Monday 31 January 2011

Sunday 30 January 2011

The Scramble For Africa Mark Five

The problems occurring in many parts of Africa at present owe a great deal to the latest version of The Scramble For Africa that has been going on since the apparent withdrawal of European and other powers in the mid 20th Century.

Taking a longer view of the past, as with other territories, there has been a great deal of change down the ages. The first two phases are in the deeper past and about which we have to rely on science, archaeology and palaeontology to tell us such story as they can.

The first is from 75,000 years ago when it is suggested that small numbers of humans surviving a major geophysical event were located in Africa and began to grow in numbers and move across new lands within and beyond Africa.

The second is the period following The Sahara becoming desert allied with other climatic and geophysical events that triggered successive waves and movements over several thousand millennia. This will include what we call the Classical period and the period of the Dark Ages to the Middle Ages.

There is some recorded history in a number of places and much more known about human interaction and organisation. Until recently, the lack of both records and of much real archaeology led to assumptions about the primitive nature of Africa but it seems that what was happening there may have been a lot more organised and complicated than we have thought in the past.

Persons of African origin do appear in other places. Recently, one set of remains has been found in Stratford upon Avon from during the Roman period. We can assume that amongst the Romans there were those of African origin.

Although it seems to be a surprise if you know that the Romans were trading up the Severn, then along the Avon it is navigable to a point close to the Fosse Way and a Roman way station.

The Scramble Mark Three I would put as beginning in the late 14th and early 15th Centuries when we know more arising from the expansion of European, Arab and Chinese interest in Africa. Although the Chinese did not follow through, both the Arabs and the Europeans did establishing both contact and control in many areas.

By and large the Europeans kept mostly to the coastal areas in this period, the interior south of The Sahara being almost unknown to them until the mid 19th Century. The Arabs, however, who spread down the East coast did trade into parts of the interior and had cross African routes to the West.

Mark Three, with its many sided history I would put as lasting until the mid 19th Century. This covers the period of the Slave Trade as we have understood it. We should be aware that there were other varieties of people subjection that were not far removed from this which have lasted until the present.

It was also a period of some large scale movements of people. In South Africa the Dutch from the south at around the same time that other groups were moving down from the north catching those indigenous in a kind of pincer movement.

The Scramble Mark Four begins in the mid and late 19th Century with increased European penetration into the interior and assertion of dominance over both West and East Coasts. Although Britain and France were the principal powers at this stage it was not long before older and more recently formed European nation states began to claim hegemony over parts of Africa.

As the purpose was profit rather than settlement, given the discovery of vast riches of primary resources and the potential for agriculture, the risk of expensive conflicts meant that the European powers made a rare excursion into negotiation and agreement.

The Berlin Conference of 1884-1885 parcelled out Africa into chunks of territory with little reference much to geography, ethnic or religious considerations. This exercise led to the identity of many of the existing states in Africa.

It was not long before the rivalries of the European powers led them to self destruct in terms of their Empires in two major world wars that impacted on Africa in many ways. One was to stimulate demands for self rule and to encourage these new states to take some control and direction over their own economies. This became the story of the 1950’s and 1960’s.

By the 1970’s, it seemed that a new era had begun, of self ruling states largely at peace with each other and beginning to control their own futures on a more or less democratic basis. Critically, it was believed that they would be able to manage and control their own resources, finances, trade and commercial structures.

It hadn’t because The Scramble For Africa Mark Five had already begun and was under way. As the Governors, official administrators, and soldiers departed through the front door the arms dealers, bankers, businessmen and commercial travellers were climbing in through the back window helped through by their trained bands of lawyers, accountants, consultants and experts, all trades that the new states lacked in numbers.

The analogy is taken from Nicholas Shaxson’s book “Treasure Islands – Tax Havens And The Men Who Stole The World” which gives a good deal of attention to Africa and the looting of its wealth since around 1980. “Aid” has just become another money go round, a means of lubricating a corrupt and kleptocratic system.

Famous people preach on the need to help the African’s whilst keeping their own capital and income as free from any tax as possible. Once elites had been bribed, corrupted or suborned then the expansion of the tax havens and their services has led to greater losses and impositions than the Mark Four Scramble ever did.

It is said that the ruling family in Tunisia took out $3 billion and more alone. How much more had been removed by others connected to them cannot be known. All these accounts and the movements of money around them are veiled in secrecy.

Now that cheap oil is coming to an end and food prices and other essential commodities are rising in price the fat is literally in the fire. It may not be long before there is a Scramble Mark Six as existing states begin to collapse and all the old tribal, ethnic and religious differences begin to take hold.

And the mass migrations will begin again.

Thursday 27 January 2011

Bending To The Rules And The Wind

One of the curiosities in the large few years and especially during the recent crisis is the absence of much in the way of fraud and other stories in the media and popular press beyond those of the Members of Parliament.

One reason for this is the absence of much in the way of police activity or attention. Even where the regulatory bodies are concerned with some firms and individuals there is very little information that surfaces and not much being pursued in the courts.

