The "can-do" spirit in the United States can be a mixed blessing, especially when it gets the country into wars that turn out to be unwinnable. At other times, though, it can be amazing to behold. Last night I watched New York Mayor Michael Bloomberg calmly reciting how the city was coping with a snowfall of about half-a-metre. There were two crews of 2400 municipal workers, each putting in 14-hour shifts and using 1700 pieces of equipment to shift the snow. Main routes had already been cleared twice and even before the storm had moved on, they were in a position to turn their attention to secondary and tertiary routes. Airports had been forced to close briefly, but were set to reopen as soon as the storm moved away. (At the time of writing, about 24 hours after the worst of the storm, La Guardia is the only NY airport still closed).
It's a complete contrast with what we've seen in the UK over the past couple of weeks, in response to about a quarter as much snow. The main response of politicians has been to point fingers of blame, mostly in the direction of businesses that they saw fit to privatise -- airports, railways -- in the not too distant past. In truth, the country coped reasonably well with the most recent snowfall, though that owes more to the resilience of the public than to any effort on the part of the authorities. (The main road at the end of my street was "cleared" entirely by the action of car tyres moving over it; the same is true in most urban areas, though up north and in the country they do things a bit better).
The one exception is, of course, Heathrow Airport. It's now emerged that Heathrow's snow emergency plan all along was....to close the airport if more than THREE CENTIMETRES of snow fell! So when they got 15 centimetres a week or so before Christmas, they (or rather their customers) were stuffed. The CEO of the airport operator, BAA, has done the modern equivalent of falling on his sword, by giving up his bonus for this year, and there have been the usual promises to "learn from our mistakes". However, I'm not at all sure that even with a Mike Bloomberg in charge, Heathrow will ever be able to cope much better if the same conditions recur.
I've written here before about Heathrow being in the wrong place. It's also much too small in terms of ground area, and it's entirely hemmed in by highways and housing. At most airports, as you taxi to and from the runways you see expanses of grass to the sides. At Heathrow it's all been paved over and put to use. Terminal 5 was built on just about the last space between the two main runways, and the perimeter is fully taken up with parking. BAA estimated that there were 30 tons of snow surrounding each aircraft parked at the terminals -- and as the storm began early in the morning, just about every stand was occupied. The cramped dimensions of the airport meant that there was very little space to put all this snow, and no way to use ploughs on the aprons, even if the airport had possessed such things. Instead they were forced to use earth moving equipment to shift the snow onto trucks. It's no wonder it took the better part of a week to get the place moving normally again. (La Guardia is on a similarly cramped site, which may explain why it is the last NY airport left closed after yesterday's dump -- though I suppose they have the option of pushing the snow into Long Island Sound).
There you have it, then. Heathrow, the world's busiest international airport, gateway to the UK: badly located, too cramped, and incompetently run by a bunch of carpetbaggers. What could possibly go wrong?
Tuesday, 28 December 2010
Wednesday, 22 December 2010
Now that's what I call journalism
The British media's reaction to Julian Assange and Wikileaks has veered between anger and contempt. (Partial exception: Ian Hislop, editor of Private Eye, who admitted on television that if he'd come into possession of the treasure trove of US files, he'd have published them). Assange doesn't seem to be a very nice man, but what really gets the media's collective goat is that he dares to describe himself as a "journalist". Apparently getting people to divulge all sorts of information to you and then publishing it falls short of the exalted standards expected of that profession.
Courtesy of the Daily Telegraph, we've seen a good example this week of the highly-principled activities of "real" journalists, namely, adopting bogus identities in an effort to entrap a minister of the Crown, in this particular case Vince Cable, the Business Minister.
This sort of thing is not new, of course, though it's generally the preserve of rather less self-important newspapers than the Telegraph. The News of the World has entrapped numerous personalities, including Sven-Goran Eriksson, using one of its staffers posing as a "fake Sheikh". However, the Telegraph has taken the whole tawdry process to new lows. Cable made some wildly inappropriate and negative comments to the undercover journalists about the Murdoch media empire, over which he has (or rather, had) regulatory oversight. Cable is (or rather, was) soon to make a decision on a takeover bid by Murdoch's News Corp. for its partly-owned subsidiary, BSkyB. Since the Telegraph opposes this takeover, it chose not to publish these comments in its initial reports on the interview with Cable.
This so shocked one Telegraph insider that he/she passed a full tape of the Cable interview on to Robert Peston at the BBC. Relations between the Beeb and the Murdoch empire are cordially poisonous, but Peston immediately broke the full story. Cue full-scale panic on Downing Street, with Cable hauled onto the carpet at No 10 and stripped of his powers of oversight over the media sector, including the still-pending BSkyB decision. The Telegraph, which seems never to have intended the full story to come out, has nevertheless seen fit today to allow one of its attack dogs, Simon Heffer, to write an opinion piece demanding to know why Cable has not been sacked from the Government!
Who are the winners and losers in all of this nonsense? The Telegraph is a loser on all counts, resorting to shady gutter-press tactics, attempting to hide the resulting story and then playing into the hands of its commercial rivals. The BBC has kept its integrity but must have reported the full story through gritted teeth, knowing that the chances of the BSkyB deal going through have just soared. Cable is a big loser, with his tenure in the government under question from all sides. And the Government as a whole is a loser, because no decision it now makes on the BSkyB deal will ever be seen as clean.
Sadly, the only real winner is Rupert Murdoch, who has gleefully watched his enemies circling their wagons and firing inwards. And I suppose we have to count Julian Assange as a winner too: compared to the "real" journalists on Fleet Street, he suddenly seems like a paragon of respectability and sound judgment.
Courtesy of the Daily Telegraph, we've seen a good example this week of the highly-principled activities of "real" journalists, namely, adopting bogus identities in an effort to entrap a minister of the Crown, in this particular case Vince Cable, the Business Minister.
This sort of thing is not new, of course, though it's generally the preserve of rather less self-important newspapers than the Telegraph. The News of the World has entrapped numerous personalities, including Sven-Goran Eriksson, using one of its staffers posing as a "fake Sheikh". However, the Telegraph has taken the whole tawdry process to new lows. Cable made some wildly inappropriate and negative comments to the undercover journalists about the Murdoch media empire, over which he has (or rather, had) regulatory oversight. Cable is (or rather, was) soon to make a decision on a takeover bid by Murdoch's News Corp. for its partly-owned subsidiary, BSkyB. Since the Telegraph opposes this takeover, it chose not to publish these comments in its initial reports on the interview with Cable.
