25 September, 2008

Holding my breath

As I write, Alitalia has hours to submit its business plan to the Italian Civil Aviation Authority, and several unions have yet to agree.

In America the markets are on hold pending Congressional approval of the rescue plan. We need something, even if, as Anatole Kaletsky says in today's Times, it has not been fully thought through. I am told that something about moral hazard and something about holding back bonuses should see it scrape under the wire....

And in the UK, we wait to see if Gordon Brown has been saved by his wife.

Interesting times.

24 September, 2008

Singapore


The BBC reports that Singapore's High Court has ruled that the Far Eastern Economic Review (FEER) magazine defamed Singapore's leaders in an article in 2006.

The Lee family requested summary judgment, which means a judge sits alone without a court, over an article about the main opposition leader Chee Soon Juan. Justice Woo ruled that the article implied that Prime Minister Lee (the son of Lee Kuan Yew, modern Singapore’s founder) "is unfit for office because he is corrupt and he too has set out to sue and suppress those who question him to cover up his corruption". Ironically sue is exactly what they did.

I must say I find this very disturbing. I have contributed to the FEER, which is a serious, sober publication, and spent quite a bit of time in Singapore. It is a great place to live and work with a superbly managed economy, efficient social services and good race relations in a unique ethnic mix. There is an enormous amount for the Lee family to be proud of. They do not need to attack every little insinuation of wrongdoing against them: their works speak for themselves.

Singapore is a modern, outward looking nation. It is high time it had the self-confidence to allow modest criticism of the government, from opposition and press alike.

22 September, 2008

Alitalia


Incredibly, the saga of Alitalia continues. The airline loses 3m euros a day, and a month ago it had only 50m euros in cash, so it ought at least to be insolvent. There have been some cancelled flights and there are stories of credit for fuel being stopped but like some ham actor in a B-movie the corpse keeps on thrashing around.


It is a problem for Silvio Berlusconi. During the election campaign he promised that there would be an all-Italian solution for the bail out. The unions then rejected the Air France -KLM deal which was on the table. Now they have rejected the all-Italian one, which required 3,000 job losses, longer hours and some pay reductions.


On a political level Berlusconi must decide whether to ditch Alitalia and blame the unions (no one knows whether they would have rejected the previous deal but it looks, at least, as if they rejected it on the promise of something better) or whether he should press on, forcing everyone's hand.


I would counsel ditching Alitalia, for three reasons: firstly we are past the point of negotiation; forcing the issue now would require a real demonstration of harsh reality and there is neither the time nor the will for this.


Second, it does not seem likely that it can now thrive. I know of many people who stopped flying Alitalia months ago because its reliability record was so poor you couldn't be even moderately sure of catching a business meeting. I don't think they will go back to it.


Most importantly, there is the future to consider. One commentator has said that Alitalia is lost but there is still time to save Italy. The unions are so strong here that there has to come a Margaret Thatcher and the miners moment or the country will descend into chaos.


Berlusconi could send the clearest signal to other unions that he tried his best but the pilots were so intransigent that they forced the liquidation; that even Italians cannot pretend they can always avoid the nasty realities of life. It would be a good lesson for the country to learn.


But 19,000 people would lose their jobs.

19 September, 2008

Notes on a crisis

Imagine the financial crisis as an illness. Now we are at the stage of the raging fever, it seems as if the patient will die, but the wise doctor knows this is a phase that has to be passed, makes sure the sick man has enough water and waits for the crisis to subside.

The decision of the FSA to ban short selling of financial stocks is understandable but, in my view, wrong. Short selling, which the FSA admits is ‘a legitimate investment technique in normal market conditions’ is a pointer to how things are likely to be. Many financial institutions are insolvent and to forbid this indicator would be the equivalent of denying the patient had a disease. You don’t help yourself by banning the symptoms.

Besides which there are the people who already own the shares. You are not going to stop them selling, presumably, which they might now be more likely to do given that the market is artificial – protected by the FSA.