Contrast this story from Los Angeles with the UK coverage and this tale is a common one across the pond where police and other authorities are far more active:,0,2316837.story?page=1

Yet it is apparent that a good deal of sharp practice has been going on in the UK at all sorts of levels. Just how did many of the crazy PFI deals get made and who exactly benefited, apart from the obvious people? In the story flagged, the insider dealing will have its impact on massaging financial figures in the markets.

It is my view that in recent years the UK has been awash with petty fraud and worse a lot of nasty, unscrupulous hard ball tactics in the day to day dealings. Add to that fiddled figures, imaginative accounting and careless record keeping so there could be a great deal of money leaking and being taken in ways that would be criminal in other jurisdictions.

So when it appears that the government does not seem to know what it is doing or indeed what is going on in its own departments it is no surprise. We are now living in a state where corruption and dishonesty are becoming the norm.

On the web I saw that some mathematicians looking at the collapse of states, empires and political entities have found that there are many in recorded history where it has happened for no obvious cause. They just implode because of their own complexity, uncertainty, collapse of law and inability to maintain just rule.

Could it happen here?

Tuesday 25 January 2011

Grounds For Concern

Lord Coe of Codswallop has appeared before us in his Savile Row suits and delicate personalised premium fragrances rather than the downmarket sackcloth and ashes to admit that Britain is a disgrace to civilisation and the world. The nations and peoples have been astonished and it is the talk of all the bazaars and holy places. An Englishman has broken his word.

The reason is that a modest sports stadium, erected at public expense for a three week sports binge in the summer of 2012, may have its future use altered in order to avoid the more humiliating fate that has befallen other Olympic facilities in the world in the past.

Two soccer clubs have bid to be the future operators. One, West Ham United, whose old ground is becoming creaky hopes to retain facilities for athletics. The other, Tottenham Hotspur, who rather than revamping their existing one at some cost, sees the Olympic Stadium as offering more scope and certainly far better transport links that the present one at White Hart Lane. The Spurs would keep it for soccer and entertainment events only.

Those who follow what is going on in the world beyond football and entertainment probably could think of a number of things in the past couple of decades which they could suggest represent a disgrace to the UK and a shame that is much more serious. As I want this post to be less than ten thousand words, I will skip the potential listing.

A world of brief sound bites and instant responses is also a world of short memories. Is it so long since there was a debate over Wembley? This is now our “national” soccer stadium, built by foreigners with money borrowed on the international markets.

Erected at the beginning of the 1920’s for an Empire Exhibition it became a half decent dog track and speedway stadium used occasionally for football of one sort or another. Once and once only I was wined and dined there with a seat in the Royal Box, it was a surreal experience.

It was used for the 1948 Olympics and some Commonwealth Games but in general was rarely used for athletics events or other sports. It did make a venue for other things. Billy Graham converted thousands to God there following his success with Richard Nixon and there were some rousing pop festivals. There was the soccer World Cup of 1966, was it Argentina or Germany who won?

Anyhow, the soccer bods, by now in control of the new Wembley project dumped the idea of athletics facilities despite the huge government support given to it. Similarly the new Twickenham ground for the Rugby Union avoided the issues that athletics might bring. There have been other major stadia built, also without reference to such sports or the possibility. There was once White City, home to the 1908 Olympics now lost to us all.

This left us with Crystal Palace which was built in 1964 and is now one of five National Sports Centres and becoming run down. Crystal Palace FC soccer once played there but were evicted in 1915 by the military going to Selhurst Park also now suffering wear and tear. They want to return to a new stadium on the site but have considered whether the athletics facilities should be retained.

Are you beginning to have the impression that it is all a long, confused story which does not make a lot of sense? Similarly are you wondering how such a highly centralised state and media operations could make such a sorry mess of the whole business?

There is also the question of whether beyond 2012 there are to be big crowds for athletics. Lord Coe may beg the question by doling out free tickets, again at public expense. But this is not really the answer. The question has arisen before and we know what the answers were.

Up in Sheffield Blunkett and friends put on a World Student Games in a new stadium at a staggering loss. Now it is an arena for all sorts of things, but the basic one is that Rotherham United, a lower division soccer team play their home games there with a great many empty seats in view.

Then there is Eastlands, The City of Manchester Stadium in Manchester, built to host the 2002 Commonwealth Games after a failed Olympic bid and then substantially altered to become a soccer stadium for Manchester City and other events.

Personally, I think the Olympic Stadium should be put into Trust and Leyton Orient and Dagenham & Redbridge soccer teams could share it. Failing that, it might make a superb multi layer covered fungi growing food factory. That way it might even turn in a bit of profit.

Incidentally, in the next few years council taxes in London will be going up by more that the rate of inflation.

Sunday 23 January 2011

Who Owns London?

Those who do not have a few tens of millions to splash out on second or tenth homes will have missed the shindig to celebrate the completion of Number One Hyde Park (look at and endless stories) in Knightsbridge and opposite Harrods, a subsidiary of Fulham FC just for contrast.

