Monthly Archives: March 2005

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Bad news for The Guardian 

The news that Simon Jenkins is joining The Guardian is tied to even worse news: he is replacing David Aaronovitch who is filling Jenkins’s slot at The Times. I don’t always agree with Aaronovitch, but I always find him worth reading and thought provoking. A huge step down for The Guardian.

No young readers 

The Carnegie Corporation’s report, Abandoning the News, is an eye-opener on how young people in the US have deserted conventional news media (hat tip to Dan Gillmor). Newspapers fare particularly badly.

“From 1972 to 1998, the percentage of people age 30-to-39 who read a paper every day dropped from 73 to 30 percent. And in just the years between 1997 and 2000, the percentage of 18-to-24-year-olds who say they read yesterday’s newspaper dropped by 14 percent, according to the Newspaper Association of America.”

I suspect the wholesale neglect of newspapers by the young isn’t as severe in the UK, but the trend is the same. The entire Carnegie report is essential reading for anyone wanting to understand the developing media ecology.

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Explaining Kyrgyzstan 

Elinor Burkett explains what’s happening in Bishkek: “This is not democracy. This is just a crowd.”

I know where Kyrgyzstan is, and I know how to spell it. I’ve even met now-former president Askar Akayev a number of times. But I didn’t understand the news from Bishkek before Burkett’s piece.

FT: no comment 

There were two must-reads in yesterday’s Financial Times and one curious piece about weblogs.

The must-reads were an analysis of the US property bubble and Wolfgang Munchau’s lament about Europe’s growth strategy (or lack of it). Both, needless to say, are subscribers only.

The key passage on US property:

  In the US there are enough overheated areas to raise fears of serious economic consequences as these markets cool down. An estimate by suggests that house-price appreciation has been responsible for one-quarter of the economic growth in the US since 2000 – taking into account equity withdrawal and the faster pace of home building. The sense of rising wealth provided by the property market has also encouraged Americans to consume more and save less of their incomes.
  Figures from the Federal Reserve this month underlined just how dependent Americans have been on housing market appreciation for rising levels of wealth. Since the start of 2000 net household wealth has risen by $5,020bn to $48,525bn – despite a $341bn decline in holdings of equities. Of this increase in wealth, 70 per cent came from the increase in owners’ equity in property.
  Largely as a result of this surge in wealth, Americans have neglected to save. In January, consumers put aside just $1 for every $100 of disposable income – close to the lowest level since the second world war. Even in the high-spending late 1990s, Americans saved an average of $3.80 for every $100.
  “Americans have been putting too many of their eggs in one basket,” says Bill Gale, an economist at the Brookings Institution. “As a result, their spending may have become too sensitive to the moves in the housing market.”
  It may not even take a flat or falling housing market to damage consumer confidence. A market that merely fails to meet the expectations of many Americans may be enough to convince them to rein in their spending.
  A recent survey by Yale University suggests that many people in property hotspots have bought in the expectation of wildly unrealistic gains. In Los Angeles, the survey suggested that on average homeowners in 2004 expected their property to appreciate by 22.5 per cent a year for the next 10 years. This was close to double their expectations in 2003. Even in the humbler property market of Milwaukee, consumers are expecting a rate of appreciation of 13.4 per cent a year over the coming decade. The dream of coasting to wealth on the back of housing appreciation seems even stronger than during the property boom of the late 1980s, when residents of LA were expecting a more modest appreciation of 14 per cent per year over the coming decade.
  “Many people, particularly in frothy areas, seem to be assuming that the housing market will continue do their savings for them,” says [ head of research Mark] Zandi. “If prices start to slide in some of these states, it will be quite a blow and many may feel they need to increase their savings rate quite significantly at the expense of consumption.”
  Calculations by HSBC suggest that the US would need to create an additional 2m jobs to make up for an end to mortgage equity withdrawal. This is not a blow that the economy could easily take on the chin.