The statements by Alasdair Darling and Gordon Brown abut the HBOS/Lloyds merger maintaining a presence in Edinburgh were disgraceful, particularly if true (it might of course be a bare faced lie – you never know with these folk). There is a by-election coming up in Fife and manipulating the rescue of the financial system for your own electoral purposes is about as low as politics gets.

Equally awful is the statement that the new company should maintain its mortgage book. Lloyds HBOS should concentrate on surviving and if that means lending less it means lending less. A casual scan suggests it is overexposed to the UK lending market. The markets will remember that this government cannot even keep its own house in order and is scarcely equipped to be advising others.

That aside, the encouraging of mergers is a good thing (and far better than bailing out financial institutions or nationalising them) and the co-ordinated liquidity pumping by the central banks (making sure the patient has enough water) seems to have gone well.

We now have to wait for the fever to subside. There will be more mini-crises throughout 2009, in my view, but this might be, as Churchill said of the Battle of Britain, the end of the beginning.

18 September, 2008

Jimi


Today marks the anniversary of the death in 1970 of Jimi Hendrix. Incredible to think it is 38 years since he played.


Hendrix died only three years after his first record came out, but in those three years he revolutionised rock music.

17 September, 2008

US Elections

Irwin Stelzer in today's Telegraph

'So sit back and enjoy the show. It is far more entertaining, and certainly more democratic, than waiting for the defenestration of a prime minister by a cabal of his colleagues.'

16 September, 2008

Sharia and you


I must draw your attention to three unconnected news stories. First, from the Daily Telegraph:

‘Five sharia courts have been set up in London, Birmingham, Bradford and Manchester and Nuneaton, Warwickshire. The government has quietly sanctioned that their rulings are enforceable with the full power of the judicial system, through the county courts or High Court. Previously, the rulings were not binding and depended on voluntary compliance among Muslims.’

Second, again from the Daily Telegraph

Sheikh Muhammad Munajid claimed the mouse is "one of Satan's soldiers" and makes everything it touches impure.

But he warned that depictions of the creature in cartoons such as Tom and Jerry, and Disney's Mickey Mouse, had taught children that it was in fact loveable.

"Mickey Mouse has become an awesome character, even though according to Islamic law, Mickey Mouse should be killed in all cases."

Third, from Yahoo News:
In 2007, a Mickey Mouse clone named "Farfour" was used in the Tomorrow's Pioneers television series, on the official Hamas TV station, to educate children. Farfour has stated such things as: "You and I are laying the foundation for a world led by Islamists" and "We will return the Islamic community to its former greatness, and liberate Jerusalem, God willing, liberate Iraq, God willing, and liberate all the countries of the Muslims invaded by the murderers.’

It all bears thinking about, doesn’t it?

13 September, 2008

spag bog


We learn that schoolchildren are to receive cookbooks under a new initiative. I am absolutely in favour of this, but surely a modicum of rigour is required in academic institutions, even with a publicity seeking initiative organised by the awful Ed 'Blinky' Balls.


The book 'Real Meals' contains, it is said, a recipe for spaghetti bolognese. This is the pasta equivalent of chicken tikka masala, something invented by the British. Spaghetti is pretty well the only type of pasta a northern Italian cook would not serve with rag├╣ bolognese.


Try a broader, egg-based pasta such as tagliatelle or papardelle, (spaghetti is not made with egg).



12 September, 2008

Fannie and Freddie

Anatole Kaletsky in the Times, who should know better, has written the most extraordinary piece of tosh linking the bail out of Fannie Mae and Freddie Mac in America to the end of capitalism.

These two institutions were unique, set up by the Federal Government (just try launching a corporation in the USA with ‘Federal National’ in the title). They were there to provide liquidity to the mortgage market by buying packages of loans from the mortgage banks. When in the 80s and 90s the commercial market became clever enough to do this itself (remember the Special Investment Vehicles in Northern Rock?) Fannie and Freddie were not closed down. Their importance now was to support the redlining regulations – making banks lend to the poorer parts of town, not in what we would call a ‘postcode lottery’. Their other importance was to give jobs to political apparatchiks who needed paying off.

