Archive for the ‘ UK ’ Category

The underperforming FTSE – set to rebound?

See my piece here. The FTSE’s underperformance in the last year is rooted in two main factors: that it has a defensive skew, which mean it naturally rises less in rising markets, and the fact that the rising market itself has not been driven by those cyclical sectors that it is more heavily weighted in. That means that the last year has been the perfect storm for the FTSE to lag.

The converse is therefore also true, and moving into next year, the FTSE could find itself a winner whatever the weather. If miners rebound, as is expected, then that will benefit the FTSE disproportionately but also if the global growth outlook darkens and the “Draghi put” runs out of steam, with the euro zone debt crisis re-intensifying and hammering financials once again, the the British defensive skew should also help it out.

As China sees a soft landing, a certain amount of cyclical rotation into miners seems likely, which may dampen enthusiasm for financials even without renewed crisis. Fund flow data reflects this. And while the perfect storm that has hampered the FTSE could carry on into the first part of next year, the bets on the FTSE falling are being reduced by even more than my story says, with Karl Loomes, Market Analyst at Astec Analytics, informing me yesterday that over the past 30 days there has now been a 54% decrease in shares being borrowed on the FTSE– far outstripping European peers.


An inglorious triumvirate

I’ve had some interesting feedback to my last blog post, some of which took it more seriously than intended but all of which is well taken (not least as I’d be hypocritical to defend lazy blogging with appeal to humour given my unforgiving post of the same day). The central point of the post is the use of discourse: when the economy is recovering, it is due to the government’s genius, when it is tanking, it is due to all manner of implausible, irrelevant  and highfalutin excuses. And that point still stands.

The claim that the panic was purposively induced was meant more ironically, which is just as well because, as has been pointed out to me, the figures don’t add up. ONS statistics of Q4 GDP at market prices have £380,517,000 = 0.1% of quarterly GDP, meaning that to add +0.3% (assuming 0% growth without the fuel crisis) would require >£1.1bn extra spending. If we assume 30 million cars on the roads, they’d all have needed fill up at the government recommended amount of half a tank (30 litres) at 140p per litre, and it not had had a negative impact on other consumption. In one sense this is possible, as the nature of panic buying isn’t that everyone followed the government’s “reasonable” advice, but that those who did top up bought much more than half a tank, even if it wasn’t all the 30 million. But then wrangling like this is tenuous, as how many would had to have bought petrol anyway, how many people at petrol stations across the country who were interviewed by the BBC exclaimed their frustration at the panic buying while claiming (very plausibly) that they needed it? Analogously you can argue that the supposed growth of last quarter was illusory because the the proportion of money that is spent on food… clearly that is absurd. My point was that the government’s reasoning is likewise tenuous, and had growth been below par they probably would have cited Lent and a drop in demand for sugar as the reason, even though it’s never been relevant any other year, and people buy Easter eggs preemptively…

Whatever, you get the picture. Given the difficulty of working out the effect of the petrol crisis on growth, the idea that it was pre-planned conspiracy is far-fetched to say the least. Irony is hard to convey on a blog, and while I don’t apologise for that, I did want the figures and will happily admit that they don’t back up the hypothesis of coalition led conspiracy. But part of me thinks: if only they did! Because as explanations of accounting for the government’s motivation during the the petrol crisis, we have that it was:

a) a conspiratorial account for inflating growth figures,

b) a possible “Thatcher moment”, spoiling for a fight with trade unions

c) due to massive amounts of governmental incompetence.

The friend who alerted me to the figures cited b), I’d just as happily believe c). Inflating growth figures, while underhand, could instrumentally benefit the country, restoring market confidence and perhaps creating a positive cycle of growth. While we have a classic case of credit-taking by the political class, good things could come of it, and frankly, it seems the lesser of three evils when explaining the government’s action. Which might be, in term, why on examination it’s the least plausible. After all, of all the feedback I had from the blog, no-one said that I was being unfair on the government per se; merely that I had misidentified their motivations, and the exact nature of their dastardliness/incompetence. Which doesn’t exactly cover them in glory.

Abandoning the 0.7% aid target – is it wise?

