Friday, 14 June 2019

Pakistan's Political Instability

The mindfulness conspiracy - Is Meditation the enemy of Activism?

It is sold as a force that can help us cope with the ravages of capitalism, but with its inward focus, mindful meditation may be the enemy of activism. By Ronald Purser in The Guardian 

Mindfulness has gone mainstream, with celebrity endorsement from Oprah Winfrey and Goldie Hawn. Meditation coaches, monks and neuroscientists went to Davos to impart the finer points to CEOs attending the World Economic Forum. The founders of the mindfulness movement have grown evangelical. Prophesying that its hybrid of science and meditative discipline “has the potential to ignite a universal or global renaissance”, the inventor of Mindfulness-Based Stress Reduction (MBSR), Jon Kabat-Zinn, has bigger ambitions than conquering stress. Mindfulness, he proclaims, “may actually be the only promise the species and the planet have for making it through the next couple of hundred years”.

So, what exactly is this magic panacea? In 2014, Time magazine put a youthful blonde woman on its cover, blissing out above the words: “The Mindful Revolution.” The accompanying feature described a signature scene from the standardised course teaching MBSR: eating a raisin very slowly. “The ability to focus for a few minutes on a single raisin isn’t silly if the skills it requires are the keys to surviving and succeeding in the 21st century,” the author explained.

But anything that offers success in our unjust society without trying to change it is not revolutionary – it just helps people cope. In fact, it could also be making things worse. Instead of encouraging radical action, mindfulness says the causes of suffering are disproportionately inside us, not in the political and economic frameworks that shape how we live. And yet mindfulness zealots believe that paying closer attention to the present moment without passing judgment has the revolutionary power to transform the whole world. It’s magical thinking on steroids.

There are certainly worthy dimensions to mindfulness practice. Tuning out mental rumination does help reduce stress, as well as chronic anxiety and many other maladies. Becoming more aware of automatic reactions can make people calmer and potentially kinder. Most of the promoters of mindfulness are nice, and having personally met many of them, including the leaders of the movement, I have no doubt that their hearts are in the right place. But that isn’t the issue here. The problem is the product they’re selling, and how it’s been packaged. Mindfulness is nothing more than basic concentration training. Although derived from Buddhism, it’s been stripped of the teachings on ethics that accompanied it, as well as the liberating aim of dissolving attachment to a false sense of self while enacting compassion for all other beings.

What remains is a tool of self-discipline, disguised as self-help. Instead of setting practitioners free, it helps them adjust to the very conditions that caused their problems. A truly revolutionary movement would seek to overturn this dysfunctional system, but mindfulness only serves to reinforce its destructive logic. The neoliberal order has imposed itself by stealth in the past few decades, widening inequality in pursuit of corporate wealth. People are expected to adapt to what this model demands of them. Stress has been pathologised and privatised, and the burden of managing it outsourced to individuals. Hence the pedlars of mindfulness step in to save the day.

But none of this means that mindfulness ought to be banned, or that anyone who finds it useful is deluded. Reducing suffering is a noble aim and it should be encouraged. But to do this effectively, teachers of mindfulness need to acknowledge that personal stress also has societal causes. By failing to address collective suffering, and systemic change that might remove it, they rob mindfulness of its real revolutionary potential, reducing it to something banal that keeps people focused on themselves.

Jon Kabat-Zinn, who is often called the father of modern mindfulness. Photograph: Sarah Lee

The fundamental message of the mindfulness movement is that the underlying cause of dissatisfaction and distress is in our heads. By failing to pay attention to what actually happens in each moment, we get lost in regrets about the past and fears for the future, which make us unhappy. Kabat-Zinn, who is often labelled the father of modern mindfulness, calls this a “thinking disease”. Learning to focus turns down the volume on circular thought, so Kabat-Zinn’s diagnosis is that our “entire society is suffering from attention deficit disorder – big time”. Other sources of cultural malaise are not discussed. The only mention of the word “capitalist” in Kabat-Zinn’s book Coming to Our Senses: Healing Ourselves and the World Through Mindfulness occurs in an anecdote about a stressed investor who says: “We all suffer a kind of ADD.”