This so shocked one Telegraph insider that he/she passed a full tape of the Cable interview on to Robert Peston at the BBC. Relations between the Beeb and the Murdoch empire are cordially poisonous, but Peston immediately broke the full story. Cue full-scale panic on Downing Street, with Cable hauled onto the carpet at No 10 and stripped of his powers of oversight over the media sector, including the still-pending BSkyB decision. The Telegraph, which seems never to have intended the full story to come out, has nevertheless seen fit today to allow one of its attack dogs, Simon Heffer, to write an opinion piece demanding to know why Cable has not been sacked from the Government!
Who are the winners and losers in all of this nonsense? The Telegraph is a loser on all counts, resorting to shady gutter-press tactics, attempting to hide the resulting story and then playing into the hands of its commercial rivals. The BBC has kept its integrity but must have reported the full story through gritted teeth, knowing that the chances of the BSkyB deal going through have just soared. Cable is a big loser, with his tenure in the government under question from all sides. And the Government as a whole is a loser, because no decision it now makes on the BSkyB deal will ever be seen as clean.
Sadly, the only real winner is Rupert Murdoch, who has gleefully watched his enemies circling their wagons and firing inwards. And I suppose we have to count Julian Assange as a winner too: compared to the "real" journalists on Fleet Street, he suddenly seems like a paragon of respectability and sound judgment.
Tuesday, 21 December 2010
Infra dig
Media pundits to the left and right of the political spectrum are having a joyful time putting the boot into the airports operator BAA, as Heathrow airport remains largely locked down three days after the last measurable snowfall. For the first couple of days of the crisis, BAA was sending out a poor curly-haired intern called Andrew Teacher to face the media throngs, but in the last day or so its CEO has finally manned up and ventured out to offer his apologies to the stranded thousands. He has promised that BAA will learn the lessons from the debacle, a promise not made since the last time Heathrow was caught short by the arrival of snow in winter, about ten months ago.
It's not just BAA that needs to learn lessons. People are starting to wake up to the fact that flogging off vital national infrastructure to companies whose sole strategy is "sweat the asset" might not be the smartest way forward. Here's a (long) extract from a piece in the Toronto Globe and Mail, written by Carl Mortished, a Canadian freelancer living in London:
Consider the airports: long privatized, they are now foreign-owned. BAA, the Heathrow operator, is controlled by Ferrovial, a debt-burdened Spanish building company. Ferrovial was forced to sell three airports to satisfy competition concerns and last year Gatwick was snapped up by Global Infrastructure Partners, a private equity firm backed by Credit Suisse and GE.
Britain’s airports, its power companies and its water companies are controlled by foreign enterprises. E.ON and RWE of Germany and Electricité de France have the lion’s share of the power grid while Canadian pension funds have partially filled the vacuum in domestic transport. Ontario Teachers' Pension Plan controls the airports of Bristol and Birmingham, while Borealis and Teachers together have agreed to buy High Speed 1, the Channel Tunnel Rail Link.
You might wonder why the British are not keen to invest in their infrastructure when the business case for power and transport is clear. It could be a profound loss of collective will. These are strategic investments which require not only commercial but also political and national vision, and that has been dwindling for many years. When BAA was privatized, its new owners rapidly turned the airports into a highly profitable series of shopping malls. It was to be a short-term property play rather than long-term infrastructure game, and an attempt was made to do the same with the railroads until the privatized network began to collapse in confusion and terrible accidents.
The reference to the Channel Tunnel Rail Link (now known as High Speed 1, though passengers travelling at 20 kph on the line during the current snowfall may wish to dispute that) is a reminder that the policy of selling off the nation's furniture to buy gin has continued under the present government. The Canadian buyers have snapped up this asset for a fraction of its capital cost from an apparently desperate vendor. In current circumstances some may take comfort from the fact that Canadians surely know a lot about snow, but sadly they don't know very much at all about railways*. Like Heathrow and so many other privatised assets, HS1 will be sweated to produce the greatest possible short-term returns, with little concern for passengers and none whatsoever for the national interest.
In the meantime, the government is still struggling to find a regulatory regime that will encourage private investors to rebuild the country's electrical grid before the lights go out, and is pushing forward with a plan to build a high speed line from London to Birmingham at a per-mile cost many times higher than France's (state-owned) SNCF routinely manages. As I said, it's not just BAA that needs to learn lessons.
* Anyone who needs proof that there are worse ways to travel than Virgin Cross Country would be well advised to take a ride between Toronto and Montreal. Each city has a population of about 3 million and they are about 500 km apart -- and there are about six short trains between them each day. On one occasion I boarded a train in Toronto and ordered a cup of coffee. The steward moved to take the coffee away from me as soon as the train began to move, so that I wouldn't get scalded as we pitched and rolled down the tracks. "Believe me" he said, "you won't want that coffee anywhere near you once we start moving".
It's not just BAA that needs to learn lessons. People are starting to wake up to the fact that flogging off vital national infrastructure to companies whose sole strategy is "sweat the asset" might not be the smartest way forward. Here's a (long) extract from a piece in the Toronto Globe and Mail, written by Carl Mortished, a Canadian freelancer living in London:
Consider the airports: long privatized, they are now foreign-owned. BAA, the Heathrow operator, is controlled by Ferrovial, a debt-burdened Spanish building company. Ferrovial was forced to sell three airports to satisfy competition concerns and last year Gatwick was snapped up by Global Infrastructure Partners, a private equity firm backed by Credit Suisse and GE.
Britain’s airports, its power companies and its water companies are controlled by foreign enterprises. E.ON and RWE of Germany and Electricité de France have the lion’s share of the power grid while Canadian pension funds have partially filled the vacuum in domestic transport. Ontario Teachers' Pension Plan controls the airports of Bristol and Birmingham, while Borealis and Teachers together have agreed to buy High Speed 1, the Channel Tunnel Rail Link.
You might wonder why the British are not keen to invest in their infrastructure when the business case for power and transport is clear. It could be a profound loss of collective will. These are strategic investments which require not only commercial but also political and national vision, and that has been dwindling for many years. When BAA was privatized, its new owners rapidly turned the airports into a highly profitable series of shopping malls. It was to be a short-term property play rather than long-term infrastructure game, and an attempt was made to do the same with the railroads until the privatized network began to collapse in confusion and terrible accidents.
