Tuesday, 31 January 2012

Who came up with the model for excessive pay? No, it wasn't the bankers – it was academics

All the focus has been on bankers' bonuses, yet no one has looked at the economists who argued for rewarding bosses by giving them a bigger financial stake in their companies



Take a big step back. Ignore those sterile debates about how Dave screwed up over Stephen Hester's pay and where this leaves Ed. Instead, ask this: which profession has done most to justify the millions handed over to the boss of RBS, his colleagues and counterparts? Which group has been most influential in making the argument that top people deserve top pay? Not the executives themselves – at least, not directly. Nor the headhunters. Try the economists.




The ground rules for the system by which City bankers, Westminster MPs and ordinary taxpayers live today were set by two US economists just a couple of decades ago. In 1990, Michael Jensen and Kevin Murphy published one of the most famous papers in economics, which first appeared in the Journal of Political Economy and then in the Harvard Business Review. Its argument is well summed up by the latter's title: "CEO Incentives: It's Not How Much You Pay, But How."



The way to get better performance out of bosses, argued the economists, was by giving them a bigger financial stake in their company's performance. You couldn't have asked for a better codification of bonus culture had you stuck a mortar board on Gordon Gekko's head. So popular, so influential was Jensen and Murphy's work that it opened the door to a new corporate culture: one where executives routinely scooped millions in stock options, apparently justified by top research that they were worth it.



The usual criticism of economists is that they missed the crisis: they preferred their models to reality, and those models took no account of the mischief that could be caused by bankers running wild. Of all explanations, this is the most comforting; all academics need to do next time, presumably, is look a little harder – ideally with a grant from the taxpayer.



But economists didn't just fail to spot the financial crisis – they helped create it. They provided the intellectual framework and drew up the policies that helped caused the boom – and the bust. Yet rather than a full-blown investigation, their active involvement in this crisis and their motivations have barely got a look-in. As Philip Mirowski, one of the world's leading historians of economic thought, puts it: "The bankers have got off the hook, and gone back to business as usual – and so too have the economists." It's the same discipline that spoke all that nonsense about markets always being efficient that is now deciding how to reform the economy.



A few weeks ago, I described the current economic system as a bankocracy run by the banks, for the banks. Mainstream economists play the role of a secularised priesthood, explaining to the laity just how and why the markets' will must be done. Why are they doing this? Luigi Zingales, an economist at Chicago, calls it "economists' capture". Much of the blame for the financial crisis has fallen on regulators for being captured by the bankers, and seeing the world from their point of view. The same thing, he believes, has happened to academics. When Zingales looked at the 150 most downloaded academic papers on executive pay he found that those arguing that bosses should get more (à la Jensen and Murphy) were 55% more likely to get published in the top journals.



Anyone who saw the film Inside Job will recall the scene in which leading economists are shown puffing financial deregulation, or the outlook for Icelandic capital markets, or whatever – and then revealed to have taken hundreds of thousands, sometimes millions, from the very interests they are advocating. But this goes wider than direct payment; many academics also believe those arguments about how markets work best when they are left alone. As the economist Steve Keen puts it: "Most economists are deluded."



Maybe, but it also pays to be deluded. Think about the rewards for toeing the mainstream economic line. Publication in prestigious journals. Early professorships at top universities. The conferences, the consultancies at big banks, the speaking fees. And then: the solicitations of the press, the book contracts. On it goes.



Rob Johnson, director of the Institute of New Economic Thinking, quotes a dictum he was once given by a leading west coast economist. "If you got behind Wall Street," he remembers the professor telling him, "you went to Lake Como every summer. If you left finance alone, you took a nice vacation in California. And if you took on the bankers, you drove a secondhand car."



Were this corruption of analytical philosophy, say, this might not matter so much. But economics shapes our policy and our public debates – and it warps both. Yesterday, I listened to a discussion of Hester's bonus (what else?) on the Today programme. Defending Hester, a journalist quoted some American finding that CEO pay had actually halved since 2001.



Chicago economist Steve Kaplan does indeed argue that "CEO pay in 2006 remained below CEO pay in 2000 and 2001". What's missing there is that 2001 was the height of the US dotcom boom, when bosses were getting crazy money. Kaplan also writes papers about how hard it is to be a chief executive. According to his CV, his consulting clients have included Accenture, Goldman Sachs and a bunch of other Wall Street banks. This is the way such arguments are prosecuted: without full disclosure of either evidence or interests. And in such arguments, it's you that loses.

Monday, 30 January 2012

Old Conservative Values

Norman Tebbit in The Telegraph

It is all too easy for a blogger to respond a bit too much to the headlines of the day, so every now and again I think it useful to stand back and look at some long-term trends.


David Cameron used to speak about Britain's broken society, and even Ed Miliband makes socialist noises about society from time to time. The Lib Dems concede, too, that there are some deep-rooted problems facing any government which could not be solved by handing everything over to Brussels.
I know well enough that as a man of eighty years, if I say that many things were better in our society when I was young, those who never knew those years will condemn me as an addled old fool living in the past. Should I suggest that if a new way of organising things is clearly not working, and we might revert to the old way which did, some of the “all change is for the better” brigade will denounce me as a mindless reactionary incapable of progressive thought.

Yet the essence of Darwinism is not just that the new shall replace the old. The species that makes the wrong change in response to a changed environment suffers the same fate as that which does not change at all. For all that, there are a good many successful species which have scarcely changed at all for many millions of years.

In our human case the right approach must be the classical conservative approach. That is, when it is not necessary to change, it is necessary not to change. In recent years we have had too much gratuitous change, which has relentlessly divorced the consequences of actions from those actions themselves.

This has happened at all levels of human conduct.

Being fat used generally to be caused by eating too much. Nowadays obesity is generally a medical condition or an “epidemic”. Stealing from shops used to be theft. These days it is at worst shoplifting or a civil offence, or “a cry for help”. Sometimes no doubt it is a cry for help… but not all the time.

As we saw last summer, a crowd smashing into a shop, taking the stock and setting fire to the building may these days no longer be breaking and entering, conspiring to commit theft, violent disorder and arson so much as making “a political statement”.

Despite a rising level of expenditure on education we face a rising tide of illiteracy, innumeracy, and ignorance of science and history amongst school-leavers. Could it be that the cult of child-centred education is a failure? When bright pupils are held back less, the slow ones will follow – because they won't want to be left far behind. More to the point, if we're not stretching bright pupils in the classroom, they'll find some extracurricular activity (perhaps gang leadership) at which to excel anyway.

Why, we might well ask (as Duncan Smith has done), do we have these days hereditary unemployment in families where for two or three generations no one has ever been gainfully and legally employed?

Is it possible that we have constructed a world full of perverse incentives in which it is often the case that immediate gratification, even if not long-term benefit, is most easily achieved by anti-social behaviour? If so, might it not be a good idea to think about reverting to past ways of dealing with such things. After all, was a classroom in which corporal punishment was available, but in my experience seldom used, better or worse than one in which teachers may be physically attacked and teaching takes second place to just keeping a semblance of order?

Nor are such thoughts confined to the behaviour of the financially or socially disadvantaged. The excesses of bankers might have been more quickly changed for the better had rather more of them faced the criminal justice system. Nor can politicians escape their responsibility for creating a belief that the answer to the question, “should I do this?” is no more than “yes, if I can I get away with it”.

