Big Tech under pressure

The four winds of change

Silicon Valley is shaken. Don’t be distracted by the confidence with which Big Tech representatives have been testifying to Congress about Russian influence in the US electoral process. Nor by the latest top tech results. It is indisputable that the “gorillas” beat earnings expectations last week, leading shares of companies like Amazon, Twitter and Alphabet up sharply, that the S&P 500 Technology Index has gained more than 30% this year, and that Mark Zuckerberg may end up as US President in 2024.

But the breeze of change is turning into a proper wind and it will do more than just ruffle the feathers of Big Tech.

Big Tech believes its own story, best exemplified by the Google founders’ mantra “Don’t be evil.” But it goes further than that in a quasi-religious faith that its products make consumers’ lives better at no cost, that it creates wealth for the many who invest in its equity, and that when founders cash out they spend it on philanthropy to solve the world’s major problems.

There is another story. That they abuse their dominant positions and use their monstrous cash piles to buy up any competitors, thus denying choice to consumers. That their disruption of sectors like retail leads to ever increasing job losses, which their investments in and worship of Artificial Intelligence will only make worse. That their platforms are useful mechanisms for evil doers to up-end our political process. That they are gathering so much information on each of us that George Orwell’s Big Brother in his novel 1984 looks like a rank amateur. That their belief that, in Leona Helmsley’s immortal words, “Only the little people pay taxes” is insidiously undermining society: the most valuable companies of the 21st century pay piddling taxes which are not enough to maintain infrastructure, police, city administration and a host of other crucial societal services.

There is a reason why the Universal Basic Income theory is popular in Silicon Valley. Give a hand out to the disadvantaged members of society and you can wash your hands of them. In fact, put on a pair of VR (Virtual Reality) glasses and you won’t have to see the obese, the left-behinds, the technologically incompetent.

You may think, gentle reader, that the last line is a touch harsh. But remember that your average denizen of Silicon Valley spends time principally with like-minded folk (they recruit in their own image). They share tremendous intelligence and, most likely, a touch to a strong dose of autism. Out of these ingredients can come mind-blowing, revolutionary products or gobsmacking, disconnected howlers. To advertise their latest VR, Mark Zuckerberg’s avatar teleported to Puerto Rico to see the hurricane devastation. With real life wrecked homes in flood waters as a backdrop, he blithely says: “One of the things that is really magical about virtual reality is that you can get the feeling that you’re really in a place.”

One can only hope that the Facebook CEO and other founders will use AI to insert some emotional intelligence into themselves, for their world class public relation advisors are either not up to the job or, more likely, being ignored.

Here are four indicators of how the tide is turning.

1. Shareholders – Despite Big Tech giving equity holders returns of unparalleled juiciness, they are stirring, and discovering they have clout. Note the ousting of UBER’s CEO Travis Kalantick by shareholders on the back of various scandals including a culture that condoned sexual harassment.

Meanwhile, Zuckerberg’s plan to reclassify some shares to retain control of the listed company, resulting in an estimated loss of $10bn for public shareholders due to stock depreciation, was stopped in its tracks by a lawsuit lead by a Swedish national pension fund and others with shares in the company. As tax, regulation and a government backlash chip away at Big Tech’s returns, their vulnerability to shareholder activism will rise.

2. Tax – The tech companies are losing the battle because they have abused the system, indebted governments in the developed world need funds, and there is a limit to how far taxes can be raised on hard-pressed voters.

Big Tech have not just broken the spirit of the law, they have smashed it, and thus the PR battle is lost. Headlines in the media attest to this. The British arm of e-Bay paid £1.6million in corporation tax last year despite revenues of over a billion, an outcome that is grossly unfair when their lack of profitability is nothing but a sleight of hand to do with IP and other tax jurisdictions.

The European Commission has been a leader in tackling the issue. Amazon has been ordered to pay about €250m for back taxes in Luxembourg after benefiting from illegal state aid, while Ireland is being forced to collect €13bn in taxes owed by Apple. The EC is considering a tax on turnover or a levy on online ads or another form of tax and expects to table a proposal by next spring. Although it would be more effective if the US and other nations agreed on a method under the umbrella of the OECD, it is doubtful this will happen any time soon.

But that doesn’t mean there is no action in the US, where the tax reform package touted by the government would see tech giants repatriate a portion of their funds currently stashed overseas. Apple, for instance, holds 94% or $231bn of its cash overseas. And this summer Donald Trump attacked Amazon in a tweet: “Amazon is doing great damage to tax paying retailers.” I would expect to see more action on this front from the US government.

3. Regulation – There is movement on both sides of the Atlantic. Recently, a bipartisan group in Congress proposed the Honest Ads Act, which would make online political advertising subject to the same rules of disclosure as those on television, print and radio. As more revelations of Russia’s involvement in the 2016 U.S. election come to light through Big Tech’s testimony to Congress, the political urge for change increases.

Meanwhile, a former head of GCHQ, the UK surveillance agency, suggested tech companies might have to be regulated. Robert Hannigan said they had been naïve about fake news and their interference in the democratic process. At the end of June Germany passed the Network Enforcement Law which imposes steep fines (€5m to €50m) on platform companies if they don’t remove hate and other detrimental speech within 24 hours.

Anti-trust law or other regulation will probably be used at some point on Facebook and Google due to their oligopolistic dominance of the digital ad market. They control 60% of it between them and, of even more concern, around 85% of all new digital advertising revenue. Competitors barely make a dent before they are gobbled up.

4. Political backlash – Governments are expending huge effort to tackle economic inequality, one of the biggest issues of our time – once they and the media understand Big Tech’s contribution to it, there is bound to be legislation.

A bit of background: in a pioneering study, Professor Beverly Skeggs at the London School of Economics used software to track the trackers, mainly Facebook, and analyse the use of data. Bids for the data of High Net Worth individuals and their network – that means you, dear reader – are made 50 billion times a day. With the January implementation of PSD2, a European directive that aims to increase consumer financial choice, Facebook and other tech giants will have access to even more of our financial data.

The bigger scandal lies in who else is being targeted. Professor Skeggs points out that the poor and the vulnerable are sold to advertisers – they are peddled debt, predatory lending, scams like Trump university. With more than eight million adults in the UK living with problem debt, US consumer debt levels at record highs and interest rates set to rise, those struggling will face even more adversity. Governments will need to respond. Big Tech would make a convenient – and justified – target.

German Justice Minister Heiko Maas summarised Big Tech’s attitude to the intrusion of the real world in a speech a few months ago:

“Experience has shown that, without political pressure, the large platform operators will not fulfill their obligations…”

A number of factors are coming together. As knowledge of the modus operandi of Big Tech becomes more widespread, politicians and the media will feed off each other. The headlines and the political wins will result in fines and laws which should make Big Tech more accountable.

Shareholders will also be more active, not least because of the changes to the tech business model. More staff to monitor posts, more staff to lobby politicians and more staff to communicate with the outside world…this sounds not entirely unlike the journey banks undertook post the financial crisis. But banks realised their culture needed to change as well. Big Tech is just starting to realise this. The EQ of Silicon Valley has yet to match its IQ.

Russia is the only existential threat

An interview with US Commanding General Hodges

Despite the heightened threat from North Korea, the Alliance mustn’t lose sight of the fact that Russia is the only existential threat to Europe and the US, declares the Commanding General in charge of US troops in Europe.

Interviewed as Russia and its ally Belarus hold the Zapad-2017 war games, following similar ones in 2009 and 2013 which served as distractions and preparation for the invasions of Georgia, Crimea and Eastern Ukraine, Lieutenant General Ben Hodges says: “There are multiple threats all around us, of course, which is part of why our NATO alliance is so important. Of course Russia, and its behaviour over the last three years, is the only nation that really possesses the ability, the capability, to destroy a European country or the United States with its nuclear weapons. In terms of an existential threat: that’s Russia.”

He adds,” Now it’s not likely, but that’s a part of it.”

Zapad, which is Russian for “West”, is causing heightened anxiety in the North American Treaty Organisation (NATO) for many reasons. They are the largest war games in years – although the Russians insist troop numbers are under the 13,000 beyond which foreign observers have the right to participate, NATO members like Estonia estimate the numbers at around 100,000. Meanwhile, the state of Russian-NATO relations is at a low, communications between the two camps to avoid misunderstandings have declined considerably and rumours are rife that the Russians are considering leaving behind troops in Belarus or annexing it outright on the back of disagreements with its ruler Alexander Lukashenka.

At a 2016 summer summit in Warsaw, NATO upped the military stakes on the back of Russia’s actions. It feared that its troops were too far back from a potential war front. Moving from what it called an assurance to a deterrence strategy, European and US troops are now closer to the border in the Baltic states and Poland. For instance, there are 800 British troops in Estonia, Canadians in Latvia and Germans in Lithuania, part of NATO’s forward presence, although “the foot is tapping on the brake to avoid anything provocative as no one wants a war with Russia,” says Hodges.

NATO armies, including the US, have been under financial pressure for a number of years. The top US army commander in Europe is philosophical about the resulting trade-offs, no doubt helped by having experienced many different twists and turns in policy over a 37-year career. Reports that the ever-diminishing British army may end up with only 65,000 troops don’t faze him: “I would say the British army has the same challenge that the American army has: not enough resources to do everything that it’s asked to do.”

He sings the praises of the British army leaders for making the most of their funds, while pointing out possible parallels with the US: “We reduced the size of the US army to pay for modernisation and readiness and now we’re having to grow the army back up and increase the size to meet all the requirements, so the price will be paid somewhere else.” In fact, in his trademark southern drawl, he points out that the UK is launching two magnificent aircraft carriers but “I don’t know if they have enough sailors to man both aircraft carriers.”