The reference to the Channel Tunnel Rail Link (now known as High Speed 1, though passengers travelling at 20 kph on the line during the current snowfall may wish to dispute that) is a reminder that the policy of selling off the nation's furniture to buy gin has continued under the present government. The Canadian buyers have snapped up this asset for a fraction of its capital cost from an apparently desperate vendor. In current circumstances some may take comfort from the fact that Canadians surely know a lot about snow, but sadly they don't know very much at all about railways*. Like Heathrow and so many other privatised assets, HS1 will be sweated to produce the greatest possible short-term returns, with little concern for passengers and none whatsoever for the national interest.
In the meantime, the government is still struggling to find a regulatory regime that will encourage private investors to rebuild the country's electrical grid before the lights go out, and is pushing forward with a plan to build a high speed line from London to Birmingham at a per-mile cost many times higher than France's (state-owned) SNCF routinely manages. As I said, it's not just BAA that needs to learn lessons.
* Anyone who needs proof that there are worse ways to travel than Virgin Cross Country would be well advised to take a ride between Toronto and Montreal. Each city has a population of about 3 million and they are about 500 km apart -- and there are about six short trains between them each day. On one occasion I boarded a train in Toronto and ordered a cup of coffee. The steward moved to take the coffee away from me as soon as the train began to move, so that I wouldn't get scalded as we pitched and rolled down the tracks. "Believe me" he said, "you won't want that coffee anywhere near you once we start moving".
Sunday, 19 December 2010
For once, it's nice to be wrong
Back in March 2009, I had this to say about the Madoff mega-fraud:
It would be nice if the media, as well as employing someone who can spell the words "Ponzi scheme", would also give a job to someone who knows what a Ponzi scheme is. No doubt a lot of the cash was creamed off by Madoff himself, but the bulk of it went to....the investors! Or to be more precise, the early ones. Yes, it's true. In a Ponzi scheme, since there are no underlying investments (the bank account where Madoff apparently parked the cash doesn't count), returns to existing investors are mainly funded from cash injected by new investors.
Since Madoff was paying dividends of the order of 12% year-in and year-out, he needed to grow the fund by 12% each year, by attracting new victims, just to stand still. The bigger the fund gets, the harder that becomes. Once the inflows slow, the Ponzi artist starts paying investors back with their own money (i.e. the capital provided by the early investors) and starts to pray. When people ask for the return of their capital, the whole thing starts to unravel very fast. As the credit crunch began to bite, that seems to be what happened to Madoff.
In short, most of the missing £50 billion is hiding in plain sight, in the bank accounts of many of the people who are screaming for Madoff to be lynched. The early investors have got their money back, in the shape of the outsize returns that Madoff was paying in order to rope a new set of marks -- though I doubt if many of the investors (or their lawyers) see it that way. Barring some very messy litigation to wrestle that money back, those who signed up late in the day are going to be out of luck.
Most of that still holds up, but it's good to see that the final sentence has proved too pessimistic. When the Madoff fund imploded, every investor claimed to have lost all their money, but as I pointed out at the time, those who hitched up with Madoff early had done just fine. Those improbably outsized dividends were in fact a return of capital, funded by the latecomers. Amazingly, lawyers have managed to explain this successfully to some of the biggest winners from the scheme, and have so far secured the return of $10 billion, including an unbelievable $7 billion returned by the estate of just one investor this past week. It's probably better not to enquire too closely as to just what methods of persuasion the lawyers may have resorted to, but the end result is the right one. And who knows, some of the journalists who covered the original story may now have a better understanding of how a Ponzi scheme works.
It would be nice if the media, as well as employing someone who can spell the words "Ponzi scheme", would also give a job to someone who knows what a Ponzi scheme is. No doubt a lot of the cash was creamed off by Madoff himself, but the bulk of it went to....the investors! Or to be more precise, the early ones. Yes, it's true. In a Ponzi scheme, since there are no underlying investments (the bank account where Madoff apparently parked the cash doesn't count), returns to existing investors are mainly funded from cash injected by new investors.
Since Madoff was paying dividends of the order of 12% year-in and year-out, he needed to grow the fund by 12% each year, by attracting new victims, just to stand still. The bigger the fund gets, the harder that becomes. Once the inflows slow, the Ponzi artist starts paying investors back with their own money (i.e. the capital provided by the early investors) and starts to pray. When people ask for the return of their capital, the whole thing starts to unravel very fast. As the credit crunch began to bite, that seems to be what happened to Madoff.
In short, most of the missing £50 billion is hiding in plain sight, in the bank accounts of many of the people who are screaming for Madoff to be lynched. The early investors have got their money back, in the shape of the outsize returns that Madoff was paying in order to rope a new set of marks -- though I doubt if many of the investors (or their lawyers) see it that way. Barring some very messy litigation to wrestle that money back, those who signed up late in the day are going to be out of luck.
Most of that still holds up, but it's good to see that the final sentence has proved too pessimistic. When the Madoff fund imploded, every investor claimed to have lost all their money, but as I pointed out at the time, those who hitched up with Madoff early had done just fine. Those improbably outsized dividends were in fact a return of capital, funded by the latecomers. Amazingly, lawyers have managed to explain this successfully to some of the biggest winners from the scheme, and have so far secured the return of $10 billion, including an unbelievable $7 billion returned by the estate of just one investor this past week. It's probably better not to enquire too closely as to just what methods of persuasion the lawyers may have resorted to, but the end result is the right one. And who knows, some of the journalists who covered the original story may now have a better understanding of how a Ponzi scheme works.
Friday, 17 December 2010
Baa1 humbug!
Those prescient intellectual giants at Moody's Investor Service have today lowered Ireland's sovereign debt rating by five notches, to Baa1.
Now some uncharitable folk might think that cutting the rating so drastically, AFTER Ireland has been forced into accepting a massive international bailout, must mean that Moody's analysts haven't been paying attention. That's not the case at all. The much simpler truth is that Moody's, together with all the other rating agencies, is completely useless. The fact that they are able to continue charging people for their "services" after their sub-abysmal performance during the financial crisis is one of the mysteries of the age.
And since I'm in an unseasonably mean mood, how about a little pearl of wisdom from the UK government-sponsored "watchdog", Consumer Focus (CF)? Power prices in the UK are to be boosted* in order to finance replacement of outdated generating capacity, prompting CF to opine thusly:
Consumer Focus, the energy watchdog, said: “Consumers can’t be expected to write a blank cheque to fund this. A balance must be found on how this is funded between government, energy customers and the industry.”