Perhaps my views are shaped not just by growing up in rather hard times, but by my profession as a pilot. We aviators learned the inexorable laws of aerodynamics and of the frequently fatal consequences of the pretence that they could be scoffed at, ignored, or changed. And we learned to pay heed to those who had survived longer than us in that unforgiving environment.

Wednesday, 25 January 2012

The demise of the dollar

In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading 

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."

This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.
Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.

China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq – blocked by the US until this year – and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (where it has substituted for US interests) and has been negotiating for oil concessions with Libya, where all such contracts are joint ventures.

Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon systems, food, clothes, even dolls. In a clear sign of China's growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan appreciate against a sliding dollar and, by extension, loosen China's reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro.

Ever since the Bretton Woods agreements – the accords after the Second World War which bequeathed the architecture for the modern international financial system – America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.

The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar."

Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018.

The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.

"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.

Should we give the doosra a little leeway?


What if spinners were allowed to flex their arms 20 degrees while bowling?
January 25, 2012
Comments: 19 | Login via | Text size: A | A
Saeed Ajmal bowls looking to add to his seven wickets in the first innings, Pakistan v England, 1st Test, Dubai, 3rd day, January 19, 2012
 
One midwinter English Sunday, two arresting sporting headlines - neither, pluckily, having anything whatsoever to do with f**tball. Tucked away in the bottom left corner at the front of the latest Sunday Times sports section, beneath the acres given over to "Kenny Blasts Reds" and "Dalglish threatens clear-out of 'unprofessional' players", lurked "Robinson attacks 'arrogant' England" - the Robinson in question being neither Nottinghamshire's Tim nor Sussex's Mark but Andy, the English-born coach of Scotland's rugby union side. In the top left corner, opposite "Magical Murray - Briton Storms Into Last 16 At The Aussie Open", lurked "Fanning The Flames - Trott Voices New Suspicion Over Pakistan Spinner". 

As a snapshot of Blighty's sporting fancies it was nothing if not symbolic. Team games before individual, f**tball before all. As a reflection of the lengths sportsfolk will go to secure an advantage, it was just as telling.
Robinson's "attack" came a fortnight before Scotland meet - you guessed it - England in the opening match of the Six Nations championship, that annual scrap to prove who's the best in Europe but still a distant second on the planet; Trott's "suspicion" during preparations for the second Test against Pakistan. In both instances, not unnaturally, the agitators were smarting from a humbling: Scotland's last encounter with England, in October, had seen them beaten in the World Cup quarter-finals; Trott and England had just been drubbed in Dubai.

Both headlines were broadly accurate; both, as is the way of the media world, masked thin but provocative stories, stories where the headline is the story. Robinson's allegation about the arrogance of those accursed English ruckers was entirely unspecific. He used the word, yes, but resolutely declined to go a zillimetre further. Trott's "suspicion" (which wasn't exactly "new") proved to be little more than a sliver of a scintilla of a hint, albeit a politically correct one: "From what the guys are hearing… and are talking about, we can't make any accusations before the guy has been tested. The ICC have got their job to do and we trust they will be able to do it." Then he covered his tracks a bit more: "There is going to be speculation around his action… [but] it would be foolish for us every time we face him to think he's suspect."

All of which ran somewhat counter to Graeme Swann's assertion in his Saturday morning column for the Sun, to wit: "Some people are talking about [Saeed] Ajmal's action but it's not a topic of conversation in our dressing room." He has tried to bowl a doosra himself, Swann related, but couldn't do so "without bending my elbow". Meanwhile, Andy Flower was adding his ha'pworth: "I've got my own private views and talking about them here and now isn't going to help the situation."

Everyone, in other words, was steering that narrow course between libel action and the inalienable right of sportsfolk to play mind games, however ineptly. Call it the Doosra Dance. Call it the game within the game within the game. Boxing, which has always had one foot in the sham of showbiz, led the way. Stirring the pot has been part and parcel of the pre-match ritual for time almost immemorial, but as the stakes rose, so the press became more brazen; and as radio, television, internet and social media multiplied the megaphones, so the vigour and wattage rose. The philosophy became part Machiavelli, part Malcolm X: get under the opposition's skin by any means necessary. The lawyers quietened things down but the sound of sniping still reverberates. It's in the script.

Greg Chappell characterised this inner-inner game with typical succinctness long ago. On the eve of the final Test of the 1982-83 Ashes series in Sydney, where victory for the outclassed tourists would have kept the urn in English hands, captain Bob Willis, happy to kindle memories of Australia's gobsmacking collapses at Headingley and Edgbaston 18 months earlier, said he would rather Australia bat last, obviously. The riposte from his opposite number was as firm and straight and true as one of Chappell's on-drives: "That's just propaganda."

The difference in Ajmal's case is that Flower, Swann and Trott (and Matt Prior for that matter) had two other factors to contend with as they contemplated airing their views. First, they would be accusing a fellow professional of cheating, still widely considered the most dastardly of sporting crimes, even among those horrified by match-fixing. Second, by questioning Ajmal's action, or even alluding to any dubiousness, they ran the risk of being seen as whingeing Poms, whether of the Northamptonian or southern African variety. They also knew a swift but polite "no comment" would have sufficed. Swann, presumably, has some control over what goes out under his name, so he could have ignored the matter altogether. The Sun's sports editor might not have liked it but he'd have had to lump it. Instead, all three chose to fan the flames behind a veil of respectability, the better to unsettle.
 
WHICH LEADS US, INEVITABLY, to the bigger question. Not whether all is fair in love, war and ballgames, but whether bending the elbow beyond the permissible 15 degrees might actually be more acceptable in a spinner. To propose this, of course, should in no way be seen as a desire to see a new generation of Tony Locks wreck stumps and wreak havoc with 80mph "faster" balls, prompting victims to surmise - as Doug Insole did so volubly after being castled by the Surrey southpaw - that they could only have been run out.

In June 2009, a batch of eminent Australian spinners, including Shane Warne, Stuart MacGill, Ashley Mallett and the late Terry Jenner, gathered in Brisbane for a grandiloquently dubbed "Spin Summit". All condemned the doosra. "There was unanimous agreement that [it] should not be coached in Australia," wrote Mallett in the Adelaide Review. "I have never seen anyone actually bowl the doosra. It has to be a chuck. Until such time as the ICC declares that all manner of chucking is legal in the game of cricket I refuse to coach the doosra. All at the Spin Summit agreed." Principle was surely the cause; the only other interpretation is that they didn't want their records broken.

A couple of months earlier, by way of context, Ajmal had been reported by the umpires following an ODI against Australia in Dubai. An expert in biomechanics, however, gave his doosra the all-clear, and, so far as we know, the charge has never been repeated. Muttiah Muralitharan and Harbhajan Singh were both reported before the degree of flexibility was justly raised from 10 degrees - on the basis that just about every ball ever recorded on film would otherwise have been illegal - but not thereafter. To my knowledge no official aspersions were ever cast about the doosra wielded so wickedly by its inventor, Saqlain Mushtaq.
 