And Munchau on Europe:

  Under the reformed stability and growth pact, the rules underpinning EU members’ fiscal policy, governments will be able to run budget deficits of more than 3 per cent of gross domestic product for several years without facing a penalty. I estimate that the reform will raise the eurozone’s cyclically adjusted deficit from about 2 per cent of GDP now to about 2.5 to 3 per cent of GDP in the medium-term.
  They also missed two big opportunities for the next stage of economic reform. Once again, they managed to overload the Lisbon agenda with a diffuse collection of more than 100 policy goals, and they threw out the services directive. The latter is particularly unpopular in France because Jacques Chirac, the president, and his government have failed to explain it to their citizens. Ironically, France would have been one of the main beneficiaries, but the debate over the directive focused exclusively on the prospect of job losses in some sectors. The decision to drop it is a sign of political panic as opinion polls now predict a victory for the No campaign in France’s referendum on the European constitution on May 29.
  Taken individually, each of the decisions last week was bad. But they are devastating in combination. The eurozone could just about afford a small rise in the deficit. It could also afford to be complacent about its growth rate. But it cannot afford to do both at the same time without facing long-term insolvency.

And the curious piece on weblogs (not behind the subscription firewall)? It’s about how advertisers are discovering the power of blogs. It was played prominently, on the back page of the first section next to the Lex column — which must be one of the most-read things in the newspaper. It was reasonably sensible. But not a single weblogger was quoted. That’s way below the standards I expect of the FT.

Let it snow, let it snow, let it snow 

It’s been so long since I’ve been truly snowed under with work that it’s a novel feeling to be swamped. But it’s a very good feeling.

Sadly, something has to suffer in the circumstances, and it has been Davos Newbies. I need to find a way to keep my hand in here, but for the moment the demands of starting a new company are taking absolute precedence.

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Barry Ritholtz on the, ahem, efficient market.

Whither goes the renminbi… 

Brad Setser on the possible devaluation of the renminbi. I still marvel that I can get thorough analysis like this straight from real experts rather than mediated by the Financial Times or The Wall Street Journal.

Could Arnold be up in the High Court?  

Maybe I missed something, but I find it odd that I’m in California but I only read about a Schwarzenegger libel case on the BBC.

It could go to trial in London this autumn, apparently. My advice to the governor: you don’t want to face a libel action in English courts. Libel law is a mess in England, with a presumption on behalf of the plaintiff and few of the protections US libel law offers to public figures.

Libel is such a soft touch for plaintiffs in England (I say England rather than Britain because Scotland has its own court system) that plenty of people “jurisdiction shop” to lodge an action there. There have been far more tenuous connections to England than in this case.

The one consolation for Schwarzenegger is that damages, should he lose, will be assessed not on the global damage to Anna Richardson’s reputation but only on the extent to which she suffered loss in the UK. Since the alleged libel was published by the Los Angeles Times, which is available in the UK through its website, I can’t imagine the damages locally were that great.

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What if the no vote wins in France? 

I realise there’s a long way to go until May 29, but I’m surprised that French polls already seem to suggest that the “no” camp will win the referendum on the constitution. Only a few weeks ago, the “yes” campaign was well ahead; now it’s fighting to come through with occasionally ridiculous rhetoric.

Can interior minister Dominique de Villepin really have meant it when he said a no vote would produce “the big market that the Anglo-Saxons dream about, a Europe under US influence, a Europe under Chinese influence”?

What can that possibly mean?

As happens so often in European referenda, the vote will only nominally be about the constitution. Instead, it’s a chance for people to register how much they hate the present govenment. The problem the “yes” camp faces is that if they actually turn to the constitution, even putative supporters will be so bored that they won’t turn up to vote. So only the rabid no voters will bother.

I don’t have that much of a problem with what the constitution says. Major institutional reform is needed to have an effective Europe of 25 countries; even with 15 countries before last year’s expansion, the mechanisms were fairly creaky. What’s wrong with the constitution — drafted by a conference led by former French president Valery Giscard d’Estaing — is that it is such a dreary, technocratic document.

The motivation to have a constitution was correct. But the lack of leadership, the inevitable compromises, the failure of imagination produced a treaty, not a constitution.

Of course if the no vote wins, Tony Blair — who will win his third election on 5 May, three weeks before the French vote — will be off a very big hook. It will render moot his promise to have a UK referendum on the constitution next year.

When I mentioned this to a Berkeley political scientist today, he said, “So Blair must be funding the no campaign in France.” Not such a bad idea, come to think of it.