Hodges, whose family home was spared the destructive ire of Hurricane Irma, is more concerned with the many impediments to moving troops and equipment around NATO countries. These range from bridges too weak to take the weight of Challenger tanks to bureaucratic processes appropriate to peacetime only. Already in 2015 he called for the military equivalent of a Schengen zone – in essence the ability to move forces freely through all European nations without the current red tape restrictions -a move seconded this year by Dutch Defense Minister Jeanine Hennis-Plasschaert. Yet no advances appear to have been made on this front.

“If we had only three days to send a formation to Poland, it has to be be done under peace time conditions and we will be way too late to the party,” he warns.

Treading carefully to avoid any criticism of President Donald Trump, whose public berating of NATO country heads of government at his first NATO summit in May made the Alliance look weak and in disarray, Hodges makes the point that prior US Presidents also complained about burden sharing. In a rather more positive tone than his President, who lambasted 23 of the member nations for not paying what they should for their defence, the General notes that the 2014 commitment to spend 2% of GDP was to be reached a decade later in 2024 and yet “almost every nation in the Alliance has moved either towards that two percent, has achieved it, or at least has stopped that decline. That’s very important because that demonstrates commitment towards collective security.”

“US economic ties with Europe are five times what they are with any other region in the world,” he points out.

The General, due to retire next year, is concerned about balancing the need for more cyber security to counteract Russian and other attacks, with the need for interoperability between the troops of different countries. “No doubt, it’s undisputed, that Russia is putting pressure on nations, individuals, or organisations through the use of cyber… The cyber domain is on the front of everybody’s minds,” he says.

Jens Stoltenberg, Secretary General of NATO, has said that a cyberattack against a member by another state could trigger a collective military response under Article V.

Hodges, whose career encompasses time spent fighting in Iraq and as Director of Operations in Kandahar, Afghanistan, is sanguine about another nation involved in cyberattacks against the Alliance: Turkey. This is despite an official German security report accusing the NATO member of interference in the German elections due later this month, as well as other policy moves by President Erdogan which are not in keeping with an ally.

“The fact is we are more effective as an alliance with Turkey than we would be without Turkey. It’s been a loyal member of the Alliance since it joined in 1952. It has a very good professional military. The geographic location, obviously, on the Black Sea, the Caucasus, the eastern Mediterranean. It’s essential for the alliance for so much that we have to do in that part of the world,” he says, adding some caveats: “It is a challenge. I think that Turkey knows that their future is with the West. They may buy weapons from Russia, they may depend on Russia for energy, as does half of Europe, but their real, true economic prosperity depends on the West, not Russia.”

Having been involved in NATO at various points in his career, he sounds relatively unconcerned, if not blasé, about internal divergences. “So, look, each member of NATO irritates other members; the United States irritates people; Germany irritates people; the UK irritates. That’s kind of the nature of a coalition.”

On the Korean front, he is very concerned, and sees China as key. “China has the most important role here. China does not want a war in Korea because they will inherit all the debris and the disaster that would fall out from it. But I also don’t think that China wants a unified Korea that would possibly become an American ally the way South Korea is. So, they’ve got to figure out their role,” he says.

Earlier this week, the UN Security Council, which includes China and Russia, voted unanimously to boost sanctions against North Korea. How well these are being respected is another matter.

Meanwhile, Hodges dismisses as misguided a headline-grabbing open letter signed by over 100 tech entrepreneurs such as Elon Musk calling for the United Nations to ban the development and use of killer robots like drones. Their precision significantly reduces civilian and military casualties, while any ban would mean that terrorists and enemies would use them: “So I don’t know what good, in terms of real effect, would come out of that.”

Interviewed after a breakfast briefing to the Worshipful Company of International Bankers, a City of London livery company, as part of reaching out to the public, the General is philosophical, and endearingly humble, about his stellar 37-year career. “I’ve made about every mistake you can make seriously and not get sacked,” he muses.” I’ve been forgiven for losing equipment, getting lost, failing a mission, those kinds of things.”

At a time when there has been a mass erosion of institutional legitimacy in the US and other NATO countries, the fact that the military can hold its head high is due in no small measure to men like General Ben Hodges.

Two fresh ideas on migration

Paddington Bear, the ultimate refugee, would never have made it past the recent terrorism and refugee-inspired checks. Some of my followers, holidaying in Europe, may even now be reading this while standing in endless airport queues.

Here is one reason for the checks: in the first half of 2017, the Italian Ministry of Interior registered 83,752 new migrant arrivals, which is the highest number recorded for this period since 2014, with thousands arriving every week in these peak summer months. It is no coincidence that the populist Five Star Movement is running neck to neck with the centre-left Democratic Party in polling for the 2018 general election.

The issue of migrants divides countries, allies, regional groupings, all at a time when a unified front is the only way to deal with it, as well as other related problems confronting mankind, such as climate change and Islamic terrorism.

Transformational factors are at play which will increase humanitarian disasters, leading to an explosion in the numbers of migrants and refugees over the coming decades, says Dr Randolph Kent, a former United Nation official whose roles included Humanitarian Coordinator in Somalia and Kosovo. He envisages migration flows that could be analogous to the flows of tribes in north-east Asia in the 12th century, numbering hundreds of millions.

“And, unlike the 14 million refugees that moved between Pakistan and India in 1947, the vast numbers that one can foresee in the future will also have access to sophisticated weapons,” he states in an article for the International Review of the Red Cross.

Our increasingly complex eco-systems guarantee this outcome through the weakening of the post-war global system, the inter-related threat of cybernetic attacks, the resurgence of sovereignty, population growth, demographic shifts, the wildfire effect of social networking, climate change and wars.

Given that large movements of people in search of family safety and/or a better life are going to be an increasing feature of our society, valiant attempts to categorise “economic migrants” separately from “refugees” fleeing war, with rights under international law, are useful only at the margin.

Migration per se is not a zero-sum game where one less migrant means one more job for a local – the local who may well be the product of a substandard education and a Western benefits system. For the many countries with declining working age populations, lower migration means crops left unpicked, engineering jobs left unfilled and a faster uptake of robots. Any complacency in the UK about a Mediterranean-based influx solely to the Continent ignores the evermore sophisticated smuggling networks.

Dealing with repercussions in the social order, integration and a host of other issues is a challenge for us and the next generations. Visionary ideas are needed. I came across two recently.

Former US Secretary of State John Kerry gave the 53rd annual lecture at think tank Ditchley Park in Oxfordshire last month. The house had been a weekend home to Prime Minister Winston Churchill during World War II. It was an appropriate venue for another committed internationalist to express his ideas.

Kerry called for a Marshall Plan for the 21st century by a doubling up of the developed world’s bet on the promise of globalisation – not only confined to the developing world, but to the West and wealthy OECD countries – in order to strike at the roots of the despair leading to populism and extremism.

He spoke of the “largest public-private partnership the world has ever seen” by having the West partner with China, busy with its “Belt and Road” policy of investing in the developing world to boost trade and stimulate economic growth across Asia. Kerry called for a global initiative that would release “some of the $12-13 trillion that today is sitting in net negative interest rate status around the world”. He believes this would strike at the roots of extremism and hopelessness by developing education and job opportunities around the world.

His vision encompassed developing clean energy, which has the potential to become the largest market the world has ever seen, and harnessing the power of technology which is already leaving too many people behind. Rather than reacting to change, the private sector and governments need to do more to shape the future through unified action. Rooting out corruption would be critical to delivering the programme.

German Chancellor Angela Merkel has also been looking at the Marshall Plan idea, consulting with private sector investors in Africa.

The second visionary idea comes from Tolu Olubunmi and the World Economic Forum, which already recognised her a couple of years ago as one of 15 women changing the world. She co-chairs Mobile Minds, an initiative focused on remote working as an alternative to migration. For talented individuals who do not necessarily want to leave home but cannot find jobs, remote and mobile work are a way forward.

For countries with declining populations, this is a way around the political backlash from local populations. Benefits for companies include increased access to talent, cost savings and reduced turnover, while societal benefits include global traffic mitigation and a decreased brain drain from the developing world to the developed world.

US-based Olubunmi does not underestimate the challenges of a widespread implementation of cross-border remote work – compliance issues, consistency of fair labour standards, a tangle of employment laws, among others. But as a Nigerian national and a trained chemical engineer who arrived in the US as an undocumented and unemployed migrant, her own story gives credence and lends determination to this globally transformational agenda.

Paddington Bear turned out to be the right sort of refugee, despite his inauspicious start. An immigration officer would have judged that the short, brown figure lacking in skills – as evidenced by the label round his neck that read “Please look after this bear” – would not be GDP-enhancing. Yet if one could measure added value by the laughter of children and adult alike, or marmalade sandwiches, the naughtiest bear in the world broke all the records.

Bring back Boris

An unlikely saviour

Much as one hates to welcome back a turncoat who sacrificed his Remain views on the altar of unparalleled ambition, bring back Boris!

The UK’s June 8th general election was Theresa May’s to lose and this she did. The catchphrase “strong and stable” turned out to be untrue, as U-turn followed U-turn with not even a glimpse of an apology. Being the recipient of years of austerity – however much it was needed following the financial crisis – was always going to make defending government positions on health and security a dreadful task. Labour leader Jeremy Corbyn, meanwhile, could scatter largesse for all and sundry like a bridesmaid’s petals. Cleaning up the mess was never going to be his problem.

At the time of writing, the Tory majority has collapsed with the loss of 13 seats, nine of them government ministers, while Labour has won 29. To reach the 326 seats needed to govern, the 318-seat Conservative Party is in talks with Northern Ireland’s 10-seat Democratic Unionist Party (DUP).