 
Should the regulations distinguish between spinners and quicks? Given that there is an appreciable gap between the intent and potential physical ramifications of a 95mph "chuck" and a 60mph one, this does not seem unreasonable
 





All of which would suggest: a) half a dozen degrees of flex are indiscernible to the naked eye, and b) there are oodles of people, many of them umpires, who believe not only that it is entirely possible to bowl such a ball legitimately but that it is done so with considerable regularity. In their refusal to coach it (not, one imagines, that they could so without a scary amount of homework, seldom something that comes naturally to retired luminaries), Warne et al are almost certainly doing their heirs a grave disservice.

But let's just say, strictly for the sake of argument, that Ajmal's right arm does stray fractionally beyond that prescribed limit. Should the regulations, in this respect, distinguish between spinners and quicks? Given that there is an appreciable gap between the intent and potential physical ramifications of a 95mph "chuck" and a 60mph one, this does not seem unreasonable. Why not a 15-degree leeway for one and 20 for the other? It was only a few years back, after all, that the ICC deemed such a differential - five degrees for pacemen, ten for twirlers - right and proper. Offspinners, of course, are entitled to raise another point: why, unlike their wrist-flexing brothers-in-arms and charms, should they be denied the right to bowl a wrong'un?

The sentiments of Bernard Bosanquet, proud parent of the wrong'un, ring down the ages with a deafening echo. "Poor old googly!" he lamented in the 1925 Wisden. "It has been subjected to ridicule, abuse, contempt, incredulity, and survived them all. Nowadays one cannot read an article on cricket without finding that any deficiencies […] are attributed to the influence of the googly. If the standard of bowling falls off, it is because too many cricketers devote their time to trying to master it [...] If batsmen display a marked inability to hit the ball on the offside, or anywhere in front of the wicket, and stand in apologetic attitudes before their wicket, it is said that the googly has made it impossible for them to adopt the old aggressive attitude and make the old scoring strokes. But, after all, what is the googly? It is merely a ball with an ordinary break produced by an extra-ordinary method."

So it all boils down, in essence, to the Googly Question: would you prefer the game to remain rigid and obstinate, clinging fast to traditional notions of what is far and unfair, and hence stagnate, or encourage the expansion of horizons? In other words, would we be better off with or without the doosra? You don't have to be a fully qualified Luddite to reply in the negative, but it helps. 

Rob Steen is a sportswriter and senior lecturer in sports journalism at the University of Brighton

Tuesday, 24 January 2012

The secret to an enduring sex life - cups of tea

Making love with a long-term partner is less about sex toys and snatched passion and more about sharing time, intimate moments – and cups of tea, says the marital therapist Andrew G Marshall. He explains how couples can keep the spark alive

Sex life a bit lacking? Take heart: the answer lies not in scary-sounding toys or tantric techniques, but a nice cup of tea. That's the comforting view of leading marital therapist Andrew G Marshall. He explains how it works: "If you stop in the middle of love-making to have tea and talk to each other, it shows how desire comes and goes – that sex isn't just a race to the end. It allows you time to be intimate with each other. Sex which used to last 15 minutes suddenly lasts an hour and a half. Sex doesn't have to involve going out of your comfort zone – although challenging yourself is good."
Marshall is on a mission to reclaim monogamous sex for couples who are puzzling out how to feel sexy with the partner who shares the frankly unsexy business of domestic life and bringing up children. As a marital therapist with practices in London and Sussex, Marshall has enjoyed a rare insight into the love lives of ordinary people over the past 25 years. His latest book is, How to Make Love Like a Prairie Vole: Six Steps to Passionate, Plentiful and Monogamous Sex (Bloomsbury, £12.99), published both as a book and an app.

In his view, too many couples resign themselves to little or no sex after the first few years and pretend they don't mind while secretly yearning for better sex – or resorting to an affair. "Too often people leave a relationship at just the point when sex has the potential to get much better," Marshall says.

"One myth I particularly want to challenge is that after the first few years it's downhill all the way and once you get past 40 that's about it – you've got one last chance and you'd better grab it quickly. That encourages all sorts of stupid affairs.

"However, if couples make love rarely it leaves the relationship pretty vulnerable, because we don't lose our need for sex. It's a wonderful way of feeding a relationship. It's not just about orgasms: what's particularly restorative is that afterglow, where you hold each other and feel cared for. But if you don't feed your relationship it dies, or someone else comes along and feeds your partner. I don't think people get divorced because they have a bad sex life, but I certainly think it's a contributing factor."

Marshall encourages couples to reinvent their sex lives every few years. It's not about spicing things up superficially with new techniques and toys but about building confidence and openness. If couples can pull this off – in the face of undeniable pressures like kids and careers – sex gets better and better. Yet the very glue that binds long-term relationships can hamper progress, because individuals are naturally wary of suggesting changes for fear of rocking the emotional boat and as time goes on there's so much more at stake. And while it's all very well for sexperts to bang on about the importance of communication, most couples haven't got a clue where to begin.

Too often sex has become the elephant in the room; a subject far too scary to bring up because it feels like criticism. So much easier to bite your tongue and put up with things the way they are.

Marshall's advice is to avoid bringing up problems, which will make your partner feel defensive. Instead start by talking about what you like about your sex life and remembering what was wonderful in the past. That should to break the ice for further discussions about how to bring more good stuff into the relationship now.

Marshall is also keen to bust the myths about sex which hold couples back: that it has to be spontaneous and that both partners have to be equally turned on at the same time. "That puts people under extreme pressure," he says. "What's needed is a bit of give and take and accepting that sometimes one person is in the spotlight, sometimes the other. If you wait until you both feel in the mood you'd probably only have sex once a year, on holiday. That's not to say you can't have spontaneous sex, just that you can't rely on it. The rest of the time you need to plan."

And he urges couples to treat sex as a priority, rather than the last thing on the minds of two exhausted individuals. Parents, whether their children are teenagers or toddlers, should take note: "If anything is causing problems in our sex lives, it's the sense that we have to be super-parents who are available to our children 24/7," he says.

"I can't tell you how difficult it is to persuade couples to put a lock on their bedroom door, although they wouldn't dream of barging into their kids' bedrooms! If your kids hear you making love, Hurrah! It says you are sexual creatures and I think that's incredibly reassuring because it gives children the message that their parents love each other – and that is a wonderful bedrock for them to have."

SEXUAL HEALING

* Take the pressure off by having a break from sex for a few weeks. Focus on touching instead.
* Develop habits that give you a head start, such as going to bed at the same time as your partner and keeping distractions such as computers and phones away from the bedroom.
* Simple communication also helps: if you're going to bed, then make a point of telling your partner, so they know you haven't just gone for a bath or whatever.
* If you've got children, put a lock on your bedroom door. If you're worred about being overheard, play music.
* Don't wait to be in the mood. Sex doesn't always have to be spontaneous. Plan sex.
* Communicate. Bringing up the subject of sex can easily be taken as a criticism. Don't focus on problems but talk about what's good about your sex life and what you enjoyed in the past.

Only a maximum wage can end the great corporate pay robbery


Corporate wealth is being siphoned off by a kleptocratic class that has neither earned nor generated it
Vince Cable
The business secretary, Vince Cable. Photograph: Martin Argles for the Guardian
 
The successful bank robber no longer covers his face and leaps over the counter with a sawn-off shotgun. He arrives in a chauffeur-driven car, glides into the lift then saunters into an office at the top of the building. No one stops him. No one, even when the scale of the heist is revealed, issues a warrant for his arrest. The modern robber obtains prior approval from the institution he is fleecing.
The income of corporate executives, which the business secretary Vince Cable has just failed to address, is a form of institutionalised theft, arranged by a kleptocratic class for the benefit of its members. The wealth that was once spread more evenly among the staff of a company, or distributed as lower prices or higher taxes, is now siphoned off by people who have neither earned nor generated it.