Apparently it was a gathering of our new good and great in the land. Essentially chaps with their hands on oil and gas supplies and others who are at the forefront of the Non-Taxed part of our economy. The sort that Mayor Bossy Boris The Blonde Blunderbuss prostrates himself before at the tinkle of a phone call.

Within these people there are connections with a UK background. There are a handful of remnants of the old landed aristocracy who were lucky enough to marry heiresses owning lands on the fringes of the London of the 18th and 19th Centuries.

They are the ones who were clever enough to move their valuable property holdings into company ownership before Inheritance Tax and the consequences of the long Agricultural Depression could cull them along with their peers.

There are the Crown Estates, the only one that excites the London media and a useful distraction that avoids too much attention on other property owners, especially those media moguls and their friends who have substantial interests in London property.

It is not a simple business. In the middle years of the 20th Century those with mortgages almost always borrowed from UK financial organisations who relied in turn on UK savers or investors based in the UK. Public Sector organisations normally owned their own buildings or rented them from UK property companies.

Much of private industry and commerce were the same, those who owed money on their buildings again were large engaged with UK financial companies. Some of the arrangements had more complex arrangements but it was simple to know who was who and in money terms what was what and the implications.

In other sectors, rentals and leaseholds much the same applied. UK ownership, borrowing, management services and the rest were identifiable firms. You knew where they were, who owned them, for the most part could see their accounts and they were more or less all within the taxable economy.

What is the position now? One of the better known examples is HMRC who are said to have unburdened themselves of property ownership and management. They have sold off and then leased/rented or what back, given over the management of the properties and the rest to attract “investment” into UK government operations.

The general idea was to promote “efficiency” more or less like Santa Claus is said to be an efficient way of distributing goods to the lower age market segment of the leisure products industry. He promotes sales and the reindeer and elves get to eat while he is the public image of a bountiful financial operator.

However, as all parents know the reality is sharp increases in spending out of disposable incomes often now driven by increased debt loading with added interest and servicing costs arising from children’s insatiable demands urged on by a foreign ruthless and relentless marketing and financial servicing operation.

Were I to go through all the ownership, property management, financial systems and the hugely complicated, layered, intricate ways of moving money, credit, debt, added consultancy and accounting costs of all the types of property in London it would be a very long post indeed and that is not mentioning tax havens.

Also, it would be almost impossible to understand and certainly the financing of much is beyond any comprehension. Because not only do ordinary people have little idea of what is going on, nor do our politicians who serve the system, nor does the average financial adviser or pension fund trustee and least of all the people who are actually running the show.

As for the Bank of England, this lot are the equivalent of a pack of drunken incompetent elves under the guidance of a Santa who is in serious denial of his mounting money problems and reindeer out of their skulls on schnapps laced moss and lichen.

Bossy Boris believes in unlimited support for housing benefit for non-working, non tax-paying people lodged in premises owned by non-taxpaying people engaged with financial agencies who pay little or no UK tax all of whom owe little or no allegiance to the UK. One does wonder where his family money is invested in.

But if you go round all sectors of property in London now and ask the simple question of who owns what, where the money is coming from, where the eventual ownership lies, how it is managed and to whom money is owed and what have been the trends over the last twenty years you will come to realise that the UK no longer owns most of London.

London may be the capital, financial and media centre of the UK. but the taxpayers outside the M25 are paying huge subsidies one way or another to sustain a city whose main activity is to extract as much money from the UK and to pay as little UK tax as possible.

If my visit yesterday was any guide, it is not just the ownership that stinks; the air quality there now is the worst I have experienced.

And I remember December 1952.

Friday 21 January 2011

Food For Thought

What is striking about the media coverage of events at present is not only the relentless attention given to some of the grubbier aspects of our political culture but what appears to be a loss of focus on the nature of the present problems and the means and ends of dealing with them.

Sometimes a head bravely appears above the parapet. Laura Sandys M.P. for South Thanet in the latest “Ecologist” newsletter deals with food security. She points out that in many ways we have been living in a fools paradise that is about to end.

What did catch my eye was the short part where she more or less says that we will need a Royal Navy suitably equipped with Special Forces to ensure that our supply lines are viable and protected. Not only that, but we need to spend more time thinking about our own ability to produce both a wide range and sufficient foods.

To do that and other basic things to enable us to more or less survive economically if it all turns nasty, as it has done so often in the past, our policies need to take into account not just short term fixes or Ra Ra prestige stunts but making sure about all the various elements of the continuance of the polity.

In terms of education the government is going in for Academies. We have those which specialize. The performing arts is one favourite designed to prepare people for a strictly service sector notorious for its very high levels of unemployment, insecurity, low wages for the many and riches for the very few as well as being one of most vulnerable to all sorts of rapid change and fashions.

The there are sports and business studies. It seems we need more gold medalists in the future. Has anyone calculated just how many we are likely to win and so the average cost of each one? At present rates of expenditure each would cost roughly the same as a new Olympic Stadium.

As for “business studies”, in effect what they mean for the vast majority of them is training for the very middling and low paid jobs they can aspire to because not many of them will ever get anywhere near the highest paid. As entrepreneurs of the future will need capital, they are unlikely to get it in the foreseeable future.