So by definition Fannie and Freddie were Government run institutions used to prop up anti-market regulations and were directed by people who were in the way anywhere else. It is not surprising they went bust and not surprising they were bailed out.

It does mark a halt to the banks’ relentless drive for capital, but only for a couple of years, in my view. The markets will revert to type: always have done, always will.

Making the rules


The news that baseball was invented in England, in Guildford to be precise, in 1755 will come as no surprise to those who have studied the matter. The British invented football, rugby, cricket, golf and some say tennis, but don't play any of these games well. What we are good at is making up the rules.

In future, just as African potentates go to Savile Row to invent the uniforms for their armies - an instant bit of 'tradition' - so they will come to us to invent their national games for them. Something to do with coconuts, your Majesty?

A new service industry is born.

10 September, 2008

Fallen asleep?

Charles Clarke, the red wine swilling former Blair cabinet minister who made such a poor shot at being Home Secretary, has had a go at Gordon Brown saying Labour faced ‘utter destruction’ under his leadership. No one seems to have had the courage to rally to his banner but there have been other grumblings in the Labour ranks that the party faced wipe out in the elections. Having lost a poll lead to being 20 points behind in just one year must mean that nobody would rule it out.

But if it were to happen, and I am far from sure that it is, what would it mean for British politics?

Since the War, Britain has effectively had a two party system. The Liberals / SocDems / LibDems were there if you wanted a protest vote, and following the excellent example of David Such there has been a host of small parties, Greens, UKIP, Loonies etc. But nobody ever thought that the government would be anything other than Labour or Conservative.

Anyone who has been canvassing will know the depressing experience of finding ‘No, we’re a Labour / Conservative family’. I used to feel like slapping them until they remembered it was their duty as members of a democratic society to register an objective vote on the merits of the case which would at least involve reading the bloody literature, but there you are. Democracy is about dealing with the people you have got. This blinkered attitude is as bad if you are campaigning in Gloucestershire for the Labour Party or in Pontypridd for the Conservatives.

What will these people do, then (I mean the staunch Labour voters, we can pretty well guess what is going to happen in Gloucestershire)? You see, the other fault line in the British Electorate, as well as thinking that your political affiliations were laid out for you at birth, is that they like to back the winner, as if voting were the same as punting on the 3.30 at Epsom. When I campaigned for UKIP a lot of people would say that they agreed with the party policy (at that stage it was just about leaving the EU, none of this immigration claptrap) but that they wouldn’t vote for us because we couldn’t possibly win.

I believe most people will come to think that Labour can’t possibly win the next election. Note, though, that it takes a surprising amount of time for this sort of feeling to trickle down to the electorate. The Westminster village reacts immediately to poll swings but the people are, rightly, slower to convince. By 2010 however even the guy in the Pontypridd housing estate is going to think they can’t win and, statistically, several of his ilk are not going to vote for them. But will they vote for anyone else?

My fear is that they’ll vote for nobody and there will be a Cameron landslide caused by Labour not getting its vote out. That would be far from healthy. But what happens in the election after that? Will Labour do as the Tories did, sit it out and wait their turn to come back into popularity? Or will the party apparatus split into Old and New Labour?

My guess is that the old left will die: that there will never be another serious politician in the Brown mould, believing in State manipulation of the economy and of the lives of the people. That would be nice: we must guard against the re-emergence of these people as we must guard against the return of fascism. They are the same.

But the possibility remains, as Tony Blair said of the Tories, they won’t have died, they will just have gone to sleep.

09 September, 2008

Celebrity Chef


I mentioned back in January that Samak Sundaravej, the prime minister of Thailand, presents a TV cookery programme on Thai food called ‘Tasting, Grumbling’, wondering how long it would be before we go the same way (not that Delia would make a worse cock-up of government than this lot).