Over the past 10 years, chief executives' pay has risen nine times faster than that of the median earner. Some bosses (British Gas, Xstrata and Barclays for example) are now being paid over 1,000 times the national median wage. The share of national income captured by the top 0.1% rose from 1.3% in 1979 to 6.5% by 2007.

These rewards bear no relationship to risk. The bosses of big companies, though they call themselves risk-takers, are 13 times less likely to be sacked than the lowest paid workers. Even if they lose their jobs and never work again, they will have invested so much and secured such generous pensions and severance packages that they'll live in luxury for the rest of their lives. The risks are carried by other people.

The problem of executive pay is characterised by Cable and many others as a gap between reward and performance. But it runs deeper than that, for three reasons. As the writer Dan Pink has shown, it's not just that there is currently no visible link between performance and pay; but high pay actually reduces performance. Material rewards incentivise simple mechanistic jobs: working on an assembly line, for example. But they lead to the poorer execution of tasks which require problem-solving and cognitive skills. As studies for the US Federal Reserve and other such bolsheviks show, cash incentives narrow people's focus and restrict the range of their thinking. By contrast, intrinsic motivators — such as a sense of autonomy, of enhancing your skills and pursuing a higher purpose — tend to improve performance.

Even the 0.1% concede that money is not what drives them. Bernie Ecclestone says: "I doubt if any successful business person works for money … money is a by-product of success. It's not the main aim." Jeroen van der Veer, formerly the chief executive of Shell, recalls, "if I had been paid 50% more, I would not have done it better. If I had been paid 50% less, then I would not have done it worse". High pay is both counterproductive and unnecessary.

The second reason is that, as the psychologist Daniel Kahneman has shown, performance in the financial sector is random, and the belief of traders and fund managers that they are using skill to beat the market is a cognitive illusion. A link between pay and results is a reward for blind luck.
Most importantly, the wider consequences of grotesque inequality bear no relationship to entitlement. Obscene rewards for success are as socially corrosive as obscene rewards for failure. They reduce social mobility, enhance plutocratic power and allow the elite to inflict astonishing levels of damage on the environment. They create resentment and reduce the motivation of other workers, who see the greedy bosses as the personification of the company.

Cable has announced four main policies: more transparency, a requirement that companies should "report" on boardroom diversity, a mechanism for clawing back pay settlements not justified by the company's performance, and granting shareholders binding powers to block excessive rewards. They are likely to be almost useless – or worse. Pay transparency, while of general interest, can create the perverse result that executives discover how much their rivals are getting, and use the information to demand more. The clawback mechanism will be inserted into the corporate governance code. This is voluntary, and its existing provisions are widely ignored.

Shareholder power is likely to be illusory. As Prem Sikka has shown, the proportion of stock owned by individuals fell from 47% in 1969 to 10% in 2008, while the percentage in foreign hands has risen from 7% to 42%. Why should oil sheikhs care about social justice in the UK? And most traders hold shares too briefly to take an interest in the inner workings of a company. As Rob Taylor, formerly the chief executive of Kleinwort Benson, points out, if shareholders don't like the way a company is run, they don't hang around to change it; they sell up and move on.

Labour's policies seem designed to sound tough but change little. Like Cable, its spokesman Chuka Umunna talks of transparency and simplicity (which are both worthy aims) but not of holding down pay. Labour has based its policy on the findings of the High Pay Commission, which have been widely hailed as revolutionary. I've read the commission's final report, and can find no justification for this description. Its recommendations are, to be frank, pathetic. With the possible exception of employee representation on pay committees, the 12 measures it proposes are likely to make only a marginal difference. Nowhere does it suggest anything resembling the obvious means of capping executive pay: namely, er, capping executive pay.

So what should be done? The UK government imposes a minimum wage, and even the neoliberal coalition appears to accept that this is a necessary intervention in the market. So why should it not impose a maximum wage?

I'm not talking about ratios or relative earnings. Various bodies have proposed that there should be a fixed ratio of the top earnings within a company to either the median or lowest salaries. But as a report on this issue by the New Economics Foundation shows, the first measurement quickly becomes complex and opaque, the second creates an incentive to contract out the lowest paid work. I'm talking about an absolute maximum, applied nationwide.

Let's say £500,000 a year, a figure that includes bonuses, share options, pensions and benefits. It will rise with inflation, but no faster than that. If you want to make more, you can invest in a risky venture of your own or someone else's. If you want to make more money as a salaried worker – in other words while other people carry the risks – you can go abroad, and good riddance to you. Another country, incautious enough to set no cap, can deal with the consequences of your destructive greed.
The feeble measures proposed by the government will do nothing to prevent the great pay robbery. If Vince Cable intended to limit executive pay, he would limit it. But he knows who his masters are, and the policies he has announced are intended to create only a semblance of action.

Courage: a product of practice rather than faith

The question of moral courage – and whether you can get better at it – has stayed with me ever since I was shot at by Israelis

by Giles Fraser in The Guardian


OK, we all get it. Captain Francesco Schettino was a coward. Sinking the Costa Concordia was one thing – a mistake, even. The running away bit, though: that's a different order of moral failure. But how do we know what sort of person we would turn out to be in such circumstances? Hero or villain?



Years ago I was shot at by Israeli soldiers on the Gaza/Egypt border. Bullets kicked up a line of dust a few feet to my right. Despite being in the company of a dozen Palestinian children, I ran and hid. Sick with adrenaline, I cowered behind a block of flats for a good 10 minutes. To be fair on myself, we all did, and that may well have been the only thing to do. Nobody got hurt. But the question of moral courage has remained with me ever since: in particular, the question of how those who do this sort of thing, day in day out, build up the emotional resources to confront danger with bravery. Is courage something you are born with; or can you get better at it?



"Each of us has a bank of courage," explains Peter de la Billière, a former commander of the SAS. "Some have a significant credit balance, others little or nothing; but in war we are all able to make the balance last longer if we have training, discipline, patriotism and faith." This feels so much like the advice of a bygone age. For these are values whose stock has not fared well in the latter half of the 20th century and beyond. Indeed, those of us who at school learned by heart the war poem Dulce et Decorum Est have come to associate a whole cluster of courage-based values – valour, sacrifice, etc – with what Wilfred Owen called "The old Lie". For these were values so soaked in blood, so purloined for the purposes of militaristic propaganda, that their rehabilitation remains problematic, even now.



But the idea that courage requires discipline and training needs a fairer hearing. For at least since Aristotle there has been an important strain of moral thought that has recognised human virtue not as some innate given, but rather as something that one can prepare for, and indeed get better at. The reason the soldier strips and re-strips his weapon a thousand tedious times on the parade ground is so that he can do it, without thought, when he hasn't slept for days and the bullets are pinging about his ears. Over time, it becomes a matter of instinct. And the advice of the modern army is that the same is true of courage. If you rehearse "doing the right thing" enough, you are much more likely to do the right thing when terrified or confused.



