THE WORLD'S LATEST

Accountability

noreply@blogger.com (Unknown) — Fri, 12 Dec 2008 12:15:00 +0000

Held to account

Which big organisations and companies are accountable?

THE International Olympic Committee is the least accountable global organisation according to a survey published on Wednesday December 10th by One World Trust, a British think-tank. The study ranks 30 companies, inter-governmental organisations, and voluntary groups and charities, according to an index based on criteria such as transparency, participation with outsiders and how complaints are dealt with. The IOC was found to be the least transparent in its workings, while the International Atomic Energy Agency and Care International were found to be worst for setting out ways to deal with external complaints or whistle-blowing. Businesses are most likely to respond to complaints and banks score best for transparency. Charities and aid agencies are most likely to involve outsiders in decision-making.

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Corruption in America

noreply@blogger.com (Unknown) — Fri, 12 Dec 2008 12:08:00 +0000

The Chicago way

ROD BLAGOJEVICH has the hair of a Kennedy and the tongue of a crook. When he first arrived on the political scene in Illinois, many thought he was a rising star. Some even murmured that the Democrat might climb as high as the White House. Mr Blagojevich, young and handsome, was elected as a congressman in 1996 and then as governor in 2002. He took office vowing to bring ethics reform to Illinois.
How things have changed. “Fire those fuckers”, said the governor about his critics at the Chicago Tribune. “If they don’t perform, fuck ‘em”, he said of an effort to squeeze contributions from a state contractor. Barack Obama’s Senate seat, Mr Blagojevich explained, “is a fucking valuable thing, you don’t just give it away for nothing.” These were some of the pearls of eloquence included in a 76-page complaint against Mr Blagojevich. At about 6am on Tuesday December 9th an FBI agent telephoned the governor at his home in Chicago to say that he was about to be arrested. Mr Blagojevich asked if the call was a joke. He denies any wrongdoing.

The arrest may have been a surprise to the governor, but many others were expecting it. Investigations of his administration’s hiring, contracting and fundraising stretch back to 2003. (His re-election in 2006 had much to do with the ineptitude of state Republicans.) Thirteen people had been indicted or convicted in the debacle, among them Tony Rezko, a developer and fundraiser who was once a friend of Mr Obama. Patrick Fitzgerald, the tireless prosecutor for Illinois’s northern district, shows no signs of slowing down.
Few, however, expected the prosecutor to present such a feast of bad behaviour. The most stunning charge is that Mr Blagojevich, who has the power to appoint Mr Obama’s successor in the Senate, wanted to sell the seat to the highest bidder. But almost equally shocking are the alleged efforts to fire his critics at the Tribune and to withhold money from a children’s hospital unless its executive contributed to his campaign. If convicted of wrongdoing in these and other schemes, Mr Blagojevich would have the honour of being the most despicable politician in Illinois’s recent history. This is no small feat in a state where three of the past seven governors have gone to jail. Though he may have been ambitious, however, he was not particularly clever. His conversations about Mr Obama’s seat, for example, came at a time when everyone knew federal investigators were watching him closely.
It is unclear whether or when Mr Blagojevich will resign. The leaders of the state Senate and House say that they will vote next week to strip the governor of his appointment powers, and that a special election should be held to fill the Senate seat. Mr Obama himself should be anxious that the mess will become, at the least, a distraction. David Axelrod, his chief campaign strategist who will be a close presidential adviser, has reversed a statement made in November suggesting that Mr Obama had spoken to the Illinois governor about the Senate vacancy.
Illinoisans, meanwhile, have been jerked from the hazy bliss that blanketed the state since Mr Obama’s election. They have long suffered from the state’s penchant for corruption. Mr Fitzgerald, one indictment at a time, has been pushing Illinois in the right direction, but his exposure of Mr Blagojevich represents a new low.
Beyond Illinois, too, Democrats have reason to be worried. William Jefferson, an indicted Louisiana congressman, lost a special election on Sunday—he is best known for stashing $90,000 in his freezer. And in New York Charles Rangel, chairman of the House Ways and Means committee, continues to be accused of scandal. The most recent matter involves suggestions that a bill was dropped in exchange for a donation to a pet project. Democrats have seized power from the Republicans. They are in danger of seizing the mantle of corruption too.

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Primary education

noreply@blogger.com (Unknown) — Fri, 12 Dec 2008 12:05:00 +0000

In praise of facts

“NOW, what I want is, Facts. Teach these boys and girls nothing but Facts. Facts alone are wanted in life.” How horrible for the pupils at Professor Gradgrind’s school; Charles Dickens pulled out all the grim stops in describing it. No one today really thinks that school, especially in the early years, should consist of nothing but dreary rote learning.
But children do love learning real things—why trees have leaves, how two minuses make a plus, the number of wives’ heads Henry VIII removed. Only if they begin to build up a core of knowledge can they develop the habits of mental discipline that must last them a lifetime. You cannot look up on Google something you do not know exists; and the ability to hold facts in your head is a prerequisite for many careers—the law, say, or engineering. It is not enough in primary school to learn about learning; children need to learn actual stuff.

So it is a particular disappointment that the interim version of the biggest review of British primary schooling in decades nudges the country a little further down its path toward factfree education (see article). The existing curriculum is not without its faults: repeatedly re-engineered since it was set in place 20 years ago, it is now cluttered and prescriptive. And Sir Jim Rose, once Britain’s chief inspector of primary schools, was dealt some marked cards for his review: computer skills had to be ranked alongside literacy and numeracy (though employers complain not that young job-seekers are clueless online but that they are illiterate); room had to be made to teach a modern foreign language (thank heavens); and a gaggle of personal-development goals (learning not to set fire to your friends or trash the classroom) were to be emphasised.
The report suggests that everything be mashed into six “learning areas”. The titles alone appal. History will be part of “human, social and environmental understanding”, where it will compete for airtime with geography and, no doubt, global warming (is it any wonder that Gordon Brown has to scrabble about for a recognisable definition of national identity?). Britain’s increasingly fat children will presumably cut back what limited running around the playground they do now and sit, rapt, through lessons in “understanding physical health and well-being” (rumoured to include “happiness” lessons too).
Sad but true
Sir Jim is no fool, and he talks the talk better than most. There is to be “challenging” subject teaching as well as “equally challenging” cross-curricular study, the report insists; nothing will be lost. This is disingenuous. Maths looks safe; and reading and writing reasonably so (although English has to share its “understanding” area with other languages). But other hard, fact-filled subjects—history, geography and so on—will be compressed to make room for the sloppy, politically correct mush.
So, children, here are some crunchy facts. Spending on education has more than doubled in a decade, but standards have stalled as New Labour has conspired with its friends in the teachers’ unions to dumb down exams and meet performance targets. One in five pupils still leaves primary school unable to read and write effectively. Britain is sliding down the world’s literacy league tables (it does better at maths, which thankfully remains ringfenced). You cannot teach children everything. But that is no excuse for teaching them nothing much at all.

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Barack Obama's Economic Team

noreply@blogger.com (Unknown) — Thu, 04 Dec 2008 08:25:00 +0000

Off to work they go

Barack Obama has stacked his cabinet with clever economists, but can they work
together? And what will they do?

WHEN The Economist asked academic economists in September which presidential candidate would pick the better economic team, a huge majority said Barack Obama. He has not disappointed them. The team he unveiled this past week is studded with stars of the profession.
Mr Obama’s policies may not be any more successful at combating the financial crisis and recession than those of George Bush. But it does seem safe to say that economics will play a bigger part in the formation of those policies. Three of the first four members of the team to be named are well-regarded PhD-holding economists and the fourth, Tim Geithner, the new treasury secretary, is a respected central banker (he heads the Federal Reserve Bank of New York). Only one of the four people they will replace shares a comparable background (see chart).

They are not just any economists but among the best. “Their IQs are off the chart,” gushes a former colleague of some of them. Henry Kissinger supposedly once said every president should give Larry Summers an office in the White House. On November 24th Mr Obama did. As director of his National Economic Council (NEC), Mr Summers “will be by my side, playing the critical role of co-ordinating my administration’s economic policy”.
It is a striking contrast with the outgoing administration, in which economists never had much clout. Consider the Office of Management and Budget director, who as overseer of $3 trillion in federal spending plays a pivotal role in setting economic priorities. Mr Bush has had four: one was a pharmaceuticals executive, one did government relations for an investment bank, and two were congressmen. All four trained as lawyers. Mr Obama’s nominee, Peter Orszag, the outgoing director of the non-partisan Congressional Budget Office, is a professional economist known for such page-turners as “Saving Social Security”, a 300-page tome boasting 37 pages of footnotes and eight appendices. Whether Mr Orszag will be tough enough with the red pencil, however, is something that his track-record does not tell us.

The team’s other striking feature is its centrism. Mr Summers is on the conservative wing of Democratic economists. As Mr Clinton’s treasury secretary he backed the law that in 1999 tore down barriers between commercial and investment banks and still backs it despite recent criticism. Christina Romer, an economic historian from Berkeley, has just published a paper with her husband David showing how raising taxes retards growth. Jason Furman, likely to be named as an aide to Mr Summers, outraged unions for his 2005 article, “Wal-Mart: A Progressive Success Story”. One hedge-fund manager who, before the election, was terrified Mr Obama would usher in “confiscatory” tax policies breathed a sigh of relief. “No Robert Reichs,” he said, a reference to the leftish adviser who was Mr Clinton’s labour secretary. “There’s no radicals in the whole cabinet that anyone can find.”
Mr Obama’s backers, in fact, can with some justification feel betrayed by the presence of so many figures from the Clinton regime: Mr Summers and Mr Geithner served at the Treasury then, and Mr Orszag was on the NEC. Moreover, many of them are protégés of Mr Clinton’s second treasury secretary, Robert Rubin, whose star has dimmed considerably as Citigroup, where he has been a senior executive since 1999, has lurched from crisis to catastrophe.
Still, if Mr Obama is going to emulate the economic record of any predecessors, Mr Clinton is not a bad one to pick. Hiring Mr Clinton’s team won’t bring back that era’s steady growth and low unemployment, but it does bring valuable experience of fighting financial crises. Mr Summers and Mr Geithner were deeply involved in dealing with the disasters that befell Mexico, East Asia, Russia and Latin America during that time. Mr Geithner has spent the past 15 months battling the current crisis, though so far with little success.
Their influence helps explain why Mr Obama wants a hefty fiscal stimulus to keep the economy from “falling into a deflationary spiral”. Mr Summers had prominently called for “significant, speedy and sustained” fiscal stimulus. Mr Obama says he has asked his team to come up with a two-year plan to raise employment by 2.5m more than would otherwise be the case. Reports suggest a price tag of $500 billion-$700 billion over two years. The stimulus could include both aid to states, funding for public infrastructure and early implementation of Mr Obama’s promised $1,000-per-family tax-credit. It may also include health-care aid for the poor and uninsured—a down payment on one of Mr Obama’s more costly promises.
Mr Obama’s people will also be more willing to deploy the $700 billion Troubled Asset Relief Programme to prop up the financial system; they may even seek to enlarge it, and pursue some formal powers for taking over failing financial institutions. Other issues they will have to tackle quickly include whether formally to guarantee the debts of the mortgage agencies, Fannie Mae and Freddie Mac; a moratorium on mortgage foreclosures; reform of bankruptcy law to permit judges to rewrite mortgage contracts; and reforming the financial regulatory system.
Though impressive enough on paper, it’s less clear how well Mr Obama’s picks will function as a team. The NEC director is traditionally the honest broker of the economic team’s ideas. Given his reputation as an intellectual bully, many wonder whether Mr Summers can play that role. “Larry clearly can’t do that, and it’s a waste of his talents, quite frankly,” says a former colleague. But that may sell Mr Summers short. More than anything else, he relishes a spirited debate with worthy adversaries. One of those is Mr Geithner, who first came to Mr Rubin’s attention by contradicting Mr Summers in a staff meeting. Mr Geithner once described the Rubin Treasury as “an open competition of ideas.” And Mr Summers will have no trouble standing up to Mr Obama’s skull-cracking chief of staff, Rahm Emanuel.
That said, too much competition of ideas can breed chaos, and Mr Obama may have increased the risk by creating yet another body. On November 26th he said Paul Volcker, a former Federal Reserve chairman, would head his new Economic Recovery Advisory Board and Austan Goolsbee, his longest-serving economic adviser, would be its staff director. The board seems to overlap with the three-member Council of Economic Advisers, which vets policy proposals for economic idiocy: Mr Goolsbee will also serve on that council. Might too many economists spoil the recovery?

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The EU and China

noreply@blogger.com (Unknown) — Thu, 04 Dec 2008 08:02:00 +0000

The Summit of Discourtesy

Crisis or no crisis, China’s diplomatic priorities
prevail

SUMMITS are a dime a dozen these days. So it is tempting to shrug off the announcement on November 26th that China pulled out of an EU-China summit, at less than a week’s notice. But China’s high-profile snub—aimed at President Nicolas Sarkozy of France, who was to be the host on the European Union side—cannot be dismissed so easily.
Cancelling a meeting at such a high level is a rare breach of diplomatic manners. Mr Sarkozy has irked China by proposing to meet the Dalai Lama at a party in Poland for former winners of the Nobel peace prize on December 6th. Before then, he was due to play host to the Chinese prime minister, Wen Jiabao, in the French city of Lyon, in his capacity as holder of the rotating presidency of the EU. Some of the EU’s regular summits with China are very dull. This one had important things to discuss, such as joint action on tackling the global financial crisis. An official EU statement regretted the summit’s postponement, “particularly” at a time when the world situation calls for “very close co-operation”.

