then you may ask, why is that an exception rather than rule?
Unfortunately, that is because CAPITALISM is all about Monopoly or Oligopoly not Competition or Choice. From Murdoch's Sky to Microsoft's Window, it is Monopoly all the way...Who has the time for Words......when cash register is ringing...
Regards,
Pradeep Kabra
----------------
Sent at 09:00 (GMT+01:00). Current time there: 11:57. ✆
to pradeepkabra@gmail.com
date 23 September 2010 09:00
subject Re: Words to describe the glory of Apple
mailed-by ft.com
Dear Pradeep
Thanks for your wise message. I fear you are quite right.
Lucy Kellaway
--------------
Words to describe the glory of Apple
By Lucy Kellaway
Published: September 19 2010 19:26 | Last updated: September 19 2010 19:26
Like most Brits, I find success in others pretty hard to cope with. When that success is combined with good looks, I can’t tolerate it at all.
Apple’s continued glory eats away at me like a maggot at my core. I long for it to pick up some bruises. When the iPad came out, I prayed that it would be awful. My prayers were not heard: like all Apple products, it is sleek and gorgeous, and in due course I shall go to one of its wondrous temples of consumption and grumpily buy one.
Now I find that Apple has succeeded in an area even more revolutionary than designing beautiful products that are easy to use. This time, though, I feel no discomfort. Apple has discovered something that other companies have long forgotten, if they ever knew: language can also be beautiful and easy to use. Words can be fun to read. They can look elegant. They can make you laugh.
Earlier this month it published a set of guidelines for apps sold at its App Store. According to the laws that govern this sort of thing, this document should have been doubly unreadable. It was a list of legal requirements and was aimed at techies. Instead, it was funny and clear, and I found myself reading it effortlessly, even though I barely know what an “app” is.
“We have over 250,000 apps in the App Store. We don’t need any more Fart apps. If your app doesn’t do something useful or provide some form of lasting entertainment, it may not be accepted.”
The tone is direct, comic and elegantly threatening.
“We will reject apps for any content or behaviour that we believe is over the line. What line, you ask? Well, as a Supreme Court Justice once said, I’ll know it when I see it. And we think that you will also know it when you cross it.”
Now compare this to the standard stuff on the Microsoft website. The brand new browser, it says, “delivers a richer, faster, and more business-ready Web experience. Architected to run HTML 5, the beta enables developers to utilise standardised mark-up language across multiple browsers”. Well I never. Reading this, I’m bored and restless, irritated and alienated.
Given the towering superiority of the first linguistic style over the second, will it catch on? Will other companies copy Apple’s language just as they have copied its design?
You might think so. You might think there was a clear commercial advantage to be had in writing clearly and stylishly. But you would be wrong. There is no sign that Microsoft has been suffering from its stolid, dodgy way with words. Indeed it is one of the great mysteries of capitalism that there is no invisible hand that joins good language and good profits. If anything, the hand pushes the two apart.
Even in industries that make their money by selling messages there is no appetite for clarity. Just last week a reader sent me the following sentence from the blog of Bob Jeffrey, the head of JWT, in which he describes what his vast and successful advertising agency does: “Global consumers are rapidly re-evaluating and readjusting their value paradigms and purchasing decisions. Our job is to keep our ear to the ground with these consumers, providing relevant real-time insight to our clients that inspires cutting-edge, cost-efficient solutions.”
The Apple version of this would be something like: “Consumers can change so we try to keep up.” This version reads better, but it is not hard to see why Mr Jeffrey didn’t put it that way. “A relevant real-time insight” sounds like something that a befuddled client might pay more money for.
An even better example of the link between high profits and low language was on the appointments pages in the Financial Times 10 days ago. It was an advertisement from “one of the largest and most trusted banking and financial services organisations in the world” which was hoping to hire a “customer journey re-engineering manager”.
This title contains three layers of obfuscation: the ludicrous yet ubiquitous idea that a banking customer is on a journey; the idea that this journey needs re-engineering; the notion that this needs managing. There is only one conclusion to be drawn: surplus profits generate bonuses and bullshit in equal measure.
The only customers who are really on a journey are those of the transport sector. And as I looked at a collection of them chugging along into Moorgate station last week I thought of another reason why Apple’s brave effort to rehabilitate language won’t catch on. Words are finished. Customers on journeys don’t read. They watch videos on their iPads, iPhones and iPods.
lucy.kellaway@ft.com
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Saturday, 4 September 2010
10 Things You Need to Know About Sleep
This excellent work by BBC's Kate Silverton is relevant to all of us. I gained immensely from the earlier documentary on losing weight and food in general - http://pkabrathoughts.blogspot.com/2009/05/10-things-you-need-to-know-about-losing.html
Individually they are all effective, combined they form a potent tool to lead a healthy life.
For UK Users it is still available on - http://www.bbc.co.uk/iplayer/episode/b00j08h7/10_Things_You_Need_to_Know_About_Sleep/
You can also get more tips on getting a good night's sleep on the BBC Headroom site:
http://www.bbc.co.uk/headroom/newsandevents/programmes/sleep.shtml
1. Bath Before Bedtime - Internal temperature is key to sleep. A warm bath atleast an hour before sleep helps in raising the internal temperature and then dropping it thereby inducing sleep.
2. Stay In The Bedroom Only To Sleep & Get Up At The Same Time - This discipline helps in maintaining the sleep pattern and helps to beat insomnia.