This sort of advice is not peculiar to the army. Alcoholics Anonymous has the phrase: "Fake it till you make it." If you want to become a different sort of person, first act like you are, and the acting will eventually transform you. Pretend to be the person you want to be and you will end up becoming more like that person. This cuts right against the grain of familiar assumptions that moral change comes from within, that the most important thing is expressing who you really are – "To thine own self be true", as Polonius puts it in Hamlet. From this perspective, an honest confession of our own weakness – our lack of courage, for instance – becomes the only real expression of virtue. In other words, an emphasis on authenticity can easily become an alibi for a refusal of character development.



While awaiting execution in Flossenburg concentration camp for his part in a plot to assassinate Hitler, Dietrich Bonhoeffer wrote an extraordinary poem entitled Who Am I? that dramatised the gap between his outward display of courage and his inner fear. "I stepped from my cell's confinement … like a squire from his country house"; and yet inwardly he was "faint and ready to say farewell to it all". Which is the real me, he ponders. "Am I both at once?"



Courage isn't about not being afraid. Indeed, not being afraid in life-threatening situations is simply foolishness or foolhardiness. Rather, courage is being afraid and doing the right thing nonetheless. Which is why Bonhoeffer is remembered for his bravery and not for being the "contemptibly woebegone weakling" he so feared himself to be. Faith may have been a part of his moral construction. But, a propos Peter de la Billière's list of what boosts courage, I suspect faith itself is considerably less significant than the sort of moral formation that comes from inculcating certain habits of behaviour.



Yes, church itself can be a school of virtue, encouraging a set of practices that transform character. In the trade it is known as formation. But the faith bit may well be incidental. For we can be schooled in virtue by a whole range of institutional practices, the army and AA being two others. The Jesuits believed that the acting out of virtue as expressed in theatre could function in this way too.



All of which suggests that it's not the fear of our inner Captain Shettino that matters most. He lurks within us all. The real question is how we shape our behaviour. Which is why the issue of being true to oneself offers so little to the task of becoming the person we would want to be. Change requires practice.



Friday, 20 January 2012

A decade ago, Ecuador was a banana republic, an economic basket case. Today, it has much to teach the rest of the world

Could Ecuador be the most radical and exciting place on Earth?


Ecuadorian President Rafael Correa
President Rafael Correa's approval ratings are in excess of 70%. Photograph: Guillermo Granja/Reuters

Ecuador must be one of the most exciting places on Earth right now, in terms of working towards a new development paradigm. It shows how much can be achieved with political will, even in uncertain economic times.

Just 10 years ago, Ecuador was more or less a basket case, a quintessential "banana republic" (it happens to be the world's largest exporter of bananas), characterised by political instability, inequality, a poorly-performing economy, and the ever-looming impact of the US on its domestic politics.

In 2000, in response to hyperinflation and balance of payments problems, the government dollarised the economy, replacing the sucre with the US currency as legal tender. This subdued inflation, but it did nothing to address the core economic problems, and further constrained the domestic policy space.

A major turning point came with the election of the economist Rafael Correa as president. After taking over in January 2007, his government ushered in a series of changes, based on a new constitution (the country's 20th, approved in 2008) that was itself mandated by a popular referendum. A hallmark of the changes that have occurred since then is that major policies have first been put through the referendum process. This has given the government the political ability to take on major vested interests and powerful lobbies.

The government is now the most stable in recent times and will soon become the longest serving in Ecuador's tumultuous history. The president's approval ratings are well over 70%. All this is due to the reorientation of the government's approach, made possible by a constitution remarkable for its recognition of human rights and the rights of nature, and its acceptance of plurality and cultural diversity.

Consider just some economic changes brought about in the past four years, beginning with the renegotiation of oil contracts with multinational companies. Ecuador is an oil exporter, but had benefited relatively little from this because of the high shares of oil sales that went to foreign oil companies. A new law in July 2010 dramatically changed the terms, increasing the government's share from 13% to 87% of gross oil revenues.

Seven of the 16 foreign oil companies decided to pull out, and their fields were taken over by state-run companies. But the others stayed on and, as a result, state revenues increased by $870m (£563m) in 2011.

Second, and possibly even more impressively, the government managed a dramatic increase in direct tax receipts. In fact, this has been even more important in revenue terms than oil receipts. Direct taxes (mainly corporation taxes) increased from around 35% of total taxes in 2006 to more than 40% in 2011. This was largely because of better enforcement, since the nexus between big business and the public tax administration was broken.

Third, these increased government revenues were put to good use in infrastructure investment and social spending. Ecuador now has the highest proportion of public investment to GDP (10%) in Latin America and the Caribbean. In addition, social spending has doubled since 2006. This has enabled real progress towards the constitutional goals of free education at all levels, and access to free healthcare for all citizens. Significant increases in public housing have followed the constitution's affirmation of the right of all citizens to dignified housing with proper amenities.

There are numerous other measures: expanding direct public employment; increasing minimum wages and legally enforcing social security provision for all workers; diversifying the economy to reduce dependence on oil exports, and diversifying trading partners to reduce dependence on the US; enlarging public banking operations to reach more small and medium entrepreneurs; auditing external debt to reduce debt service payments; and abandoning unfair bilateral investment agreements. Other efforts include reform of the justice system.

One exciting recent initiative is the Yasuní-ITT biosphere reserve, perhaps the world's first attempt to avoid greenhouse emissions by leaving oil underground. This not only protects the extraordinary biodiversity of the area but also the habitats of its indigenous peoples. The scheme proposes to use ecotourism to make human activity compatible with nature.

All this may sound too good to be true, and certainly the process of transformation has only just begun. There are bound to be conflicts with those whose profits and power are threatened, as well as other hurdles along the way. But for those who believe that we are not condemned to the gloomy status quo, and that societies can do things differently, what is happening in Ecuador provides inspiration and even guidance. The rest of the world has much to learn from this ongoing radical experiment.

Wednesday, 18 January 2012

Ian Stewart's top 10 popular mathematics books

Ian Stewart is an Emeritus Professor of Mathematics at Warwick University and a Fellow of the Royal Society. He has written over 80 books, mainly popular mathematics, and has won three gold medals for his work on the public understanding of science. In collaboration with Terry Pratchett and Jack Cohen he wrote the Science of Discworld series. His new book, 17 Equations That Changed the World, is published by Profile.
  1. Seventeen Equations that Changed the World
  2. by Ian Stewart
  3. Buy it from the Guardian bookshop
  1. Tell us what you think: Star-rate and review this book
Buy 17 Equations That Changed the World from the Guardian bookshop
"'Popular mathematics' may sound like a contradiction in terms. That's what makes the genre so important: we have to change that perception. Mathematics is the Cinderella science: undervalued, underestimated, and misunderstood. Yet it has been one of the main driving forces behind human society for at least three millennia, it powers all of today's technology, and it underpins almost every aspect of our daily lives.
"It's not really surprising that few outside the subject appreciate it, though. School mathematics is so focused on getting the right answer and passing the exam that there is seldom an opportunity to find out what it's all for. The hard core of real mathematics is extremely difficult, and it takes six or seven years to train a research mathematician after they leave school. Popular mathematics provides an entry route for non-specialists. It allows them to appreciate where mathematics came from, who created it, what it's good for, and where it's going, without getting tangled up in the technicalities. It's like listening to music instead of composing it.
"There are many ways to make real mathematics accessible. Its history reveals the subject as a human activity and gives a feel for the broad flow of ideas over the centuries. Biographies of great mathematicians tell us what it's like to work at the frontiers of human knowledge. The great problems, the ones that hit the news media when they are finally solved after centuries of effort, are always fascinating. So are the unsolved ones and the latest hot research areas. The myriad applications of mathematics, from medicine to the iPad, are an almost inexhaustible source of inspiration."