Mr Sarkozy seems singled out for special punishment. Both Angela Merkel of Germany and Gordon Brown of Britain have met the Dalai Lama in the recent past, without triggering such diplomatic fireworks. Mr Sarkozy, a mercurial chap, may not have prepared the ground with Beijing for his meeting with the Dalai Lama quite as diligently as did Ms Merkel and Mr Brown, diplomats suggest. Also, France and China have had some bruising spats this year: Mr Sarkozy criticised China’s handling of unrest in Tibet; the Olympic-torch relay was disrupted by protests in Paris (as in London); Mr Sarkozy hinted he might stay away from the opening of the Beijing Olympics unless China started talks with the Dalai Lama. Reprisals followed, notably an apparently temporary tourism boycott of France by China.
But other things are in motion. Recently the French, who will surrender the EU presidency at the end of December, unexpectedly put out feelers to see if other EU countries wanted to move ahead with a long-delayed EU code of conduct on arms sales to China. That code of conduct has long been presented by the French as the key to a much bigger prize for China: the scrapping of an EU embargo on arms sales to China, dating back to the 1989 Tiananmen massacre. The French, it is said, found little enthusiasm for movement on the arms-for-China dossier. America dislikes any idea of EU arms helping China modernise its army, since American troops might one day be on the wrong end of such lethal toys, in a fight over Taiwan. European leaders are not about to annoy the new President Obama, just to please China.

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Californias Budget

noreply@blogger.com (Unknown) — Wed, 15 Oct 2008 11:37:00 +0000

No Money to pay Bills

The state’s finances are worsening by the day

TWO weeks ago Arnold Schwarzenegger, California’s governor, signed a state budget that was a record 85 days late. Much cajoling and bullying was required to get it to his desk. At one point the governor threatened to pay state bureaucrats the minimum wage; at another he promised to veto every bill he saw. Few like the end result, which involves spending cuts and a good deal of what John Chiang, the state controller, described as “Enron-style accounting tricks”. And yet it became clear this week that the budget is hopelessly optimistic and will almost certainly have to be renegotiated.
The world’s eighth biggest economy has two problems, both stemming from the economic downturn. First, it is finding it hard to raise enough money to pay the bills. Under normal circumstances the state would sell $7 billion in bonds to tide it through until April, when income taxes flood in. Thanks in part to the delayed budget, the state has been forced to go to the bond markets at a time when investors are wary of everything but Treasury notes.

This obstacle ought to be cleared by the end of the month, when the state would run out of money. Encouragingly, Massachusetts managed to sell $750m-worth of bonds on October 8th. California’s Treasury plans to go to market next week with a slimmed-down $4 billion bond sale. If the credit markets gum up even more than at present, the state may seek relief from the Federal Reserve or from its enormous public-employee pension funds. With the immediate problem out of the way, though, a bigger one will loom into view.
California’s revenues have already dropped below even the pessimistic estimates on which the budget was based. Mr Chiang announced this week that sales-tax receipts in the third quarter were 9% below the May estimate, whereas corporate taxes were 16% lower. The prognosis for income-tax receipts, which account for more than half of all revenue to the state Treasury, is scarcely better. California’s tax regime is highly progressive. The state depends heavily on the rich, particularly the stock-owning Silicon Valley rich. Unfortunately, shares in technology companies have tumbled along with others.
By the end of December, an estimated $3 billion must be found to plug the hole. Sacramento is the last place in America one would want to look for such a sum. Along with just two other states—Arkansas and Rhode Island—California requires a super-majority vote to pass a budget. Yet getting two-thirds of legislators to agree is exceptionally difficult. Thanks in part to ruthless gerrymandering, state politicians are sharply divided between tax-loathing Republicans and public services-loving Democrats.
The Republicans, who make up less than half but more than a third of both the Assembly and the Senate, resisted any tax raises this summer and will probably do so again. If anything, says Roger Niello, a Republican legislator who sits on the budget committee, opinions are hardening as the economy stumbles. Poor Mr Schwarzenegger. His last two years in office may be little happier than the twilight era of Gray Davis, whom he replaced in 2003.

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No

noreply@blogger.com (Unknown) — Wed, 15 Oct 2008 11:37:00 +0000

The Caribbean and the Olympics

noreply@blogger.com (Unknown) — Mon, 22 Sep 2008 06:23:00 +0000

Champs and Chumps

Why Jamaica outpointed
Cuba?

AN E-MAIL circulating in Jamaica states that international sporting authorities have banned cassava on the grounds that it is a performance-enhancing substance. This was a wry comment on the remarkable success of an island of only 2.7m people at the Beijing Olympic games. Jamaica won 11 medals, of which six were gold. In doing so, it knocked its bigger neighbour, Cuba, from its perch as the Caribbean’s sporting power. The Cubans returned home with just two golds, their worst showing since 1968.
What explains this reversal of fortune? In large part, who got to compete. All of Jamaica’s medals came on the track. The Champs, as Jamaica’s high-school athletics championship is called, is the country’s top sporting event, televised nationally and held in a big stadium. This may explain why Usain Bolt, the world’s fastest man, was not coaxed into throwing his energy into basketball, cricket or football (though he has the physique to excel at the first two). More than genetics, it is this national specialisation which has allowed Jamaica to emerge as a track power.
Cuba spreads its talent more widely. Its Communist rulers have set great store by Olympic success as a symbol of political superiority. But it is boxing at which Cubans have long excelled. Whereas boxers elsewhere turn professional as they get older and better, Cuba’s state-sponsored “amateur” fighters remain eligible for the Olympics. When offered $1m to fight by Don King, an American boxing promoter, several Cuban champions are said to have replied that they would rather fight for 10m Cuban people.
In Beijing, Cuba’s boxers still managed eight medals (a third of the country’s respectable total haul of 24). But there were no golds. That may be because three of the five gold medallists in Cuba’s 2004 Olympic team have since defected; a fourth languishes in Havana, disgraced for trying to do the same. Because of official fears of more defections, the boxing team did not travel to the 2007 world championships, held in Chicago.
There is, however, another theory. According to Fidel Castro, who wrote an editorial on the subject this week, Cuban boxers were robbed by malicious referees. A Cuban Taekwondo fighter, Angel Matos, was banned for life, along with his trainer, when he delivered a vicious kick to the head of the referee who had just disqualified him for taking too long to get medical attention. Mr Castro declared himself in “total solidarity” with Mr Matos and his coach. So it’s official: Jamaica has eclipsed its island neighbour because of an imperialist plot.
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The Next Olympics

noreply@blogger.com (Unknown) — Mon, 22 Sep 2008 06:07:00 +0000

The Morning After

Measures to further sport
will work better for the elite than for the masses

WHILE lacking, perhaps, the cohesion of the men’s coxless four or the cycling pursuit team who won golds for Britain in Beijing, the unlikely quartet of footballers and pop stars led by Boris Johnson at least managed to accept the Olympic flag from China without dropping it. The whimsy of the British performance at the Olympic handover, featuring twirling umbrellas and a doubledecker bus, suggested that Britain would not attempt to match the pageantry and stadiums that cost China billions. It plans to rely heavily on what London’s mayor hopefully calls Britain’s “wit and flair”.
As far as the sporting competition is concerned, however, Britain will give no quarter. Basking in the afterglow of the country’s most successful Olympic games in a century, Gordon Brown has big plans for developing sport in Britain. The prime minister’s initiatives include attempts to get more girls involved, funding to give schoolchildren five hours of sport a week and a return to competitive games in schools (on the wane since the 1960s). More money is also expected for community sports facilities.

This frenzy of activity has two aims: to ensure that Britain’s Olympians repeat their success in four years’ time; and to get a generation of potatoes off the couch and onto the track. The first will be easier to achieve. The British medals in Beijing showed that well-targeted funding allied to greater professionalism brings results, and home advantage will help. But Britain’s successful coaches are much in demand elsewhere. And £100m of private-sector funding for elite athletes in the run-up to the 2012 Olympics has yet to materialise, because of the credit crunch.
Inspiring non-Olympians to pull on their trainers is another matter. Research in 2002 by Maarten van Bottenburg, of Utrecht University, found no correlation between the success of a sporting elite and increased public participation in those sports. But taken the other way around, if more people can be enticed to do sports, are world-class athletes likelier to emerge?
Stressing competitive games at school does seem to raise the ambitions and hone the talents of the young: in Australia and Sri Lanka thousands turn out to watch schools do battle on the rugby or cricket pitch, and those countries excel at those sports. In Britain too, schools with money for better facilities produce better sportsmen: private schools educate 7% of Britons yet their old boys (and girls) won 45% of Britain’s medals at the previous three Olympics.
So boosting the money for competitive sport in schools would probably produce a few more gold-medallists (and would have other benefits too). But persuading large swathes of the citizenry to spend less time watching sport on television and more time actually working up a sweat is a Herculean task. As Stefan Szymanski, of City University’s Cass Business School, points out, it is harder to build a national sporting culture from the top down than it is to propel a handful of highly talented athletes to the podium. Mr Brown is likely to find that he can bring pools of water to the masses, but he can’t make them swim.

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Investment Banking

noreply@blogger.com (Unknown) — Mon, 22 Sep 2008 05:51:00 +0000

Is there a Future?

The loneliness of the independent wall
street,.

IN THE early years of this decade, when banks did quaint things like making money, the mantra on Wall Street was: “Be more like Goldman Sachs”. Bank bosses peered enviously at the profits and risk-taking prowess of the venerable investment bank. No longer. “Be less like Goldman Sachs” is the imperative today.
Of the five independent investment banks open for business at the start of the year, only Goldman and Morgan Stanley remain. Doubts about the sustainability of the model are rife. In earnings conference calls on September 16th, the chief financial officers of both firms had to bat away analysts’ questions about their ability to survive on their own. Spreads on their credit-default swaps, which protect against the risk of default, soared as investors digested the implications of Lehman Brothers’ demise (see chart).

Universal banks, which marry investment banking and deposit-taking, are in the ascendant. Bear Stearns and Merrill Lynch found shelter in the arms of two big universal banks, JPMorgan Chase and Bank of America. Barclays, a British universal bank, is picking at the carrion of Lehman Brothers. The mood at Citigroup, seen until now as one of the biggest losers from the crisis, is suddenly bullish: insiders talk up the stability of its earnings and the advantages of deposit funding.
Regulatory antipathy to universal banks has also eased. Although the 1933 Glass-Steagall act, which separated investment banks and commercial banks, was repealed in 1999, the universal model is still viewed with suspicion in America. Among measures announced on September 14th, the Federal Reserve temporarily suspended rules restricting the amount of money that banks can lend to their investment-banking affiliates. Many are sceptical that this rule makes much practical difference. Even if the investment-banking arms of universal banks nominally have to raise money separately, their parents’ ratings still make their funding cheaper. By the same token, if they get into trouble, the effects ripple through the entire balance-sheet. Even so the suspension, and the dramatic reshaping of Wall Street, represents the final repeal of Glass-Steagall.

Can Goldman and Morgan Stanley survive as independents? In normal times, the question would seem ludicrous. Both banks had profitable third quarters, with Morgan Stanley beating expectations comfortably. Rivals’ disappearance should allow them to grab new business and has already helped to increase pricing power: Morgan Stanley hauled in record revenues in its prime-brokerage business. Both have reduced their most troubling exposures; both can call on decent amounts of capital and strong pools of liquidity. And both can marshal strong arguments that they are better managed than their erstwhile peers.
The problem, of course, is that these are not normal times. Although the firms condemn the rumour-mongering, stories that Morgan Stanley was looking for a partner continued to swirl. As The Economist went to press, Wachovia, an American bank, and Citic of China were among the names in the frame.
Three doubts hang over the independent model. The first concerns the risk of insolvency. Investment banks have higher leverage than other banks (in America at least), which worsens the impact of falling asset values. They do not have the safety-valve of banking books, where souring assets can escape the rigours of mark-to-market accounting. And they lack the stable earnings streams of commercial and retail banking. In other words, they have less room for error. Goldman’s reputation for risk management is excellent, Morgan Stanley’s a bit patchier. But asking investors to take valuations and hedging processes on trust is getting harder by the day.
The second, related doubt concerns their funding profile. As a group, the pure-play investment banks have relied heavily on short-term funding, particularly repo transactions in which counterparties take collateral as security against the cash they lend. Both survivors say they are nowhere near as exposed to the risk of a sudden dearth of liquidity as Bear Stearns was. They could also argue that retail deposits can be as flighty as the wholesale markets: just ask Northern Rock and IndyMac, both of which suffered rapid withdrawals. Even so, a further shift towards longer-term unsecured financing will be the price of survival for Morgan Stanley in particular.
That would increase costs, which in turn raises the third doubt, profitability. As well as dearer funding and lower leverage, the investment banks face the prospect of weakened demand for their services. As and when the market for structured finance revives, it will be smaller and less rewarding than before. Demand for many services will not go away, but in a world of scarcer credit, universal banks will be tempted to use their lending capacity to win juicier investment-banking business from companies. “Don’t give me the bone,” says one European bank boss. “Leave some meat on it.”
By these lights, universal banks appear to offer clear advantages to both shareholders and regulators. Yet some of those advantages are illusory. For regulators, larger, diversified institutions may be more stable than investment banks but they pose an even greater systemic risk. “The universal bank is the regulatory equivalent of the super-senior mortgage-backed bond,” says one analyst. “The risks may look lower but they do not go away.” And deposit funding is cheaper than wholesale funding in part because those deposits are insured. Measures to protect customers may end up allowing banks to take on risks that endanger customers.
For shareholders, too, the universal bank may offer false comfort. A model that looks appealing in part because assets are not valued at market prices ought to ring alarm bells. Sprawling conglomerates are just as hard to manage as turbo-charged investment banks. And shareholders at UBS and Citi will derive little comfort from the notion that the model has been proven because their institutions are still standing. If the independent investment banks survive, they will clearly need to change. But they are not the only ones.

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Muslim Extrimism in France

noreply@blogger.com (Unknown) — Fri, 19 Sep 2008 11:13:00 +0000

Jailhouse Jihad

Fears that terrorism is
breeding in french prison

HOME to Europe’s biggest Muslim population and a robust counter-terrorism system, France has long kept a keen watch on Islamic radicalism. In recent years it has been spared big bombings of the kind seen in London and Madrid. But France is no stranger to attack by jihadists, and officials fear it is just a matter of time before they strike again.
The authorities are particularly worried about recruitment to militant Islam in France’s overcrowded prisons. “French prisons are a preferred recruiting ground for radical Islamists,” Michèle Alliot-Marie, the interior minister, told Le Figaro newspaper. She and her EU counterparts have been working on a joint handbook on how to counter the phenomenon, which touches many European countries, notably Britain. At the end of September, Ms Alliot-Marie will host an EU seminar, in the heavily Muslim Paris banlieue of Saint-Denis, to discuss what to do.