For a smack of reality look at what is happening at the LSE which claimed that in 2007 around 30% of its graduates went into the City and related finance sector with many others doing a variety of business and public sector management courses.

I quote what the Director, Howard Davies, will be talking about shortly in public:

“In December the coalition government agreed a new fee regime for EU undergraduates in British universities, along with other changes to the regulation of higher education, following the Browne Review.

Over the next few months universities will need to decide how to position themselves in the new environment. The consequences for the LSE are quite serious, involving the loss of all grants for teaching.

A final decision on fees will need to be made this summer. But how is the School addressing the challenge? And what kind of future can it look forward to under the new regime?”

As it happens the LSE has a great many students from abroad. Indeed it is arguable that its present undergraduate number from the UK is not many more than forty to fifty years ago. My guess is that numerically there are certainly far fewer UK working class men there now than in the 1950’s.

At the same time, the bankers want to import top people, the retailers want to import routine line managers, some sectors are being out-sourced and others rely on contact and particular agency supplied staff. Not least in the media and other parts the use of interns and short term contracts creates obstacles to those who need a real living wage.

Under the previous government the “management” of agriculture has resulted in the reduction of the numbers of farms and farmers and the driving of key skills off the land and out of the rural communities. These are not skills that can easily be dealt with by people with only general management or business studies education.

Much of our food supply is in the hands of large producers and processors under the thumb of the international money men. They are not using much in the way of UK management and even fewer workers.

If the banks are not going to give credit to the middling and small farmers and the subsidies have gone to Europe just what can happen to the UK food supply if the world supply begins to fall well short of basic needs elsewhere?

Again, if you doubt that food can be short, just read some history. I do not need to because I remember all too well the 1940’s.

Anyone for leftovers?

Tuesday 18 January 2011

The NHS, Grist To The Mill

After staggering through torrential rain, luckily just ahead of the shunt that closed the motorway, we arrived at the hospital. Again, we had no letter or e-mail; the new booking service has yet to inform us as promised.

Phone calls had been made, but it was apparent that critical advice that should have been in place wasn’t there. Other than all this admin’ things went as they should do; which made a change.

So we were less than happy when we put on the TV when we returned to see Dave At The RSA doing his serious concerned chap routine to convince us that it was all about “Change”, he alleged for the better. What does he think has been going on for the last sixty odd years?

In the thirty five years before the inception of the NHS, ten had been in major wars and around another ten in serious economic difficulties, counting the bad time after 1918 in with the better known Great Crash.

There was a mish mash of local, Poor Law, private, academic and various forms of community services that had tried to cope with the demands of an increasingly urbanised population.

All in all, it was not in good shape and without the resources or means to deal with the mounting health problems and the pace of development in the science and the technology of medicine.

As the creation of the NHS was a political act, at the beginning it was organisational, financial and control systems that mattered. The medicine and the underlying stresses were low on the agenda, being taken for granted.

Since then we have seen roughly two full generations of the NHS and are now into the early years of the third. The first generation lasted until 1974 when the Edward Heath inspired major changes were made in organisation, again largely politically and financially based rather than in the context of the period and what amounted to a take off in medicine, science and treatments.

I recall in the late 1970’s in our meeting before the Area Health Authority met looking gloomily down the agenda as the Senior Community Medical Officer and I contemplated the problems we were going to have with the politicians who preferred to listen to accountants and “executives”.

We agreed that it wasn’t working well and was becoming more and more disconnected with the reality of the work to be done.

So in the 1980’s Ken Clarke, looking at the problems through his haze of cigar smoke, decided to throw it all up and the air and see how it came down before addressing many of the more intricate issues.

After then in the period of Mrs. Thatcher’s decline and fall and the Major years of trying to get the Tory party to agree to anything, we had years of indecision and uncertainty.

Worse there came to be an increasing reliance on haphazard initiatives, all sorts of schemes, largely promoted by non-medical consultants and worse endless spin and obfuscation of the difficulties and needs for radical re-provisioning and rebuilding.

Then came New Labour, who arrived at what was soon the start of the third generation. By this I mean a period when medical and technical technology were being transformed and research and knowledge were advancing far more rapidly, especially in the new context of immediacy in the transmission of information and knowledge.

So what did they do? One thing was ever more spin and a deliberate policy of “turning” the NHS into a bedrock agency of Labour ideology and beliefs. Also, they let loose the money men in PFI etc., hordes of management consultants from The Big Four and others and financial advisers of all shapes and sizes.

The professionals, doctors and nurses, essentially were bought off to subject them to the new disciplines and there was never ending change and reshaping. What did happen was major distortion of medical provision according to political demand rather than real need.

The funding and organisation of computer services for basic recording and service has been an expensive disaster.

It was all to be paid for by the new boom boom bust free economy. Now there is an expensive mess that apparently we can no longer afford. Also it bears the burden of huge financial liabilities that will extend for two generations beyond that of the present one.

Treatments may or may not be available for many conditions that are not “sexy” or spin worthy. Political criteria will govern who does what where. The mood of the moment is likely to continue to be key to decision making.