Mindfulness advocates, perhaps unwittingly, are providing support for the status quo. Rather than discussing how attention is monetised and manipulated by corporations such as Google, Facebook, Twitter and Apple, they locate the crisis in our minds. It is not the nature of the capitalist system that is inherently problematic; rather, it is the failure of individuals to be mindful and resilient in a precarious and uncertain economy. Then they sell us solutions that make us contented, mindful capitalists.
By practising mindfulness, individual freedom is supposedly found within “pure awareness”, undistracted by external corrupting influences. All we need to do is close our eyes and watch our breath. And that’s the crux of the supposed revolution: the world is slowly changed, one mindful individual at a time. This political philosophy is oddly reminiscent of George W Bush’s “compassionate conservatism”. With the retreat to the private sphere, mindfulness becomes a religion of the self. The idea of a public sphere is being eroded, and any trickledown effect of compassion is by chance. As a result, notes the political theorist Wendy Brown, “the body politic ceases to be a body, but is, rather, a group of individual entrepreneurs and consumers”.

Mindfulness, like positive psychology and the broader happiness industry, has depoliticised stress. If we are unhappy about being unemployed, losing our health insurance, and seeing our children incur massive debt through college loans, it is our responsibility to learn to be more mindful. Kabat-Zinn assures us that “happiness is an inside job” that simply requires us to attend to the present moment mindfully and purposely without judgment. Another vocal promoter of meditative practice, the neuroscientist Richard Davidson, contends that “wellbeing is a skill” that can be trained, like working out one’s biceps at the gym. The so-called mindfulness revolution meekly accepts the dictates of the marketplace. Guided by a therapeutic ethos aimed at enhancing the mental and emotional resilience of individuals, it endorses neoliberal assumptions that everyone is free to choose their responses, manage negative emotions, and “flourish” through various modes of self-care. Framing what they offer in this way, most teachers of mindfulness rule out a curriculum that critically engages with causes of suffering in the structures of power and economic systems of capitalist society.

The term “McMindfulness” was coined by Miles Neale, a Buddhist teacher and psychotherapist, who described “a feeding frenzy of spiritual practices that provide immediate nutrition but no long-term sustenance”. The contemporary mindfulness fad is the entrepreneurial equal of McDonald’s. The founder of McDonald’s, Ray Kroc, created the fast food industry. Very early on, when he was selling milkshakes, Kroc spotted the franchising potential of a restaurant chain in San Bernadino, California. He made a deal to serve as the franchising agent for the McDonald brothers. Soon afterwards, he bought them out, and grew the chain into a global empire. Kabat-Zinn, a dedicated meditator, had a vision in the midst of a retreat: he could adapt Buddhist teachings and practices to help hospital patients deal with physical pain, stress and anxiety. His masterstroke was the branding of mindfulness as a secular spirituality.

Kroc saw his chance to provide busy Americans with instant access to food that would be delivered consistently through automation, standardisation and discipline. Kabat-Zinn perceived the opportunity to give stressed-out Americans easy access to MBSR through an eight-week mindfulness course for stress reduction that would be taught consistently using a standardised curriculum. MBSR teachers would gain certification by attending programmes at Kabat-Zinn’s Center for Mindfulness in Worcester, Massachusetts. He continued to expand the reach of MBSR by identifying new markets such as corporations, schools, government and the military, and endorsing other forms of “mindfulness-based interventions” (MBIs).

Both men took measures to ensure that their products would not vary in quality or content across franchises. Burgers and fries at McDonald’s are the same whether one is eating them in Dubai or in Dubuque. Similarly, there is little variation in the content, structuring and curriculum of MBSR courses around the world.

Illustration: Patryk Sroczyński

Mindfulness has been oversold and commodified, reduced to a technique for just about any instrumental purpose. It can give inner-city kids a calming time-out, or hedge-fund traders a mental edge, or reduce the stress of military drone pilots. Void of a moral compass or ethical commitments, unmoored from a vision of the social good, the commodification of mindfulness keeps it anchored in the ethos of the market.

This has come about partly because proponents of mindfulness believe that the practice is apolitical, and so the avoidance of moral inquiry and the reluctance to consider a vision of the social good are intertwined. It is simply assumed that ethical behaviour will arise “naturally” from practice and the teacher’s “embodiment” of soft-spoken niceness, or through the happenstance of self-discovery. However, the claim that major ethical changes will follow from “paying attention to the present moment, non-judgmentally” is patently flawed. The emphasis on “non-judgmental awareness” can just as easily disable one’s moral intelligence.