Fiercely secular, France does not collect official statistics based on religion. But Farhad Khosrokhavar, a French specialist on the subject, estimates that Muslims make up well over half France’s prison population—far higher than their 8% or so share of the total population. Among these there are currently some 1,100 people behind bars in France for terrorist-related activities, according to Alain Bauer, a criminologist. Ms Alliot-Marie said that another 55 have been detained this year.
Proselytising among inmates is common. Security officials are worried that many radicals jailed around the time of the 1998 football World Cup, hosted by France, are starting to be released. “Radicalised Islamists become more influential in prison,” says Mr Khosrokhavar. He reckons there are a few hundred Islamists actively recruiting behind bars in France.
It is hard to know how to counter this. Concentrating jihadists in one or two penitentiaries, as many countries do, may help them plot attacks from prison. Yet dispersing them, or regularly moving them between high-security prisons in order to disrupt networks, may spread radical ideology and increase recruitment.
Less crowded cells might help. France, whose jail population has grown by 30% since 2001, is building three new prisons to this end. Another idea is to provide more Muslim chaplains to offer a moderate spiritual outlet for Muslim inmates.
Azzedine Gaci, head of the Regional Council of the Muslim Faith in Lyon, makes such visits to the prison in Villefranche-sur-Saône, where he reckons 70% of its 700-odd inmates are Muslim. “They need a different interlocutor,” he says. In the absence of competent chaplains, extremists fill the vacuum. France currently has 1,100 chaplains accredited to visit its 63,000 inmates across 195 prisons—yet only 117 of them are Muslim.

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Malaria

noreply@blogger.com (Unknown) — Fri, 19 Sep 2008 11:13:00 +0000

Counting Bites

The number of malaria cases
is down sharply,for reason good and bad.

AT FIRST blush, the change seems like staggeringly good news. The World Health Organisation (WHO) has just issued a new report on malaria. The agency’s experts estimate that each year there are some 250m cases of malaria globally. That is a huge fall from the previous 350m-500m figure in a 2005 report.
A happy confluence of funding, political will and practical tools is indeed making a difference. Drug treatment that combines artemisinin, a powerful anti-malaria treatment, with other medicines, and the use of insecticide-embedded bed nets, are particularly effective.

Thanks to that, 20-plus countries outside Africa have seen their malaria burden decline in recent years. And even within Africa, which accounts for most of the world’s 880,000 or so malaria deaths each year, a handful of countries have made excellent progress. The number of new malaria cases in Eritrea fell by more than a half between 2001 and 2006. Rwanda and São Tomé and Príncipe made big gains too.
Sadly, the bigger reason for the seeming drop in the total number of malaria cases is the way the WHO counts them, a tricky task in countries with weak health-care systems. Previous reports relied on estimates dating back to the 1950s and 1960s in some countries outside sub-Saharan Africa. The new methodology takes the actual number of malaria cases reported by local health authorities as a starting point. Nearly half the fall comes thanks to counting cases in India by the new method.
The report comes on the eve of a United Nations malaria summit in New York on September 25th. Governments, philanthropic outfits (notably the Gates foundation), activists and celebrities will launch a new global strategy and collect hefty pledges in its support. Campaigners say that malaria’s moment has finally arrived.
If so, the assembled worthies may pay attention to a point made by Amir Attaran of the University of Ottawa. He argues that malaria and similar diseases need to be monitored like the weather, with what he calls “sentinel surveillance networks” throughout the developing world. This is essential both to measure malaria incidence more accurately and to assess the success or failure of various policies.
With enough time and effort, big reductions in malaria caseloads reported in future WHO studies could even be cause for celebration rather than embarrassment.

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Children's Health

noreply@blogger.com (Unknown) — Fri, 19 Sep 2008 11:13:00 +0000

Worries in a Bottle

Are commonly used plastics
and medicines harming human health?

IT IS a family nightmare. New parents try to eliminate potential hazards from their children’s lives, but what if hidden dangers lurk in the use of everyday objects and familiar substances, like plastics or medicines? Just imagine if baby-feeding bottles harmed infants’ health, or if a painkiller widely administered to children ended up doing more harm than good.
Activists have long raised concerns about the poorly understood links between the environment and health. Some worry about toxins in the air and the overuse of plastics, while others fret that children are overmedicated. Regulators and industry officials have pooh-poohed such talk, but several studies released this week may lead them to reconsider.

A frequent cause for concern has been bisphenol-A (BPA), a commonly used plastic. The Work Group for Safe Markets, a coalition of American charities and lobbying groups, earlier this year issued a report called “Baby’s Toxic Bottle” that suggested BPA leaches into milk when bottles are heated. Others worry that adults have been harmed by this plastic too, since it is often used to line the inside of drink cans.
Such worries were easily dismissed because they were not backed by scientific evidence—at least until now. A study published this week in the Journal of the American Medical Association analyses the most comprehensive set of data that tracks both a variety of health indicators and concentrations of BPA in urine. The latter matters because when this plastic is absorbed, it quickly passes through the body.
The researchers, led by Iain Lang of Peninsula Medical School at Exeter in south-west England, found that higher urinary concentrations of BPA were associated with heart problems, diabetes and liver complications. They did not find such a correlation with other diseases. Although the study did not include infants, parents using BPA bottles are unlikely to be reassured by these findings.
A separate study in the Lancet will also come as little comfort. A team led by Richard Beasley of the Medical Research Institute of New Zealand studied the link between the use of paracetamol, a painkiller frequently used for young children, and asthma. After scrutinising the health data for children aged six and seven participating in the International Study of Asthma and Allergies in Childhood, they draw a sobering conclusion: use of this drug to tame fevers in children under the age of one is associated with an increased risk of their having asthma when they are six.
So, is this all doom and gloom for parents? Not necessarily. For one thing, these studies are not the final word on a very complex subject. The authors of the paper on paracetamol, for example, admit that “causality cannot be established” from a statistical study such as theirs; to determine whether the link is coincidence or causation, they recommend randomised control trials that look carefully into the long-term effects of paracetamol use. The BPA paper also acknowledges that independent replication and follow-up studies are needed. Another complication is that even a link between asthma and paracetamol needs to be put into the proper context. Any demonstrable harm caused by the use of plastics and painkillers has to be weighed against the benefits they bring, such as reliability and efficacy. They also need to be weighed against the costs and benefits of alternatives.
Simply abandoning two familiar tools of parenthood in a panic might make matters worse: suppose, say, BPA were replaced with new materials that eventually turned out to have even more worrying properties. This week’s studies, although not definitive, do provide enough reason for researchers to redouble their efforts to understand the complex links between a child’s early life and its later health.

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Sleep

noreply@blogger.com (Unknown) — Fri, 19 Sep 2008 11:13:00 +0000

Restless

A strang case raises the
question of what sleep is for
THE function of sleep, according to one school of thought, is to consolidate memory. Yet two Italians have no problems with their memory even though they never sleep. The woman and man, both in their 50s, are in the early stages of a neurodegenerative disease called multiple system atrophy. Their cases raise questions about the purpose of sleep.
Healthy people rotate between three states of vigilance: wakefulness, rapid eye-movement (REM) sleep and non-REM sleep. But all three are mixed together in the Italian patients. The pair were initially diagnosed by Roberto Vetrugno of the University of Bologna and his colleagues as suffering from REM behavioural disorder, in which the paralysis, or cataplexy, that normally prevents sleeping people from acting out their dreams is lost. This can cause people in REM sleep to twitch and groan, sometimes flailing about and injuring their bedmates. These patients, however, soon progressed from this state to an even odder one, according to a report in Sleep Medicine.
One of the principal ways to measure sleep is to monitor brainwave activity, which can be done by placing electrodes on the scalp in a technique known as electroencephalography (EEG). Non-REM sleep itself is divided into four stages defined purely by EEG patterns; the first two are collectively described as light sleep and the last two as deep or slow-wave sleep. When the Italian patients appeared to be asleep, their EEGs suggested that their brains were either simultaneously awake, in REM sleep and non-REM sleep, or switching rapidly between the three. Yet when subjected to a battery of neuropsychological tests, they showed no intellectual decline.
Mark Mahowald of the University of Minnesota Medical School, whose group first described REM behavioural disorder in 1986, thinks memory consolidation is still going on in the brains of the two Italian patients; hence their lack of cognitive impairment or dementia. What needs to be revised in light of their cases, he says, is the definition of sleep.
Dr Mahowald suspects that sleep can occur in the absence of the markers that currently define it, which means those markers are insufficient. What’s more, the Italian cases lend support to an idea that has been gathering steam in recent years: that wakefulness and sleep are not mutually exclusive. In other words, the human brain can be awake and asleep at the same time.
That evidence takes the form of a growing list of conditions in which wakefulness, REM and non-REM sleep appear to be mixed. An example is narcolepsy, in which emotionally laden events trigger sudden cataplexy. When the dreaming element of REM intrudes into wakefulness, which can happen with sleep-deprivation, the result is wakeful dreaming or hallucinations. Since such dreams can be highly compelling, Dr Mahowald thinks they might account for some reports of alien abduction.
But there is another possible explanation of the Italian puzzle: that sleep is not necessary for memory after all. Jerry Siegel of the University of California, Los Angeles, has studied the sleep habits of many animals and thinks that could well be the explanation. All of which gives researchers something new to keep them awake at night.

Fishing and Conservation

noreply@blogger.com (Unknown) — Fri, 19 Sep 2008 11:13:00 +0000

A Rising Tide

Scientist find proof that
privatising fishing stocks can avert a disaster

FOR three years, from an office overlooking the Atlantic in Nova Scotia, Boris Worm, a marine scientist, studied what could prevent a fishery from collapsing. By 2006 Dr Worm and his team had worked out that although biodiversity might slow down an erosion of fish stocks, it could not prevent it. Their gloomy prediction was that by 2048 all the world’s commercial fisheries would have collapsed.
Now two economists and a marine biologist have looked at an idea that might prevent such a catastrophe. This is the privatisation of commercial fisheries through what are known as catch shares or Individual Transferable Quotas (ITQs).

Christopher Costello and Steven Gaines (the biologist) of the University of California and John Lynham of the University of Hawaii assembled a database of the world’s commercial fisheries, their catches and whether or not they were managed with ITQs. As these fisheries were not chosen at random and without having any experimental control, they borrowed techniques from medical literature—known as propensity-score matching and fixed-effects estimation—to support their analysis. The first method compared fisheries that are similar in all respects other than the use of ITQs; the second averaged the impact of ITQs over many fisheries and examined what happened after the quotas were introduced. Whichever way they analysed the data, they found that ITQs halted the collapse of fisheries (and according to one analysis even reversed the trend). The overall finding was that fisheries that were managed with ITQs were half as likely to collapse as those that were not.
For years economists and green groups such as Environmental Defense, in Washington, DC, have argued in favour of ITQs. Until now, individual fisheries have provided only anecdotal evidence of the system’s worth. But by lumping all of them together the new study, published this week in Science, is a powerful demonstration that it really works. It also helps to undermine the argument that ITQ fisheries do better only because they are more valuable in terms of their fish stocks to begin with, says Dr Worm. The new data show that before their conversion, fisheries with ITQs were on exactly the same path to oblivion as those without.
Racing to fish
Encouraging as the results are, ITQ fisheries are in the minority. Most fisheries have an annual quota of what can be caught and other restrictions, such as the length of the season or the type of nets. But this can result in a “race to fish” the quota. Fishermen have an incentive to work harder and travel farther, which can lead to overfishing: a classic tragedy of the commons.
The use of ITQs changes this by dividing the quota up and giving shares to fishermen as a long-term right. Fishermen therefore have an interest in good management and conservation because both increase the value of their fishery and of their share in it. And because shares can be traded, fishermen who want to catch more can buy additional rights rather than resorting to brutal fishing tactics.
The Alaskan halibut and king crab fisheries illustrate how ITQs can change behaviour. Fishing in these waters had turned into a race so intense that the season had shrunk to just two to three frantic days. Overfishing was common. And when the catch was landed, prices plummeted because the market was flooded. Serious injury and death became so frequent in the king crab fishery that it turned into one of America’s most dangerous professions (and spawned its own television series, “The Deadliest Catch”).
After a decade of using ITQs in the halibut fishery, the average fishing season now lasts for eight months. The number of search-and-rescue missions that are launched is down by more than 70% and deaths by 15%. And fish can be sold at the most lucrative time of year—and fresh, so that they fetch a better price.
In a report on this fishery, Dan Flavey, a fisherman himself, says some of his colleagues have even pushed for the quota to be reduced by 40%. “Most fishermen will now support cuts in quota because they feel guaranteed that in the future, when the stocks recover, they would be the ones to benefit,” he says.
Although governing authorities are important in setting up ITQs, so is policing of the system by the fishermen themselves. In the Atlantic lobster fishery a property-based system has arisen spontaneously, says Dr Worm. Families claim ownership over parcels of sea and keep others out. Anyone trying to muscle in on the action risks being threatened; their gear may be cut loose or their boat could vanish.
Jeremy Prince, a fisheries scientist at Murdoch University in Australia, has been involved in ITQs since they were pioneered in the early 1980s by Australia, New Zealand and Iceland. In Australia they are only one way of managing with property rights, he says. Depending on the nature of a fishery, other methods may work better. These might divide up and sell lobster pots, numbers of fish, numbers of boats, bits of the ocean or even individual reefs. The best choice will depend on the value and underlying biology of each fishery, and in some places they may not work at all. In a fishery with a large, unproductive stock that grows slowly, fishermen may prefer short-term profit to the promise of low long-term income and catch all the fish straight away. Nevertheless, Dr Prince believes that, overall, market-based mechanisms are the way forward.
The most difficult place to introduce market-based conservation methods is in international waters. Attempts to do so have ended in failure. One problem is that there is simply too much cheating in the open ocean. Some scientists think a renegotiation of the law of the sea through the United Nations is the only way forward—or a complete ban on fishing in international waters. Although a dramatic course of action, the effects may not be so huge. Dr Worm reckons that 90% of the world’s fish are caught in national waters.
So, if Dr Costello and his colleagues are right and the profit motive can drive the sustainability of fisheries, why do the world’s 10,000-plus fisheries contain only 121 ITQs? Allocating catch shares is a difficult and often fraught process. In America it can take from five to 15 years, says Joe Sullivan, a partner in Mundt MacGregor, a law firm based in Seattle. The public, he says, sometimes resists the privatisation of a public resource and if government gets too involved in the details of the privatisation (rather than leaving it to the fishermen to work out), it can end up politically messy. But evidence that ITQs work is a powerful new hook to capture the political will and public attention needed to spread an idea that could avert an ecological disaster.