It is sometimes in the detail that you see how things are lost. There are many people with dangerous conditions that may cause them to collapse with little or no warning. You may well know one or two.

There is nothing in the NHS to deal with this situation and no system of recording or recognising those who live with such risks. Those than can afford it can sign up with a private service which has a 24 hours response and advice line. But large numbers of NHS are not aware of the meaning and nature of the dog-tags and bracelets.

Nor are police or fire or other services that may be dealing with people who have gone down and in difficulty. Typically, a police officer who sees someone writhing on the floor or not entirely coherent will simply assume drink as will almost all the public. It is the reason why so many now are dying where they fall or in police hands.

Yet the cost of this compared to many things is absurdly cheap, as is the cost of creating awareness both within the services and in the general public of what are high risk conditions and what might need to be done.

And these conditions and needs have been known ever since the NHS came to exist.

Sunday 16 January 2011

Whither The Weather?

Yesterday, Saturday 15 January, in the “Guardian” Environment section, Dr. Germaine Greer delivered a brutal analysis on the matter of the Queensland disaster, “ Australian Floods, Why Were We So Surprised?”. She is stranded up a mountain there at present attempting to save the rain forest. One of the factors in the flooding has been the deforestation in the territory.

Along with this, she suggests is the usual mix of human greed, stupidity, short sightedness and failure to comprehend the nature of complex events or to plan or deal with them effectively.

Elsewhere, “Naked Capitalism” worries about other consequences of the present floods in economic terms, there could be nasty price effects and strain on the finances of some countries.

The “Black Swan” is nothing to do with the new film about ballet or even the much better pirate film of 1942 about Henry Morgan, starring Tyrone Power, but refers to the concept developed by Nassim Taleb, Black Swan Events which means that the unexpected or unbelievable might just be out there waiting to happen, as in the discovery in Australia of black swans, before then held to be always white.

Meanwhile on Friday 14 January , Science Daily (the source of much of Daily Mail stuff, many of whose interns do not really understand it) put up an article from the Journal of Sciences, taking the longer view of climate and weather which gives context. Climate/weather patterns can and do change and have changed. Judging which way we are going is more complicated.

All this is a rich source for debate on many matters. What is happening at present may simply be predictable glitches and occurrences with an existing pattern, or it could be the first signs of larger scale change in progress.

But I can say with confidence that in the foreseeable future, I and others like me, will be worse off and suffer a great deal of inconvenience.

Friday 14 January 2011

Planning The Past

Watching TV is becoming ridiculous. On some channels the advertising bits are now up to a third of the programme timing. The cunning lies in starting with little interruption, then setting up the story so they hit you with three long ones in an hour that with the padding before and after mop up all that time.

Yes, if you have a “box” you can avoid this. But sitting there clutching a remote and needing supreme skill and judgement to zip over them does not add to the joy of watching or the entertainment. Luckily there are one or two channels where the problem is far less, but these are specialist in many ways.

Indeed, there is the BBC but this is now spending more and more time “puffing” its own and adding endless crash bang wallop intro’s and crossovers to give bad news to the ears or what is left of them. The difference in decibel levels is marked.

Often because of all the background and sounds off on the screen (natural like they say) you have the sound up more than wanted to hear the speech. This is often not good, over the shoulder, going away etc. Then you have the sudden and unexpected lurches into heavy sound, taking it into the danger levels for many people.

Also, there are the endless repeats and series with similar names so you never quite know where you are or whether you have watching them. Little wonder we are often reverting to radio, CD’s or DVD’s. As for the football………

Sometimes it is interesting to put on a football match and have on sound only a music channel. It can be quite a party game to guess which team goes with which piece of music. Does Liverpool FC at present go with Meatloaf’s “Bat Out Of Hell”?

One of the more off the wall programmes is “Heir Hunters”. Perhaps it should be called “Schadenfreude” because it deals with unclaimed estates and the people who earn their keep by searching for heirs and taking commissions to convince The Treasury that there are beneficiaries according to Probate Law.

The latest series tells us that in this property owning age around two thirds of us who go to the great property ladder in the sky fail to make wills or dispose of our wealth to those who we feel should have it. I can watch it safe in knowing that amongst my eligible cousins there is not a cat in hell’s chance of a brass farthing.

This can have some unexpected results. Often the money will go to people that they have never known or knew existed. Sometimes, it goes to a member of the family they detested. All too often the one who most deserves something does not get a penny or is short changed by the rules.

What the programme does tell us that there is no shortage of disrupted or tragic lives in the immediate past. When the researchers are driven back into the 19th Century and the Census Returns etc. it is no better.

If the figure of two thirds is given, this is more that that alleged in the first series which might suggest a worsening of the overall situation in the latest generations. There are now the complications of how Probate Law interacts with modern living patterns.

Also, as many people have now taken property abroad they run into Probate laws that are very different and filled with additional complications. All too often they have blithely ignored the potential effects of this.

How long, I wonder, before the State decides that people cannot be trusted to make proper decisions on the disposal of their wealth and takes the lot?