Finding the women 

Katha Pollitt‘s accurate, well-taken questions about why there aren’t more women columnists in prominent positions has been linked to just about everywhere.

By coincidence, Lucy Kellaway writes about the same thing in today’s Financial Times (subscribers only):

  Back to the women columnists. There are hardly any serious ones in the US. This is because, says Dowd, women have difficulty being nasty. Women also are not comfortable pontificating. And if they do write something horrid, all hell breaks loose, as men don’t like taking criticism from women, which in her view is to do with a castration complex. And by way of conclusion, she says there must be lots of brilliant women columnists who are hiding somewhere. “We just need to find and nurture them.” I am not sure who “we” is, but still.

As Kellaway points out, the situation is very different in Britain. She names Polly Toynbee, Melanie Phillips, Julie Burchill, Ann Leslie, Deborah orr and Jackie Ashley. It’s odd that the UK, which is behind the US in many ways in terms of diversity, has advanced women into lots of prominent roles in the media.

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What pressure? 

Maybe I shouldn’t put such faith in The Guardian’s political coverage (see below), when they get a business story as wrong as this:

  Google under pressure as Diller buys Ask Jeeves
  IAC/InterActiveCorp, the American online conglomerate run by the media mogul Barry Diller, took another step towards web domination yesterday with the $1.85bn (£1bn) acquisition of the internet search engine Ask Jeeves.
  The all-share deal is further evidence of increasing confidence in the potential of internet advertising and search engines. It will also position IAC directly against the likes of Google, Yahoo! and Microsoft…
  Mr Diller said that Ask Jeeves, one of the few internet site engines surviving from the dotcom boom, “has the potential to become one of the great brands on the internet and beyond”. Analysts said the deal could raise concerns for Google, which generates about two-thirds of Ask Jeeves’ revenues by brokering advertising deals for the site.

Where to start? “Step towards web domination”? “Raise concerns for Google”? Tell me why Google — or Yahoo or Microsoft — will give a moment’s thought to a company that has 3% and dropping of the search market, and which has never produced decent search results.

I thought The New York Times’s purchase of was the height of folly, but this is worse.

The unsurprising election 

I don’t want to be accused of complacency, but here’s an unremarkable headline: Tory revival runs into the sand.

More on Wolfowitz 

Felix Salmon has an excellent piece on the Wolfowitz nomination, deconstructing The Wall Street Journal’s op-ed piece.

Is anyone listening? 

Iain Duncan Smith, the ludicrous former Tory leader, has a weighty op-ed piece in today’s New York Times. It’s an odd sensation to see a politician who no one would give the time of day to in Britain given important editorial space in the US.

That said, his point about the dangers of elective dictatorship (as can happen when one party has a large majority in the UK parliament) is perfectly valid. I did think, however, that it was dissembling for him to make no reference whatsoever to his own party’s consistent abuse of its majority during its ascendency in the Thatcher years.

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27 years of change, part I 

I’ve alluded to my new venture before on Davos Newbies. All will be revealed in due course, but the equally big news for me personally is that after 27 years in Europe, I’ll be moving to the United States this summer.

Lots of people I know say to me, “What’s it like to be going back?” The odd thing is that after all this time, I don’t really think of it as going back. It’s moving, certainly. But there’s no “back” about it.

Many of the same people also offer an exclamation of one kind or another about my moving to Bush’s America. I have several responses to this. First, we all live in Bush’s world, so separating yourself from the US geographically doesn’t make much difference. Second, I’m moving to Berkeley, which is about as far as you can get from a Bush worldview and remain on the planet.

We have a beautiful house organised (when we make the move, I’ll spell that organized) in the Elmwood neighbourhood (neighborhood) of Berkeley. We’ve found a great school for the boys. And of course I have an exciting new business to create.

Reading The New York Review of Books on the plane the other day, I thought of a series that I’m going to initiate here on Davos Newbies: 27 years (or thereabouts) of change. Paul Krugman in the March 10 issue of NYRB has a revealing statistic:

  In 1980, private health spending [in the US] was 5 percent of GDP, and government health spending was 3.8 percent. By 2003 the numbers were 8.3 and 7.0, respectively.

There are more dramatic shifts over 27 years, but since that was the statistic that set me thinking about changes in my native country over the years, it’s an appropriate place to start.