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Global Warming

noreply@blogger.com (Unknown) — Fri, 19 Sep 2008 11:13:00 +0000

A Changing Climate of Opinion

Some scientist think climate
change needs a more radical approach. As well as trying to curb greenhouse-gas
emision,they have plans to re-engineer the Earth.

THERE is a branch of science fiction that looks at the Earth’s neighbours, Mars and Venus, and asks how they might be made habitable. The answer is planetary engineering. The Venusian atmosphere is too thick. It creates a large greenhouse effect and cooks a planet that is, in any case, closer to the sun than the Earth is to even higher temperatures than it would otherwise experience. Mars suffers from the opposite fault. A planet more distant from the sun than Earth is also has an atmosphere too thin to trap what little of the sun’s heat is available. So, fiddle with the atmospheres of these neighbours and you open new frontiers for human settlement and far-fetched story lines.
It is an intriguing idea. It may even come to pass, though probably not in the lifetime of anyone now reading such stories. But what is more worrying—and more real—is the idea that such planetary engineering may be needed to make the Earth itself habitable by humanity, and that it may be needed in the near future. Reality has a way of trumping art, and human-induced climate change is very real indeed. So real that some people are asking whether science fiction should now be converted into science fact.
Tinkering with the atmosphere or the oceans on the scale required to do this would be highly risky and extraordinarily complex. But the alternative, getting the world’s population to give up fossil fuels, is proving exceedingly hard. Geo-engineering, as it has come to be known, may be a way of buying time for the transition to a low-carbon economy to take place in an orderly manner.
In the past, geo-engineering was taboo because many felt that the very possibility of fiddling with the climate would create an excuse to avoid the hard choices a low-carbon economy would impose. However, the feeling is now growing that if politicians came to scientists for advice on the matter, it would be a good idea for them to have some to offer. To that end, the Royal Society, Britain’s oldest scientific academy, has published a series of papers in its Philosophical Transactions outlining some of the options, and suggesting a few experiments to test whether they would work.
Transactional analysis
Broadly, these ideas fall into two categories. One is to remove excess carbon dioxide from the atmosphere. The other is to compensate for the climate-warming greenhouse effect this carbon dioxide and other gases cause, by reducing the amount of sunlight reaching the ground.
The most plausible way to remove carbon dioxide is to increase the amount of photosynthesis going on. Photosynthesis creates plant matter out of carbon dioxide and water. But rotting plant matter returns carbon dioxide to the atmosphere. So, if the gas is to be removed permanently, that rotting has to be avoided.
One widely discussed idea, which the Royal Society’s correspondents re-examine, is to fertilise the oceans with iron. The growth of plankton in the sea is always limited by something. It may be light, or a familiar nutrient such as nitrate or phosphate. In some places, though, iron is the limiting nutrient. Adding iron to such places should cause a bloom of planktonic algae, thus sucking carbon dioxide out of the atmosphere.
Several preliminary experiments have shown that plankton do, indeed, bloom when iron is added. What is not clear is what happens to the carbon. For the idea to work, some of it would have to sink to the ocean floor and stay there.
One reason to think this might happen is that during recent ice ages the cold, dry conditions caused a lot of iron-rich dust to blow around. Supporters of the iron-fertilisation theory believe this dust produced blooms of oceanic algae that then sank to the seabed, taking large amounts of carbon with them, which helped to reduce temperatures still further.
Victor Smetacek, of the Alfred Wegener Institute for Polar and Marine Research in Germany, and Wajih Naqvi, of India’s National Institute of Oceanography, therefore propose conducting experiments that look not only at how much carbon dioxide is sucked up, but also at what happens to it. In particular, they are interested in the fate of diatoms. These are single-celled algae which seem to absorb almost all of the extra carbon dioxide captured when the ocean is fertilised with iron. The crucial question is what happens to these diatoms when they die. If enough of them sink to the ocean floor and stay buried there, the idea should work. If they do not, it won’t. By reviewing studies of the ooze at the bottom of the sea (which is often made of the shells of diatoms) Dr Smetacek and Dr Naqvi reckon the best rate of burial is to be found in the south-west Atlantic, and they propose to carry out an experiment there next year.
The advantage of fertilising the oceans is that it could be done with existing technology. The disadvantage is the unknown knock-on effects. Planktonic algae are at the bottom of the food chain. If more of them are around, the rest of that chain will be affected. This could be a good thing, of course. More algae might mean more krill, and that might mean more whales and other large sea animals. On the other hand, shallow-water blooms caused by nitrate and phosphate pollution often swamp the local environment.
A second idea for scrubbing excess carbon dioxide from the atmosphere, alluded to in the Transactions but not much discussed, is to plant more trees. In principle, any old trees would do—although they die and rot, more forest cover would lock up more carbon dioxide. However, genetically modified trees might grow faster. Such trees are being developed to help the lumber, pulp and biofuel industries. But fast-growing forests could also be planted in order to capture carbon dioxide quickly.
Another possibility that the Royal Society’s writers consider is recycling carbon dioxide from the atmosphere into fuel, by reacting it with hydrogen. Of course, that would require a supply of hydrogen, and producing hydrogen takes energy—which would have to be generated in a way that produces no carbon dioxide.
Perhaps the most intriguing idea—which was published last year, though not discussed by the Royal Society—is to eject carbon dioxide from the atmosphere at the Earth’s poles, using the planet’s magnetic field. This may sound absurd, but oxygen already leaks out this way (the phenomenon is the subject of a paper just published by Hans Nilsson of Swedish Institute of Space Physics). Alfred Wong, a researcher at the University of California, Los Angeles, proposes that a system involving powerful lasers and finely tuned radio waves could encourage carbon dioxide to take the same route. His calculations suggested that using lasers to ionise molecules of carbon dioxide, and radio waves to get them to spin at the correct rate, would cause those molecules to spiral away from Earth along the lines of magnetic force until they were lost for ever in space.
Reflecting on the future
Space is likewise the destination in the other set of approaches. Reflecting sunlight back into outer space (increasing the Earth’s albedo, as it is known) would also cool the planet, and the Royal Society’s authors consider two ways of doing so.
One, which has been widely touted in the past is, perversely, to increase the amount of pollution in the atmosphere. Governments have spent the past half-century trying to reduce the amount of sulphur compounds in the air. These compounds are the main cause of acid rain. They also, however, have a tendency to form tiny particles that reflect sunlight back into space. That effect is most noticeable when a volcano erupts explosively, as Mount Pinatubo did in 1991, or Tambora did in 1815. Those eruptions put sulphate particles into the stratosphere, and because that is above the part of the atmosphere where weather occurs, these particles tended to stay there rather than being washed out by rain. That cooled the whole climate. The year after Tambora’s explosion was known for a long time as the “year without a summer”.
The reverse is also true. When civilian flights over the United States stopped in the wake of the terrorist attacks of September 2001, the lack of sulphur-laden contrails led to a perceptible rise in temperature. Philip Rasch, of the National Centre for Atmospheric Research, in Boulder, Colorado, and his colleagues are therefore exploring the idea of deliberately polluting the stratosphere with sulphate in order to reflect solar heat back into space.
To offset the rise in temperature expected by the middle of the century if things carry on as they are, the amount of sunlight reaching the Earth’s surface would have to be cut by just 1.1%. That is still a lot of energy in absolute terms, but the sums suggest it is within reach. It would require the addition of about 10m tonnes of finely divided sulphate particles to the stratosphere each year. These could be sprayed out of special aircraft-borne injectors, or produced by burning high-sulphur aviation fuel.
If aviation fuel were used in this way, and was 5% sulphur (between ten and 100 times today’s levels), it would require 1m flights a year to the middle of the stratosphere (between 15km and 25km up), assuming an average flight was four hours. Those flights alone would use up half as much fuel as civil aviation now consumes. However, you could achieve part of the effect by making civil aviation use dirty, high-sulphur fuel. It would not be a perfect solution. Civilian jets cruise at an altitude of 10km, the bottom of the stratosphere, and any sulphate they released would thus fall to earth faster. But it would be a lot cheaper than flying 1m special missions.
Besides polluting the stratosphere, there is another way of changing the atmosphere to make it more reflective. This is to tinker with cloud cover. One person working on this idea is Stephen Salter, a marine engineer at the University of Edinburgh best known for seeking to replace fossil fuels with Salter’s duck, a device for turning ocean waves into electricity. He has also been working on the geo-engineering end of climate change.
Dr Salter and his colleague at Edinburgh, Graham Sortino, together with John Latham, one of Dr Rasch’s colleagues at the National Centre for Atmospheric Research, have been looking into how clouds might be made more reflective. Their answer is to spray them with seawater. Particles of salt formed by the evaporation of ocean spray act as nuclei around which the droplets of water that form clouds can condense. Increasing the number of particles increases the number of droplets. That does not change the total amount of cloud (which is controlled by the amount of water vapour in the atmosphere). But having more, smaller droplets does increase a cloud’s reflectivity.
A drop in the ocean
Dr Latham led a team of climate modellers who wondered whether, in principle, this phenomenon might be used to increase the planet’s albedo enough to compensate for projected global warming. Their answer was that it could, but it would require 1.4 billion tonnes of seawater to be converted into spray each year.
Dr Salter and Dr Sortino then joined Dr Latham in trying to work out how to manage this. Their answer is a fleet of specially designed ships. These would be wind-powered—not by sails but by Flettner rotors, which are giant, rotating cylinders that extract energy from the wind using the Magnus effect. (This is the effect that causes cricket balls to swing in the air, among other things.) The ships would drag turbines through the sea to provide electricity that would both drive the cylinders and power pumps that sprayed the atmosphere with seawater, suitably broken up into droplets.
Such ships would weigh 300 tonnes. A fully operational system would require 1,500 of them. And it would have the advantage of an almost instant off switch. Stop spraying, and things would revert to normal within a couple of days.
Cui bono?
That reversibility is important. Many scientists are understandably nervous about tinkering on a grand scale with the atmosphere and the oceans. The Intergovernmental Panel on Climate Change—a scientific body appointed by the United Nations to assess the risks of a changing climate—has described geo-engineering as “largely speculative and unproven, and with the risk of unknown side-effects”.
Broadly, there are two types of fears. The first is of technological hubris. History is littered with plans that went awry because too little was known about complex natural systems. As with irrigating Soviet cotton fields from the Aral Sea in Central Asia or introducing rabbits to Australia, modifying the climate will have both physical and biological consequences. Some of these will be unpredictable and some of them may be worse than the harm they were intended to treat. Critics point out, for instance, that carbon dioxide does not just warm the atmosphere. It also makes the oceans more acidic. That is bad because many marine creatures rely on shells made of calcium carbonate to protect themselves. As every schoolboy knows, if you drop calcium carbonate (limestone, for example) into acid, it dissolves. The sea would not become so acidic that shells would actually dissolve, but the extra acidity would mean making them was harder work, which might upset the oceanic ecosystem quite badly. For this reason, approaches to geo-engineering that merely reflect heat back into space need to be viewed cautiously.
The other fear is of moral hazard—the possibility that people would see the promise of geo-engineering their way out of trouble, despite its risks and uncertainties, as an excuse to continue to pollute the atmosphere as usual.
It would be a mistake to think of geo-engineering as a substitute for curbing carbon-dioxide emissions—not merely because of the acidification of the oceans, but also because if you ever stop fertilising the oceans or spraying the atmosphere or whatever, the problem will rapidly return. Nevertheless, Brian Launder of the University of Manchester, who edited the Royal Society papers, argues that the sort of geo-engineering schemes they describe might buy the world 20 to 30 years to adjust. That breathing space would be useful if something really bad, such as the collapse into the sea of part of the Greenland ice-shelf, was in imminent danger of happening, and the realisation of the danger led to a political agreement that climate change had to be stopped rapidly.
So what now? The answer is probably to carry out preliminary trials of the sort proposed by Dr Smetacek and Dr Naqvi. Correctly done, they should help to indicate what could work, what would not, and what the financial and environmental costs might be.
Local schemes, particularly ocean fertilisation, need not be that expensive. They would be well within the budget of a small country, a large company or even a tycoon. Richard Branson, a British businessman, is already offering a prize of $25m for a workable way of removing a billion tonnes of carbon dioxide from the atmosphere every year. And at least one private firm has come in for criticism for attempting to sell carbon credits based on ocean fertilisation. And yet, the effects of geo-engineering would rarely be restricted to a single country—that is, after all, the whole point.
For this reason, if geo-engineering is to be done properly, it must be regulated properly. The world needs a way of deciding the size and scope of any project, who takes responsibility for any mistakes, and whether and how to compensate losers—of whom there will be many. Schemes designed to cool the climate could harm countries such as Canada and Russia. Global warming may make their northern wastes more habitable and allow them to exploit oil and gas located under what is now an ice-covered Arctic Ocean. Meanwhile a country such as Panama would prefer a cooler world in which ice continues to seal off the North-West Passage and to prevent competition with its canal.
Some tinkering to suit local needs may be possible. Ken Caldeira of Stanford University, another of the authors, reckons that it may be feasible to place sulphates in the stratosphere near the poles and thus cool the Earth in a place where global warming manifests itself most strongly, though that would scarcely please the Russians and the Canadians. Nor does it answer the question of how to decide whose interests such tinkering should serve.
Even its advocates think geo-engineering is not to be approached lightly. Nor, though, is it something to be ignored completely. Global warming is such a threat that all the options deserve to be explored. It would be a big experiment, but it would at least be a planned one—unlike the equally big, but unplanned experiment that is now being conducted by motor cars, power stations, cement factories and logging companies all across the planet