A weak minority government with a discredited leader will not last. Nor is it the right position from which to negotiate Brexit. A new Conservative Party leader is needed to fight a new election.

The country’s saviour, Foreign Minister Boris Johnson, is an unlikely figure. Yet the contrast with Prime Minister May is where his strength lies. Bumbling and dishevelled vs controlled and neatly clad. Eton-honed debating skills vs May’s ducking the party leader debate. An excess of everything on display – flesh, words and humanity, vs containment. Well-documented sexual transgressions vs a steady marriage of 37 years.

Boris could recover the London and youth votes that May lost. He also stands a better chance of keeping the Hard Brexiters in the party under control. Not necessarily due to his charm, although that helps, but because the party has just received a horrendous shock. The actual share of the vote is truly terrifying for them, with the Tories at 42% compared to Labour’s 40%. The complacency of May is giving way to a June panic. And the biggest unifier for any party is a credible opposition.

Helpful to Boris will be the perception that voters are tired of austerity. The government will borrow more to fund policies ranging from increased police numbers to the NHS health service. It will also have to raise taxes. What this will mean for interest rates and the pound is far from clear due to a host of external factors, such as the German general elections in September and the timing of the Brexit negotiations. But with Boris at the helm, a soft Brexit looks more likely.

As the UK continues its slide into international irrelevance on the international stage, it is time for the return of the Teddy Bear, this time to head the Conservative Party, head the next government, and arrest the decline.

A New Age for Old Age

The latest tech innovations

Dimmed lights are reflected on the heated sea water in the indoor pool, while New Age music wafts across the cavernous room. Aged bodies advance in slow motion from jet to jet, allowing each one to massage a different part of their arthritic bodies, while chatting desultorily with each other and with Nikkos, the Greek God of a lifeguard.

This vision of the future, courtesy of a thalassotherapy spa holiday near Athens, shocked me into a personal awareness of how the population of the world’s major economies is ageing, notably in Europe, Japan, China and the US. And what a wealth of opportunities and challenges arise out of it.

People over 60 are set to become the world’s fastest growing cohort. By 2050 there will be 2 billion of them. Their participation in the workforce will be crucial to make up for fewer working-age adults. For this to happen, more flexibility will be needed in the world of work, whose practices too often continue to be hidebound by tradition.

Adapting the tools of work is also vital. Sixteen-year old students at a recent workshop at ADA, the National College for Digital Skills in London, experimented with taping three of their fingers together and wearing dark glasses while trying to use a normal keyboard. The simulation of old age travails will undoubtedly lead to breakthroughs in workable technology.

In any case muscle weakening, for instance, will not be an irreversible effect of age. The Olympic-contest handshake between French President Emmanuel Macron and US President Donald Trump was won by the younger man. No surprise there. But bionic inserts, created using 3-D printing, are on the horizon.

Blurring science fiction and reality, Bristol-based Open Bionics creates 3D-printed robotic hands for amputees, mainly children. One child asked them for a pocket to store his iPhone on his bionic arm. In a few years, one can visualise an older person who has lost the use of their arms due to, say, Parkinson’s, asking for an app to be downloaded into their arm which would call their carers when they had a severe fall. (In fact, the latter already exists, albeit on an iPhone, not inserted into a body.)

Later that day at the spa, gently perspiring in a sticky seaweed wrap, I reflected that in 500 BC Greek physician Hippocrates came up with a revolutionary focus on preventing sickness instead of simply treating disease. The older people at the spa (and those of us who meander in the middle-age range) were doing just that. Monitoring our health is becoming normal through Fitbit and other wearable devices, while exciting apps are being developed that can tell when a depressive episode is about to happen or when a heartbeat is out of sync, as seen in the Flying Health incubator in Germany.

Robots will undoubtedly help with old age. Yet the warmth of human interaction is invaluable. Penelope, one of the personal trainers at the spa and the living image of a koure (temple maiden), led a keep-fit class in the pool and her smile, surely, encouraged us more than any robotic voice could have. In any case, the human/tech interface is emerging as the most productive piece of the puzzle in our new world. Take Vida, a start-up funded by Hambro Perks which aims to disrupt the carer market. The app lets customers book carefully vetted carers and includes capabilities like setting the tasks they are to accomplish. It sees itself as the Uber of carers.

Mental stimulation is essential both to quality of life and to being a productive member of society. Tech devices will help deal with, and possibly reverse the decline in our mental capacity as we age – but nothing can be as stimulating to our brains (and souls) as using our professional capabilities to help society. This can be seen through the work of United Nations Volunteers. Assignments can range from advising on dam building to editing a newspaper in Haiti or changing laws in Vietnam. There is also online volunteering in areas like proposal writing or social media management for an organisation in Cameroon. The UN is visionary is in not having any upper age limit for the skilled individuals it seeks, thus appealing to retired professionals, amongst others.

In fact, the Odyssean saga of Greek debt forgiveness/restructuring/bailout, which dominated the local papers during our stay, would assuredly benefit from the advice of old hands who dealt with the Latin America or Asian debt crises.

Touring the fascinating Acropolis Museum with my elegant 85-year old mother stuck in the customary wheelchair at groin height, I mused on the business opportunity in creating one that would allow the occupant to be at the proper viewing height for the exhibits. But an ageing population is not all about opportunities. It is just as much about facing up to the challenges and the biggest one is financing, not easy for politicians.

The difficulty of so doing became apparent as we landed in London to find that Prime Minister Theresa May had done a U-turn on a new policy to make pensioners pay more for their care. It needed more work, but the basic premise that more funds were needed was accurate. However, even on the funding side there are new ways of doing things, in this case using data to come up with risk-pooling initiatives via cloud communities, as mentioned in more detail in a FT piece.

To the young out there, embrace the older generation for their wisdom and experience; to the middle-aged and old, fear not advancing age but grasp it with the strength of a Hercules.

*Open Bionics and the Flying Health incubator both gave presentations at the fascinating annual Global Female Leaders Summit 2017 in Berlin. I am a member of the Advisory Board. The next one is April 23-25, 2018.

Escape from the bubble

Re-engineering capitalism

I live in Chelsea, studied at the LSE and live in a bubble. This sounds like a confession from a self-help group like Alcoholics Anonymous. So it is, dear reader of Karina’s Column, for you too are most likely to be among the much-talked about 1% of the global population that owns half the world’s wealth. In fact, chances are a decent number of you are part of the 0.1% *

We socialise and work primarily amongst ourselves, while our global outlook and preoccupation with the state of the world is matched with socially liberal and economically conservative politics. A minority of you voted for Brexit, but its triumph was a surprise; a minority of you voted for Donald Trump, but his triumph was a surprise; I hope none of my French readers vote for Marine Le Pen and that she will not triumph.

Yet I am not sure after reading Edouard Louis’s The End of Eddy, an autobiographical account of unemployment, brutality and family love in Northern France. Caught in a trap of alienation and hopelessness, Le Pen’s National Front canalises that anger and frustration.

Understanding the world we live in is crucial. LSE’s motto is ‘Rerum cognoscere causas’ or ‘to Know the Causes of Things,’ without which we cannot properly deal with the consequences and come up with solutions.

Here is one of the primary causes of the current crisis. Two thirds of households in developed economies saw no increase in their real incomes between 2005 and 2014, according to a McKinsey study. Even with the return of some jobs to their developed country base, slow growth and technology-induced disruptions look set to eliminate jobs for humans faster than new ones can be created. Improved education and training, the mantra of all governments for the last decade or two, have stumbled against the obstacle of implementation. That doesn’t mean we should not forge ahead – the boost to apprenticeships in the UK being a case in point – but may be of use only at the margin.

In 2011, McDonald’s launched a high-profile initiative to hire 50,000 new workers in a single day and received over a million applications, a ratio that made landing a McJob more of a statistical long shot than getting accepted at Harvard, as cited by Martin Ford in his must-read The Rise of the Robots.  These are the sort of low wage and no benefit jobs which have provided a kind of safety net of sorts for workers with a lack of skills. But San Francisco-based Momentum Machines’ first device makes gourmet burgers from scratch – how soon before the cost plummets and McDonald’s burgers are made and delivered by robots?

Meanwhile, the gig economy and zero hour contracts often represent a self-destructive capitalism that could take us all down with it. Putting to one side any moral considerations about a total lack of employer responsibility, on a purely economic level our societies only function on the back of large numbers of consumers who live with hope.

And yet, despair at the bleak present and future of work can be staved off. We are at a point in the developed world where we are getting to ‘know the causes’ past and present, and are beginning to visualise the future. Solutions like a Universal Basic Income (UBI) are being discussed. It does not really matter whether the idea of all citizens of a country receiving an unconditional amount of money allowing them to survive at a low level is viable, or not. What matters is that a re-engineering of capitalism is a constant topic of discussion. Innovative ideas are bubbling away.

Even much-maligned Etonians are working at solutions. The Hoberman Prize for Social Entrepreneurship in Technology was this year presented to three boys who developed a free app connecting employers and employees in the gig economy. Crucially, it also attempts to ensure workers’ rights are upheld.

I live in a bubble pricked by recent election results. Armed with optimism and the intellectual and financial resources of the 1% I believe we will be able rise to the challenge.

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* The Credit Suisse Research Institute defines the top 1% as having assets of over $759,900, including property and stock market investments, but excluding debt. Only those I have met personally or been introduced to are signed up to my column. However, a few people at hedge funds have signed themselves up.