3. Take A Nap In The Afternoon - A short nap of 30 minutes is great for body between 2-5 PM every-day. But for naps to work, they should be taken at the right time. Obviously 2-5 PM is the best time for nap. 7-12 AM & 6-8 PM is bad time for napping.
4. Manage Snoring - Since snoring has a negative effect on 1/5 relationships and also for the well-being, it is extremely important to manage it properly. It has serious health conditions including High Blood Pressure, Heart Attacks & Strokes in extreme cases. Though the program doesn't give a specific way of beating snoring apart from some off-the-shelf commercial & expensive solutions, I believe regular exercise & Breathing Kriya along with Jala/Sutra Nethi helps in beating it.
5. Maintain Sleep Cycles - Our sleep is made up of 5 stages and a set of 5 stages is called a cycle. In Stage 1 we feel Drowsy. In Stage 2 we fall into a light sleep. In Stage 3 & 4, we are in deep sleep. In Stage 5 we dream with rapid eye movements. A healthy night sleep will have 4-6 complete cycles. Disrupting our sleep cycle can make us lose concentration, mood swings and damage our long-term health. Generally drinking alcohol and coffee before sleep disrupts our sleep cycle. Don't Drink high quantity of Coffee or Alcohol more than 4 hours before bed.
6. Power Of A Daylight - Melatonim levels decides our sleepy state. They can be reduced by Blue Light. So if you start your work early, getting up and switching on Blue Light can make a huge difference to induce the daylight in your system. But when you are sleeping, KEEP THE CURTAINS SHUT.
7. What We Eat - Atleast 4 hours before sleep, try and eat food rich in Carbohydrates. Carbs helps sleep while Proteins perk you up. So for instance a diet full of proteins like fish is good in lunch for your sleep.
8. How To Beat Jet-Lag - It is simple really. Forego your airline food. Eat again at regular meal-time in the new time-zone.
9. Relax - Stress obviously is no good for sleep. The easy way of relaxing apart from my favorite breathing Kriya technique is tensing and relaxing body muscles. Starting from toe to head. Muscle Relaxation Therapy helps to lower the Crotisol level and minimizes stress.
10. Herbal Potions - A very old technique but still effective in this computerized age. Apart for Green Tea and its variations, Valerian and Lavender herbs are excellent to help you relax and sleep.
Individually they are all effective, combined they form a potent tool to lead a healthy life.
For UK Users it is still available on - http://www.bbc.co.uk/iplayer/episode/b00j08h7/10_Things_You_Need_to_Know_About_Sleep/
You can also get more tips on getting a good night's sleep on the BBC Headroom site:
http://www.bbc.co.uk/headroom/newsandevents/programmes/sleep.shtml
1. Bath Before Bedtime - Internal temperature is key to sleep. A warm bath atleast an hour before sleep helps in raising the internal temperature and then dropping it thereby inducing sleep.
2. Stay In The Bedroom Only To Sleep & Get Up At The Same Time - This discipline helps in maintaining the sleep pattern and helps to beat insomnia.
3. Take A Nap In The Afternoon - A short nap of 30 minutes is great for body between 2-5 PM every-day. But for naps to work, they should be taken at the right time. Obviously 2-5 PM is the best time for nap. 7-12 AM & 6-8 PM is bad time for napping.
4. Manage Snoring - Since snoring has a negative effect on 1/5 relationships and also for the well-being, it is extremely important to manage it properly. It has serious health conditions including High Blood Pressure, Heart Attacks & Strokes in extreme cases. Though the program doesn't give a specific way of beating snoring apart from some off-the-shelf commercial & expensive solutions, I believe regular exercise & Breathing Kriya along with Jala/Sutra Nethi helps in beating it.
5. Maintain Sleep Cycles - Our sleep is made up of 5 stages and a set of 5 stages is called a cycle. In Stage 1 we feel Drowsy. In Stage 2 we fall into a light sleep. In Stage 3 & 4, we are in deep sleep. In Stage 5 we dream with rapid eye movements. A healthy night sleep will have 4-6 complete cycles. Disrupting our sleep cycle can make us lose concentration, mood swings and damage our long-term health. Generally drinking alcohol and coffee before sleep disrupts our sleep cycle. Don't Drink high quantity of Coffee or Alcohol more than 4 hours before bed.
6. Power Of A Daylight - Melatonim levels decides our sleepy state. They can be reduced by Blue Light. So if you start your work early, getting up and switching on Blue Light can make a huge difference to induce the daylight in your system. But when you are sleeping, KEEP THE CURTAINS SHUT.
7. What We Eat - Atleast 4 hours before sleep, try and eat food rich in Carbohydrates. Carbs helps sleep while Proteins perk you up. So for instance a diet full of proteins like fish is good in lunch for your sleep.
8. How To Beat Jet-Lag - It is simple really. Forego your airline food. Eat again at regular meal-time in the new time-zone.
9. Relax - Stress obviously is no good for sleep. The easy way of relaxing apart from my favorite breathing Kriya technique is tensing and relaxing body muscles. Starting from toe to head. Muscle Relaxation Therapy helps to lower the Crotisol level and minimizes stress.
10. Herbal Potions - A very old technique but still effective in this computerized age. Apart for Green Tea and its variations, Valerian and Lavender herbs are excellent to help you relax and sleep.
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