America's Presedential Race

noreply@blogger.com (Unknown) — Wed, 17 Sep 2008 12:52:00 +0000

The Palin Effect

John Mccain has wipe out Barrack Obama's lead in the poll

BOUNCES are, by definition, temporary. Nearly a fortnight has passed since the end of the Republican convention and it is clear that it, and the Democratic get-together beforehand, have produced more than just a bounce. The conventions, and especially John McCain’s choice of Sarah Palin, have changed the course of the presidential race. On Monday September 15th both candidates sought to make tough statements on the demise of Lehman Brothers and the turmoil on Wall Street. And both attempted to score points off the other over the strength of those responses.
Even battling for small victories is important at this stage of the race. Before the conventions, Barack Obama enjoyed modest, but enduring, poll leads for weeks on end. Just after, Mr McCain suddenly shot to big leads in many polls himself. Now, public opinion shows that the race is probably tied or that Mr McCain has a small lead. The electoral college is of course more important. But here, too, the dynamics seem to be changing.
A big reason for Mr McCain’s boost seems to be Mrs Palin. She is both a staunch Christian conservative and a western governor. This has helped Mr McCain in the territorial battle. When Mr Obama was riding high, he confidently put resources into states that Democrats had disdained, especially the interior West and the South. Polls provided him with good reason for doing so, showing a race that was surprisingly close in unlikely states such as Montana, North Dakota, North Carolina and Georgia. But Mrs Palin’s selection has brought the Christian wing of his party, formerly sceptical, not only into line but enthusiastically so. Mr Obama is scaling back some of his more ambitious efforts, including pulling money and staff from Georgia (to put them in North Carolina, where he has a slightly better chance).
Other aspects of public opinion have changed too. A post-convention poll shows the two candidates nearly tied in perceptions of who would change Washington. Independents are moving towards Mr McCain despite Mr Obama’s strong advocacy of “change” in his campaign. The “enthusiasm” gap is closing, too: before, many voters told pollsters that they would vote for Mr McCain, but not happily. Now, many more are pleased with their pick. Again, Mrs Palin's elevation has much to do with this. At the Republican convention in St Paul, she generated such enthusiasm that there was jocular talk of flipping the ticket to put her at the top and Mr McCain in the vice-presidential slot.
Mr McCain has not taken control of the race, by any means. But having solidified support in previously wobbly states, it means he can concentrate more closely on a handful of swing states that Mr Obama must win himself. Once again, Ohio is pivotal, along with Pennsylvania and New Hampshire. Mr Obama also has a shot in Virginia and Colorado, traditional Republican territory. If he wins these states, he will probably win the election. If Mr McCain simply holds the states that George Bush won in 2004, naturally he wins. And Mr McCain thinks he also might snatch Michigan from the Democrats.
There is concern, but not panic, on the Democratic side. On Monday, both Mr Obama and his running mate, Joe Biden, sharpened their attacks. And they had good news to back them up: in August, Mr Obama once again smashed the monthly fundraising record for a presidential candidate, hauling in $66m. His press team is responding quickly and furiously to attacks from Mr McCain. One last week was particularly scurrilous: a television advertisement saying Mr Obama wanted kindergartens to have sex education. In fact, Mr Obama supported a bill that would include teaching designed to prevent child sex abuse.
Mr McCain has also been caught telling some straightforward fibs, for example that Mrs Palin, as governor, had “never” sought federal earmark money for her state—her request per head for Alaska was the biggest in the country. He and Mrs Palin continue to insist that she killed an infamous “bridge to nowhere” project in Alaska, even though every journalist in America now knows she did so only after supporting it, and only after it became a political albatross. Mr McCain has good reason to worry about his reputation for straight-talk, the strongest part of his political brand.
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The Democratic National Convention

noreply@blogger.com (Unknown) — Wed, 17 Sep 2008 12:29:00 +0000

Ready on the Left

Tuesday

AMERICANS have a remarkable talent for creating transparently pointless political rituals. The most pointless of all is the “spin room”. The first thing that journalism’s finest do after every debate is rush off, notebooks in hand, to a special room where the candidate’s surrogates brief them about how well their man (or woman) did. Dennis Kucinich is building up unstoppable momentum! Tom Tancredo has the Republican nomination in the bag! The spinmeisters manage to impart all this nonsense not just with a straight face but with a look of complete sincerity.

The big question hanging over the next two weeks is whether the conventions are the most transparently pointless rituals of all. It has been decades since anything was actually decided at a convention. They have degenerated into little more than prolonged infomercials designed for prime-time television.

Every single one of the thousands of journalists here knows how the week will unfold already. Hillary Clinton will make a rousing speech about how wonderful Barack Obama is. Mr Obama will make a wonderful speech about how wonderful change and hope are. And the Democrats will pull ahead in the polls. Why endure the misery of a four-hour flight when you can just stay at home and watch the whole thing from the comfort of your La-Z-Boy recliner?

This complaint is not without merit. I have already passed a lot of time with journalists that I regularly pass a lot of time with in Washington, DC. I am preparing to go to seminars on how Mr Obama will govern that will be presented by policy wonks from the Brookings Institution, which is a few hundred yards from my office. Washington has arrived in the Rockies and is doing what Washington does best—talk to itself.

Even so, there remains something exciting, at least for people in the commentary business, about the sight of thousands of people gathered together to participate in a political ritual, however hollow. You get to stay up late and drink too much while discussing the minutiae of electoral maths—and people actually seem to be listening. And when you wake up in the morning there is a huge package of convention bumph waiting outside your hotel door.

The ever-industrious National Journal not only provides a glossy magazine containing everything from a poll of insiders to no fewer than three articles by the brilliant Ron Brownstein; it also produces a daily newspaper analysing what has gone on. There is even a political crossword for hard-core obsessives. “No hiccups so far”, reads one headline, which is all to the good, since, at the time when the story was filed, the convention had not even got underway.

The convention also gives you a chance to meet real live Democrats en masse—people who live far beyond the Beltway but nevertheless care enough about politics to devote a chunk of their lives to getting their candidate elected. One Denver-bound Democrat I met at Dulles airport was wearing a T-shirt that read “Kill ‘em all—let God sort ‘em out”. (The TSA officials waved him through security without raising an eyebrow.) Denver has also witnessed a minor riot involving professional malcontents such as Ward Churchill and Cindy Sheehan.

But for the most part everybody seems disturbingly nice. Nobody complained about the 90 minutes it took for United to offload our baggage (they blamed lightning). Nobody seemed in the least put out that there were no taxis around for another half an hour. Everybody seemed to be delighted to be here—and delighted to be taking part in a history-making event. I overheard three young people discussing whether they should meet up at the black-Jewish mixer, the Hispanic-Jewish mixer or the black-Jewish-Hispanic mixer. They decided, in the spirit of black-Jewish-Hispanic unity, to go to all three.

Wednesday

THE watchword of the Democratic National Convention is “unity”. National unity (“There is no red or blue America” etc). Family unity. And above all party unity.

But the atmosphere in the Pepsi Centre in Denver is rather like that at a dinner party thrown by a couple who have just had a plate-throwing row: the superficial bonhomie cannot conceal the rage that seethes just below the surface.

Button sellers are doing a brisk business in “Hillary supporters for Obama” badges. One former Hillary supporter in a striking wool pantsuit sported a badge reading “Old white women for Obama”. And the party is doing its utmost to rally the faithful. Nancy Pelosi, the speaker of the House, kicked off Monday evening with a veritable Niagara Falls of clichés about the American dream.

APAn intimate family moment

The party then played not just the Kennedy card, but the whole deck. Caroline Kennedy sang her uncle Ted’s praises. A slightly bizarre film showed Ted helping the poor and skippering his yacht. Then the man himself delivered a tub-thumping speech about Barack Obama. The crowd would have gone wild in any circumstances, but the fact that Mr Kennedy is suffering from serious health problems (and laboured over some of his words) added poignancy to the performance.

But even uncle Ted was outclassed by Michelle Obama. It’s not just that she is a poised and impressive woman and a fine speaker. She struck exactly the right notes to reach out to the “bitter” Hillary voters who have failed to warm to her husband.

She presented herself as the product not of the civil rights movement, but of the solid upwardly mobile working class. Her father worked for 30 years at a local plant before succumbing to multiple sclerosis. He raised his children to go to college and law school—but taught them never to forget their roots. This was a story that all Americans can embrace. It went down like a dream.

The Clintons will no doubt do everything that they need to do to boost Mr Obama. Mrs Clinton will urge “her” delegates to embrace her former rival. Her husband will rally the tribe for the struggle against the forces of evil. They will do it with the utmost sincerity.

But will anybody believe them? Everybody knows that we have just seen one of the most bitter quarrels in Democratic history. Everybody knows that Bill and Hill regard Mr Obama as an upstart who gamed the system and stole what rightly belonged to them. And everybody knows that Mrs Clinton would be, shall we say, ambivalent about a Democratic defeat in November: it would prove that she was right all along and hand control of the party back to her.

Many of her supporters on the floor are surprisingly open about all this. Chili Cilch, who was proudly wearing a “Hillary army” badge, told me that “With Hillary Clinton I was confident that she would do what was needed to be done. With Barack Obama I’m hopeful. I’d rather be confident”.

Other Hillary supporters were more combative. Many Hillary delegates sat on their hands and conspicuously failed to join in the general Obama-rama.

This is worrying news for the Democrats. The Obama team had assumed that Mrs Clinton’s supporters would return to the fold. How could they do anything but vote Democrat after eight years of George Bush? How could they continue to bear a grudge with the economy in the doldrums and house prices slumping? But so far the grudge remains tightly clenched.

Over the past two-and-a-half months Mr Obama’s support among Hillary voters has got worse rather than better, despite plenty of wooing. Roughly 30% of Clinton voters say that they will not vote for him. Since June Mr Obama has lost ten points among Clinton supporters and John McCain has picked up ten points. The presidential candidate for a party that has been out of the White House for eight years only enjoys the support of 80% of his party’s supporters.

This is partly because the Obama forces have been cack-handed in handling Mrs Clinton: they argued that they could not consider her for vice-president because she is a Washington insider who voted in favour of the Iraq War. Then they chose Joe Biden—a Washington insider who voted in favour of the Iraq War. But the deeper reasons are cultural: the white, working-class voters whom Hillary Clinton rallied are profoundly sceptical of Mr Obama’s coalition of black activists and liberal professionals.

The hosts at the Denver dinner party may be putting a brave face on it. But when the guests go home the seething family quarrel will burst back into life.

Thursday

ON MONDAY night I began to wonder if the convention was turning into a disaster. Many of the speeches were lacklustre. Wild rumours were circulating about the Hillary forces demanding a floor vote. The Democrats let the entire day pass without laying a glove on John McCain.

Tuesday put many of these fears to rest. The speakers did their jobs much better. The throngs in the Pepsi Centre responded with gusto. And the revolt of the Hillary-ites failed to materialise. It would be too much to claim that the Democrats are now united after the trauma of the primary season. But the leadership has done a good job of reminding the troops that the real enemy is Mr McCain and his plan for four more years of George Bush.

AFP

The roster of speakers was a vivid reminder of just how large a coalition the Democrats have managed to assemble. There were two governors from hard-core conservative states (Kathleen Sebelius of Kansas and Brian Schweitzer of Montana). There were also leading politicians from three vital swing states: Ted Strickland, Ohio’s governor; Bob Casey, Pennsylvania’s junior senator; and Mark Warner, a former governor of Virginia.

The speakers displayed the party’s ideological diversity as well as its geographical reach. Mark Warner is a multimillionaire who, as governor, went down well with both his state’s business elite and its rural voters. Bob Casey is an anti-abortion Catholic whose father was prevented from addressing the Democratic convention because of his anti-abortion views. Brian Schweitzer is a rancher who boasts about how many guns he owns. I’ve grown a little weary of Mr Schweitzer’s western shtick over the years. But he certainly delivered a rousing performance on Tuesday.

The speakers also provided plenty of what Monday night lacked: McCain bashing. Ms Sebelius joked that the Republican candidate believes that there is “no place like home...and home...and home”. Mr Schweitzer said that “even if you drilled in all of Mr McCain’s back yards” there would not be enough oil to satisfy America’s needs. Almost everybody argued that Mr McCain is a shill for oil companies and Washington lobbyists, and he represents nothing more than “four more years of George Bush”. The crowd loved it.

This was all, of course, a prolonged overture to the main event of the evening—Hillary Clinton’s speech—and she carried it off with aplomb. The crowd was as worked up as any I have seen at a Democratic convention. Many of the people on the floor had seen their dreams of electing America’s first female president dashed by “a handful of votes”.

But Mrs Clinton left no doubt that she wanted her supporters to back Mr Obama. In his convention speech in 1980 Ted Kennedy mentioned his victorious rival, Jimmy Carter, once. Mrs Clinton heaped praise on her former rival.

There were times when her speech sounded typically Clintonian—all about her. She talked about everything she had spent her 35 years in politics working for. She reminisced about the campaign that had consumed 19 months of her life. “You made me laugh and, yes, you even made me cry”.

But then she cleverly turned everything around. She told her supporters that they had not been campaigning for her. They had been campaigning for her causes. And the only way to get those causes honoured was to vote for Mr Obama. When she started speaking, the massed throngs had been waving “Hillary” banners. When she finished, many of them were holding signs that read “Obama” on one side and “unity” on the other.

The conventioneers poured out of the Pepsi Centre in a much better mood than on the previous evening. Even the protesters did their part. “No homo sin” read one banner. “Fox News is the only fair and balanced news” read another. The conventioneers were spoiling for a fight—but first there were parties to attend and bars to drink dry.