An oasis of stability amidst the populism

The Spanish exception

Political upheaval stalks the West. Holland went to the polls in March and the far-right party of Geert Wilders came in second place. Marine Le Pen looks likely to win the first round of the French presidential elections in April. The US voted for Trump and Britain voted for Brexit. Yet cast your eyes south to a country with 42% youth unemployment, two inconclusive elections, almost a year without an elected government, and discover an oasis of stability.

“Spain is different!” Napoleon was reported to have exclaimed after his troop’s first defeat on Spanish territory in 1808 following a remorseless string of successes elsewhere.

Spain now boasts the same conservative Prime Minister, Mariano Rajoy, and the same Economics Minister, Luis de Guindos, as in 2012 when the Partido Popular came to power.

Protest party Podemos has lost its puff, while the traditional opposition socialist party is leaderless and beset by infighting, forced to abstain from voting against a minority conservative government for fear of new elections at which it would likely lose more votes. At a time when the UK Conservative Party and the US Republican Party espouse policies their predecessors would not recognise, the Partido Popular administration stands by the labour law reforms from its last stint in government. There is even a whiff of hope around the Catalan question, as the government privately and publicly dialogues with local politicians.

Meanwhile, the UK’s loss of influence in the EU has moved Spain into a more central, influential position. At the mini-EU summit in Versailles earlier this month, Mariano Rajoy was very visible in the company of Germany’s Angela Merkel, the French President and the Italian Prime Minister.

The answer to why Spain has evaded a major upset is complex – and like recipes for paella, everyone has a different one. “We are too poor to indulge in a Brexit-like bit of populism,” states a Spanish diplomat friend. “Only a wealthy country like the UK can afford to do so.”

‘Poor’ is an exaggeration, but what is true is that the years of scarcity are not as far back in Spain’s collective memory as that of other European neighbours. Spain’s per capita nominal GDP is $28,115. The UK’s is $39,530. For the US this is $56,115.

Evidence of what populism means in practice is also cited as a reason. Podemos, with its pony-tailed, jeans-clad leader, reached the apogee of its support a couple of years ago. It then suffered the shock of actually making it into some local and city governments, proving to be incompetent and unable to fulfil any of its promises. The party’s connections with Venezuela came to light as did other revelations of corruption, all leading to disappointing results for them in the last general elections.

Additionally, the populace has not reacted to large scale immigration or terrorist attacks with xenophobia and anti-Muslim sentiment. Partly, easily integrated Latin Americans make up the vast majority of the 10% of the total population who are immigrants. Yet there are also an estimated one million Moroccans in Spain. It is a tolerant society.

Spain’s home ownership rates provide another clue, says a Spanish bank chairman. A substantial 78% of Spaniards own their own home, even after one of the deepest recessions in the EU. It is 22% lower for the UK, the US and France. And almost half of the population own their homes outright, without a mortgage, compared to 34% in the UK. Despite headline-grabbing statistics like 18% unemployment, the Spanish middle class has a larger stake in political stability.

In fact, the economy is progressing solidly, with 3.2% GDP growth last year and forecasts of up to 2.7% in 2017 on the back of a rebound in private consumption, exports, and investment, aided by past reforms, according to the IMF. Tourism has reached record highs as the list of sunny competitor countries that are also safe becomes ever smaller.

Although the Spanish phrase “mal de muchos, consuelo de tontos” (only a fool takes comfort from the misfortune of others) comes to mind, Madrid also hopes to take advantage of Brexit to poach some City jobs. It has put on an impressive turn of speed. The financial markets regulatory authority, the CNMV, guarantees foreign companies a fast-track pre-authorisation process in two weeks and authorisation in two months. The simple pre-authorisation form is on the website and, like all company documentation, can be submitted in English. An English-speaking coach is appointed to guide each firm through the process.

For expats, it doesn’t get much better than living in small city where you can easily drop off your children at any number of international schools before work, walk to the office, have a light lunch of fresh, grilled gambas in one of the many outdoor restaurants even in March, and from May enjoy a game of evening golf or savour the array of cultural activities in endless sunshine. For Spaniards only stay at home when they are ill. Seriously ill. Life-threateningly ill.

Madrileños, in the words of a foreign CEO “combine the rigour of the Germans with the creativity of the latins.” That is certainly a reason why Madrid is the 2nd region in the EU for technology created employment: 220,000 professionals working in high-tech industrial and services sectors.

In truth, calling a country with a minority government dependent on the abstention of its rivals an oasis of stability, may seem an exaggeration. But in our topsy turvy world, what matters is relative stability, not absolute stability. And whatever happens on the political front, I would always vouch for Spain’s welcome of foreigners – be they tourists, immigrants or displaced bankers.

The Trump presidency – China a winner

Rhetoric vs Reality

Donald Trump wants to take on China. The president’s winning campaign promised to impose heavy tariffs on imports of Chinese goods and brand the Asian superpower a currency manipulator. Several analysts subsequently forecast that it would make the Middle Kingdom one of the biggest losers from his presidency. And yet, counterintuitively, this column believes China looks likely to be a winner.

The world has indeed gone topsy-turvy when President Xi Jinping appears on stage at the World Economic Forum defending globalization. The vacuum left by a lack of US leadership is rapidly being filled.

At an economic level, China’s rise is visible in trade and treasuries, as well as the renminbi’s increased importance and enhanced profitability of the country’s banks.

First, the US-led Trans-Pacific Partnership, from which China was excluded, looks dead. Both Trump, and the Republican Party, which dominates both houses of Congress, have expressed opposition to it. As a result, in December, US ally Australia spoke out in support of the Beijing-directed Free Trade Area of the Asia-Pacific (FTAAP) proposal, as well as Beijing-supported regional trade pacts, which exclude the US.

Second, given that a Trump government plans to increase spending while lowering taxes, larger borrowings will be needed. China has been by far the largest foreign owner of US treasuries for several years. This amounted to $1.185 trillion – or over 19% of foreign-owned treasuries – as of August 2016, according to estimates from the Federal Reserve. China’s goodwill is crucial to issuing more debt, although, as usual in these cases, Beijing’s ownership of such a large stock of US government bonds ensures the relationship is one of mutual dependence.

There is a third area, foreign direct investment. Data from 2015 shows Chinese investors bought a record $15 billion worth of companies and real estate in the US, a figure which is set to be doubled in 2016, according to data from the Rhodium Group and the National Committee on US-China relations. Late in 2016, Dalian Wanda, China’s largest real estate company, acquired the US company behind the Golden Globe awards for $1bn. Around 90,000 people are employed by Chinese-affiliated companies across more than 80% of congressional districts – a handy lever for China if relations deteriorate.

Additionally, China could prove an important ally in improving ailing US infrastructure, a $550m Trump promise and one that all parties can agree on. The Chinese are master builders and their experience in Africa – where they have built roads and bridges in exchange for minerals and land – will stand them in good stead. (Your intrepid correspondent recently witnessed this for herself, driving along the asphalt roads of Tigray in Ethiopia, all built by the Chinese.)

The dollar’s status as the primary reserve currency remains. Yet last year over 22% of China’s external trade was settled in RMB, well up from zero in 2010, while HSBC estimates it will shoot up to 50% in 2020.

Among other effects, this will give a funding cost advantage to Chinese banks who had been labouring under the disadvantage of Western banks’ greater access to US dollars for trade, writes research boutique Redburn. The report outlines why Chinese banks look likely to increase their profitability at the expense of their Western counterparts.

China, the great imitator, a country accused of illegally copying Western designs, broke the record for patent applications last year. Granted, there was government pressure on companies to file and not all will stand up to international scrutiny. Still, well over a million patents were filed, more than those in the US, Japan and South Korea combined.

Underestimating China is as foolish as believing pollsters can predict who will win the US presidency…

Why Trump’s election is China’s triumph

There is huge speculation and fear about Donald Trump’s intentions. Figuring out which of the future President’s election tweets represent his real views is a complex task. The policy implications will become clearer over the next few months.

In the meantime, here are four distinct winners, some more serious than others.

China

Forget Trump’s rhetoric on the campaign trail. “We can’t allow China to continue to rape our country,” he said, referring to the US trade deficit with China.

When a bullying buffoon is elected President of the US, the decline of the West is accelerated and the momentum behind the rise of China accelerates. This is visible in at least two areas, trade and Treasuries.

The US-led Trans-Pacific Partnership (TPP), from which China was excluded, is dead. Both Trump, and the Republican party which dominates both houses of Congress, have expressed opposition to it. The vacuum left by a lack of US leadership is rapidly being filled.

Already this week US ally Australia has spoken out in support of the Beijing-directed Free Trade Area of the Asia-Pacific (FTAAP) proposal, as well as Beijing-supported regional trade pacts, which exclude the US.

Secondly, given that a Trump government plans to increase spending while lowering taxes, higher borrowing will be needed. China has been by far the largest foreign owner of US Treasuries for a number of years. According to estimates available from the Department of the Treasury/Federal Reserve, this amounts to $1.185 trillion, or over 19% of foreign-owned Treasuries, at 31 August 2016. China’s goodwill is crucial to issuing more debt.

There is a third area, foreign direct investment (FDI). Data from 2015 shows Chinese investors bought a record $15 billion worth of companies and real estate in the US, a figure which is set to be doubled in 2016, according to data from the Rhodium Group and the National Committee on US-China relations. Earlier this month, Dalian Wanda, China’s largest real estate company, acquired the US company behind the Golden Globe awards for $1bn. Around 90,000 people are employed by Chinese-affiliated companies across more than 80% of congressional districts – a handy lever for China if relations deteriorate.