Alas, time has caught up with Samak. Despite doing the last four programmes free, he charged for bringing the vegetables to the studio and this has been deemed unconstitutional. He has to resign but the good news is that his party are likely to vote him back.


His favourite dish is pork leg cooked in Coca Cola, and traditionally after the cooking part of the show he delivers a high spirited monologue on a subject of his choice. Just think of Brown doing this.


I urge the Thais to have him back. It would be a tragedy if this man were lost to public life.


06 September, 2008

Lita Roza


There passed away in August, almost unnoticed, Lita Roza, whose story has lessons for us in good taste and artistic integrity.


She had been a modestly successful singer with a big band when in 1953 her agent urged her to record 'How much is that doggie in the window'. Lita thought the song puerile but agreed to sing it, just once, for the recording. It was, as the agent had predicted, hugely successful but Lita stuck to her guns: 'I said I would sing it once and only once and then I would never sing it again, and I haven't'.


Bemused audiences who only knew her for the song pleaded with her to sing it at her concerts but she never did.


Later musical tastes moved to Rock and Roll and she wouldn't sing that either, so died having achieved a fraction of the fame she might have done.

02 September, 2008

Teaching God


Recent news about the Republican Running Mate Sarah Palin sent my thoughts back several decades. I don’t mean that her daughter is pregnant – stuff, as another Republican pointed out, happens – but that she had agreed that creationism should be taught alongside Darwinism in schools.

As a child I pointed out to a schoolmaster that learning in one class that we were the result of a six day creation-fest and in another that we were descended from the apes smacked of inconsistency. He gave me the ‘I’ll try to be tolerant’ look and explained that one was Religious Instruction and the other was Biology.

The problem in America is that Church and State are strictly separated, so if you want to teach creationism you have to teach it as science, not religion.

A pity. I think most of us have problems with both, it’s just that one seems less unlikely than the other.

01 September, 2008

Taxing Windfalls


Well, it’s September, and this is the month, you will recall, that we are to expect Gordon Brown’s Economic Recovery Plan. In my opinion there is pretty well nothing that he can do which would have a favourable outcome before the middle of next year and the Labour Party doesn’t have that kind of tolerance, so expect something just for show.

What his party would like is a windfall tax on oil companies, with the proceeds to be directed towards the ‘fuel poor’ (a concept Labour have invented just for this purpose) and it may well be that Brown will be tempted into this for political reasons. To the socialist mind these huge corporations are a fair target, making billions in profit on the back of high oil prices; ‘Unearned Income’ is how they see it.

To do this would be a huge mistake. First, just consider the basic economic theory. The oil price is high because people are demanding more than is supplied. A windfall tax would make the exploration business less profitable resulting in less exploration and less oil. So we reduce the supply of oil and then give money to people to demand more: a worsening on both sides of the equation.

Now the lefties will say that the oil companies will continue to explore because that is what they do, but we have ample evidence to the contrary. For Gordon has form.

Brown has raided the oil companies twice before, in the April 2002 budget when he introduced the North Sea Production Tax and in December 2005 when he doubled the tax rate. The result was a dramatic lowering of North Sea investment culminating in Britain becoming a net oil and gas importer when this need not have happened for years.

Drilling for oil is a 20 year investment and the oil companies need to know that a fickle government will not punish them after the funds have been committed. Taxation on this basis is retrospective legislation: taxing profits after the exploration companies have made the investment decision on the previous fiscal model. And Brown has already done it twice. Naturally the oil companies don’t trust this government.

This is a lesson for Cameron: fix a long term (and attractive) tax regime and declare it will last for as long as they are in power. That way the companies will do their job, there will be more oil on the market and prices will be lower.

That is, as Brown would say, the right long-term decision. But Brown does not have a long term view: he may well pursue a scorched earth policy, knowing he will lose the next election and wanting to make the Tories suffer. Let’s hope not.