Friday

THE main business of political conventions is to introduce the candidate to the American public. All the rest of the hoopla—the funny hats, the late night parties, the tedious speeches by minor politicians—is merely incidental.

The Democratic convention in New York in 1992 was a success because it branded Bill Clinton the “Man from Hope”. Likewise, the Republican convention in Philadelphia in 2000 was a success because it presented George Bush as a new kind of conservative—the compassionate kind.

AFP

What has made the convention in Denver such a peculiar affair is that it has been about two things rather than one—persuading the party to get over the Clintons as well as introducing Barack Obama. So far the first has completely overshadowed the second.

The problem with persuading the party to get over the Clintons is that the only people who could do it were the Clintons. This meant that the former first couple dominated two nights of a four night convention.

Hillary Clinton stole the show on Tuesday with her tribute to her “army of the travelling pantsuits”. She then stole the show again on Wednesday when she interrupted one of America’s time-honoured political rituals—reading the roll call of how each state cast their votes—to move that Mr Obama be nominated unanimously. That was before her husband had even opened his mouth.

On Wednesday Bill Clinton delivered one of his best speeches in recent years. He strode onto the stage to the sound of Fleetwood Mac’s “Don’t Stop Thinking About Tomorrow”—his theme song from 1992 convention—and pledged his support to the Chicago wunderkid.

Mr Clinton said all the right things. But it was impossible not to fixate on the man from Hope rather than on the man he was praising—on his extraordinary personal magnetism and his rare gift for bumper-sticker phrases (“America must lead by the power of our example rather than the example of our power” was a particularly nice one).

The psychological focus did not really shift to Mr Obama until Joe Biden’s speech. Mr Biden did a good job of introducing himself—as the scrappy son of Scranton who has endured family tragedy and wants to help ordinary Americans who have fallen behind under the Bush administration. He also did a good job of reassuring voters about Mr Obama’s biggest potential weakness—his inexperience on foreign policy. On every decision that matters, he argued, Mr Obama’s judgment has been right and Mr McCain’s has been wrong. Mr Obama’s surprise appearance on the stage to embrace his running mate sent the hall into predictable paroxysms.

All good stuff. But Mr Biden also recycled two Democratic talking points that I am beginning to find extremely irritating. The first is that his running mate was a legislative powerhouse in the Senate. This is nonsense. New senators are never powerhouses in an institution based on seniority (the real powerhouses are mostly past retirement age). And Mr Obama was less of a powerhouse than most first-termers: he spent his time planning to run for president and then campaigning.

The second is that Mr Obama made great sacrifices in going into public life. “With all his talent he could have written his ticket on Wall Street”, Mr Biden argued. But instead he chose to become a lowly community organiser.

This not only suggests that the Democrats think that up-by-the-bootstraps types who go to Wall Street are greedy sell-outs; it is also absurd. Mr Obama has been well-rewarded for his bet on public life. And even if he he’d remained a lowly Chicago politician he would be doing very nicely, thank you. His wife earns more than $300,000 a year for running “community outreach” for the University of Chicago hospital.

Three days into the convention Mr Obama nevertheless remains as much as a mystery to me as ever. I have seen him speak dozens of times. I have read piles of material on him. But I still cannot figure out what makes him tick. How can a man who had such a difficult background be so preternaturally self-confident? And how can someone live at the heart of the political storm and yet remain so relentlessly cool? Bill is a much easier figure to understand than Barack.

Today is all about Mr Obama. Tonight more than 75,000 people will cram into Invesco Stadium to hear him speak. Mr Obama will undoubtedly give another stunning performance—and everyone will thrill to the fact that America’s first black presidential candidate is speaking on the 45th anniversary of Martin Luther King’s great “I Have a Dream” speech. But whether we will end the evening with a deeper understanding of the man who is causing all this excitement I very much doubt.

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The Republican National Convention

noreply@blogger.com (Unknown) — Wed, 17 Sep 2008 11:57:00 +0000

Ready on the Right

Daily dispatches from St. Paul

Monday

THE most important feature of this year’s Republican convention is not its location, purpose or personalities. It is timing: for the first time in decades, the two parties convene in successive weeks. While most people celebrate the Labour Day holiday at home, the journalist class will arrive in St. Paul barely having recovered from Denver: the heat, the death-march-length walk from the security perimeter to the Pepsi Centre, the lack of seats, the alcohol.

If it’s September 11th, or it’s election night and they’ve just un-called Florida for Gore, urgency makes your exhaustion irrelevant. You don’t notice you’re tired until you climb into bed, and then you’re asleep in seven seconds. Conventions are exhausting precisely because they are extended infomercials, utterly devoid of urgency.

Last week’s pressing questions: Can Barack Obama meet the huge expectations for his speech? Would he and Hillary Clinton reconcile? Can Joe Biden be an attack dog while folksily charming Reagan Democrats back into the fold? Could we have answered all these questions from New York and Washington? The answers were as predictable as the slogans in the hall: Yes we can. (Can I get into the Vanity Fair party? No, I can’t.)

But in contrast with Denver, there were, and remain, real unknowns going into St Paul. What would John McCain seek in a running-mate? A jolt of attention and energy from an unorthodox choice? A safe choice? A former rival? Joe Lieberman, Tim Pawlenty and Mitt Romney all fell at some unseen hurdle. (The hurdles were more visible for Mr Lieberman; apparently, a host of Republican grandees urged Mr McCain at the last minute: no way, no how, no Joe.)

Sarah Palin slapped journalists awake on Friday morning. She was almost completely unknown until rumours began to fly early that day. Democratic delegates and the press trudged to the airport on Friday muttering “really pro-life”, “super-conservative” and “weird” (the last referring to the pick, not the woman herself).

Mark Green, a New York politician turned liberal radio-pundit, was on my flight; he admitted knowing next to nothing about her. When I mentioned that she is 44-years old, he merely said, “Makes Obama look old.”

All of this means Democrats can define her just as easily as Republicans can. Television commentators have not even settled on whether her name is pronounced Pale-in or Pal-in. The Obama campaign quickly sent journalists an e-mail saying, “Today, John McCain put the former mayor of a town of 9,000 with zero foreign-policy experience a heartbeat away from the presidency.” Mr Obama and Mr Biden themselves put out a kinder personal statement, congratulating her.

I’ll confess: I thought it was going to be Tim Pawlenty, for do-no-harm reasons. I then expected the Republicans next week to gird their loins, hoist shield and spear, and head frenzied into a conventional conservative attack, with Barack Obama’s name being mentioned far more often than John McCain’s in Denver. I expected a grimly determined, disciplined convention. To give up a journalist’s dirty secret, I had begun writing parts of this entry before Ms Palin was announced, for deadline reasons.

Suddenly, I had to dump a lot of copy, exactly as Mr McCain wanted. He snatched attention from Mr Obama’s triumphant speech. I now have no idea what to expect in St Paul. Can national-greatness conservatives, who love Mr McCain so much for his heroism in Vietnam and his steadfastness on Iraq, swallow a vice-president with less than two years’ experience running a state with fewer people in it than Delaware? Somehow I doubt their nerves will be calmed because, as Fox News just reported, she has dealt with Russia on fishing issues.

It seems from early reactions that her staunch social conservatism will rally the religious base. Reporters were suckered into playing up largely personal Clinton-Obama tensions. They have spent less time on the deep divisions between Mr McCain and much of his base. Mr McCain’s newfound orthodoxy on key issues may have helped him a bit, and Ms Palin may help much more. But will it play outside of St Paul?

Little matter for now. I head back into a cocoon, having just left one. It’s going to be a fascinating week. To my surprise, I find myself looking forward to it.

Tuesday

I had been expecting a predictable week. The Democrats had theirs in Denver, for the most part a successful one, which laid the ghost of bitterness between Hillary Clinton and Barack Obama to rest. The days were long and the nights longer, and by the end of the week in Denver, I was secretly dreading ploughing my way, exhausted, on to St Paul.

Sarah Palin was the first surprise. Over the weekend, especially on the venerable Sunday morning political chat shows, both parties struggled mightily to define the blank-slate candidate. Spin like this is common, but it was unusually polarised, even in this era.

EPA

For Republicans she was a brilliant pick, fresh and far from Washington, but experienced, tough and savvy, and a compelling face to boot. The religious right is genuinely ecstatic: she opposes abortion even in the case of rape or incest, and thinks sex education should be replaced with abstinence-only teaching.

Democrats quickly sought to paint her both as dreadfully inexperienced (two years ago, she was running a town of 7,000) and a pander to the base by the former maverick John McCain. Blackberries between Denver and St. Paul began to hum with rival press releases, and I began to develop in my head the story of a newly energised party, improbably welded together by a John McCain who had managed both to thrill the base and dust off his maverick image.

When I arrived in St. Paul late Sunday night, though, the script began to change again: Hurricane Sarah had given way to a non-metaphorical hurricane, Gustav, bearing down on the Gulf coast. George Bush and Dick Cheney had announced they would stay in Washington to oversee relief efforts (their party breathed a sigh of relief) By the time I landed and checked the news, all of Monday’s events, except some mandatory legal business, had been binned or postponed.

After the usual bewildering search for press credentials and the press-filing center on Monday morning, I sat down to catch up on hurricane news, in order to give my editors a view of what there might be, if anything, to write about in St. Paul.

No one knew what Gustav would do. I chat with an editor in London about whether to write about the politicising of the storm. (John McCain talked up his trip to the coast; Barack Obama said he would stay away so as not to tax resources of the emergency personnel; each side is accusing the other of grandstanding.)

Monday afternoon, another storm breaks, this time of the metaphorical variety again. It is one of those that can either turn into a tropical depression and be forgotten, or gain hurricane strength and wreak damage. Rumours had swirled around far-left blogs that Sarah Palin had not actually been the mother of her fifth child; according to the gossip, she had covered for a pregnancy of her 17-year-old daughter, Bristol.

The rumours had not made it much past the blogs, but suddenly the Palins put out a press-release: we are very pleased to have five children, and also to tell the world that Bristol “came to us with news that as parents we knew would make her grow up faster than we had ever planned.” Indeed. Bristol is five months pregnant. She will marry the father and keep the child. Ms Palin’s opposition to sex-education seems suddenly relevant.

How will it play in the hall? I know it’s making reporters buzz. The secretary of commerce, briefing journalists as a courtesy, is asked about it. I hear another reporter quizzing a delegate about it. The Brazilian TV crew in the filing center are talking about it. Surely a frustration for Republicans, eager to get a different message out.

But for today, they have little control. The business in the hall is mostly routine; there are no rousing red-meat speeches. Laura Bush comes on, to hearty applause and cheers, at the end of the shortened day. She introduces videotaped messages from the (Republican) governors of the states hit by the hurricane. Cindy McCain, her would-be successor, joins her in appealing for donations to the gulf-state aid agencies. And then the benediction, at five o’clock, and the end of a very unusual day one.

Wednesday

WITH nothing much happening at the real convention yet, I decide to check in on the Ron Paul movement. I was surprised at the breadth and depth of his primary support. As depressed as the Republican party was, just about the only signs and bumper stickers I saw this winter (which I spent in Georgia) were for Mr Paul. But he mostly dropped off my radar after John McCain won, cropping up only late in the race, when an embarrassingly large number of people voted him after the race was effectively over.

On the first night of the convention, when nothing happened in St. Paul, I pile into a car and head up to a party supposedly held “10 miles” north of Minneapolis-St Paul. We drive far more than ten miles, finally reaching Blaine, Minnesota, where what looks like a high-school sports arena is filled to Friday-night football capacity for the party. Most of the partygoers are on the field, and mediocre country music wafts from a band onstage.

Bloomberg

The Paulites I meet seem more articulate and motivated than most of the delegates I’ve talked to at both major-party conventions. Each has a chief concern. Christe tells me she doesn’t know the first thing about Iraq, and neither does anyone she knows; why on earth are we invading it? Adam tells me that his big thing is civil liberties. Another one whose name I forget says that the metal in coins is worth more than the face-value of the coins these days; he wants the Federal Reserve abolished, and the current monetary system replaced by competing private currencies.

The Paul people are like that: over here, a view lots of people in both parties can agree with, like opposition to the war. And over there, a view so far out of the mainstream I sputter to rebut it politely. One woman dressed up as the Statue of Liberty has a sign mentioning Mr McCain and the letters CFR. She says that she is voting against Mr McCain because he’s a member of the Council on Foreign Relations in New York. The Council is an organisation so mainstream many consider its flagship publication, Foreign Affairs, a snoozer for its predictable ideas. But many of the Paul people think it’s a secret cabal, like the Freemasons or the Illuminati. (Disclosure: your correspondent is a junior member—of the CFR, not the Illuminati. Either it has no secret agenda for global mastery, or they haven’t yet decided I’m trustworthy enough. Let me in, would you?)

The feel at the huge Rally for the Republic, held the next day across the river in a basketball arena in Minneapolis, is similar. There are huge cheers for opposition to the Iraq war and the Patriot Act. But the biggest is inspired by Jesse Ventura, the former Reform Party governor of Minnesota.

The burly former professional wrestler says that the second amendment protecting gun ownership isn’t there to protect hunting and fishing. “The second amendment is there so that if our government gets out of control, we can rise up and change it.” The room is electrified: thousands of people are on their feet, screaming with glee at the notion of turning their firearms on the federal government.

I am reminded of a phrase popularised by Richard Hofstadter: “the paranoid style in American politics”. Mr Ventura raises the crowd to further hoots with a few musings about whether Osama bin Laden really committed the September 11th terror attacks. He’s not saying he didn’t, but why hasn’t the federal government officially indicted him? He’s just asking.

We queue with a gaggle of other journalists to interview Mr Paul. The interviews before us have run long; they’re way behind schedule, and everyone is starting to get a little cranky. I admit that I’m unamused when three young Paulites from Kansas, only one affiliated with any media outlet (her university newspaper), are moved ahead of us.