Thursday 13 January 2011

Malaysia, Losing The Rubber

On the Noriel Roubini web site, the Wednesday Note (12 January 2011) is a piece about the changes occurring in the Far East.

One way and another there is something familiar about what has happened in Malaysia and the potential consequences.

In addition you might wonder what this means for much of our own manufacturing sector and that of Europe.


Malaysia’s policy makers have been forced to confront the factors blocking the country’s rise to high-income status. Facing higher labor costs, the economy has been unable to maintain a growth model based on low-value-added manufacturing that was largely successful for the 30 years prior to the 1997 Asian financial crisis.

One of the most noticeable manifestations of this so-called middle-income trap has been the secular decline of Malaysia’s once-dominant electronics and electrical products (E&E) sector, examined in “Still Not a Tiger: The Decline of Malaysia’s Electronics Sector,” available exclusively to clients.

At the sector’s height in 2000, E&E accounted for more than one-third of the country’s total value added in manufacturing, over 70% of revenue from manufacturing exports and almost 4% of world E&E exports.

Since then, Malaysia’s E&E sector has witnessed dramatic deceleration in productivity, stagnation in exports and deterioration in its global market share.

The sector remains dominated by downstream industries that increasingly face competition from lower-cost producers in the region, including the Philippines and China.

Confronting similar challenges, the Asian Tigers (South Korea, Taiwan, Hong Kong and Singapore) were largely successful in transitioning to higher-value-added E&E production.

Beginning in the 1960s, Malaysia and Singapore (and, to a lesser extent, Taiwan and South Korea) industrialized by encouraging multinational corporations to take advantage of their relatively cheap labor forces and establish downstream E&E production facilities.

In Singapore in particular, the presence of multinationals spurred local entrepreneurs to begin “clustering” around downstream enterprises, acting as suppliers and logistics managers.

Over time, this led to the development of a robust, indigenous E&E sector that increasingly produced further upstream, which typically included the stages in the supply chain in which labor adds more value—i.e., the stages with higher levels of labor productivity.

By the time labor cost increases forced downstream production facilities to lower-cost markets, local firms were experienced and competitive enough to continue operating in the E&E supply chain at higher levels of value added. In this way, Singapore has managed to increase its global market share of E&E since 2000.

In contrast, Malaysia’s E&E sector has been unable to adjust to shifts in the country’s comparative advantage. One important barrier has been ethnicity-based affirmative action policies, which have stifled the evolutionary process that other export-driven economies in the region were able to ride to higher-value-added production on their way to high-income status.

Established under the New Economic Policy of 1971, affirmative action in Malaysia seeks to rectify socioeconomic disparities within the local population by expanding opportunities for ethnic Malays (bumiputra or bumiputera) in areas like education, housing and investment, often at the expense of other ethnic groups (namely ethnic Chinese).

These policies have not only exacerbated the country’s brain drain of talented non-bumiputra; they also have created a strategic disadvantage for local firms by limiting both human and financial capital and perpetuating an unlevel playing field for entrepreneurs.

All domestic companies incorporated in Malaysia must reserve at least 30% of new shares for bumiputra to purchase at discounted prices. This essentially taxes local start-ups that wish to go public and makes expansion more difficult, which helps explain why initial public offering growth was relatively flat through the 2000s and why equity remains a minor source of manufacturing investment financing.

Meanwhile, the continued presence of the government in the economy—via procurement policies and access to joint ventures with the nearly 500 government-linked corporations—has provided ample opportunity for rent-seeking by well-connected bumiputra who can take advantage of favorable policies.

The New Economic Model—presented in 2010 as a 10-year vision for Malaysia’s ascension to high-income status—proposes “revamping” affirmative action “to remove the rent seeking and market distorting features” and shifting the basis for eligibility to socioeconomic status, rather than ethnicity.

Yet given the governing party’s reliance on bumiputra support, major changes are unlikely until new elections are held and the government has the political confidence to confront popular resistance to reform.

The underperformance of the E&E sector over the past 10 years should serve as a warning to the country’s policy makers that the continuation of distortionary policies may limit Malaysia’s future growth prospects.


The heritage of Empire?

Wednesday 12 January 2011

The People Spoke

Two months after the Coalition took office a graffiti slogan appeared by the railway line going into London.

It proclaimed “Sack Cameron”.

It is a little while since our last visit, but yesterday we travelled up again.

The slogan had been amended to read “Back Cameron”.

Indeed, the Conservatives will stop at nothing.

Monday 10 January 2011

Change In The USA, Taxation And Representation

Above is a snip from Financial Armageddon that was taken from a fuller article below in The Atlantic dot com. If you look at it, a short one, and click on the picture you will get the full picture.

The USA has changed in the last four years. How far is the change either permanent or just a stage in a long term decline?

In the UK we have paid relatively little attention to the USA recently because our media has interesting celebrities to discuss. A tragic event has now caught our attention, but with little interest in the overall background.

For a long time the USA has been one of the key motors of the world economy. A radical change there will affect us all, for better or worse.

Elsewhere we see that there the “growth” has been almost exclusively amongst the very rich while the poorer half of the population is in deep trouble as are most of the States of the Union.