I can only assume that CF has been taking economics lessons from its granny, because it's hard to think of anyone else who might believe that government and the industry have sources of financing that are in some way independent of the consumer. Unless, of course, CF is expecting Ben Bernanke to pass by with his helicopter.
* Supposedly electricity prices will double by 2030, which sounds scary but is in fact a compound rate of only 3.5% a year. If any electricity supplier is prepared to offer me that deal right now, I'll sign up for it immediately.
Now some uncharitable folk might think that cutting the rating so drastically, AFTER Ireland has been forced into accepting a massive international bailout, must mean that Moody's analysts haven't been paying attention. That's not the case at all. The much simpler truth is that Moody's, together with all the other rating agencies, is completely useless. The fact that they are able to continue charging people for their "services" after their sub-abysmal performance during the financial crisis is one of the mysteries of the age.
And since I'm in an unseasonably mean mood, how about a little pearl of wisdom from the UK government-sponsored "watchdog", Consumer Focus (CF)? Power prices in the UK are to be boosted* in order to finance replacement of outdated generating capacity, prompting CF to opine thusly:
Consumer Focus, the energy watchdog, said: “Consumers can’t be expected to write a blank cheque to fund this. A balance must be found on how this is funded between government, energy customers and the industry.”
I can only assume that CF has been taking economics lessons from its granny, because it's hard to think of anyone else who might believe that government and the industry have sources of financing that are in some way independent of the consumer. Unless, of course, CF is expecting Ben Bernanke to pass by with his helicopter.
* Supposedly electricity prices will double by 2030, which sounds scary but is in fact a compound rate of only 3.5% a year. If any electricity supplier is prepared to offer me that deal right now, I'll sign up for it immediately.
Thursday, 16 December 2010
Christmas and New Year greetings
I'd like to wish all readers of the blog an enjoyable Christmas season.
I'm very happy to say that readership of the blog has increased sharply in the last few months. The largest audiences are in the UK and the United States, but there are regular readers in Russia, China, Singapore and most of Western Europe, as well as the occasional visitor from places as varied as Iraq, Brazil and Guadeloupe. Thanks to you all, whoever and wherever you may be!
Next year promises to be every bit as "interesting" as 2010 has been, so I'll have plenty to write about. I hope you'll continue to visit -- and feel free to bring a friend!
Jim
I'm very happy to say that readership of the blog has increased sharply in the last few months. The largest audiences are in the UK and the United States, but there are regular readers in Russia, China, Singapore and most of Western Europe, as well as the occasional visitor from places as varied as Iraq, Brazil and Guadeloupe. Thanks to you all, whoever and wherever you may be!
Next year promises to be every bit as "interesting" as 2010 has been, so I'll have plenty to write about. I hope you'll continue to visit -- and feel free to bring a friend!
Jim
Don't need a weatherman
Scientists trying to convince the public that human activity is causing irreparable damage to the world's climate often seem to be their own worst enemies.
It's not that long ago that we learned that the main UK academic centre of climate change research had seen fit to destroy all of the original data it had collected in support of its climate change research, thus making it impossible for anyone to review (or more pertinently, challenge) the results. It transpired that this was pretty much par for the course within the climate change community, with dissenters routinely denied access to academic publications and subject to ad hominem attacks. None of this seemed to square with the supposed "scientific method" of doing things, but remarkably, it was all forgotten soon enough.
Cut now to the current winter in the UK, which is turning out to be colder than average, as was last winter. (I've seen this month described as the coldest December since 1981, since 1890 and even since 1659, which makes you wonder what kind of records these people keep). Evidence against global warming, perhaps? Not according to the experts, who are rather patronisingly telling us that we mustn't confuse "weather" with "climate".
Strangely, when we had warmer than usual winters and summers a few years ago, these same people had no hesitation in telling us that the benign weather was a sure-fire indicator of climate change. I can't be the only person who's questioning my previous willingness to believe the climate change story, and it's not just because I'm dreading my gas bill.
It's not that long ago that we learned that the main UK academic centre of climate change research had seen fit to destroy all of the original data it had collected in support of its climate change research, thus making it impossible for anyone to review (or more pertinently, challenge) the results. It transpired that this was pretty much par for the course within the climate change community, with dissenters routinely denied access to academic publications and subject to ad hominem attacks. None of this seemed to square with the supposed "scientific method" of doing things, but remarkably, it was all forgotten soon enough.
Cut now to the current winter in the UK, which is turning out to be colder than average, as was last winter. (I've seen this month described as the coldest December since 1981, since 1890 and even since 1659, which makes you wonder what kind of records these people keep). Evidence against global warming, perhaps? Not according to the experts, who are rather patronisingly telling us that we mustn't confuse "weather" with "climate".
Strangely, when we had warmer than usual winters and summers a few years ago, these same people had no hesitation in telling us that the benign weather was a sure-fire indicator of climate change. I can't be the only person who's questioning my previous willingness to believe the climate change story, and it's not just because I'm dreading my gas bill.
Wednesday, 15 December 2010
Last exit to Threadneedle Street
Ever since the financial crisis, there's been a debate bubbling away over whether policymakers need to be more concerned about inflation or deflation as a longer-term problem. The perceived need to avoid an outright depression has been the major driver of policy decisions up to this point. Inasmuch as the worst case has been avoided, this looks to have been the right choice. Of course, we can never test the counter-factual of what would have happened if Keynesian fiscal stimulus and quantitative easing had not been adopted, but I suspect there are few outside the Tea Party who would have wanted to take the chance of finding out.
The policy choices are not about to get any easier. The recovery in the developed world is still far from self-sustaining, but signs of inflationary pressures are steadily mounting. Global commodity prices have been on a tear; commodity-based currencies such as the Aussie and Canadian dollars are strong; and some domestic inflation rates are starting to look uncomfortable. In the UK, for example, CPI in November stood 3.3% above its year-earlier level. With VAT set to rise in January, prospects for CPI to fall back to the Bank of England's 2% target by the end of 2011 appear to be slim-to-none -- and Slim, as the saying goes, just left town. Deflation is nowhere to be seen.
Can we really be surprised? As Milton Friedman famously said, "inflation is always and everywhere a monetary phenomenon". The world has now had the dubious benefit of extraordinarily lax monetary policy for a decade. The blind refusal of the Greenspan Fed to recognise the dangers posed by the asset-price inflation triggered by its monetary incontinence was a major contributor to the financial crisis. The need to forestall a rerun of the Great Depression meant that the taps have since been opened even further. It would be a major surprise if inflation had not surfaced by now.