When we finally see him, he’s energetic and has a gleam in his eye, despite interview after interview. I try to suss out what he plans to do with his support. The Republicans will not let him speak at the convention, and will not let his duly elected delegates speak up, either. If they do, they will be thrown out.

Does he still consider himself a Republican? To my surprise, he does not hesitate in saying yes: “I’m an old Republican.” His confidence that his movement will conquer his party, and his unwillingness to endorse either Mr McCain, Mr Obama or a third-party candidate like the Libertarian, Bob Barr, confuses me. What exactly is Mr Paul after? I’m not as sure as he is that he will conquer the Republicans.

Back in the hall, I file this as a song, “Ron Paul, Ron Paul,” blares out the loudspeakers to the tune of “New York, New York.”

I want to wake up to a country that doesn’t sleep

to fight for our rights

and civil liberties…

These neocon blues

Are melting away

We’ll make a brand new start of it

Vote Ron Paul

And let’s show we care

And shout it everywhere

It’s up to us to vote Rooon PAAAAAAAAAAULLLLLLL

ROOOON PAAUUUUUL!

Thursday

IT IS the lull between the warm-up—the first two days of the convention, which have seen little action—and the main events of the second half. Fred Thompson, once John McCain’s rival, fired up the crowd last night by lionising the nominee and attacking the Democrats. The man who could barely be bothered to stay awake for his own failed campaign was masterful. He worked the crowd in his signature, gravelly baritone like the trained actor that he is. But Joe Lieberman generated far less enthusiasm. The Republicans’ impatience to get started for real is palpable. So far, an underwhelming convention.

In this lull, I plan to take in an event sponsored by the New America Foundation, the think-tank of choice for Washington’s clever young things, on the future of the Middle East. Their event in Denver was great, and I’m eager to watch. This week, it would be different; the host has called me the night before to say that there have been a few cancellations, and could I sit on the discussion panel myself.

AFPFred Thompson works the crowd

I agreed, and when I get to the room I see why I’ve been called up. The room is only half-full, whereas the host, Steve Clemons, had filled a far bigger room in Denver. Do Republicans not care about the future of the Middle East? Unlikely, but it’s not obvious why there are so many fewer people here. Despite the small crowd, I take the stage and enjoy the next two hours of lively discussion on energy, Israel, Palestine and Iran.

Tonight is Sarah Palin’s big night: I know because the television chyrons read “SARAH PALIN’S BIG NIGHT” and “MAKE OR BREAK”. I think the Democrats have let themselves get out-framed on this one. When Mrs Palin, who after all is a governor, gives even a medium-competent speech full of Republican applause lines, the party will rightly hail it as a triumph.

But that is hours off, so I meander around the floor, warming up for the day’s events. The stage managers seem to have ditched last night’s blue-sky background with a single, tasteful waving flag on a flagpole, in favour of a backdrop screen that is one enormous, animated waving flag. It’s the size of a house, and it’s about to give me a seizure. Will it play on television?

It can’t be worse than the odd choice of a pale-yellow and black background for Barack Obama in Denver, which looked like a Japanese paper house. But this flag scares me. Gone are the days of mere rows of normal-sized flags. Some things just shouldn’t be the subject of too much creativity.

John Rich, a country star, rehearses his song “Raising McCain”, which he will play tonight (not bad for a political song, I must admit). And am I imagining things, or have the added “PROSPERITY” to the lettering around the arena? Last night I remember seeing only “COUNTRY FIRST”. Maybe an implicit response to Mr Obama’s complaint today that the Republicans are not talking about issues at all, and especially ignoring the economy.

I’m a little bored of interviewing delegates, to be honest. Unlike the Ron Paul people, few at either convention have said anything surprising. But I stand on the floor, pretending to check my Blackberry, to overhear a television crew interviewing a Colorado delegate. I want to see how they do it; maybe they know something about getting a more newsworthy response.

Only the reporter, a medium-sized blonde woman whose back is to me, seems to be antagonising the tall, gangly Coloradan. I can barely hear her questions, but he repeatedly gets annoyed: “Can we have a real discussion about politics?” On Mrs Palin: “No, I had heard of her. No, I didn’t Google her. I mean, I did Google her, but months ago. You want to check my computer?” I think, crikey, this is what they mean by the agenda-bearing liberal media? What on earth is she asking him to annoy him so?

Finally, when she gets the Coloradan to say “yeah, OK. She’s attractive. There. You happy?” I get it. The interview breaks up, and everyone moves off, and I see the reporter: Samantha Bee, from “The Daily Show”, a comedy news programme. You win another one, fake news.

Friday

AS THE room rattles around me, my phone buzzes in my pocket. Text messages from several friends. “What do you think?” “What’s it like in there?” What is it like in there, as Sarah Palin sinks her teeth into the Democrats and Barack Obama, exhilarating a packed house?

I am standing near the Texas delegation, overflow delegates on every side and behind me, every one in a cowboy hat. The distinguished-looking fellow on my left has stylish, wavy grey hair, a blue blazer with gold buttons, and a lapel pin of cross coloured red, white and blue. The man to my right wears a sticker on his cowboy hat reading “Drill here, drill now, pay less.” I am standing, for a moment, in the most Republican spot in the universe. What’s it like in there?

They hate me.

AFP

Oh, not me personally. In fact, no one has so much as frowned at me this week. But on Wednesday night, I have to duck to avoid the flying red meat aimed at the media. Mike Huckabee, mild-mannered as usual, saves one of his only barbed comments of the night for “the elite media...for doing something that, quite frankly, I wasn’t sure could be done, and that’s unifying the Republican Party and all of America in support of Senator McCain and Governor Palin.” (Really? All of America?)

Rudy Giuliani says, “We the people—the citizens of the United States—get to decide our next president...not the media, not Hollywood celebrities, not anyone else.” (Are not celebrities and reporters, at least, people, and often Americans? My passport is as blue as yours, Rudy.)

And the star of the week, Sarah Palin, says “Here’s a little news flash for all those reporters and commentators: I’m not going to Washington to seek their good opinion. I’m going to Washington to serve the people of this country.” I hadn’t realised the two were mutually exclusive, but the crowd goes wild, as I stand there with a big card reading “PRESS” dangling around my neck. I think I detect a theme.

In sport, you “work the ref”, complaining often and loudly, hoping that the referee will lean your way on the next call, to avoid hassle. Speaker after speaker has done that this week. Sometimes it works: reporters don’t want to be hated, and they might really feel like they got it wrong if a reaction is virulent enough.

After the 2004 election, in particular, I think members of the press felt a strong disconnect with much of America: on the second go round, surely nobody would vote for George Bush. And yet so many did that reporters, who after all are charged with knowing the world, felt like they may not really understand things as well as they thought. There’s been a renewed attempt to understand conservative middle America.

Now she has spoken for herself, far clearing the insanely low bar the Democrats set for her by acting as though she were an ignoramus. And in the lull before Mr McCain speaks (I am filing this before he takes the stage), there is a feeling of self-examination among the press. What’s off-limits and what isn’t? Ms Palin has featured her family prominently, but doesn’t want reporters covering her kids. Fair enough. Republicans have said that she is their kind of “feminist”, even if she isn’t to Democratic tastes. I can accept that.

But this week we have been abused again and again for asking basic political questions. Does she have ethical troubles back home? It’s not our fault that her mini-scandal involves her family. Is her support for abstinence-only sex-education particularly salient in light of her teenager’s pregnancy? Many people legitimately think so. It is wonderful that she had a Down syndrome child, but should that mean, as she thinks, a rape victim should not have access to abortion? The odd pick of Ms Palin has made the personal political and the political extremely, extremely personal. And we in the press have been made players in the story. The bad guys? Half the country seems to think so.

Economy in a fall?

noreply@blogger.com (Unknown) — Wed, 17 Sep 2008 11:48:00 +0000

Business this Week

The American government made its biggest intervention yet in the credit crisis by taking control of Fannie Mae and Freddie Mac. The “government-sponsored enterprises” have financed around 80% of all mortgages in America this year. With a large part of their $5 trillion debt and mortgage-backed securities owned by central banks and investors outside the United States, Hank Paulson, the treasury secretary, reiterated that both companies are “so large and so interwoven” in America’s financial system that the failure of either one would cause great turmoil in world markets.

The director of the Congressional Budget Office, an advisory agency, said that Fannie and Freddie would be counted as part of the public sector in future analyses of the federal budget. The CBO had just estimated that the deficit for the 2009 fiscal year would soar to $438 billion.

Missing out on the bonanza

Stockmarkets briefly rallied on the news of Fannie’s and Freddie’s rescue. However, stockbrokers in the City lost millions of pounds in potential commission when the London Stock Exchange suspended trading because of a computer failure.

Russia’s RTS stockmarket index sank to a two-year low as investors fretted that falling commodity prices would hurt the Russian economy. Another factor was the surprise decision by Russia’s antitrust regulator to press ahead with fining Gazprom, the state-controlled gas company, for withholding access to its pipelines from a gas operator in Tartarstan.

A technical glitch was blamed for the reappearance on a newspaper’s website of a six-year-old article describing United Airlines’ bankruptcy. The item was picked up by Google’s news service and UAL’s share price fell by 75% before the airline reassured investors that the story was old news—it le

ft bankruptcy protection in 2006.

In harm’s way

Lehman Brothers

suffered another rocky week. The investment bank predicted another huge quarterly loss and unveiled more measures to boost its capital, including a sale of property assets. E

arlier, its share price tanked when Korea Development Bank pulled out of talks about buying a stake. Credit-default swaps on Lehman’s debt leapt to levels higher even than in March, when the markets were in turmoil preceding the bail-out of Bear Stearns.

Washington Mutual ousted its chief executive. Kerry Killinger had led the Seattle-based bank since 1990, turning it into one of America’s leading mortgage lenders. However, the removal of Mr Killinger did little to ease fears about WaMu’s prospects. Its share price plunged on news that regulators had put the bank under special supervision.

The Pentagon suspended a controversial competition for a $35 billion contract to build new flying tankers. The air force had awarded the contract to an aircraft made jointly by EADS and Northrop Grumman, but Boeing complained about the procedure for assessing the bids and in July the whole process was reopened. Robert Gates, America’s defence secretary, now thinks a “cooling-off period” is needed.

Altria, the parent company of Philip Morris USA, agreed to buy UST in an $11.7 billion deal. UST makes America’s leading brands of smokeless tobacco, Copenhagen and Skoal. Although there are fewer smokers in America, the number of people chewing tobacco has shot up; it is particularly popular in the South.

Opaque production targets

OPEC ministers revised their complex yield allocations, which the cartel’s president said amounted to a cut of 520,000 barrels a day in output based on what member countries actually produce. Some OPEC members are keen not to let oil prices fall too far; they have dropped to almost $100 a barrel from a high of more than $145 in July.

The Iraqi cabinet approved a preliminary agreement that will create a joint venture between the state-run South Oil Company and Royal Dutch Shell to develop natural-gas resources in the Basra region. It is the first deal between a Western oil company and Iraq since the invasion of 2003 (Iraq recently approved a $3 billion deal with China to develop an oilfield).

It emerged that Carlos Slim, a Mexican telecoms mogul and the world’s second-richest man, holds a 6.4% stake in New York Times Co. Mr Slim denied he was making a strategic move into America’s media market and said the investment was “strictly financial”. Earlier this year the struggling newspaper publisher fought a proxy battle from a hedge fund pushing for big changes at the company. It has laid off staff in the newsroom and taken other cost-cutting measures to offset a decline in advertising revenue.

Brazilians in China

noreply@blogger.com (Unknown) — Wed, 17 Sep 2008 04:35:00 +0000

Footlose Capitalism

China's largest brazilian community enjoys the benefits of
globalization
IN DONGGUAN, a city of some 7m people situated 90km (56 miles) north of Hong Kong, factories abound producing everything from furniture to car parts, helping to fuel China’s economic boom. But take a closer look and you may spot something rather less familiar: a thriving community of Brazilians, estimated to number 3,000, most of them working in the footwear industry.
They trace their roots to southern Brazil, which was the bustling centre of their country’s shoe-export business until the early 1990s, when a sharp reduction of Brazil’s trade barriers, an appreciating currency and pressure from cheap Chinese labour combined to cause exports to stagnate. In 2007 Brazil exported 177m pairs of shoes, 12% below the early-1990s peak of 201m. Many firms that survived moved north, to parts of the country where labour costs less. Meanwhile China powered ahead, with its share in world shoe exports, already the largest, doubling to two-thirds over the same period. Dongguan is now China’s footwear capital, exporting 600m pairs a year. And many more are made elsewhere in China on behalf of Dongguan firms.
Chinese firms undermined Brazilian producers at the cheaper end of the market, thanks to the abundance of cheap labour, but the know-how and craftsmanship needed to make fancier shoes were in shorter supply. This encouraged a slow trickle of skilled Brazilian production controllers and sewing technicians, some armed with advanced degrees in tanning, to cross the ocean to hawk their skills and knowledge to Chinese companies.
Ricardo Correa, the owner of Paramont Asia, which sold more than 35m pairs of ladies’ shoes last year, moved to China in 1995, prompted by the combination of price pressures in Brazil and a shortage of skills in China. His firm takes design specifications for shoes from its customers and then manages product development and quality control in factories in China (and now in India and Vietnam, too). Most of the resulting shoes are then shipped to America. Of Paramont’s 800 employees, 100 are Brazilian, and day-to-day business is conducted in English.
Brazilians in other professions have followed the shoe specialists to provide supporting services, such as running restaurants or teaching their compatriots’ children in Portuguese. Dongguan’s Brazilian community is now China’s largest, twice the size of Shanghai’s and almost triple the size of that in Beijing. Brazil’s foreign-affairs ministry plans to open a consulate in the nearby provincial capital, Guangzhou, this year so that it can serve its citizens better. In the past two Brazilian presidential elections, a polling station was even set up in Dongguan—a novelty for local Chinese.
The Brazilians seem to have adapted well to life in China. They observe that crime rates are lower than at home, and they can earn higher salaries than local workers or their counterparts in Brazil. “The more I go back to Brazil the more I like China,” says Ari Filipini, another Brazilian who works at Paramont.
But the march of globalisation continues, and it is now putting pressure on Dongguan’s factories to cut costs. Some shoemakers are shutting factories and moving further inland or to cheaper parts of Asia. For firms like Paramont, which are already farming out production to distant factories, this is not yet a big problem. But the Brazilians moved once before, and they could always move again.