In Selling Spirituality: The Silent Takeover of Religion, Jeremy Carrette and Richard King argue that traditions of Asian wisdom have been subject to colonisation and commodification since the 18th century, producing a highly individualistic spirituality, perfectly accommodated to dominant cultural values and requiring no substantive change in lifestyle. Such an individualistic spirituality is clearly linked with the neoliberal agenda of privatisation, especially when masked by the ambiguous language used in mindfulness. Market forces are already exploiting the momentum of the mindfulness movement, reorienting its goals to a highly circumscribed individual realm.

Mindfulness is easily co-opted and reduced to merely “pacifying feelings of anxiety and disquiet at the individual level, rather than seeking to challenge the social, political and economic inequalities that cause such distress”, write Carrette and King. But a commitment to this kind of privatised and psychologised mindfulness is political – therapeutically optimising individuals to make them “mentally fit”, attentive and resilient, so they may keep functioning within the system. Such capitulation seems like the farthest thing from a revolution – more like a quietist surrender.

Mindfulness is positioned as a force that can help us cope with the noxious influences of capitalism. But because what it offers is so easily assimilated by the market, its potential for social and political transformation is neutered. Leaders in the mindfulness movement believe that capitalism and spirituality can be reconciled; they want to relieve the stress of individuals without having to look deeper and more broadly at its causes.

Mindfulness is being sold to executives as a way to de-stress, focus and bounce back from working 80-hour weeks

A truly revolutionary mindfulness would challenge the western sense of entitlement to happiness irrespective of ethical conduct. However, mindfulness programmes do not ask executives to examine how their managerial decisions and corporate policies have institutionalised greed, ill will and delusion. Instead, the practice is being sold to executives as a way to de-stress, improve productivity and focus, and bounce back from working 80-hour weeks. They may well be “meditating”, but it works like taking an aspirin for a headache. Once the pain goes away, it is business as usual. Even if individuals become nicer people, the corporate agenda of maximising profits does not change.

If mindfulness just helps people cope with the toxic conditions that make them stressed in the first place, then perhaps we could aim a bit higher. Should we celebrate the fact that this perversion is helping people to “auto-exploit” themselves? This is the core of the problem. The internalisation of focus for mindfulness practice also leads to other things being internalised, from corporate requirements to structures of dominance in society. Perhaps worst of all, this submissive position is framed as freedom. Indeed, mindfulness thrives on doublespeak about freedom, celebrating self-centered “freedoms” while paying no attention to civic responsibility, or the cultivation of a collective mindfulness that finds genuine freedom within a co-operative and just society.

Of course, reductions in stress and increases in personal happiness and wellbeing are much easier to sell than serious questions about injustice, inequity and environmental devastation. The latter involve a challenge to the social order, while the former play directly to mindfulness’s priorities – sharpening people’s focus, improving their performance at work and in exams, and even promising better sex lives. Not only has mindfulness been repackaged as a novel technique of psychotherapy, but its utility is commercially marketed as self-help. This branding reinforces the notion that spiritual practices are indeed an individual’s private concern. And once privatised, these practices are easily co-opted for social, economic and political control.

Rather than being used as a means to awaken individuals and organisations to the unwholesome roots of greed, ill will and delusion, mindfulness is more often refashioned into a banal, therapeutic, self-help technique that can actually reinforce those roots.

Mindfulness is said to be a $4bn industry. More than 60,000 books for sale on Amazon have a variant of “mindfulness” in their title, touting the benefits of Mindful Parenting, Mindful Eating, Mindful Teaching, Mindful Therapy, Mindful Leadership, Mindful Finance, a Mindful Nation, and Mindful Dog Owners, to name just a few. There is also The Mindfulness Colouring Book, part of a bestselling subgenre in itself. Besides books, there are workshops, online courses, glossy magazines, documentary films, smartphone apps, bells, cushions, bracelets, beauty products and other paraphernalia, as well as a lucrative and burgeoning conference circuit. Mindfulness programmes have made their way into schools, Wall Street and Silicon Valley corporations, law firms, and government agencies, including the US military.

The presentation of mindfulness as a market-friendly palliative explains its warm reception in popular culture. It slots so neatly into the mindset of the workplace that its only real threat to the status quo is to offer people ways to become more skilful at the rat race. Modern society’s neoliberal consensus argues that those who enjoy power and wealth should be given free rein to accumulate more. It’s perhaps no surprise that those mindfulness merchants who accept market logic are a hit with the CEOs in Davos, where Kabat-Zinn has no qualms about preaching the gospel of competitive advantage from meditative practice.