The House of Lords Economic Affairs Committee today recommended to the government that they should drop the 0.7% GNI target for aid, citing that how money is spent, rather than how much money is spent, is what should determine policy. Their point about aid effectiveness is well taken, and that they want value for money is quite hard to argue with. No-one can take particular issue with with it, in the way that no-one ever lost an election by saying that they were going to make cuts to “waste”, as if there were billions of pounds floating around going to literally no use at all (see issue 9, p3).

However, as the more perceptive readers among you will have already realised, there is nothing to suggest that you shouldn’t make these fantastic savings by giving aid where a cost/benefit analysis suggests is efficient, but still giving at 0.7%. They don’t really explain why this isn’t an option.

It may well be that an absence of good reasons for a 0.7% target is reason enough to abandon it. As they point out, no other donor country has honoured their promise, and the reaffirmed commitment to the figure is a relatively recent development. However, if you take the premisses of a) giving aid by results and b) stopping aid when you get results, then over time, you’ll end up spending less and less on aid, even when it is still needed.

Let me explain. I wrote a paper this year motivated by the following quote.

Countries that are not corrupt do not require foreign aid, and foreign aid to corrupt countries entrenches corruption by increasing the gains to corruption.

 The first clause roughly corresponds to premiss b), and the second to premiss a). I say roughly, which is important, because I don’t attribute the views of Posner and Becker to the Economic Affairs Committee or DFID. Posner says he does not believe in giving foreign aid, which you’re unlikely to find Andrew Mitchell saying any time soon. But you can see how the committee’s wariness at giving to corrupt regimes (i.e. not basing giving on results) echoes Posner, and how, in the long run, non-corrupt countries will cease to have a need for aid as DFID fabulously well targeted programmes have the intended development outcomes. So while Posner is wrong to say that non-corrupt countries don’t need aid (levels of corruption and levels of development are different things), the British government may fundamentally agree in this analysis as a long term view of things, insofar as the non-corrupt and successfully developed countries will be the same thing when (if?) the aid programmes work their magic.

In my paper, I argued against the Posner view of aid. So what’s wrong with this view? There is a group of people who remain in a dire condition when the aid dries up. The poorest in the most corrupt countries get cut adrift. Financial transfers to their political leaders isn’t an attractive option, but it’s an absurd straw man to imply that this is the only form of aid available to donors. The House of Lords report also had disappointingly little mention of Technical Assistance. In the Section on “The Impact of Aid”, it is mentioned once:

Some forms of aid are less fungible than others. Technical assistance tends to be the least fungible, simply because it is tied to specific projects that might otherwise not take place. Budget support is the most fungible.

This is true, but they don’t build on this. It isn’t mentioned in the section on corruption, instead:

“… [aid] and corruption always go hand-in-hand, because aid is essentially seen by those entrusted with it as “free money”…”

Michaela Wrong’s insight is valid, but surely at this point the compilers of the report should have joined the dots and realised that aid isn’t seen as free money if it’s given in a non-money, non-fungible form. And perhaps people who read the whole report will join those dots, but when it’s not mentioned in the summary, or the snazzy accompanying video, then one imagines that Technical Assistance will be overlooked by policy makers and DFID too.

How is this related to the 0.7% target? There’s nothing about the figure 0.7% that is intrinsically significant, but I think abandoning a commitment to spend a fixed percentage of GNI on aid risks Britain cutting adrift those very populations that are most in need before time. There are four mooted reasons why reaching the 0.7% is said to be a bad idea: that the government will…

  • Wrongly prioritise the amount spent rather than results achieved
  • Make the achievement of the target more important than the overall effectiveness of the programme
  • Risk reducing the quality, value for money, and accountability of the programme
  • Increase the risk of a corrosive effect on political systems in recipient countries

Of these reasons, the first three don’t necessarily hold (you can still give plenty of money and be mindful of where it goes; they aren’t mutually exclusive), and the last one is avoided by using Technical Assistance rather than money transfers. Because, here’s the kicker: we could just spend that extra money on Technical Assistance. Suppose that giving more money than was optimum after a CBA was carried out really did reduce quality, as the 0.7% caused DFID to lose all discretion in their money transfers to dictators etc etc: even then, we could still spend at a 0.7% level, with the excess going to funding Technical Assistance. This could help governance even in corrupt countries while the optimum level of aid is being spent in non-corrupt countries.