How will that affect the UK and Ireland, will it be worse here or better?

Saturday 8 January 2011

2011, A Bad Beginning

If you really want to know just how crazy the world of international finance is, how far out of control it has gone in recent years and why so many ordinary people living ordinary lives have had so much misery and loss inflicted on them you have only to look around you.

Or read the major feature in the Financial Times of Friday 8 January 2011 relating to the serious situation at Consensus Business Group, its major subsidiary Peverel and the implications for their eventual owners, well known property investors. It seems that Peverel will have to be sold by Consensus because they are in the hole for £100 million.

The Bank of America is riding to the rescue with the usual armoury of debt-equity swaps and other complicated arrangements. For those of us who follow USA affairs this may not be good news, there seem to be a number of reservations about that organisation at the moment. American taxpayers, already in a property crisis of their own, may not be amused.

In your home district or not far away there will be a block or blocks of flats, built for and occupied by elderly leaseholders who needed or wanted to make life simpler and easier in their declining years. Most of them were put up by McCarthy and Stone. Initially they ran their own in house property management services, Peverel, to do the basic work.

This was essentially site and buildings maintenance, attending to repairs and the usual services and keeping a degree of ordered, low key control over how the communal and related facilities were managed. Necessarily, this included keeping good relationships with the residents and occasionally dealing with crises.

There were not medical or social services functions or anything elaborate, it was all bog standard site and building functions with a top dressing of polite and ordinary human contacts, albeit being with some people who were ill and vulnerable. One objective was to ensure a quiet life as far as possible for all.

During the first decade Peverel was sold and bought several times before ending up with a very acquisitive and active financial group, Consensus BG, aiming to build a major, if not controlling, stake in property management and control.

This group had a number of aims. One was to engage in highly leveraged borrowing and lending to enable further acquisitions. Another was to securitise its assets and income streams to assist this. Another was to work the assets very hard to fund the personal Trusts, celebrity lifestyles and add to the fortunes of its owners.

Accordingly, in the leasehold retirement flats the service charges have increased well above the rate of inflation, other charges have gone up sharply and there is a raft of other fees and means of extracting money. The properties are a cash flow with little or no controls of means or ends.

In the warp and weft of all the financial dealings between the associated and owned companies, the relevant trusts, the inter lending, charging, income flows, fees and the rest it is impossible to disentangle what has been going on.

As there major outflows to accounts etc. in tax havens it is also impossible to find out what has happened, how much is involved, and who owns what because of secrecy.

Given the numbers and skills of all the lawyers involved everything will be legal in one jurisdiction or another. If there have been doubts in the minds of some of the good and the great these will have been assuaged by sessions on the ocean going yachts, introductions to the celebrities of the day, contributions to party funds and assistance to those interests and charities dear to the hearts of our elites.

The media have been entranced by these operations and any number of praises have been sung and applauding been done by journalists and financial reporters over the last few years. For those who actually live in the properties, however, there is now an organisation devoted to fighting exploitation and mismanagement. There are also a number of legal wrangles arising.

Many of the pensioners involved have been affected already by inflation in key areas, not included in the usual indexes. A good many who do have private pensions are in real difficulty. Those who depend on savings, and there are many widows, have been badly hit over the last couple of years.

So in the space of a decade a reliable and adequate means of homing and catering for the elderly to allow them a degree of peace and a settled way of living has turned into an arena for excessive and damaging financial risk taking. They are being stripped of their savings, face a management concerned only with money targets, and are embroiled in unpleasant disputes and legal wrangles.

If you want to realise the nadir of it think of this. It is 2.00 a.m. on a cold January night. Police and ambulances are gathered outside a block on a major emergency. A resident is in real medical danger.

But they can’t get in, the company in house security service will not let them in because it has been reorganised to improve its financial performance and bungled the systems.

Someone woken by the racket lets them in and assists them to the emergency. A few days later the company tells its manager to tell the someone that they will face action because an additional very minor cost has been incurred that was not authorised. Its security firm had to spend time looking it its files.

Now those in the block and others like them will learn that they are in the hole for their share of the company’s problems and the one certain thing is that they will paying and not those who were responsible. The money men will not be the real losers, one of them, in real trouble, is presently funded by a state owned bank.

Nothing will be done because one of the owners, according to reports, has bought personal access to the Prime Minister under his party’s current lobbying arrangements.

Wednesday 5 January 2011

Gather Ye Taxes While Ye May

In all the debate and argument about what the problems are and what is to be done it is clear that much of the media and many of the politicians simply have not realised the degree of change that has occurred since the 1980’s. Nor has the increase in the pace of change over the last decade impacted on their thinking.

Consequently, they are carrying round in their heads a baggage of beliefs, ideas, and assumptions that derive from not just the late 20th Century but from a longer past. This does not only apply to economics and politics, it has happened across many fields of study.

So when they are faced with practical problems of key importance now and for the immediate future the debate is couched in arguments and policy platforms that are increasingly disengaged from what is actually out there.