Over the past few decades, neoliberalism has outgrown its conservative roots. It has hijacked public discourse to the extent that even self-professed progressives, such as Kabat-Zinn, think in neoliberal terms. Market values have invaded every corner of human life, defining how most of us are forced to interpret and live in the world.

Perhaps the most straightforward definition of neoliberalism comes from the French sociologist Pierre Bourdieu, who calls it “a programme for destroying collective structures that may impede the pure market logic”. We are generally conditioned to think that a market-based society provides us with ample (if not equal) opportunities for increasing the value of our “human capital” and self-worth. And in order to fully actualise personal freedom and potential, we need to maximise our own welfare, freedom, and happiness by deftly managing internal resources.

Since competition is so central, neoliberal ideology holds that all decisions about how society is run should be left to the workings of the marketplace, the most efficient mechanism for allowing competitors to maximise their own good. Other social actors – including the state, voluntary associations, and the like – are just obstacles to the smooth operation of market logic.

Illustration: Patryk Sroczyński

For an actor in neoliberal society, mindfulness is a skill to be cultivated, or a resource to be put to use. When mastered, it helps you to navigate the capitalist ocean’s tricky currents, keeping your attention “present-centred and non-judgmental” to deal with the inevitable stress and anxiety from competition. Mindfulness helps you to maximise your personal wellbeing.

All of this may help you to sleep better at night. But the consequences for society are potentially dire. The Slovenian philosopher Slavoj Žižek has analysed this trend. As he sees it, mindfulness is “establishing itself as the hegemonic ideology of global capitalism”, by helping people “to fully participate in the capitalist dynamic while retaining the appearance of mental sanity”.

By deflecting attention from the social structures and material conditions in a capitalist culture, mindfulness is easily co-opted. Celebrity role models bless and endorse it, while Californian companies including Google, Facebook, Twitter, Apple and Zynga have embraced it as an adjunct to their brand. Google’s former in-house mindfulness tsar Chade-Meng Tan had the actual job title Jolly Good Fellow. “Search inside yourself,” he counselled colleagues and readers – for there, not in corporate culture – lies the source of your problems.

The rhetoric of “self-mastery”, “resilience” and “happiness” assumes wellbeing is simply a matter of developing a skill. Mindfulness cheerleaders are particularly fond of this trope, saying we can train our brains to be happy, like exercising muscles. Happiness, freedom and wellbeing become the products of individual effort. Such so-called “skills” can be developed without reliance on external factors, relationships or social conditions. Underneath its therapeutic discourse, mindfulness subtly reframes problems as the outcomes of choices. Personal troubles are never attributed to political or socioeconomic conditions, but are always psychological in nature and diagnosed as pathologies. Society therefore needs therapy, not radical change. This is perhaps why mindfulness initiatives have become so attractive to government policymakers. Societal problems rooted in inequality, racism, poverty, addiction and deteriorating mental health can be reframed in terms of individual psychology, requiring therapeutic help. Vulnerable subjects can even be told to provide this themselves.

Neoliberalism divides the world into winners and losers. It accomplishes this task through its ideological linchpin: the individualisation of all social phenomena. Since the autonomous (and free) individual is the primary focal point for society, social change is achieved not through political protest, organising and collective action, but via the free market and atomised actions of individuals. Any effort to change this through collective structures is generally troublesome to the neoliberal order. It is therefore discouraged.

An illustrative example is the practice of recycling. The real problem is the mass production of plastics by corporations, and their overuse in retail. However, consumers are led to believe that being personally wasteful is the underlying issue, which can be fixed if they change their habits. As a recent essay in Scientific American scoffs: “Recycling plastic is to saving the Earth what hammering a nail is to halting a falling skyscraper.” Yet the neoliberal doctrine of individual responsibility has performed its sleight-of-hand, distracting us from the real culprit. This is far from new. In the 1950s, the “Keep America Beautiful” campaign urged individuals to pick up their trash. The project was bankrolled by corporations such as Coca-Cola, Anheuser-Busch and Phillip Morris, in partnership with the public service announcement Ad Council, which coined the term “litterbug” to shame miscreants. Two decades later, a famous TV ad featured a Native American man weeping at the sight of a motorist dumping garbage. “People Start Pollution. People Can Stop It,” was the slogan. The essay in Scientific American, by Matt Wilkins, sees through such charades.