Clearly this is a simplification. Corruption isn’t binary, most importantly. But the central point remains. An economic adviser, or an accountant, is harder for corrupt leaders to misuse, and thus a worthwhile constituent of the aid budget. And if we don’t have a level at which we’re ready to commit to spend, and only aid non-corrupt countries where there is a guaranteed return, then we’re just writing off millions of the world’s people with the greatest need.

Kony 2012: the Ugandan Prime Minister’s response

I was fascinated to watch Ugandan PM Amama Mbabazi’s response to the Kony 2012 campaign last night, and how he seems to share the critiques of many Ugandan observers, such as Mamdani, and non-Ugandans. This is not necessarily obvious, given that the Ugandan government stands to gain from the achievement of Kony 2012’s goals. If you remember my first blog that talked about the LRA,  it was addressing an article by John Pilger in the New Statesman who dismissed the American national interest (which justified the intervention) as “usually mean[ing] buying a corrupt and thuggish regime that has something Washington wants”. And my first piece on Kony 2012, the Think Africa Press piece by James Schneider and Zoe Flood have all noted the self-interest that is served by Ugandan forces being given a remit to pursue Kony.

Which raises the question: why doesn’t the Ugandan Prime Minister welcome Kony 2012’s simplifying message with open arms, if it seems clearly in his government’s interests to do so?

A few points here. The reality on the ground cannot be ignored; be it Zoe Flood’s taxi driver or a Professor at Makerere University, Uganda’s civil society seems to have responded unanimously, taking exception to the video. And rightly so. It could be that the Ugandan government’s response has been derived from this backlash, and deviation from the public discourse within the country (for example, if the government welcomed the video wholeheartedly) might be seen as so politically motivated as to be absurd.

Secondly, the actions of the UPDF are not necessarily the direct fault of the central government. By this I mean, when Flood’s taxi driver says that “they haven’t arrested him because he makes them too much money”, it’s unclear who he means by “they”, and many of the UPDF’s abuses appear to be more the result of moral hazard rather than centralised policy. I wrote in my earlier post about Kisangani, and Gerard Prunier pointed out (in Africa’s World War) that mineral exploitation in Kisangani was not centrally controlled through the government, as it was by Rwanda. Moreover, when Schneider refers to “military commercialism,” he talks of Uganda’s senior officials in the army, not of the government per se. This isn’t a defence of the government, as clearly they should be responsible for their troops if they’re out of control as much as if they were just following orders. But it provides a dualism through which the government can keep a distance from the actions of the army, and again, might be jeopardised if the government supported the film too much.

Thirdly, throughout the film it is clear that Mbabazi is playing down the role of the military for a reason. He wants to encourage tourism and investment, and stress that Uganda is a safe country which has been at peace for five years. These things are all true, but this only makes sense if the gains to peace are higher than the gains to aid given to support the capture of Kony. This suggests that Flood’s taxi driver only takes us so far: while there may be marginal benefits to pursuing a war out of a Collier style “greed” scenario, the growth produced by investment and peace seem to outweigh this. It may be that both can be pursued, with the army being given a carte blanche to galavant around Central Africa to find Kony, while publically the government emphasises gains to peace inside Uganda.

Finally, it might just be that the Pilger story isn’t plausible. Why wouldn’t the Ugandan PM like a film which supported US aid for his “corrupt” government that is otherwise powerless to stop a warlord? Well, why would he? Perhaps it’s not all a big conspiracy theory, but rather the honest reaction of a man in government who is just as much bemused by the simplification of his country’s problems and history as his compatriots are. At this point, here’s a helpful reminder of some of my previous thoughts on African conspiracy theories.

I think the extreme version of the last point might be a bit naïve, but, as ever, comments are welcomed.

Friday Question: What are the dangers of changing the definition of marriage?

In a bid to make my blog more interactive (and working on the principle “blog more often, blog fewer words”…) I’m introducing a Friday question, the great advantage of which is that I don’t need to figure out for myself what I think before I post about it.

This week’s is a genuine puzzler to me. During the gay marriage debate, I’ve heard a lot about the “dangers” of messing with an institution on which this country was built. But I’ve heard very little about what these dangers actually are. Newsnight last night was a good case in point. With the new “lots of people in a small room” set-up, it got a bit heated, incomprehensible and awkward. However, while the person who suggested that arguments about gay marriage can be an excuse for thinly veiled homophobia was pretty roundly shouted down, I can’t see a “danger” in changing the idea of marriage following on from any other premiss than homophobia.