One feature of the debate on taxation is the lack of understanding of the realities. We have a government claiming to be attacking tax evasion and criminality yet depending for its work and key support on people who pay comparatively little tax.

But this is tax avoidance which is applauded by many as a worthwhile feature of the economy to advance growth etc.

Cutting through the complications it is my view that we now have an economy part of which is The Taxable Economy and the rest which is The Alternative Economy.

The situation is that The Taxable Economy is not large enough to fund the government’s needs for revenue and to some degree real lending. Nor in present conditions can it be made large enough in the foreseeable future to cover the spending and associated plans. Also, year on year it is declining in real terms.

The Alternative Economy has three parts. One is the legal activities by which tax is less than it might be for those who might pay. This is broader than people assume given the many and varied nature of the tax breaks handed out to all sorts of people and activities. This includes tax avoidance as we know it.

The second is the range of activities that escape tax. This covers activities such as Barter, DIY, helping out the family or the neighbours, voluntary work, “community” work etc. This is normal and unrecorded activity that has always been part of life. In the past for many, especially in the poorer sections of the population, this was a real and vital part of their personal economy.

The third is the illegal sector. Tax evasion, bootlegging, knock-offs, petty thieving (M.P.’s expenses come to mind), pilfering, drugs, trafficking of one kind or another and money laundering and all the full range activity outside the law to yield income and profit with little or no tax being paid.

If my wife cuts my hair without charge, this is Alternative 2. If I claim hair cutting on my expenses, this changes it to Alternative 3. If we set up a charity to cut the hair of the poor at low cost and this allows tax breaks then we are functioning in Alternative 1.

If we set up a company registered in Jersey, cut hair as a job and then ensure that the revenues go there and avoid tax again this is Alternative 1. If you think that this is unlikely then we have a jobbing builder along the street who does just that.

To make matters worse for the imbalance between realisable tax revenue and obligations in the spending commitments of government there is a range of payments that worsen the situation.

One is the discouragement of employment by over regulation and haphazard rules and another is all the obligations to give money to people from whom little or no tax can be realised other than on their spending.

In short the government’s own spending in many areas exacerbates the problem on top of all the tax breaks that have been handed round to win friends and votes.

So the government now has to increase the burden severely on those who have to operate within The Taxable Economy, now largely middling and lower income people. It might be tempting to tax property, but as the USA is finding out, having such a tax is great when the values are rising, but a disaster when they crash.

Taxing the rich will catch comparatively few because many are already in The Alternative Economy and so much of UK economic activity is run by people in other countries. Moreover, as many countries are engaged in a race to the bottom in taxation it will be hard to accomplish.

My fear is that there is no way out of the maze and worse still neither the media nor the politicians have the faintest idea of what has happened under their noses.

Monday 3 January 2011

Isn't This Where We Came In?

What can be said at the beginning of this year? Many people make predictions. I can confidently say that as there are so many varying, contradictory, confused, vague, expert and inexpert that some could be right.

Which of them will be I do not know. What I can say is many people will say and do things they will later regret, things will happen that are unexpected, some of the expected or hoped for things will not happen and the human race will be no more wiser or reliable at the end of the year than at the beginning.

On the subject of wisdom Grant Shapps, Minister for Housing, who has been in and out of the property market along with others seems to be saying that he is alright the rest of us can forget it in terms of Brown’s Boom, the end that was never to be it seems is imminent.

Quite how he can square this with reports of funny money flooding into London to keep the pot boiling, encouraged by the government, is uncertain.

When I walk along the High Street in my town most of the shops that used to sell things are now either employment agencies or estate agencies.

There is a discrepancy between them, because the salary levels, many for jobs with responsibility requiring experience and qualifications, would not allow the takers to get into the job market on the basis either of salary or possible savings.

A reason for this is that lenders have recently rediscovered the knowledge that if you lend pots of money to people that cannot afford to repay it on the basis of them telling you what you want to know about their incomes and personal status, you may find yourself stuck with either bad debts or unsaleable overpriced property or both.

So what would Grant Shapps like to have? It is more lending to people on a relaxed basis and with lots of “innovative” mortgage products subject to little or no regulation. This is just what was involved in the recent crash.

One worry for the government is the needs of families. These are said to be in decline because of social changes. But according to an item in the Hals Report there could be other reasons.

We are told to be a high consumption society. Much of what we consume and eat is now dependent on petro chemical products. It is the derivatives of these shoved into almost everything we eat and use that is doing the damage. It is not just us, it is also the other creatures of the earth.

“Not with a bang but a whimper” as the poet T.S. Eliot said in his poem “The Hollow Men”

But there could be a good big bang on the way that will end the debate on the Euro because it will end much of Europe.

Apparently there is a huge Caldera in Italy compared with which Pompeii is but a pimple. British scientists are arguing with others about the right to drill holes in it.

Is this is good idea , I ask?

I can predict that in 2011 there will be some volcanic activity somewhere. How big and where and with what effect I do not know. We were told about the risk of a larger secondary Icelandic one that has yet to happen and other possibilities. Your guess is as good as mine and maybe better.

This year, next year, sometime when?