Additionally, China could prove an important ally in improving ailing US infrastructure, a $550m Trump promise and one that all parties can agree on. The Chinese are master builders and their experience in Africa, where they have built roads and bridges in exchange for minerals and land, will stand them in good stead. (Your intrepid, fearless/foolhardy correspondent witnessed this for herself two weeks ago, driving along the asphalt roads of Tigray in Ethiopia, all built by the Chinese).

Interestingly, US FDI into China was less than Chinese FDI into the US for the first time in 2015. Lower growth is one cause, but the Chinese government’s obstructionist stance towards foreign businesses has played a major role.

US universities

They are benefitting from the UK’s policy mistakes, including: the government’s insistence on foreign students being included in the immigration statistics, a hostile tone towards immigrants over the last few years and the 2012 decision to abolish visas that allowed non-EU students to work in the UK for two years after graduating. While Indian enrolment in UK universities fell to 6% of total foreign enrolment last year from 14% in 2010, Indians are the fastest growing foreign students in the US.

Most study Stem (science, technology, engineering and maths) subjects at graduate level. Many go back home to run major enterprises or to join government. Fond memories of their American sojourn and contacts most likely lead to their doing business with the US. Others, like Indian-born Sundar Pichai, graduate from Stanford University and end up becoming CEO of Google.

Donald Trump has no quarrel with these immigrants.

Plastic surgeons and chiropodists

Michelle Obama is yesterday’s woman. The new role models for girls are tall blondes with artificially puffed-out breasts, cheeks and lips. See the Trump family troupe – from wife Melania to daughter Ivanka – or buy a Barbie doll. Their exorbitantly high heels, worn at all hours of the day and night, lead to corns, bunions and other foot conditions. Plastic surgeons and chiropodists will be kept busy in Trump’s America.

The US and Europe – in sickness and in health

The importance of the Transatlantic Alliance

The venue: an estate close to New York. Our mission: to develop initiatives to help save the transatlantic relationship between the US and Europe. The participants: 40 movers and shakers from the countries involved.

I arrived full of optimism and left in despair because every action we came up with was dismissed as being unworkable due to domestic political agendas. Populism is the curse of our time.  Somewhere in the Trump/Marine Le Pen/Brexit intersection lie the forgotten remains of a transatlantic relationship that forged the post WWII liberal economic and political order.

Those who argue that its day is over, that we must accept and forge ad-hoc alliances amidst constant accommodation with our enemies, are misguided. Although returning to an earlier era is impossible, the West’s strength is dependent on its unity. “All good habits need to be practiced regularly and the Alliance is losing the habit,” in the words of one participant of the Ditchley Foundation’s weekend retreat at the Greentree Estate on New York’s Long Island.

When US President Barack Obama warns the Syrian regime not to cross a red line which it then crosses; when the West is reduced to asking Russia to “show mercy” to Aleppo residents, in the words of the UK’s Foreign Secretary Boris Johnson; when there are so many crises and flash points in the world, then the need for a reinvigorated transatlantic partnership becomes critical.

In one area, the relationship is working: NATO. Russia’s actions have forced the US to reconnect with the Continent and forced rearmament in Europe, with President Barack Obama’s 2009 “pivot to Asia” reduced to a distant memory. Ties between the European and American military are exceptionally strong, while the relationship between the UK and European NATO members have the friendliness and cooperation absent from the economic and political sphere.

Yet European leaders no longer focus on world order but on internal political stability, even as the continent is surrounded by a ring of external instability, from the Baltics to the Ukraine, the Balkans, Turkey and North Africa. For the UK, Brexit was yet another step in this isolationist direction. For the US, isolationism is the sleeping ogre in its history.

Challenges facing the Transatlantic Alliance include:

1. CHINA Managing the rise of China. The Chinese are “eating us for breakfast and lunch,” according to one participant. Note how badly the Chinese are now treating foreign companies in their own country, even as they buy up our companies and other assets, and transform the South China seas into their own domain. Their policy-makers speak of the New International Order led by a resurgent China and barely pay lip service to the idea of a multi-polar world.

The West’s only opportunity to counter their strength is through strategic unity, not apparent at the moment, and unlikely to surface. The Europeans are hungry for Chinese investment and prepared to overlook cyber-attacks and industrial espionage in the interests of GDP growth and jobs in their low-growth economies. The Americans, as the declining world power, are more combative towards their only serious rival.

2. REFUGEES German Chancellor Angela Merkel took in over a million refugees, a policy that has seen her popularity plummet. Due to families being allowed to re-unite, Germany will probably end up having to take in another 3 million.

The squabbling and disunity in the EU around the problem is no excuse for the US not to get involved in accepting a share. It would be a gesture of solidarity towards its European allies and a nod to the US/West’s role in the Middle East’s bloodbath. However, when Presidential candidate Donald Trump does so well in the polls with an anti-immigrant/Muslim message, it would be politically impossible for Hillary Clinton (if elected President) to welcome Muslims. Not only will the many Americans who vote for Trump still be around and very vocal, but the makeup of Congress may well impede any controversial policy. The massive displacement of populations due to war and the effects of climate change is, according to experts, bound to continue if not increase.

3. RUSSIA Reasons for Russia’s aggression include a declining population, the strategic nightmare of a 4,000 kilometre-plus frontier with China, jihadist problems on its borders and a shrinking economy. Not to mention a sense of humiliation post-the Soviet era and a corrupt, power-hungry President Putin who relies on creating a sense of outside menace to keep his popularity ratings high. In early October Russia launched a three-day civil defence exercise involving 40 million civilians to protect against a supposed US nuclear, biological or chemical attack – a large enough exercise to inspire paranoia in the most sensible Russian.

4. TRADE Global trade growth has decelerated notably since the financial crisis, both a consequence and a reason for lower world economic growth. The relatively simple Comprehensive Economic and Trade Agreement (CETA) between Canada (pop. 36m) and the EU (pop. 510m) nearly failed because the Walloon (pop. 4.2m) Parliament rejected it. CETA was finally passed a few days later with amendments to satisfy that region of Belgium.

The much more complex Transatlantic Trade and Investment Partnership (TTIP) between the US and Europe should be left quietly ticking over in Geneva in the hope that in a few years it could be resuscitated. Now, the coalition of interests arraigned against it is insurmountable. The lack of new trade deals is much more serious than it looks. Trade experts point out that like a bicycle, trade must move forward through new deals or else it collapses. On the transatlantic front, rows over multi-million US fines on European banks, and European Commission attacks on US giants like Google, look likely to continue. Meanwhile, protectionism is on the rise.

5. THREAT TO COMMON VALUES. The spike in hate crimes in the UK after the Brexit vote, especially directed at eastern Europeans, is still above pre-referendum levels. In the US, Donald Trump’s insulting language and behaviour towards Hispanics and women, among others, continues. The anti-Muslim, anti-immigrant platform of the National Front in France looks likely to see the party emerge as the second strongest in France in elections next year. Western societies have made huge advances in recognising the right to respect all individuals, whatever their race, gender and sexual orientation. Yet this basic tenet, one that unites both sides of the Atlantic, is nevertheless being eroded.

There is only so much time to act. The younger generation in the US are internationalists for whom Europe is “just another place full of cathedrals and museums,” as one eminent Harvard professor told us. Contrast this to a previous generation: within three weeks of taking office, President Nixon headed to Europe. The new generation are more prone to turn towards a growing, ever-more powerful Asia.

In the shorter term, the less we focus on our similarities and our combined strengths, the more we risk tiptoeing into a Third World War.

Germany – you are the weakest link. Goodbye!

The travails of a giant

Which country, dear reader, is the weakest link in Europe? Greece with its annual debt reschedulings? Italy with a banking crisis of massive proportions? Spain, with no government in eight months?

All problematic, yes. But I would argue that it is mighty Germany, whose economy makes us all sigh with envy, which is looking shaky. Its institutions have lost credibility, its economy is facing headwinds, and its people are angry.

Let’s take those in turn.

Angela Merkel, having been in power for over a decade, certainly counts as an institution. Her approval ratings are at record lows, even as she mulls over running for a fourth term in elections next year. In the last few days, in an early September regional election, her party had its worst-ever result, polling in third place behind the AfD (Alternative for Deutscheland). The AfD with its anti-immigrant, anti-Muslim stance is making huge strides on the back of the Chancellor’s “open door” policy decision on refugees a year ago. There are now well over 1 million in the country.

Merkel’s modus operandi hasn’t changed – taking her time, seeking consensus, moving her party, the CDU, to the more popular centre ground. But public opinion has, and they see her as ineffective and misguided in her refugee strategy.

Another institution, Deutsche Bank, poses the biggest risk to the global financial system, according to the IMF. Germany’s banking system in general is not that healthy. The country is overbanked, useful for financing business, but as we saw in the financial crisis, when there aren’t enough profits at home, the temptation to buy risky assets increases.

And what about Volkswagen? An institution that stood for all we admired in German manufacturing, turns out to have been faking emission results.

That lack of trust also applies to the press. In fact, the Germans have coined a word for it, “lugenpresse”, which stands for “liar’s press”. One German, whose home borders the Austrian border, told me about television last year only showing images of refugee families with young children streaming into Germany, when in fact he was seeing young, male refugees.

On the economic front, Germany’s obsession with achieving a balanced budget means its much-vaunted infrastructure is suffering from chronic under-investment. Even Transport Minister Alexander Dobrint admits “there is a lot of catching up to do.”

The German post-war approach, a belief that policy decided between government, business and the unions, would boost growth and protect workers, has also suffered a collapse. Following the Hartz reforms, German workers accepted years of salary restraint, while during the financial crisis they agreed a shorter working week to protect jobs. Yet there is increasing inequality, automation is making inroads, and 6.1% unemployment looks likely to rise, not least because of Brexit.