1. The Man Who Knew Infinity by Robert Kanigel


The self-taught Indian genius Srinivasa Ramanujan had a flair for strange and beautiful formulas, so unusual that mathematicians are still coming to grips with their true meaning. He was born into a poor Brahmin family in 1887 and was pursuing original research in his teens. In 1912, he was brought to work at Cambridge. He died of malnutrition and other unknown causes in 1920, leaving a rich legacy that is still not fully understood. There has never been another mathematical life story like it: absolutely riveting.

2. Gödel, Escher, Bach by Douglas Hofstadter


One of the great cult books, a very original take on the logical paradoxes associated with self-reference, such as "this statement is false". Hofstadter combines the mathematical logic of Kurt Gödel, who proved that some questions in arithmetic can never be answered, with the etchings of Maurits Escher and the music of Bach. Frequent dramatic dialogues between Lewis Carroll's characters Achilles and the Tortoise motivate key topics in a highly original manner, along with their friend Crab who invents the tortoise-chomping record player. DNA and computers get extensive treatment too.

3. The Colossal Book of Mathematics by Martin Gardner


In his long-running Mathematical Games column in Scientific American, Gardner – a journalist with no mathematical training – created the field of recreational mathematics. On the surface his columns were about puzzles and games, but they all concealed mathematical principles, some simple, some surprisingly deep. He combined a playful and clear approach to his subject with a well-developed taste for what was mathematically significant. The book consists of numerous selections from his columns, classified according to the mathematical area involved. Learn how to make a hexaflexagon and why playing Brussels sprouts is a waste of time.

4. Euclid in the Rainforest by Joseph Mazur


A thoroughly readable account of the meaning of truth in mathematics, presented through a series of quirky adventures in the Greek Islands, the jungles around the Orinoco River, and elsewhere. Examines tricky concepts like infinity, topology, and probability through tall tales and anecdotes. Three different kinds of truth are examined: formal classical logic, the role of the infinite, and inference by plausible reasoning. The story of the student who believed nothing except his calculator is an object lesson for everyone who thinks mathematics is just 'sums'.

5. Four Colours Suffice by Robin Wilson


In 1852 Francis Guthrie, a young South African mathematician, was attempting to colour the counties in a map of England. Guthrie discovered that he needed only four different colours to ensure that any two adjacent counties had different colours. After some experimentation he convinced himself that the same goes for any map whatsoever. This is the remarkable story of how mathematicians eventually proved he was right, but only with the aid of computers, bringing into question the meaning of "proof". It contains enough detail to be satisfying, but remains accessible and informative throughout.

6. What is Mathematics Really? by Reuben Hersh


The classic text What is Mathematics? by Richard Courant and Herbert Robbins focused on the subject's nuts and bolts. It answered its title question by example. Hersh takes a more philosophical view, based on his experience as a professional mathematician. The common working philosophy of most mathematicians is a kind of vague Platonism: mathematical concepts have some sort of independent existence in some ideal world. Although this is what it feels like to insiders, Hersh argues that mathematics is a collective human construct – like money or the Supreme Court. However, it is a construct constrained by its own internal logic; it's not arbitrary. You choose the concepts that interest you, but you don't get to choose how they behave.

7. Magical Mathematics by Persi Diaconis and Ron Graham


Both authors are top-rank mathematicians with years of stage performances behind them, and their speciality is mathematical magic. They show how mathematics relates to juggling and reveal the secrets behind some amazing card tricks. Here's one. The magician mails a pack of cards to anyone, asking them to shuffle it and choose a card. Then he shuffles the cards again, and mails half of them to the magician—not saying whether the chosen card is included. By return mail, the magician names the selected card. No trickery: it all depends on the mathematics of shuffles.

8. Games of Life by Karl Sigmund


Biologists' understanding of many vital features of the living world, such as sex and survival, depends on the theory of evolution. One of the basic theoretical tools here is the mathematics of game theory, in which several players compete by choosing from a list of possible strategies. The children's game of rock-paper-scissors is a good example. The book illuminates such questions as how genes spread through a population and the evolution of cooperation, by finding the best strategies for games such as cat and mouse, the battle of the sexes, and the prisoner's dilemma. On the borderline between popular science and an academic text, but eminently readable without specialist knowledge.

9. Mathenauts: Tales of Mathematical Wonder edited by Rudy Rucker


A collection of 23 science fiction short stories, each of which centres on mathematics. Two are by Martin Gardner, and many of the great writers of SF are represented: Isaac Asimov, Gregory Benford, Larry Niven, Frederik Pohl. The high point is Norman Kagan's utterly hilarious "The Mathenauts", in which only mathematicians can travel through space, because space is mathematical – and, conversely, anything mathematical can be reality. An isomorphomechanism is essential equipment. Between them, these tales cover most of the undergraduate mathematics syllabus, though not in examinable form.

10. The Mathematical Principles of Natural Philosophy by Isaac Newton


There ought to be a great classic in this top 10, and there is none greater. I've put it last because it's not popularisation in the strict sense. However, it slips in because it communicated to the world one of the very greatest ideas of all time: Nature has laws, and they can be expressed in the language of mathematics. Using nothing more complicated than Euclid's geometry, Newton developed his laws of motion and gravity, applying them to the motion of the planets and strange wobbles in the position of the Moon. He famously said that he "stood on the shoulders of giants", and so he did, but this book set the scientific world alight. As John Maynard Keyes wrote, Newton was a transitional figure of immense stature: "the last of the magicians … the last wonderchild to whom the Magi could do sincere and appropriate homage." No mathematical book has had more impact.

Learning batting from David Warner

Ed Smith

On Sunday, I fly to Adelaide for the fourth Test between India and Australia. I'm due to arrive just in time for the first ball. I hope the plane isn't late: David Warner might have scored a hundred by lunch.

In smashing 180 off 159 balls in Perth, Warner proved quite a few people wrong - not least those who said that Twenty20 would never produce a Test cricketer. Warner, of course, played T20 for Australia and in the IPL long before making the step-up to Test cricket - well, I suppose it's up to him to judge whether it's a step up. 

We've all heard the arguments against the Warner career path: that T20 ruins technique rather than developing it, that you have to learn to bat properly before you can learn to smash it, walk before you can run etc.

But the naysayers may be wrong. The Warner story reveals deep truths about how players bat at their best. In fact, I think it is time we reconsidered the whole question of what constitutes good technique.

Cricket gets itself in a tangle about the word. In football, technique is short-hand for skill. Pundits explain how Cesc Fabregas' brilliant technique allows him to make the killer pass or eye-catching volley. Technique is not the enemy of flair and self-expression: it is the necessary pre-requisite. "Technique is freedom," argued the ballet dancer Vaslav Nijinsky.

Sadly, the word "technique" in cricket is often used as short-hand for controlled batsmanship, even introspection. It is true that some great technicians are very controlled players (think of Rahul Dravid - though even he plays best technically when he is positive). But it is not compulsory that good technique has to be accompanied by caution or repression. After all, Adam Gilchrist had a wonderful technique: there is no other explanation for how he managed to hit the ball in the middle of the bat quite so consistently.