If the link between monetary expansion and inflation is well established, the causal connection between monetary policy and growth is much less clear -- yet policymakers around the world are pinning most of their hopes on the existence of such a connection. As Keynes and others long ago recognised, there comes a point when easing monetary conditions is like pushing on a string. Central banks can't force individuals and businesses to borrow -- indeed, as we are seeing at the moment in the UK and elsewhere, they can't even force banks to offer loans. As long as businesses' appetite for risk (animal spirits, in Keynes's terminology) remains depressed, the path to economic recovery will be slow and difficult.
For many countries, including the US and the UK, the task for policymakers as we look into 2011 is made yet more complicated by the persistent hangover from the pre-crisis lending binge. In countries such as Ireland and Spain, irresponsible bank lending led to rampant overconstruction of new housing -- which has, of course, led to its own set of problems, By contrast, in the UK the banks primarily shovelled money into the existing housing stock, inflating its value to an extraordinary extent. Much of the UK press applauds every upward tick on house prices and warns that the sky is falling every time there is a setback. The truth is, however, that the credit-fuelled rise in house prices, largely unaccompanied by any increase in the supply of housing, was almost entirely a bad thing from a social standpoint: a transfer of wealth from the poorer and younger (renters and would-be homeowners) to richer and older (existing homeowners and buy-to-let landowners).
The rise in home values allowed the better-off to borrow still more and to increase consumption. This may have helped to keep the economy growing, but it poses a real problem for the Bank of England now. With fiscal policy set to turn more restrictive, the Bank cannot easily start to tighten monetary settings as well. Indeed, it's under pressure from the media (and of course from the housing industry itself) to keep the monetary taps open so as to ensure that house prices don't fall any further. Yet the Bank must know that the UK can't forever depend on home equity withdrawal as its primary source of growth -- and it must also keep a nervous eye on those nasty inflation figures percolating away in the background.
It appears that the Bank wants to wean the commercial banks off their dependence on its special funding mechanisms during the course of 2011, but it will be difficult for it to do so unless other sources of funding start returning to normal. That may require higher interest rates, in order to start to address the current severe disincentive to savers (0% returns and 3.3% inflation). Raise rates too quickly, though, and the housing bubble may deflate with a damaging bang, rather than a gentle whoosh. No easy choices then, but 'twas ever thus.
The policy choices are not about to get any easier. The recovery in the developed world is still far from self-sustaining, but signs of inflationary pressures are steadily mounting. Global commodity prices have been on a tear; commodity-based currencies such as the Aussie and Canadian dollars are strong; and some domestic inflation rates are starting to look uncomfortable. In the UK, for example, CPI in November stood 3.3% above its year-earlier level. With VAT set to rise in January, prospects for CPI to fall back to the Bank of England's 2% target by the end of 2011 appear to be slim-to-none -- and Slim, as the saying goes, just left town. Deflation is nowhere to be seen.
Can we really be surprised? As Milton Friedman famously said, "inflation is always and everywhere a monetary phenomenon". The world has now had the dubious benefit of extraordinarily lax monetary policy for a decade. The blind refusal of the Greenspan Fed to recognise the dangers posed by the asset-price inflation triggered by its monetary incontinence was a major contributor to the financial crisis. The need to forestall a rerun of the Great Depression meant that the taps have since been opened even further. It would be a major surprise if inflation had not surfaced by now.
If the link between monetary expansion and inflation is well established, the causal connection between monetary policy and growth is much less clear -- yet policymakers around the world are pinning most of their hopes on the existence of such a connection. As Keynes and others long ago recognised, there comes a point when easing monetary conditions is like pushing on a string. Central banks can't force individuals and businesses to borrow -- indeed, as we are seeing at the moment in the UK and elsewhere, they can't even force banks to offer loans. As long as businesses' appetite for risk (animal spirits, in Keynes's terminology) remains depressed, the path to economic recovery will be slow and difficult.
For many countries, including the US and the UK, the task for policymakers as we look into 2011 is made yet more complicated by the persistent hangover from the pre-crisis lending binge. In countries such as Ireland and Spain, irresponsible bank lending led to rampant overconstruction of new housing -- which has, of course, led to its own set of problems, By contrast, in the UK the banks primarily shovelled money into the existing housing stock, inflating its value to an extraordinary extent. Much of the UK press applauds every upward tick on house prices and warns that the sky is falling every time there is a setback. The truth is, however, that the credit-fuelled rise in house prices, largely unaccompanied by any increase in the supply of housing, was almost entirely a bad thing from a social standpoint: a transfer of wealth from the poorer and younger (renters and would-be homeowners) to richer and older (existing homeowners and buy-to-let landowners).
The rise in home values allowed the better-off to borrow still more and to increase consumption. This may have helped to keep the economy growing, but it poses a real problem for the Bank of England now. With fiscal policy set to turn more restrictive, the Bank cannot easily start to tighten monetary settings as well. Indeed, it's under pressure from the media (and of course from the housing industry itself) to keep the monetary taps open so as to ensure that house prices don't fall any further. Yet the Bank must know that the UK can't forever depend on home equity withdrawal as its primary source of growth -- and it must also keep a nervous eye on those nasty inflation figures percolating away in the background.
It appears that the Bank wants to wean the commercial banks off their dependence on its special funding mechanisms during the course of 2011, but it will be difficult for it to do so unless other sources of funding start returning to normal. That may require higher interest rates, in order to start to address the current severe disincentive to savers (0% returns and 3.3% inflation). Raise rates too quickly, though, and the housing bubble may deflate with a damaging bang, rather than a gentle whoosh. No easy choices then, but 'twas ever thus.
Saturday, 11 December 2010
Shades of Brown
Hot on the heels of Tony Blair and Peter Mandelson, former PM Gordon Brown has released a book: "Beyond the Crash". No chance to read it just yet, but there are two fascinating reviews of it that are well worth a peek: one by Anatole Kaletsky in The Times (behind the paywall; sorry!) and the other by Joseph Stiglitz in the FT, reproduced on Slate.
The reviewers agree that there's almost no gossip or settling of scores (and probably, therefore, no sales either). They agree that Brown's initiative to recapitalise the UK's banks in October 2008 really did stop the world from falling into a severe economic depression. What's more interesting, though, is the way that each reviewer seems to have found support within the book for his own views of the future of finance.