Last year, Germany exported €89 billion worth of euros to the UK, with cars a major part of it. The collapse in sterling won’t help this trade. Plus, there is a deep division between German business which is looking for continued access to the UK, while German politicians have to juggle their voters’ jobs with the need to make exiting the EU as difficult as possible, to avoid other countries following suit.

If internally, there are problems, these are mirrored on the international stage. Germany is becoming ever more lonely.

US Treasury Secretary Jack Lew recently stated that there was a consensus about putting growth ahead of austerity in the developed world. Yet is not true for Germany. Finance Minister (and putative heir to Merkel), Wolfgang Schauble insists “the debt-financed growth model has reached its limits.” Or, in the phrase Germans use internally, the “black zero” is sacred.

Meanwhile, Southern Europeans say the euro is simply a devalued Deutschmark, of benefit to German exporters but a disaster for them. Germans, instead, believe they are continually bailing out the So

A Lament for Britain

Why Grayson Perry is right

Broken-hearted, I write this column a couple of weeks after Brexit. We seem to have decided to imprison 16 million bright, mostly young people into an old people’s home led by a myopic political class that is too intent on back-stabbing to notice the flames engulfing the nation.

Youth are not sad. They are fuming. One Facebook post from a 22 year old university student read: “To the 17 million idiots out there [who voted for Brexit], Fuck You.” The morning after the result was announced, young people gathered outside former London Mayor Boris Johnson’s house. “Shame on you, Boris!” they shouted, alluding to his choosing to side with Brexit in full knowledge of the ensuing damage to the country (allegedly).

A Dublin-based digital company is not alone in posting a job ad on various social media sites: “Fancy leaving the UK? We’re hiring more than 50 people across engineering, sales and marketing.” In the four days following Brexit, there was a 57% increase in complaints about xenophobic attacks reported to the police. Our political parties are in disarray at a time when level heads are needed. Uncertainty will reign for years as a new deal is negotiated.

At the Financial Times’s summer party, stuffed to the rafters with 400 Londoners, the global elite shook its collective head at the referendum result. We gave a resounding cheer when Editor Lionel Barber stated that turncoat Boris was now out of the race for Prime Minister. We lamented together when he stated the evident truth: the UK is no longer stable and predictable following Brexit and our imploding political parties. We depend on foreign investors to finance the nation and our companies via financial instruments and foreign direct investment. No listed, accountable company can put money into the UK over the next few years.

However it was famed cross-dressing artist Grayson Perry (absent from the FT party) who encapsulated the truth in his post-Brexit remark, “Well that’s taught us peace-loving, country-running, money-earning, forward-looking liberals a lesson.”

Governments and companies need to spread the benefits of globalisation wider and shout its advantages to the rooftops. This is an issue that has been on the West’s agenda for a number of years. We in Britain are the ultimate warning, and where Brexit goes, Trump and Marine Le Pen may well follow.

As for the UK, social unrest looks likely. Firstly, how the country exits and what sort of a deal it strikes will not be known for a few years. A full 28 states have to agree a deal, and the departing state is torn asunder. A petition to hold another referendum has already garnered over 4 million votes and it only takes 100,000 for Parliament to consider a motion for debate.

Additionally, the worst affected will be many of those who voted Brexit, such as a vocal car worker at the Nissan plant in North East England, lured by false promises that Britain’s contribution to the EU would be spent domestically. Interest rates, pace Bank of England Governor Mark Carney and his soothing remarks post-Brexit, could well rise. The UK is bound to pay more to finance itself following the loss of its coveted triple A credit rating. Meanwhile, imported inflation looks likely, with estimates of 4% in 2017 on the back of the plummeting pound, and recession lurks as growth forecasts nose-dive.

The City, chock a block with excellence from all over the world, will lose business and jobs to other jurisdictions – a serious matter for the country as it contributed 11% of total tax revenues in 2015.

Some pundits are busy predicting the UK might remain in the single market by agreeing a Norway-style deal, although as this includes free movement of people it looks unlikely. Others say a bilateral trade deal is the only possible solution.

I would no longer dare a prediction, for these are truly sad and unprecedented times.

Watch out for a Saudi failed state

All change on the ECB and BoE boards

I plan to be an old lady whose smiley enthusiasm will be tempered by a series of oft-expressed bugbears. Every other sentence will begin with a croaky shout of, “It’s a scandal that…!” I shall then proffer solutions that are fairer and more sensible, with a wave of an imperious, wrinkled hand.

In a bid to get some practice in, here are five of my current irritations: greedy fund managers; greedy companies; inconsistency on the ECB and BoE boards; the rash change in foreign policy towards Saudi Arabia; and reckless Brexiters.

1. Greedy fund managers whose missives begin with endless paragraphs on the world economy, the markets and their strategy, finally ending with a throwaway line which almost makes it clear that they lost money. Your money. Your capital. Yet they talk about “underperforming” their benchmark. You as the investor still pay their fees. The CEO of Aviva Investors recently had the gall to say that he didn’t think his company’s charges were excessive. “The vast majority of our funds are ahead of their reference benchmark (my italics),” said Euan Munro.

What would be fair: There should be a commensurate loss of fee income for fund managers when their funds lose investor money.

1. Greedy tech companies. The focus on the Panama Papers and the wealthy with legitimate offshore entities is misguided. True, there are criminal money launderers who must be apprehended because they are breaking the law. But the biggest non-payers of tax in the world today are technology, digital economy and sharing economy companies. The British Office for National Statistics (ONS) announced in April that it is (finally) working on a feasibility study to officially gauge how to measure the sharing economy i.e. companies like AirBnB and Uber.

Governments are busy bowing very, very low to all these companies, in the erroneous belief that they create many jobs and that any tax increase will scare them off to another country. Google’s pitiful £130m tax settlement with the UK authorities earlier this year was defended by Google’s UK chief Eileen Naughton with the phrase: “Its international tax law. Google didn’t set the law.” She admits that if the law were different, the company would pay more.

What would be fair: Operating in the UK, or any other country, should be dependent on paying a reasonable amount of corporate tax here. What is “reasonable” could be decided in a number of ways, including a committee of representative stakeholders.

1. The Governing Council of the European Central Bank consists of 25 members. Two of them, or 8%, are women. Germany, France, Italy and Spain, the major euro area countries governed by the ECB, all have gender quotas for their larger company boards, including banks. These range from 33% to 40%.

The Bank of England’s Court of Directors does better than the ECB on the gender front: two, or 18% of the Board is made up of women. There are no quotas in the UK, but there are targets under the Davies Review. 25% of FTSE-100 boards, including banks, are now made up of female directors. The next target is for all FTSE-350 companies to have 33% female board representation by 2020.

What would be fair: The ECB should bring its governance up to date with that of the banks it governs. So should the Bank of England. At least 33% of the ECB Governing Council should be women and at least 25% of the BoE’s Court of Directors.

1. Saudi Arabia could well face its own Arab spring within the next twelve months. Four factors are playing a big role. The fall in revenues due to the collapse in the price of oil; US disengagement – both real and perceived – from its erstwhile allies; arch-enemy Iran’s re-joining of the international community; the Saudi demographic challenge, with 70% of the population under 30 years old and around a third of them unemployed.

There is no question that the country’s alliance with the West is defective. There are reportedly ties between a few members of the Saudi establishment and some of the 9/11 bombers, detailed in a US intelligence report whose findings could well be published if a US Senate bill is passed. It is no secret that the royal family owes its permanence in power to a deal with Wahabi clerics, including the export of this particularly unpleasant branch of Sunni Islam. Women still cannot leave the house without a male guardian nor open a bank account without their husband’s permission. The country’s strategic decision to push down the price of oil so as to safeguard its market share has been done by bankrupting Western shale producers.

On the plus side, the powerful new Deputy Crown Prince, 31-year old Mohammed bin Salman, is intent on transforming the economy. Yet even here, MBS, as he is known, has as many detractors as fans. The German secret service published a memo stating that he is a danger to regional stability, while it is not even clear that he will make it to the top job when his 80-year old father, King Salman, dies.

What would be sensible (fair not being the right word): realpolitik demands that we continue to support a flawed, authoritarian regime. The West cannot afford for the House of Saud to be overthrown, resulting in another failed state like Syria or Libya, let alone one with a massive population of 32 million which happens to be a geopolitical anchor, and within whose borders is Mecca.

1. It is a scandal that Brexiters talk about a few years of disruption as the price to pay for access to the promised land of EU-free legislation. It is impossible to estimate how long and how deep a recession would ensue. But it is possible to say that this would most affect the young, the children and grandchildren of many of those advocating an exit. Jobs are precarious enough in our modern economy without taking our families down dark alleyways where additional risks lie. Plus, a vote for Brexit is a vote for Boris Johnson to take over as Prime Minister, as David Cameron would resign on principle. What emotion, gentle reader, is inspired by the thought of Boris’s finger on the nuclear button?

The vast majority of countries belong to clubs. For geographical reasons, ours happens to be the EU. However imperfect, a much better strategy is to implement a pro-active policy so as to wield more influence.

What would be sensible: vote Remain.

Pariah nations re-join the global community

187 million new opportunities

A tsunami of pessimism overwhelms the Western world today. The cauldron of war and death in the Middle East, the refugee crisis, Islamist terrorism, Trump’s ascent, increased chances of Brexit, Brazil’s implosion and huge economic uncertainty, to name a few.

Having recently returned from Colombia, I beg to differ. Like most things in life, perspective is all. There, an historic agreement is being forged between the government and the FARC, a terrorist organisation that thrived for 50 years. Although a deadline has been missed, US Secretary of State John Kerry recently gave impetus to the talks, while the double digit growth of tourism reflects the atmosphere of optimism.