Fairground Rides

noreply@blogger.com (Unknown) — Mon, 15 Sep 2008 08:23:00 +0000

Ups And Down

Italy's manufacturers of amusement
rides hit a dip

THIS month a brightly coloured, trailer-mounted “Matterhorn” fairground ride will leave Bertazzon 3B’s factory in Sernaglia, a village nestling under the Alpine foothills north of Venice, bound for a travelling amusement park based near Rochester, New York. Bertazzon 3B is one of around 50 family firms in a manufacturing cluster in north-east Italy that leads the world in turning steel, fibreglass and electronics into roundabouts, bumper cars and other fairground thrills.
Swiss, Dutch or German companies hold sway when it comes to large and expensive roller coasters, but Italians dominate other rides. Alberto Zamperla, chief executive of Zamperla, the biggest of the Italian firms, with sales of €40m ($55m) in 2007, says attention-grabbing “spectacular” or “extreme” rides (rather than those aimed at children or families) are most in demand at the moment. Zamperla’s Giant Discovery reaches a speed of 110kph (70mph), rotating its riders and swinging like a pendulum to suspend them upside down 45 metres above the ground. Italian dominance in such rides depends on a constant stream of innovations in electronics and materials.
Competition from Chinese firms, which are good at copying Italian designs and are strong in small and medium-sized rides, is a cause for concern. Mr Zamperla has responded by setting up his own manufacturing operation in China. And as in other areas of manufacturing, some firms hope to fend off the Chinese by emphasising Italian craftsmanship. Michele Bertazzon’s family firm, which specialises in traditional Venetian carousels with horses and carriages, and makes all its components in-house, is taking this approach. “We don’t do fear,” he says.

More than 80% of the rides built in the region are exported, and Bertazzon 3B expects to earn about half of its €5m sales in America this year. But the weakness of the dollar against the euro in recent years has caused problems for the industry, says Enrico Fabbri, boss of the firm that carries his family’s name. Fabbri, based in Bergantino, a village that calls itself the capital of carousels and has a museum dedicated to them, no longer sells in America. At Sartori, a firm that makes rides including the Techno-Jump, Cyber Loop and Twin Twister, American sales have fallen from about 60% of the total to zero since 2000.
The recent strengthening of the dollar may help matters somewhat, but slowing economies around the world are likely to reduce demand as families tighten their belts, and the credit crunch is affecting both manufacturers looking to finance production and customers who want to buy new rides. The Italian firms hope that new amusement parks planned for Dubai, South-East Asia and China will boost their order books. But the business of making fairground rides has always been a roller-coaster affair.

Advertising

noreply@blogger.com (Unknown) — Mon, 15 Sep 2008 08:12:00 +0000

Postmodern Wrigle

To save Microsoft, Bill Gates adjust his
shorts

THE self-appointed marketing experts of the blogosphere immediately pounced on the opening shot of what will probably be this year’s most discussed advertising campaign. Microsoft, the huge but boring software company that has been pummelled by the advertisements of its smaller and cooler rival, Apple, is fighting back. How? By having Bill Gates, its co-founder, chairman and arguably its personification, buy shoes with Jerry Seinfeld, a comedian, as his adviser. Just look, the bloggers are screaming: further proof, if any were needed, that Microsoft just doesn’t get it.
Admittedly, the first television spot of the campaign is bizarre. All that Messrs Gates and Seinfeld seem to talk about is, well, shoes. How they “run tight”. How best to stretch them. Windows and Office, Microsoft’s ubiquitous flagship products, are not mentioned at all. The word “Microsoft” is mentioned exactly once. Computers come up only insofar as Mr Seinfeld wonders whether they might someday become “moist and chewy”. Mr Gates replies with a subliminal hint, a subtle wriggle of his boxer shorts. What does any of this, the critics ask, have to do with the purpose of the ad campaign, which is to salvage the reputation of Vista, the latest version of Windows?

Crispin Porter + Bogusky, the agency behind the campaign, is known for risqué and off-beat humour. Sometimes it does the trick. When Crispin had a kinky German pair of engineers “unpimp your auto”, it revived the Volkswagen brand. When it had a decidedly mischievous “king” play all sorts of tricks, it arguably made Burger King as cool as fast food can be. But on other occasions its style seems to misfire. A campaign that made fun of the word “algorithm”, on the assumption that ordinary people don’t know what it means, did not help its client, Ask, a small search engine, but instead boosted the fortunes of Ask’s larger rival, Google.
Is Mr Gates’s shopping spree with Mr Seinfeld another misjudgment? Perhaps not. The ad appears to have set up the forthcoming campaign with an ingenious twist that its critics have missed. Its viewers, Crispin assumes, have been watching Apple’s ads, in which a nerdy, pale, chubby and hapless “PC”, played by the actor John Hodgman, talks to a hip, suave and unruffled “Mac”. Ironically, however, it is the PC who has become famous and won hearts, despite being the butt of all the jokes, whereas the Mac character is cool but smug, and would not get invited to anybody’s dinner.
Mr Gates, Crispin’s creative types must have realised, is the authentic embodiment of the PC character: geeky, awkward, dressed for a cubicle rather than a bar, unglamorous but unpretentious, able to get the job done, if not excitingly. And like the PC in Apple’s ads, the Bill Gates in Microsoft’s spot has an impish side that occasionally peeks out. One of the world’s richest men comes across as unassuming and approachable, the antithesis of Apple’s aspirational cool, which some find annoying and snooty. In a country that loves to poke fun at “elitists” (especially during elections), it would be wrong to write off Microsoft’s new campaign just yet.

Boeing and Airbus

noreply@blogger.com (Unknown) — Mon, 15 Sep 2008 08:07:00 +0000

Striking Differences

Both have big order books and similar
strategies, but only Boeing is on strike.

MANY manufacturers would love to be where Boeing and Airbus are: both have orders stretching years into the future, with exciting new products in demand and vigorous customers in Asia to take up the slack in Europe and America. Both aircraft-makers have been changing their business models to cut costs with much more outsourcing, bring in new risk-sharing partners and get closer to growing markets such as China.
But here their fortunes diverge: this time Boeing is going down, while Airbus is bouncing back from a prolonged crisis. Boeing has shut down production of commercial jets because of a strike by assembly workers that seems to be as much about job security as about pay and benefits, whereas Airbus is pressing ahead with outsourcing work, this week selling a factory near Bristol to GKN, a British engineering group, and announcing plans to open a factory in Tunisia. Airbus workers accepted a measly pay rise of 1.5% this year and swallowed the loss of 10,000 jobs—but Boeing workers have rejected a pay offer of 11% over three years, plus bonuses.
The reason Airbus is able to press ahead with more outsourcing is that the company has been in a crisis for more than two years, and its workforce knows it. Its flagship double-decker A380 is more than two years behind schedule, and the strength of the euro against the dollar has hit profits hard. This week Louis Gallois, chief executive of Airbus’s parent company, EADS, said that, despite the dollar’s recent rise, the exchange rate still posed a grave danger to Airbus, because its costs are largely in euros, whereas planes are priced in dollars. He announced a further round of cost-saving measures this week to lop off a further €1 billion ($1.4 billion), on top of €2.1 billion of cuts already under way. Mr Gallois says there will be no more job losses because production will expand by 50% over the next few years. Indeed, Airbus is hiring as it ramps up production of the A380.
Airbus’s outsourcing suffered setbacks earlier this year, when the credit crunch scuppered its plans to sell factories to German and French suppliers. But now Mr Gallois and Tom Enders, the boss of Airbus, are pressing ahead, by taking over the project to build a factory in Tunisia which was going to be built by one of Airbus’s big French suppliers, for example. Mr Gallois also said that production of A320s in China was proceeding because of the need to be close to that huge market; that Airbus and EADS would expand their activity in India because of the supply of good engineering talent there; and that production of aircraft parts would increase in the Maghreb to take advantage of low-cost labour on Europe’s doorstep. Factories in Mexico are also a possibility, especially if EADS eventually wins the controversial air-tanker-refuelling contract from America’s defence department. EADS shares rose 9% this week, helped by the stronger dollar and by Mr Gallois’s plans for extra savings.
French workers may hold noisy protests and demonstrations over job cuts, and the country’s railways and other public services are often wracked by strikes. But in the French private sector, strikes are rarer and seldom last long. And it is Boeing, not Airbus, that now has a strike on its hands. The International Association of Machinists and Aerospace Workers is one of America’s most powerful unions. Tom Wroblewski, one of its leaders, said this week that the price of a settlement had gone up since his 27,000 members went on strike. But already Boeing has offered 11% phased over three years, with about another 3% in cost-of-living adjustments and one-off bonuses of up to 6% of annual pay. In addition, the company is proposing an eye-watering 14% increase in pensions.
That the union has called a strike despite such largesse shows how worried it is about Boeing’s shift towards outsourcing. Boeing greatly expanded its use of outsourcing with the 787, about four-fifths of which is made outside the company, largely in Asia and in Europe, before coming to Seattle for assembly. But this proved unexpectedly difficult to co-ordinate, contributing to mounting delays on the fastest-selling new aircraft ever launched. The 787 was at least 14 months behind schedule even before the strike brought things to a halt, at an estimated cost to Boeing of $100m a day. Boeing has been tweaking its outsourcing model to impose more control on the supply chain. And soaring labour costs at home strengthen the case for more outsourcing in future, despite the problems Boeing has had so far.
The union is worried about a more insidious form of outsourcing, closer to home. A previous agreement allowed Boeing’s suppliers to deliver parts straight onto the factory floor at its Seattle sites. The next step, the union fears, is for contractors to start fitting parts onto planes on the line, displacing well-paid workers. It wants job security, with the payroll headcount linked to the number of orders and production rates. It wants a chance to compete formally with outsourcing contracts in a bid to keep hold of the work. But its aggressive pay demands and strike action would seem to work in the opposite direction.
A federal mediator failed to avert the strike on September 6th and is still hovering in the background, trying to get talks restarted. But the previous machinists’ strike back in 2005 lasted 28 days, and one in the mid-1990s went on for nearly ten weeks. Meanwhile the 787 just gets later and later, and suppliers have started putting their workers on shorter hours.

Business and Regulation

noreply@blogger.com (Unknown) — Mon, 15 Sep 2008 07:18:00 +0000

A New Kind Eastern Promise

It is now easier to do business in
Europe than East Asia, says a new report.

IN “BIOSHOCK”, a hit video game from last year that was heavily influenced by the libertarian philosophy of Ayn Rand, the main villain builds a fantastical city under the sea, where businesses can escape the stifling grasp of government. If you are an internationally minded entrepreneur looking to set up a small to medium-sized business, that is probably going a little far. But where should you set up shop? Much depends on where the government acts as your concierge, and where it acts as your parole officer. “Doing Business 2009”, the latest edition of an annual survey carried out by the World Bank and one of its subsidiaries, the International Finance Corporation, comes to a surprising conclusion: it is now easier to do business in eastern Europe than in East Asia.
Every year the survey tracks the state of business regulation in 181 countries and then ranks them using a scorecard that takes into account how long it takes to set up a business, how easy it is to hire and fire workers, and the level of corporate taxes, among other things. This year, as in the previous five years, economies in eastern Europe and Central Asia have consistently seen the fastest pace of positive reform (see chart). Last year their average ranking was neck and neck with that of countries from East Asia and the Pacific. But this year the eastern European countries pulled ahead, with an average ranking of 76, compared with an average ranking of 81 for East Asian countries.

On average, it takes 21 days to register a business in eastern Europe, which is 27 days faster than in East Asia. Setting up a company in Indonesia costs 77.9% of the average annual income per person; in Georgia it costs 4%—though there is the small matter of political risk to factor in. Firing a worker costs an average of 53 weeks’ salary in East Asia, compared with 27 in eastern Europe. All this cutting of red tape has brought results: Poland now has as many registered businesses relative to its population as Hong Kong does.
Eastern Europe’s rapid progress has been due, in part, to the accession requirements imposed by the European Union (EU). These include regulatory reforms that are often enacted by countries that aspire to membership, but have yet to be admitted. For instance, the EU requires new members to create a “one-stop shop”—a single point of contact at which entrepreneurs can register their businesses. Before Macedonia became a candidate for EU membership in 2005, it took 48 days to start a business there. After three years of reforms, it now takes nine days.
Governments in eastern Europe have discovered the virtues not only of a light touch, but also of a swift gavel. The report finds that commercial disputes are, on average, settled more quickly and at less expense in eastern Europe than in East Asia. Bulgaria reduced trial times by requiring judges to refuse incomplete filings rather than allowing multiple extensions.
East Asian countries still have the edge in some respects: it is easier to move goods across their borders, for example. Government-imposed fees to export a standard 20-foot cargo container average $859 in East Asia, compared with $1,428 in eastern Europe. Businesses in East Asia also face lower taxes. Taxes on profits in eastern Europe are among the lowest in the world, typically around 10%, but labour taxes and compulsory pension contributions increase the overall tax burden on business.
Of course, a few East Asian economies are still miles ahead of eastern Europe. Singapore ranked first for the third successive year. Hong Kong was fourth, behind New Zealand and America. But Georgia, Estonia, Lithuania and Latvia secured places in the top 30, even as Russia lagged behind in 120th place. Azerbaijan was the top reformer. It cut the number of procedures needed to start a business by half, eased restrictions on working hours, moved its tax system online and introduced new laws protecting minority shareholders. True, laws on the books may be different from real conditions on the ground. Still, the number of registered new firms jumped 40%.
Eastern Europe is not the only region that has done surprisingly well. The study also found that economies in Africa implemented more positive reforms in the past year than in any previous year on record. These examples prove that countries need not be rich or powerful to create a better environment for business. Businessmen need not retreat under the waves to the gloomy world of “Bioshock” just yet.