Some of the bishops alluded to marriage’s importance in producing and raising children, which is obviously at one level biologically unfeasible in gay marriage but on another level already legal in civil partnerships. The link between marriage and raising children has been dead for a while now in heterosexual relationships too. I mean, it’s not a fact that the church is necessarily a fan of, but it’s true (in the interest of brevity I’m not going to discuss this point further, but pick me up on it in the comments if you really want me to spell it out further).

Milo Yiannopolous, a gay Catholic who seemed to think that his own unique position of being gay AND a Catholic lent him some sort of profound insight into the issue which no-one could disagree with, did at least come up with a theoretically quantifiable “danger” of gay marriage: given that the Catholic (and Anglican) churches weren’t going to allow gay marriages, even if they were legalised, there would then be test cases which set individuals and the church against each other in conflict, which he personally didn’t want. I can think of two good arguments against this. First, transplant the location to Little Rock Arkansas, the issue to school segregation and play through his reasoning… and it’s not very pretty. That an institution is resistant to change which might threaten its own prejudices is regrettable but not an argument against change. Secondly, I can understand that in his own position he might think it not worth the hassle, might prefer to put his faith above his sexuality (or might convince himself that his partner is a “profoundly good friend” or whatever). But what of the Christian gay couple who were on the show, who want to get married, and whose vicar wants to marry them? The fact that sympathetic vicars can’t marry gay people reveals the more likely effect of the legalisation of gay marriage. I can completely understand that as a group who has been discriminated against, one might not want to rock the boat against a powerful adversary and face a backlash. It would be understandable, even if it didn’t make inaction right. But so many Christians are sympathetic to gay marriage, that I think the more likely outcome isn’t a big conflict between gay people who really really want a traditional Catholic marriage, but another schism where new churches, probably Anglican but also maybe Catholic, split from the mainstream and allow gay marriage. And you can see why people in high places in these Churches might not want this, but again, it’s not really a societally “dangerous” consequence of gay marriage.

So I could only surmise two actual “dangers” of gay marriage from Newsnight last night: The threat to children and the threat of test cases and conflict, and neither seem to a) appear valid or b) override normative imperatives even if they were valid (that is, even if Little Rock were to play out, that wouldn’t be an argument against the rightness of the decision).* So given these two reasons don’t stand up, this is where you come in. Can you think of any other dangers in changing the definition of marriage?


* I realise what is “right” does not mean what is safe, and so when someone talks of the “dangers” of something, it doesn’t mean they don’t think it’s right, in the general case. In this case though, it seems that they do. So I’m taking “dangerous” in the sense that the Bishops seem to use it, in the sense it might foundationally threaten the fabric of our society (which would be wrong). When they use it, they don’t say “we’re begging to do the right thing and be able to marry gay people, we just fear that our barbaric congregation will tear them limb from limb”. Either members of the clergy cite this sort of moral-spiritual “danger”, and argue against gay marriage as being “wrong”, or they argue for it as something that is “right”, regardless of other dangers.

Kony 2012: Invisible Children’s invisible agenda

In my first post on Kony 2012, I focussed on, shall we say, the demand side equation for intervention in Central Africa to catch Kony, and how Invisible Children’s campaign may be ineffective and misguided, whatever their enthusiasm and good intentions. I deliberately didn’t get embroiled in the supply side motives of Invisible Children themselves, and how dubious they might be. However, if you are interested in that side of things, then Charlie Brooker is a great place to start.

Marriage: how a word changed its meaning long before the law

Ludwig Wittgenstein once wrote that “an entire mythology is stored within our language”, yet it’s not a mythology we often take time to think about or challenge. However, if there was ever a word for which competing mythologies are being scrutinised for ever more closely in Britain these days, it’s one ever so simple one. Marriage. With a meaning seemingly self-evident.