In fact, good technique has a very straightforward definition: it is the simplest, most efficient way of doing something.

Andre Agassi had near-perfect technique on his groundstrokes. He could hit with exceptional power and consistency. How did he learn this technique? When Agassi was a boy, his father used to get him to hit thousands of tennis balls as hard and as cleanly as possible. "Hit it, Andre!" That was the essence of his coaching. If you learn how to hit the ball hard in the middle of the racket, you have to move your body and feet into the right positions to do so. In the same way, Jack Nicklaus summed up his approach to learning golf: "First, hit it hard. Then we'll worry about getting it in the hole."

I should have remembered Agassi and Nicklaus when I was out of form as a batsman and needed to go back to basics. Not only did I suffer prolonged periods of bad form, I would often get out in similar ways - nicking off to the slips, or getting trapped lbw. There were usually plenty of theories about what I was doing wrong. As one coach memorably put it to me, "If you stop getting caught and lbw, you'll be a top player." Er, yes: it would take great ingenuity to get bowled or run out throughout your career!

Many coaches tried to persuade me to change my shot selection. But that rarely helped. When I was nicking off, it was usually because I was driving badly rather than driving at the wrong ball. And I was a far less good player when I was knocked off my instinct to play positively. I came to realise that good form was a very simple issue, almost binary - like a switch that just needed to be clicked back on.

Here comes the difficult part that used to get me into trouble. I learnt that the best way to click the switch back on, to get back into the groove of playing well, was to practise driving on the up. You've probably guessed why it got me in trouble. Imagine a situation in which I had failed three or four times in a row, each time caught in the slips, and the coach walks into the nets and sees me…practising drives! I'd sense him thinking: "Doesn't he ever learn?"

But I knew what worked for me, and I think there are good reasons why it worked. To play at my best, I needed to get into good positions to attack. Why? Because when I was in position to attack, I was inevitably in a good position also to defend. But when I set out my stall to play a defensive shot - before the ball was even bowled - then I not only attacked badly, I also defended badly. Having the intention of defending caused me to be passive and late in my movements. The shot would almost happen to me, rather than me determining the shot.



To play at my best, I needed to get into good positions to attack. Why? Because when I was in position to attack, I was inevitably in a good position also to defend





On the other hand, having the intention of attacking was a win-win: I defended and attacked better. I would set myself to play positively, which had the effect of giving me more time at every stage of the shot.

I think many players are the same. The key to their batting - whether it is defence or attack - is the question of intent. That has nothing to do with recklessness, or even scoring rate. Intent merely determines the messages you send to your brain. Imagine batting as a series of dominos that culminates in the ball being struck. The very first domino, the critical one that begins the whole process, is not physical, but mental. We might call it your "mental trigger movement".

I know it sounds ridiculously simplistic - technique from kindergarten - but many players find that the best mental trigger movement is setting themselves to move towards the ball to strike it back in the direction that it comes from. That does not mean you commit to lurching onto the front foot or playing a drive; you still react to whatever is thrown at you. But your intent is positive and pro-active.

Greg Chappell used the science of physiology to examine the connection between intent and good execution. He studied the preliminary movements of the world's greatest players. Though they all had unique styles and methods, their techniques shared one common thread: at the point of delivery, they were all pushing off the back foot, looking to come forward. Chappell argued that this trait gives great players optimal time to judge length. Why? Because a full ball is released from the bowler's hand early, a short ball is released later. So when batsmen set themselves for the full ball, they will inevitably have time to adjust for the short ball.

Here is my heretical conclusion: by encouraging them to have the intention of striking down the ground with a proper backlift and swing of the bat, T20 may help batsmen get into some good technical habits. Admittedly, T20 will not develop the refinements of sophisticated Test match batting, such as soft hands and the ability to concentrate for six or seven hours. But in terms of basic technique, there is a lot to be said for keeping cricket as simple as possible. The foundation is positive intent and a clear head. In short, we could all learn something from Warner.

The counter-argument is that Warner is a freak of nature, and that no one should try copying him just yet. Either way, I can't wait to watch him in Adelaide and judge for myself. 

Huaxi: The socialist village where everyone is wealthy

Imagine a place where everyone is entitled to a free home, a free car and free healthcare. Clifford Coonan travelled to Huaxi to find out the secret of its success.
The sort of oxen you expect to see in Chinese villages tend to be pulling carts or tilling fields, not a beasts made of a ton of gold. This precious cow is located on the 60th floor of a 328m-tall skyscraper in Huaxi, China's richest village, and building that juts out of the eastern landscape like a giant tripod topped by a golden ball.
Huaxi is a "model socialist village", according to local officials, and was founded by local Communist Party secretary Wu Renbao in 1961. His foresight was to transform a poor farming community into a super wealthy community, built on its clever adaptations of modern agribusiness methods, then its diversification into steel mills, its logistics firms, and its textile businesses.

The commune listed on the stock exchange in 1998 and is now a major corporation in its own right. Its subsidiary companies, built into something that resembles a modern-day conglomerate, exports to more than 40 countries around the world. Huaxi is where Chinese people come to learn how to get rich. At a time when the rest of the world, and indeed much of China, is trying to absorb an economic slowdown, Huaxi is like a parallel universe.

"This cow cost 300 million yuan (£31m), but now it's worth 500 million yuan," says our guide, Tina Yao, as she steers us from floor to floor in the Zengdi Kongzhong New Village Tower, which is taller than anything in London. "Zengdi" translates as "increase the land" and the skyscraper cost three billion yuan (£310m).

Other floors have giant animals of solid silver. Fearsomely bejewelled chandeliers hang over your head in banquet halls that hold thousands of people. You approach these glittering sites walking on gold-leaf marble, passing aquariums with sharks and stingrays.

Far below, you see the villas and theluxury cars. Every villager gets a share of the corporation's profits and is entitled to a car, a house, free healthcare and free cooking oil.

The village feels a little like Dubai. It is not big on charm – the replicas of the Arc de Triomphe and the Sydney Opera House – are of questionable taste, but where it is widely different is in how well it is able to meet its people's needs. Mr Wu is keen that Huaxi should showcase China's achievements and now some two million visitors come to Huaxi every year to gaze upon its splendour.

The original founding families, who are known as "stakeholders", number around 1,600 and the average household income is around £100,000 a year, once all the bonuses, pensions and wages are factored in. White BMWs are ubiquitous and the murals, instead of depicting socialist realist muscled workers in overalls, have pictures of happy families living in wealthy villas.

This is where Huaxi stands apart from so many other villages in China. While the rest of the country suffers from a yawning wealth gap between the rich cities of the eastern seaboard and southern coasts and the rural hamlets, Huaxi took the initiative, driven by Mr Wu's pragmatism, and headed its own way. It behaved like a city, even importing migrant labour.

"We only ever wanted what was good for our people," is a dictum of Mr Wu, who is now 86 years old and retired. His son has taken over as party secretary, but the father still gives lectures on socialism every day. He avoids allying himself too closely with either capitalism or communism, though his pragmatism has strong elements of the Chinese Communist Party about it.

No one doubts the wisdom of Mr Wu, and looking at the village's wealth, why would they? He broke up the collective system of farming and encouraged people to grow their own crops.