Earlier this year Kaletsky published an agonizingly dull tome called "Capitalism 4.0", so it's no surprise that he thinks Brown supports his (Kaletsky's) "let the banks be" line:
He (Brown) argues, in my view correctly, that curbing financial innovation is no panacea, even with hindsight. While Tories and Liberals indulge in a populist witch-hunt against greedy bankers, Brown courageously acknowledges the vital importance of finance: “Even now there can be no return to high levels of employment and growth without harnessing finance’s creative energies to allocate resources and risk so effectively that it spurs and speeds economic growth. We must never forget that credit and the need for securitisation, too, are at the heart of a modern financial system. It should not just be tolerated as a necessary evil, but nurtured as one of the keys that unlocks opportunity.”
Stiglitz doesn't read Brown that way, to put it mildly. Here are two brief quotes from his review:
He (Brown) grasped immediately that the problem was not just one of liquidity but of a weakness in the financial sector built on years of mismanagement, lax regulation and reckless speculation. He also saw early on that unless a government recapitalisation was accompanied by requirements that banks continue lending to businesses, the crisis in the financial sector would spread to the broader economy.
"We needed to overturn 30 years of policymaking," Brown writes. No cash without government involvement became his mantra and he tried to persuade the Americans and the Europeans to his way of thinking.
And later:
Brown is outraged by the bankers' excessive risk-taking, their pursuit of greed. I can only surmise that had he looked more carefully at America's banks' predatory lending practices and the abuses in the credit card systems, how the financial system preyed on the least educated and financially unsophisticated, he would be even more outraged.
This last comment goes beyond a review or even editorialising on Stiglitz's part: it's more like "what Brown would have written if he was as smart as me". Still, that's a useful reminder that every worthwhile review tells us at least as much about the reviewer as it does about the book in question. I may just have to read the book for myself to decide whether Kaletsky or Stiglitz is interpreting Brown's views accurately. To my surprise, I'm almost looking forward to it.
The reviewers agree that there's almost no gossip or settling of scores (and probably, therefore, no sales either). They agree that Brown's initiative to recapitalise the UK's banks in October 2008 really did stop the world from falling into a severe economic depression. What's more interesting, though, is the way that each reviewer seems to have found support within the book for his own views of the future of finance.
Earlier this year Kaletsky published an agonizingly dull tome called "Capitalism 4.0", so it's no surprise that he thinks Brown supports his (Kaletsky's) "let the banks be" line:
He (Brown) argues, in my view correctly, that curbing financial innovation is no panacea, even with hindsight. While Tories and Liberals indulge in a populist witch-hunt against greedy bankers, Brown courageously acknowledges the vital importance of finance: “Even now there can be no return to high levels of employment and growth without harnessing finance’s creative energies to allocate resources and risk so effectively that it spurs and speeds economic growth. We must never forget that credit and the need for securitisation, too, are at the heart of a modern financial system. It should not just be tolerated as a necessary evil, but nurtured as one of the keys that unlocks opportunity.”
Stiglitz doesn't read Brown that way, to put it mildly. Here are two brief quotes from his review:
He (Brown) grasped immediately that the problem was not just one of liquidity but of a weakness in the financial sector built on years of mismanagement, lax regulation and reckless speculation. He also saw early on that unless a government recapitalisation was accompanied by requirements that banks continue lending to businesses, the crisis in the financial sector would spread to the broader economy.
"We needed to overturn 30 years of policymaking," Brown writes. No cash without government involvement became his mantra and he tried to persuade the Americans and the Europeans to his way of thinking.
And later:
Brown is outraged by the bankers' excessive risk-taking, their pursuit of greed. I can only surmise that had he looked more carefully at America's banks' predatory lending practices and the abuses in the credit card systems, how the financial system preyed on the least educated and financially unsophisticated, he would be even more outraged.
This last comment goes beyond a review or even editorialising on Stiglitz's part: it's more like "what Brown would have written if he was as smart as me". Still, that's a useful reminder that every worthwhile review tells us at least as much about the reviewer as it does about the book in question. I may just have to read the book for myself to decide whether Kaletsky or Stiglitz is interpreting Brown's views accurately. To my surprise, I'm almost looking forward to it.
Friday, 10 December 2010
The sound of breaking glass
Those were deplorable scenes in London yesterday, as students staged their latest protest against the rise in tuition fees, on the day this was voted on and approved by the House of Commons. It was, of course, manna from heaven for the television networks, who gave it wall-to-wall coverage. Once darkness fell it became increasingly difficult to see who was who, but it was hard to avoid the impression that the protesters were outnumbered not only by the police, but also by the journalists and cameramen.
Both the police and the media seem to be playing up the idea that these protests have been hijacked by people who have no interest in the underlying issues: anarchists, of course, and even London street gangs just turning up to take a pop at the police. No doubt there's an element of this, but it would be dangerous to assume that's the whole story.
There was an interesting little incident in mid-evening at Oxford Circus, well away from the main demo, as a group of protesters smashed windows in a large department store. The SKY-tv commentator on the scene was bemused, noting that the protesters had left nearby stores such as Liberty's unscathed; her view was that the incident was unconnected with the protest as such, and was simply a stunt to keep the police off-balance (I'm paraphrasing here).
Let's think about that for a second. Arriving at Oxford Circus, the protesters could indeed have smashed up Liberty's, or broken the windows on some of the many number 73 bendy buses that were trapped in the melee. Instead they targeted Topshop, owned by the serial tax avoider Sir Philip Green, a man who, in the coalition government's crassest move so far, was asked to look at ways to reduce wasteful public sector spending. It's hard to believe that "London street gangs" would have been so selective, or that, having broken in the windows, they would have neglected to liberate some of the merchandise while they were at it.
It's no justification for wanton damage, of course. Still, if students believe, rightly or wrongly, that post-secondary education is being priced out of their reach, it's not hard to imagine that they might feel angry at the thought of a prodigiously wealthy man routinely avoiding paying what might be deemed to be his fair share of taxes. In fact, it might not just be students who would think like that.
Both the police and the media seem to be playing up the idea that these protests have been hijacked by people who have no interest in the underlying issues: anarchists, of course, and even London street gangs just turning up to take a pop at the police. No doubt there's an element of this, but it would be dangerous to assume that's the whole story.
There was an interesting little incident in mid-evening at Oxford Circus, well away from the main demo, as a group of protesters smashed windows in a large department store. The SKY-tv commentator on the scene was bemused, noting that the protesters had left nearby stores such as Liberty's unscathed; her view was that the incident was unconnected with the protest as such, and was simply a stunt to keep the police off-balance (I'm paraphrasing here).