Of course, it’s meaning self-evident in different ways to different people. A few weeks ago, two of my friends were debating the recent gay marriage furore. One of them, I’ll call him Neil, doesn’t support gay marriage. He is gay. This might strike you as a little odd, yet it’s perfectly internally consistent. He’s sees marriage as primarily a religious concept, and, being an atheist, he’s perfectly unconcerned that gay people can’t get married. It’s like a Jewish person wanting to be baptised, and what Christians do in in their own churches is of little concern to him. He sympathises with gay people that are Christian who wish to marry, but doesn’t see it as his battle to fight.

Paul is also an atheist, and happens to be straight. However, he doesn’t see that being either atheist or gay should preclude you from being able to marry. For Paul, marriage is a societal concept, which the church shouldn’t have hegemony over. Any sort of distinction, or limiting of gay people to the realm of “civil partnership”, is discriminatory and thus intolerable.

Listening to Radio 4 this morning, can see where Paul is coming from. Vincent Nichols, the Archbishop of Westminister, told Edward Stourton that “equality does not equal sameness. There are very many ways that we deal with people with different characteristics different needs, and we try to do it equally but not in the same way.” Yeah, like in Mississippi or Arkansas in the early part of the 20th century, the “different characteristics” being  defined by race. Although Nichols drew a ridiculous comparison with insurance (which was dubious in its own right), to me, there were definite echoes of “separate but equal” facilities for black people, the ruling of Plessy vs Ferguson and justification for segregation in the Southern states of America, in what he said. And that’s much scarier. As Edward Stourton, rightly pointed out in the follow up question, if Nichols conceives marriage as a greater thing than a civil partnership, then it is surely discriminatory to “exclude gays from those blessings”. If marriage is sacred, then you are supplying an inferior institution to others if you seek to protect it.

It’s no surprise that, like Neil, religious leaders think of marriage in specifically the religious sense. Just as Neil defines himself and thus marriage in terms of religion’s non-applicability to his life, religious figures clearly conceive of marriage in an explicitly religious framework too. In this way Neil and John Sentamu would agree in saying that gay marriage would “change the definition of the word”.

But what the religious establishment can’t seem to get their head around is that it is the definition of which they speak is their deifintion, and it doesn’t exist independently of them. Language is a social construct, meaning different things to different people. The Church doesn’t own the word, and if they did it would raise other concerns; what of Hindu marriage? Or interfaith marriage? The Church has tacitly taken its own mythology of language for granted, and has been caught completely off-guard to find that, Neil aside but Paul included, most people don’t agree with them.

Let’s contextualise why the religious conception of the word “marriage” doesn’t hold much water in Britain today. Neil argues that in France, for example, civil partnerships are the “done” thing, whether you’re straight or gay, and marriage is seen as explicitly religious in the way that the Church see it here. But to argue the same for Britain, I think, is erroneous. If you’re straight and negligibly religious in Britain, you will likely get married. If I decide to commit my life to someone, I’ll want to say I married them, and so does Paul. Marriage for such a large portion of people is about the personal commitment, not the overtly religious content. Just think of the couples you know who started going to Church regularly about 6 months before their marriage, and rarely since. If our society has been secularised, then surely too has our notion of marriage. If there existed in Britain an analogous  situation to the institutional history of France, where civil partnerships were the “done” thing, then I wouldn’t object to getting a civil partnership, but you can’t coax that change in meaning out of nowhere.*

When Nichols seeks to defend the “distinctive quality” of marriage, it is what distinguishes marriage in his eyes, but the meaning of the word isn’t in “natural law” as he claims. The meaning of a word is its use in the language, as Wittgenstein knew well, and  fewer and fewer people will abide by the notion of marriage as “natural law” in the 21st century. So when Sentamu talks about not changing the meaning of the word “marriage”, he doesn’t appreciate that his fears are misplaced. Its meaning changed a long time ago.



* Interestingly, Paul reckons that people should be able to say “Oh yes, we had a Christian wedding” if they so like, and thus the overtly religious aspects should be protected for those who want to opt into it. So, as it happens, Neil and Paul both want basically the same thing: equal provision in the law for a secular union between straight or gay couples and a religious one (presumably heterosexual, though it’s up to the religion). The only difference is that while Neil would call the former a “civil partnership” and the latter “marriage”, Paul would call the former “marriage” and the latter “Christian marriage”, feeling that “civil partnership”, as Stourton was getting at, has historically and linguistic connotations of inferiority.