Below the stakeholders in the hierarchy come the residents from neighbouring villages that have been absorbed into Huaxi, and then tens of thousands of migrant workers who perform most of the rest of the work.

Work and wealth are the crowning ideologies. No one takes weekend breaks, and the streets tend to be deserted of residents because they are all off working. The hard work has clearly paid off and the money raised has helped the villagers diversify into other industry.

One of those areas is tourism – wealth tourism – and some of the locals help to meet and greet the two million tourists that come every year to see the village.

A new reason to come is to see the skyscraper, which is impressive, although as there is nothing even remotely as tall in the surrounding countryside, it looks strangely incongruous.

The reason it is so tall is a useful insight into the mindset of the people here. It is, as Mr Wu said in a recent interview, because the people Huaxi can compete with anyone in the country. "Beijing's tallest building is the 328m-tall World Trade Centre. Huaxi wants to maintain the same height with the Central Committee of the Communist Party," he said.

The village's total square area is a little less than one square kilometre, and there are barrack-style dormitories, factories, and pagoda style-buildings for local residents. The skyscraper houses the Longxi International Hotel, which has 2,000 beds and will employ 3,000 people eager to learn how to become wealthy, Huaxi-style.

Intriguingly, in the central village park, there are the statutes of five of the true icons of Communism in China, some more controversial than others. The panoply includes the former mayor of Beijing, Liu Shaoqi, who was purged in the period of ideological frenzy that was the Cultural Revolution and whom many believed Mao had murdered. He has never really been rehabilitated and remains outside the pantheon of true revolutionary heroes.

But then Mr Wu himself suffered during the Cultural Revolution. He set up factories but the Red Guards paraded him in the village as a "capitalist roader" and locked him up, much in the same way as Liu Shaoqi. Like Deng Xiaoping, who also suffered during the Cultural Revolution, Mr Wu bided his time and soon was back on his capitalist track after Mao died in 1976, except that these ideas became formulated as socialism with Chinese characteristics.

All over the village are megaphones blasting out the village anthem, which tells of how communist skies shine down Huaxi, a village of everyday miracles. "I have heard about Huaxi for many years. I have wanted to see it for many years," said one octogenarian visitor from Chengzhou.

Two men, both of them employed in security and not stakeholders in the village, say they love what is going on in Huaxi, but they admit they are a bit jealous of the shareholders who get a stake in the village's profits every year.

Certainly, there is a lot of bluster in the way Huaxi markets itself. The divisions between the stakeholders and the migrants on the streets are large. But no one in China doubts its importance as a model for the success of the nation. And deny at your peril the wisdom of Mr Wu and of the wider Chinese psyche: The song from the public address system says it proud: "Socialism is best."

Monday, 16 January 2012

Don't blame the ratings agencies for the eurozone turmoil

Europe and the eurozone are strangling themselves with a toxic mixture of austerity and a structurally flawed financial system
euros and ratings
Standard & Poor's has decided to downgrade France's top-notch credit rating. Photograph: Philippe Huguen/AFP/Getty Images
 
Even the most rational Europeans must now feel that Friday the 13th is an unlucky day after all. On that day last week, the Greek debt restructuring negotiation broke down, with many bondholders refusing to join the voluntary 50% "haircut" – that is, debt write-off – scheme, agreed last summer. While the negotiation may resume, this has dramatically increased the chance of disorderly Greek default.

Later in the day, Standard & Poor's, one of the big three credit ratings agencies, downgraded nine of the 17 eurozone economies. As a result, Portugal pulled off the hat-trick of getting a "junk" rating by all of the big three, while France was deprived of its coveted AAA rating. With Germany left as the only AAA-rated large economy backing the eurozone rescue fund (the Dutch economy, the second biggest AAA economy left, is much smaller than the French economy) the eurozone crisis looks that much more difficult to handle.

The eurozone countries criticise S&P, and other ratings agencies, for unjustly downgrading their economies. France is particularly upset that it was downgraded while Britain has kept its AAA status, hinting at an Anglo-American conspiracy against France. But this does not wash, as one of the big three, Fitch, is 80% owned by a French company.

Nevertheless, France has some grounds to be aggrieved, as it is doing better on many economic indicators, including budget deficit, than Britain. And given the incompetence and cynicism of the big three exposed by the 1997 Asian financial crisis and more dramatically by the 2008 global financial crisis, there are good grounds for doubting their judgments.

However, the eurozone countries need to realise that its Friday-the-13th misfortune was in no small part their own doing.

First of all, the downgrading owes a lot to the austerity-driven downward adjustments that the core eurozone countries, especially Germany, have imposed upon the periphery economies. As the ratings agencies themselves have often – albeit inconsistently – pointed out, austerity reduces economic growth, which then diminishes the growth of tax revenue, making the budget deficit problem more intractable. The resulting financial turmoil drags even the healthier economies down, which is what we have just seen.

Even the breakdown in the Greek debt negotiation is partly due to past eurozone policy action. In the euro crisis talks last autumn, France took the lead in shooting down the German proposal that the holders of sovereign debts be forced to accept haircuts in a crisis. Having thus delegitimised the very idea of compulsory debt restructuring, the eurozone countries should not be surprised that many holders of Greek government papers are refusing to join a voluntary one.

On top of that, the eurozone countries need to understand why the ratings agencies keep returning to haunt them. Last autumn's EU proposal to strengthen regulation on the ratings industry shows that the eurozone policymakers think the main problem with the ratings industry is lack of competition and transparency. However, the undue influence of the agencies owes a lot more to the very nature of the financial system that the European (and other) policymakers have let evolve in the last couple of decades.

First, over this period they have installed a financial regulatory structure that is highly dependent on the credit ratings agencies. So we measure the capital bases of financial institutions, which determine their abilities to lend, by weighting the assets they own by their respective credit ratings. We also demand that certain financial institutions (eg pension funds, insurance companies) cannot own assets with below a certain minimum credit rating. All well intentioned, but it is no big surprise that such regulatory structure makes the ratings agencies highly influential.

The Americans have actually cottoned on this problem and made the regulatory system less dependent on credit ratings in the Dodd-Frank Act, but the European regulators have failed to do the same. It is no good complaining that ratings agencies are too powerful while keeping in place all those regulations that make them so.

Most fundamentally, and this is what the Americans as well as the Europeans fail to see, the increasingly long-distance and complex nature of our financial system has increased our dependence on ratings agencies.

In the old days, few bothered to engage a credit ratings agency because they dealt with what they knew. Banks lent to companies that they knew or to local households, whose behaviours they could easily understand, even if they did not know them individually. Most people bought financial products from companies and governments of their own countries in their own currencies. However, with greater deregulation of finance, people are increasingly buying and selling financial products issued by companies and countries that they do not really understand. To make it worse, those products are often complex, composite ones created through financial engineering. As a result, we have become increasingly dependent on someone else – that is, the ratings agencies – to tell us how risky our financial actions are.

This means that, unless we simplify the system and structurally reduce the need for the ratings agencies, our dependence on them will persist – if somewhat reduced – even if we make financial regulation less dependent on credit ratings.

The eurozone, and more broadly Europe, is slowly strangling itself with a toxic mixture of austerity and a structurally flawed financial system. Without a radical rethink on the issues of budget deficit, sovereign bankruptcy and financial reform, the continent is doomed to a prolonged period of turmoil and stagnation.