Yet Colombia, even with its troubles, was never an international pariah. There is even more of a reason for hopefulness when you look round the globe at previously isolated nations that are now re-joining the international community. Their combined populations add up to 187 million people.

In November 2015 Argentina voted out a government that was nothing but a wealth accumulation machine veiled in a thin film of ideology. President Mauricio Macri now runs a centre-right government that is briskly dismantling the Kirchner legacy by slashing currency and trade controls and normalising relations with the rest of the world, including awkward creditors.

Much more dramatically, Cuba and Iran are heading back into the mainstream. President Barack Obama’s historic visit to Cuba in March marked the end of a Cold War remnant and an official welcome to the West. In truth, changes in Cuba were already well on their way, with the government of pragmatic President Raul Castro sending officials to the West to learn how to run the country better, while economic liberalisation continues apace under the ludicrous state banner of “actualisation” of the system.

Meanwhile, lifting sanctions after a 15 year standoff with the Islamic Republic of Iran is already leading to economic opportunities for Western countries. Few doubt that with 80 million people living there, including a large and educated middle class, there is massive potential.

Still in Asia, Myanmar, a country with a population of over 54 million is also returning to the global system, grappling with a form of democracy and with forecast growth of over 9%.

There are countries whose situations are less clearly positive but where the potential exists for major transformation. Venezuela is still on the US sanctions list. But the opposition Democratic Unity Alliance won two thirds of the seats in Parliament last December. There has been a stand-off with President Nicolas Maduro, the uncharismatic successor to Hugo Chavez, and a military coup is possible. But given the dire state of the economy, even his government has had to confront reality, devaluing the currency and raising fuel prices.

On the economic front, commentators generally focus on the negatives, of which there are indisputably many. However, a record low oil price and low commodity prices benefit consumers and manufacturers. As for the lack of inflation, shoppers are profiting. Employment is at a record high in the UK, while the US has had six years of uninterrupted job gains. Both their governments have realised the need to ensure the working poor share in the good fortune by raising the minimum wage. In fact, California, one of the world’s largest economies, just agreed to raise the minimum wage from $10 to $15 by 2022. For those who argue against these sort of measures, let us remember the capitalist system needs consumers who have the income to consume.

On a multinational level, the Paris climate agreement signed in December 2015 is ground-breaking: 195 countries adopted the first universal, legally binding global climate deal to limit global warming to well below 2 degrees centigrade. The accord is also a pathway to achieving other deals on issues of world importance, such as water scarcity.

I could go on, writing about medical and scientific advances, or about gay couples being able to kiss in public, or about the Starbucks and Googles of this world finally realising they will need to pay tax. Then again gentle reader, perhaps it is enough for all of us to consider our lives and give thanks for what we have.

This column appears in Dialogue, the leadership and management review

Russia’s cash crisis and its Syrian bombing

Hermitage Capital’s Bill Browder speaks

I met a ghost the other day. Bill Browder, last seen in Davos when he was riding high on waves of adulation for his bold bet on Russia’s future, should have been dead. Few opponents of President Vladimir Putin and his favoured oligarchs remain alive, encountering death through startling “heart attacks” and plutonium poisonings.

“The reason I am still alive is that the Putin regime hasn’t figured out a way of killing me where they are sure to get away with it, “says Browder equably.” They have made lots of threats both to kill me and to kidnap me. Unfortunately, they get more brazen by the day so my safety is far from certain.”

His bold claim that Russia will run out of cash by July 2017 must be shortening the odds of his remaining alive: “In simple terms, Russian companies have approximately $600 billion of hard currency debt and the central bank has only $350 billion of reserves (of which I believe that $150 are fake). That means if sanctions aren’t lifted, the debt repayment schedule will deplete the country’s reserves within about 18 months.”

Russia is suffering economically from Western sanctions on the back of its incursions in Crimea and the Ukraine, and even more so from the collapsed oil price. Oil and gas accounted for over 50% of its budget revenues until 2014 – this year it is forecast to be a paltry 35%. A recent agreement between the Russians and the Saudis to boost the price appears to have evaporated.

President Putin is planning major privatisations to boost the state’s coffers, according to the FT, but it is not clear who would buy the substantial stakes. Foreign investors are wary of the regime’s trampling on the rule of law, while oligarchs are keen to keep extra funds safely parked abroad for when they fall out of favour with the regime.

London’s reputation for welcoming Russian money has been heightened by publicity stunts such as the new “Kleptocracy Tour” of London, organised by the Russian Anti-Corruption Foundation and two Western think tanks. Forget Buckingham Palace and Big Ben, this bus weaves its way between the multimillion properties bought by the corrupt elite.

In the summer of 2015 Prime Minister David Cameron announced that he would tackle foreigners investing dirty money in London using anonymous offshore companies. There have been no subsequent announcements. Meanwhile, the report into the poisoning of Alexander Litvinenko in London concluded that the former spy was most likely a victim of a state-sponsored murder sanctioned by President Putin. Yet again no action has been taken.

“The British government has been completely weak-kneed when it comes to standing up to Putin. I attribute it to fear – they believe it is easier to appease a bully than confront him – and greed – many powerful people in this country are feeding at the Russian trough and they don’t want the flow of money to dry up,” claims Browder.

His story is the stuff John Le Carré novels are made of. As Founder and CEO of Hermitage Capital Management, adviser to the largest foreign investment fund in Russia, worth $1 billion in 1997, Browder was a fêted man. Until in 2005 he wasn’t. There appears to be no middle ground in a country where one minute you are clasped to the regime’s bosom in lifelong friendship, and the next you are a mortal enemy whose days are numbered.

Browder’s campaigns against corporate corruption saw him declared a threat to national security and forbidden entry to the country, while the authorities stole $230 million via the Fund’s investment companies. Sergei Magnitsky, the lawyer he hired to investigate the crime, was tortured and killed in custody in November 2009. Since then Browder has dedicated his life to seeking revenge for an innocent man. His missionary zeal resulted in the US Congress passing the 2012 Magnitsky Act, which imposed visa sanctions and asset freezes on those involved in the lawyer’s death.

Browder believes that Putin has stepped up his bombing campaign on the rebels and civilians in Syria in order to create a negotiating position to force the West to withdraw sanctions in relation to Ukraine. (Russia and the US have agreed to enforce a ceasefire in Syria from Saturday, February 27. But the omens are not favourable, given the last time one was attempted it failed, and not all groups fighting in the war have agreed to it).

“Putin has created an existential problem for us by triggering swarms of new refugees. Many EU governments are on the verge of falling because of the refugee crisis. Putin is hoping we will beg him to stop and his condition for stopping is no more sanctions,” says Browder. “Secondarily, in the long term he would like to break up the EU and the best way of doing this is to create the conditions for hard core nationalism, which is another consequence of all the new refugees.”

Other experts agree that Putin’s aim is to make German Chancellor Angela Merkel’s position untenable, given that she is the only leader who can keep the EU united on Russian sanctions and, arguably, hold the EU together in the midst of an existential crisis. Already the Schengen open-border agreement is moribund, Hungary and Poland are evermore hostile to the EU and the political shenanigans around a possible Brexit are an unwelcome and divisive distraction.

Browder disagrees with the widely-held view that Russians are used to suffering under a Tsar-like figure and thus a revolution to unseat Putin, who has been in power for 17 years, is highly unlikely.

“That’s a myth. They have just never been rewarded for bravery because the instruments of state repression have been so effective…If at any moment there is an opening, the Russians will jump on it just like the Ukrainians, Tunisians or Egyptians did with their citizen revolutions,” he says.

Let us hope this brave man is there to see it happen. As Browder writes in the mesmerising book about his struggle, Red Notice, anyone who has read Chekhov, Gogol or Dostoyevsky, knows that Russian stories don’t have happy endings.

If it’s not bust, don’t Brexit

Destroying the Norway/Switzerland myth

The UK is tying itself up in knots over Europe. The pro and anti camps come up with ever more outrageous statements: “If we leave, the UK will float in a sea of isolation comparable to North Korea’s“ vs “The EU costs up to £10m per head of population and is responsible for the death of all puppies.”

In truth, the numbers can be added up in all sorts of honest and/or creative ways to make the case for staying in, or leaving. Even those of us who believe that it is key for the UK’s future to remain within the club are disgusted by the incompetence, waste and corruption within the EU. In the face of this, it is difficult to argue against the emotionally-appealing view of an island utopia, as propounded by Brexit supporters.

But let me, as an immigrant and an adopted Brit, who has lived for longer in London than anywhere else and holds this country dear, give it a try:

1. Stop this fantasising about the UK (population 63.5m) being able to access a “favourable deal” a la Norway (population 5m) or Switzerland (population 8m) if Brexit takes place. Both countries have similar agreements with the EU which give them access to the single market. Except they have no say over regulation, which they have to sign up to, nor a say on product standards. Plus the Swiss do not have unimpeded access to the financial and other services market in the EU, which would be a major blow for the City of London and our services sector as a whole. And, a fact that seems to have been ignored by Brexit proponents, both countries have to abide by free movement of labour rules, meaning they must remain open to EU immigrants.

2. Stop blaming the EU. It is excuse number three in the lexicon of all British governments, as a Minister recently told me. Perhaps it is time to admit publicly that much of the excessive regulation this country suffers from is due to the British civil service’s addiction to gold-plating EU Directives when they turn them into UK legislation.

3. Drop the outmoded argument that the EU is seeking ever closer union and we don’t want to be part of it. The reality on the ground is totally different. Schengen is dead. The migrant cum refugee crisis is seeing the re-emergence of barbed wire and border controls. Meanwhile, the former East bloc countries are not going to join the Euro. In fact, a number of them are becoming ever more hostile to the EU itself, including the largest of them, Poland, which is following in the steps of Hungary’s autocratic government.