A different take on Wolfowitz 

Adam Posen from the Institute for International Economics has an optimistic view on Wolfowitz at the World Bank (subscribers only in the Financial Times). I don’t think his tongue was in his cheek:

  Cheap comparisons to Robert McNamara’s move from a US defence role to the bank aside, the Wolfowitz nomination has the potential to take us back to the early 1960s in two positive ways: first, the US would perhaps be substituting economic largesse for military action in at least some of its security pursuits; and second, the US would view economic development as a foreign policy problem and priority. Anyone for a “war on poverty”?

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Wolfowitz without the ideology 

So the rumours about Paul Wolfowitz getting president Bush’s nomination for the World Bank presidency proved correct.

There will be a great hue and cry, thanks to Wolfowitz’s prominence among the neo-cons. But Bush was always going to nominate an ideological soulmate. What about the other qualifications?

To my mind, the ideal World Bank president would have excellent development knowledge, experience in the developing world and have proven skill at running a large organisation. Overriding these traits, she or he would have a deep concern for helping the world’s poor people.

Wolfowitz is no fool, so I suspect his years in academia and the State Department make him a bit familiar with development issues. Not an expert by any stretch of the imagination, and probably not up to my standard of excellent knowledge.

On the developing world, he did live in Indonesia during his ambassadorship. That’s not a lot, and I suspect he spent more time in comfortable surroundings than out among the poor. But he did live in a developing economy.

He can’t, however, claim any background in running a large organisation. He’s an academic, a policy wonk, an ideologue. Not a manager by any description.

As to where his heart lies, I keep an open mind. In his favour, a European economist friend of mine, who came to know Wolfowitz when he was in Indonesia, reckons he’s not as mad, bad or dangerous as many people think.

I should also note that it’s hard to think of any World Bank president who would have done well on my criteria. Wolfensohn has certainly had his heart in the right place. But he came to the job knowing very little about development, with hardly any experience in the world’s poor countries and with a background running a boutique investment bank. His immediate predecessors came from commercial banking on Wall Street. I suppose Robert McNamara is the closest analogue to Wolfowitz in background, but he had been president of Ford when Kennedy brought him to the Pentagon.

The lesson is that heads of international organisations get chosen for reasons having very little to do with their qualifications. Let’s hope that Wolfowitz rises to the task, however, because the world certainly needs an effective World Bank.

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Peter Preston: “What is this tosh about Labour losing?”

Let the Labour supporters flow 

Bloggers4Labour has implemented an integral newsfeed from the various Labour-supporting sites. Good idea.

Chronicle of a death foretold 

The Guardian has an extract from Geoffrey Wheatcroft’s new book anatomising the death of the Conservative party in the UK.

It’s a salutary reminder for those who are either fainthearted about supporting Labour at the next election or those who are worried about Labour failing to win a third consecutive victory.

  And yet the Tories are now whistling in the dark to keep their spirits up. They have been out of office for longer than at any time in 90 years, they are facing a traumatic third defeat, and even the fact that they are talking hopefully of holding Blair to a 50-seat majority speaks for itself. In many ways, the Tories had been undone by their own achievements, and have suffered from what Peter Walker once called “the problems of success”. It might indeed be said that Tony Blair’s government is Margaret Thatcher’s greatest success, while the fate of her own party is her greatest failure.

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Wrong by a factor of 365 

A friend who knows about water companies (he does municipal finance for the European Bank for Reconstruction and Development) emailed me to say something must be wrong in my Wednesday item about London’s water losses. I linked to a BBC report which said that London was losing 1 billion litres of water a year because of leaks.

My friend reckoned that’s pretty good. A city the size of London probably consumes around 1 billion litres a day, he wrote.

Sure enough, I went to the original source and found out that both the BBC and my reliance on it was wrong. The London Assembly reckons that London loses 1 billion litres a day thanks to leaks.

Another misguided columnist 

Simon Jenkins discovers blogs and gets a lot wrong in The Times. Harry’s Place has the full deconstruction.

I have to say my heart sank recently when The Guardian announced Jenkins was going to join it as a columnist. Surely they could have hired someone with energy and new ideas, not someone who ran out of steam a long time ago (he’s been a columnist on The Times for a decade).