Let's think about that for a second. Arriving at Oxford Circus, the protesters could indeed have smashed up Liberty's, or broken the windows on some of the many number 73 bendy buses that were trapped in the melee. Instead they targeted Topshop, owned by the serial tax avoider Sir Philip Green, a man who, in the coalition government's crassest move so far, was asked to look at ways to reduce wasteful public sector spending. It's hard to believe that "London street gangs" would have been so selective, or that, having broken in the windows, they would have neglected to liberate some of the merchandise while they were at it.
It's no justification for wanton damage, of course. Still, if students believe, rightly or wrongly, that post-secondary education is being priced out of their reach, it's not hard to imagine that they might feel angry at the thought of a prodigiously wealthy man routinely avoiding paying what might be deemed to be his fair share of taxes. In fact, it might not just be students who would think like that.
Tuesday, 7 December 2010
Musica gratia artis
I know we're supposed to accept that art is whatever artists choose to do, but every time I seem to be getting my head around that concept, the Turner Prize comes along and I'm back to square one.
This year's Prize has been awarded to the improbably-spelt Susan Philipsz for her work Lowlands. This chef d'oeuvre consists of three loudspeakers in a room, through which is played a recording of Philipsz singing a Scottish folk song. Philipsz calls it a "sound sculpture", but most of us would call it "music". Or maybe not: Philipsz herself admits that she can't actually sing , and anyway she didn't write the song herself. Calling her work art may be the only way she can get people to listen to it.
Needless to say the arts community has rallied around. Check out this fabulously pretentious piece from the Guardian, for example -- and be sure not to miss the readers' comments at the end. As for me, I'm wondering what comes next. Maybe the Grammies will give one of Ronnie Wood's paintings their award for Rock Album of the Year.
This year's Prize has been awarded to the improbably-spelt Susan Philipsz for her work Lowlands. This chef d'oeuvre consists of three loudspeakers in a room, through which is played a recording of Philipsz singing a Scottish folk song. Philipsz calls it a "sound sculpture", but most of us would call it "music". Or maybe not: Philipsz herself admits that she can't actually sing , and anyway she didn't write the song herself. Calling her work art may be the only way she can get people to listen to it.
Needless to say the arts community has rallied around. Check out this fabulously pretentious piece from the Guardian, for example -- and be sure not to miss the readers' comments at the end. As for me, I'm wondering what comes next. Maybe the Grammies will give one of Ronnie Wood's paintings their award for Rock Album of the Year.
Friday, 3 December 2010
Putin on a show
Unlike the tabloid media (sample headline: FIFA bungs* the Cup to Russia) I really can't get worked up about the fact that England will not be hosting the World Cup in 2018. As a fan, I'd have been happy to see the tournament here, but as a taxpayer I'm happy to be spared any possibility of a rerun of the scandalous cost overruns afflicting the 2012 Olympic Games.
For those not familiar with this, London won the Olympics on the basis of an entirely mendacious cost estimate of £2-3 billion. The Government only supported the bid because it never seriously believed that London would win; Paris was the strong favourite. Immediately after the Games were awarded to London, the costs soared to £9 billion, and the real number may be even higher than this. Needless to say, taxpayers would never have allowed the bid to go forward if they had had even the faintest inkling of the real costs that the bid committee was about to stick them with. And as the Games near, it's becoming ever clearer that the "legacy" of sports participation that was promised is unlikely ever to be realised.
In a parallel universe the head of the Olympic bid, Lord Coe, would be behind bars for his role in this fraud. Instead he was co-opted to help out with the World Cup bid. It's impossible to know whether the FIFA committee took the Olympic saga into account when it made its decision this week, but if they were fully informed about it, it certainly couldn't have helped.
The foreign media were reportedly amazed by the sense in the London media and among the public that England was in some way "entitled" to the World Cup. Sure, it's coming up for fifty years since the one and only time it was held here, but that can't be enough. Exactly what credentials does England have to offer? It can't be the national team, about which the less said the better. It can't be the development of the game at the grass roots: the UK has far fewer trained coaches than any other major football-playing nation, and school playing fields are being sold off for housing development at a depressing pace.
No, the defining characteristic of the English game is money, pure and simple. TV and sponsorship money has made the Premiership the world's richest league. However, because of the dearth of home-grown talent (see previous paragraph), it grabs more and more of its players from less wealthy leagues overseas -- which might not, you would have to think, count very positively with those countries when they cast their votes for who gets to host the World Cup. What's more, the money in English football is very unevenly shared. The Premiership controls the purse strings. For professional clubs at lower levels, it's a hand-to-mouth existence.
Even worse, the Premiership has no interest whatever in international football: witness the constant club vs. country battles every time a player gets injured while away on international duty. So, bizarrely enough, England's World Cup bid was in a sense mounted on the cheap. There was a lot of emphasis on the fact that most of the stadia are already in place, which certainly reduces the riskiness of the bid, but makes it hard to argue that it will produce the kind of "legacy" that FIFA is always so keen on (and which was such a large part of the Olympics bid).
If your football is mainly defined by how rich it is, you can't really complain too much if you lose out to someone with more money. For sure, in choosing Russia for 2018 and Qatar for 2022, FIFA has followed the money. Russia's oligarchs and the Qatari royal family were prepared to risk much more of it than England's bid could possibly match, mainly because the bid team, led by the Football Association, has no call on the big money in English football, which is controlled by the Premiership. (Long-time readers of this blog will asume that I'm about to blame the whole mess on Rupert Murdoch, the Premiership's paymaster. You might think that; I couldn't possibly comment).
Anyway, good luck to Russia as it prepares to stage the Cup. There's a prodigious amount of work to be done, especially in centres other than Moscow and St. Petersburg. Properly handled, the Cup could be a catalyst for the same sort of transformation in Russia that the Barcelona Olympics produced in that once rather dowdy city. That would be a real legacy.
* For non-UK readers: the word "bung" is often used in the media to refer to bribery, especially in relation to football. There's zero evidence of any bribery here, but of course that never stops the tabloid press.
For those not familiar with this, London won the Olympics on the basis of an entirely mendacious cost estimate of £2-3 billion. The Government only supported the bid because it never seriously believed that London would win; Paris was the strong favourite. Immediately after the Games were awarded to London, the costs soared to £9 billion, and the real number may be even higher than this. Needless to say, taxpayers would never have allowed the bid to go forward if they had had even the faintest inkling of the real costs that the bid committee was about to stick them with. And as the Games near, it's becoming ever clearer that the "legacy" of sports participation that was promised is unlikely ever to be realised.