4. Get over the inescapable loss of sovereignty. Welcome to a world where even giants like the US and China have to balance national interests, those of their allies and the world economy. Global integration is a fact. The world is coalescing into blocs and we want to be included in treaties like the US-EU Transatlantic Trade and Investment Partnership (TTIP).

5. Britain must become a leading protagonist in the EU, alongside Germany. That is its rightful role. There are a number of EU meetings at which no UK official bothers turning up because our direct interests are not affected, an unspoken policy that started with Gordon Brown’s government, according to top UK civil servants. All meetings are important, not necessarily because of their content, but as a way of cultivating colleagues for future coalitions. A proactive policy will yield results – not least, because the world view of the UK and Germany are much more alike than that of Germany and France, with whom Germany is forced to partner due to the UK’s disengagement.

6. On the security front, the more ties that bind us to our allies in a dangerous world, the better. Sir John Scarlett, former head of spy service MI6 recently wrote in The Times that “British agencies…collaborate intimately with their European partners and benefit greatly from their capabilities.” President Barack Obama has called for the UK to remain in Europe as it gives the US much more confidence about the strength of the transatlantic union, which has made the world a safer and more prosperous place.

Brexit is a siren call. Let us not crash on the rocks, but sail on. And turn up to those meetings, guns blazing and charm turned on.

This article is due to appear in the next issue of Dialogue.

Predicting the Spanish December elections

¡Viva la diferencia!

Spain is different.

In the midst of disillusionment with the usual parties and politicians in Europe and the US, with citizens in France heading off to the far right, voting for Marine Le Pen and her National Front; with those of Poland voting for the Law & Justice Party, which sees Hungary’s anti-democratic government as a role model; with those of Greece…well, dear reader, you get the picture.

What is Spain going to do, with general elections on December 20? After all, Spaniards have more reason to complain than many other nations: tough austerity measures and unemployment over 20%, even with the economic recovery.

But Spain does not move in sync with any country, let alone France, Greece and Poland. The governing Partido Popular despite all the corruption and the charisma black hole of its leader, the country’s Prime Minister, Mariano Rajoy, scores highest in the opinion polls with 27%.

Why? Spaniards are more pragmatic than many of their European neighbours. They’re focusing on the economic revival, which has come about due to hard-hitting austerity measures and labour reforms, helped by a low oil price, the euro’s depreciation and private sector restructuring.

The traditional opposition party, the PSOE or Socialists, whose policies are social democratic, is clinging to second place in the polls with 21%. It suffers from its own corruption scandals and a leader, Pedro Sánchez, whose party is not fully behind him.

Meanwhile, a new party, Ciudadanos (Citizens) is snapping at its heels, scoring 19% in the polls. It stands to be the kingmaker and will likely ally with one of the two traditional parties to govern from 2016.

Yet again, Spain is different. It is the only European country post the crisis to boost a new party whose politics lie squarely in the centre. Cuidadanos is fiscally conservative, while its social policies are liberal; it is pro-business and calls for corporation tax to be lowered. Rumour has it that large Spanish companies have helped fund its coffers. Be that as it may, its high poll results speak for themselves. The leader, Albert Rivera, is a fresh-faced 36-year old Catalan, a useful weapon at a time when Cataluña’s independence and its lack of governability are key issues.

Over the last three years 3,000 companies have moved their headquarters from Cataluña, mainly to Madrid. The pace and size of the companies relocating accelerated this year.

In truth, the fault for the current state of the Catalan question lies just as much on the shoulders of an intransigent, unimaginative Prime Minister. The best result for Spain’s unity and its economic health, which happens to be the most likely result, is either a Socialist/Ciudadanos coalition, or a Popular Party/Ciudadanos coalition, with PM Mariano Rajoy forced out of the picture.

In point of fact there is another protest party, Podemos, but its support in the polls has plummeted to 14% from 28% a year ago. It is led by a pony-tailed academic who has been moving briskly away from the extreme left towards the centre, where the majority of Spaniards feel most comfortable.

On the economic front, growth this year looks like being 3.2% and next year is estimated at 2.7%. The highest sustainable growth rate in Europe. Spain’s stock market may provide a buying opportunity for 2016, with the IBEX index forecast to rise over 12%, according to BNP Paribas.

Moderation, aspiration and consumption are not words that set the world on fire. But for Spain, they are likely to ring true on December 20.

¡Viva la diferencia!

An anti-globalisation duet: Trump & Corbyn

Why domestic bank M&A is set for a boom

As Donald Trump and his toupee continue to ride high in the US presidential opinion polls, I find myself musing on his fellow jockey, UK Labour Party leader Jeremy Corbyn.

Mirror images of each other on the political spectrum, they will never lead their respective countries. Yet the unelectable duo are worth listening to, for they represent large elements of the population that are opposed to the globalised world we live in.

Take their attitude to free trade. Trump calls for a 15% tax for outsourcing jobs and a 20% tax for importing goods, and sees trade deals as “killing American jobs.” He believes trade negotiators are a bunch of “saps” and says he would appoint corporate leaders to do the job properly. Corbyn warns that TTIP, the prospective trade deal between the EU and the US, is nothing but a capitulation to “greedy bankers and multinationals.”

His refusal to campaign for Britain to stay in the EU has, ironically, withdrawn a major weapon from the Conservative government’s armoury for its future referendum. Corbyn and his allies, who embody the discarded remains of the Left’s 1970’s euro scepticism, see the EU as representing the interests of big capital. Rather paradoxical, given that big business sees the EU as excessively defensive of workers’ rights and the progenitor of too many regulatory burdens to protect citizens.

Trump and Corbyn, one 69 years old and the other 66, both fail John Maynard Keynes’s three imperatives for a balanced government. The economist and statesman wrote: ““The political problem of mankind is to combine three things: economic efficiency, social justice and individual liberty….the third needs, tolerance, breadth and appreciation of the excellencies of variety and independence, which prefers, above everything, to give unhindered opportunity to the exceptional and aspiring.”*

For Corbyn, social justice can be achieved without economic efficiency and individual excellence. This would result in a country with not enough profits to pay for a safety net for the disadvantaged. The reality for Trump, who would lay claim to both economic efficiency and individual liberty, is a country where protectionism kills efficiency and individual liberty applies to some, but not all. And certainly not to the roughly 11 million illegal immigrants who water his many lawns and serve in his many restaurants.

Just as surprising as their similarities, are their allies in the anti-globalisation movement. Joining them in the stop-the-world-I-want-to-get-off gang, are financial regulators on both sides of the Atlantic.

The European Central Bank’s post-crisis conventional wisdom is that geographical diversification of multinational banks does not protect against risk and adds a layer of complication. Long gone are the days when banks followed their corporate clients abroad and then proceeded to buy local entities and grow. The European Central Bank “comes out in a rash” when a Spanish bank mentions buying bank assets in emerging economies, affirms a bank CEO. The Federal Reserve in the US takes the same position, according to most accounts.

Regulators learned a lesson from the last financial crisis. It may, of course, not be the right lesson, for every crisis is different – the drying up of wholesale bank funding markets in 2007/2008 was very different from the run on the deposits of 37 banks in the Japanese Empire in 1927.

With foreign expansion off the cards, cost cutting reaching its finale, new digital entrants threatening the traditional business and financial supervisors breathing down their necks, banks will focus on local acquisitions to grow their profits. A domestic M&A boom is forecast for 2016.

Regional movements like those in Cataluña and Scotland are part of the anti-globalisation trend. Allied to the sense of alienation from their existing rulers is an almost blind belief that raising the barriers will lead to paradisiacal economies with full employment.

To these misguided idealists I would add proponents of Brexit, the exit of the UK from the European Union. The world is moving into ever larger trade groupings. Being outside is not a reasonable option for a major country – unless there is an appeal to being emailed instructions from Brussels without having a seat at the table. Norway pays a heavy price for its nominally freestanding position since it is forced to incorporate EU legislation into its own.

In 1944, Keynes warned in the House of Lords against “little Englandism” which pretended that “this small country” could survive by a system of bilateral and barter agreements or by keeping to itself in a harsh and unfriendly world. His words continue to ring true.*

Both Trump and Corbyn remind me of the rutting impalas I saw in Zambia this summer. A fresh male impala, the handsomest and most macho, fights off the others to breed with the herd of females. After around three weeks of non-stop sex, with no time to feed or groom himself, he is weak and easily taken out by a challenger, a young buck from the group of male impalas. If he’s lucky, the exhausted male impala might then re-join the all-male herd or, just as likely, be eaten by a herd of lions.

The only question about the future disappearance of fraternal twins Corbyn and Trump is whether they slip back into their old lives or are gobbled up by the forces of globalisation.

*Universal Man: The Seven Lives of John Maynard Keynes by Richard Davenport-Hines

Predicting the VW share collapse a year ago

Who else will fall?

Companies that do outstandingly well on the back of a “hero” CEO will crash, we predicted a year ago. The hero generally turns into an over-controlling, hyped up central figure who spends way too long in the job; who has the blind enthusiasm of investors and the public; who indulges in a stream of acquisitions; and who ensures there are no obvious successors.

Volkswagen was on our list. Which are the other companies? Take a look at our video on YouTube.

Why the UK’s output lags behind

August 18, 2015

School holidays and their effect on the Establishment

In a lighthearted post in the Financial Times, To boost Britain’s productivity, cancel August, Karina’s Column addressed the UK’s efficiency conundrum via the City’s holiday habits.

Six Steps to Retaining Your Promising Female Executives