In a parallel universe the head of the Olympic bid, Lord Coe, would be behind bars for his role in this fraud. Instead he was co-opted to help out with the World Cup bid. It's impossible to know whether the FIFA committee took the Olympic saga into account when it made its decision this week, but if they were fully informed about it, it certainly couldn't have helped.
The foreign media were reportedly amazed by the sense in the London media and among the public that England was in some way "entitled" to the World Cup. Sure, it's coming up for fifty years since the one and only time it was held here, but that can't be enough. Exactly what credentials does England have to offer? It can't be the national team, about which the less said the better. It can't be the development of the game at the grass roots: the UK has far fewer trained coaches than any other major football-playing nation, and school playing fields are being sold off for housing development at a depressing pace.
No, the defining characteristic of the English game is money, pure and simple. TV and sponsorship money has made the Premiership the world's richest league. However, because of the dearth of home-grown talent (see previous paragraph), it grabs more and more of its players from less wealthy leagues overseas -- which might not, you would have to think, count very positively with those countries when they cast their votes for who gets to host the World Cup. What's more, the money in English football is very unevenly shared. The Premiership controls the purse strings. For professional clubs at lower levels, it's a hand-to-mouth existence.
Even worse, the Premiership has no interest whatever in international football: witness the constant club vs. country battles every time a player gets injured while away on international duty. So, bizarrely enough, England's World Cup bid was in a sense mounted on the cheap. There was a lot of emphasis on the fact that most of the stadia are already in place, which certainly reduces the riskiness of the bid, but makes it hard to argue that it will produce the kind of "legacy" that FIFA is always so keen on (and which was such a large part of the Olympics bid).
If your football is mainly defined by how rich it is, you can't really complain too much if you lose out to someone with more money. For sure, in choosing Russia for 2018 and Qatar for 2022, FIFA has followed the money. Russia's oligarchs and the Qatari royal family were prepared to risk much more of it than England's bid could possibly match, mainly because the bid team, led by the Football Association, has no call on the big money in English football, which is controlled by the Premiership. (Long-time readers of this blog will asume that I'm about to blame the whole mess on Rupert Murdoch, the Premiership's paymaster. You might think that; I couldn't possibly comment).
Anyway, good luck to Russia as it prepares to stage the Cup. There's a prodigious amount of work to be done, especially in centres other than Moscow and St. Petersburg. Properly handled, the Cup could be a catalyst for the same sort of transformation in Russia that the Barcelona Olympics produced in that once rather dowdy city. That would be a real legacy.
* For non-UK readers: the word "bung" is often used in the media to refer to bribery, especially in relation to football. There's zero evidence of any bribery here, but of course that never stops the tabloid press.
Wednesday, 1 December 2010
Mama told me to come
The row over higher education funding in England rumbles on, but everyone seems to be very coy about their true motivations.
Take the students, for instance. Their placards seem to show a strong belief in education as a public good that should be paid for out of general taxation (or at least by someone other than the students themselves). But at least one of the protesters admitted to the media that he was protesting on behalf of his parents, because "if the goverment gets its way, they'll have to pay for my education". Well, that would certainly help to explain why so many mummies have been ferrying their kids to the demonstrations.
Then there's the government. It claims to be motivated by the need to save money, and by a desire to see that higher education is mainly paid for by those that directly benefit from it, that is, the graduates. However, many of the things that Education Secretary Michael Gove is implementing at a lower level point to a different agenda. The replacement of "modules" with formal exams for GCSEs and steps to encourage the return of Latin in schools are indicative of a traditionalist agenda. At the university level that "traditionalist" view very likely means that Gove et al think that altogether too many people are going on to higher education, and that the whole sector needs to be scaled back.
We haven't yet reached the New Labour target of 50% of school leavers going to University, but at 40% we're already way beyond, say, Germany, where about 25% go on. It's not hard to make the case that too many underprepared (if not semi-literate) school leavers are moving on to take courses of dubious value at universities of (ahem) limited academic merit, winding up with degrees that employers don't respect. Even if you think that education is worthwhile in its own right, it's hard to see who benefits from that. The Tories doubtless hope that a cutback in funding will both shrink the sector and lead to higher standards, as students shy away from going deep into debt for the sake of a Mickey Mouse diploma. But they can't come right out and say that.
Lastly there's dear old Vince Cable, who played a major role in putting the funding policy together. He now plans to abstain when it comes to a vote in Parliament, in order to preserve unity in the LibDem ranks, even tough he still believes in the policy! Ask not what your country can do for you; ask what you can do for your party: that's real leadership.
Take the students, for instance. Their placards seem to show a strong belief in education as a public good that should be paid for out of general taxation (or at least by someone other than the students themselves). But at least one of the protesters admitted to the media that he was protesting on behalf of his parents, because "if the goverment gets its way, they'll have to pay for my education". Well, that would certainly help to explain why so many mummies have been ferrying their kids to the demonstrations.
Then there's the government. It claims to be motivated by the need to save money, and by a desire to see that higher education is mainly paid for by those that directly benefit from it, that is, the graduates. However, many of the things that Education Secretary Michael Gove is implementing at a lower level point to a different agenda. The replacement of "modules" with formal exams for GCSEs and steps to encourage the return of Latin in schools are indicative of a traditionalist agenda. At the university level that "traditionalist" view very likely means that Gove et al think that altogether too many people are going on to higher education, and that the whole sector needs to be scaled back.
We haven't yet reached the New Labour target of 50% of school leavers going to University, but at 40% we're already way beyond, say, Germany, where about 25% go on. It's not hard to make the case that too many underprepared (if not semi-literate) school leavers are moving on to take courses of dubious value at universities of (ahem) limited academic merit, winding up with degrees that employers don't respect. Even if you think that education is worthwhile in its own right, it's hard to see who benefits from that. The Tories doubtless hope that a cutback in funding will both shrink the sector and lead to higher standards, as students shy away from going deep into debt for the sake of a Mickey Mouse diploma. But they can't come right out and say that.
Lastly there's dear old Vince Cable, who played a major role in putting the funding policy together. He now plans to abstain when it comes to a vote in Parliament, in order to preserve unity in the LibDem ranks, even tough he still believes in the policy! Ask not what your country can do for you; ask what you can do for your party: that's real leadership.
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