To change the world, we are told to work on ourselves – to change our minds by being more accepting of circumstances

At face value, these efforts seem benevolent, but they obscure the real problem, which is the role that corporate polluters play in the plastic problem. This clever misdirection has led journalist and author Heather Rogers to describe Keep America Beautiful as the first corporate greenwashing front, as it has helped shift the public focus to consumer recycling behaviour and thwarted legislation that would increase extended producer responsibility for waste management.

We are repeatedly sold the same message: that individual action is the only real way to solve social problems, so we should take responsibility. We are trapped in a neoliberal trance by what the education scholar Henry Giroux calls a “disimagination machine”, because it stifles critical and radical thinking. We are admonished to look inward, and to manage ourselves. Disimagination impels us to abandon creative ideas about new possibilities. Instead of seeking to dismantle capitalism, or rein in its excesses, we should accept its demands and use self-discipline to be more effective in the market. To change the world, we are told to work on ourselves — to change our minds by being more mindful, nonjudgmental, and accepting of circumstances.

It is a fundamental tenet of neoliberal mindfulness, that the source of people’s problems is found in their heads. This has been accentuated by the pathologising and medicalisation of stress, which then requires a remedy and expert treatment – in the form of mindfulness interventions. The ideological message is that if you cannot alter the circumstances causing distress, you can change your reactions to your circumstances. In some ways, this can be helpful, since many things are not in our control. But to abandon all efforts to fix them seems excessive. Mindfulness practices do not permit critique or debate of what might be unjust, culturally toxic or environmentally destructive. Rather, the mindful imperative to “accept things as they are” while practising “nonjudgmental, present moment awareness” acts as a social anesthesia, preserving the status quo.

The mindfulness movement’s promise of “human flourishing” (which is also the rallying cry of positive psychology) is the closest it comes to defining a vision of social change. However, this vision remains individualised and depends on the personal choice to be more mindful. Mindfulness practitioners may of course have a very different political agenda to that of neoliberalism, but the risk is that they start to retreat into their own private worlds and particular identities — which is just where the neoliberal power structures want them.

Mindfulness practice is embedded in what Jennifer Silva calls the “mood economy”. In Coming Up Short: Working-Class Adulthood in an Age of Uncertainty, Silva explains that, like the privatisation of risk, a mood economy makes “individuals solely responsible for their emotional fates”. In such a political economy of affect, emotions are regulated as a means to enhance one’s “emotional capital”. At Google’s Search Inside Yourself mindfulness programme, emotional intelligence (EI) figures prominently in the curriculum. The programme is marketed to Google engineers as instrumental to their career success — by engaging in mindfulness practice, managing emotions generates surplus economic value, equivalent to the acquisition of capital. The mood economy also demands the ability to bounce back from setbacks to stay productive in a precarious economic context. Like positive psychology, the mindfulness movement has merged with the “science of happiness”. Once packaged in this way, it can be sold as a technique for personal life-hacking optimisation, disembedding individuals from social worlds.

From inboxing to thought showers: how business bullshit took over

All the promises of mindfulness resonate with what the University of Chicago cultural theorist Lauren Berlant calls “cruel optimism”, a defining neoliberal characteristic. It is cruel in that one makes affective investments in what amount to fantasies. We are told that if we practice mindfulness, and get our individual lives in order, we can be happy and secure. It is therefore implied that stable employment, home ownership, social mobility, career success and equality will naturally follow. We are also promised that we can gain self-mastery, controlling our minds and emotions so we can thrive and flourish amid the vagaries of capitalism.As Joshua Eisen, the author of Mindful Calculations, puts it: “Like kale, acai berries, gym memberships, vitamin water, and other new year’s resolutions, mindfulness indexes a profound desire to change, but one premised on a fundamental reassertion of neoliberal fantasies of self-control and unfettered agency.” We just have to sit in silence, watching our breath, and wait. It is doubly cruel because these normative fantasies of the “good life” are already crumbling under neoliberalism, and we make it worse if we focus individually on our feelings. Neglecting shared vulnerabilities and interdependence, we disimagine the collective ways we might protect ourselves. And despite the emptiness of nurturing fantasies, we continue to cling to them.

Mindfulness isn’t cruel in and of itself. It’s only cruel when fetishised and attached to inflated promises. It is then, as Berlant points out, that “the object that draws your attachment actively impedes the aim that brought you to it initially”. The cruelty lies in supporting the status quo while using the language of transformation. This is how neoliberal mindfulness promotes an individualistic vision of human flourishing, enticing us to accept things as they are, mindfully enduring the ravages of capitalism.

Thursday, 13 June 2019

Higher Education in The USA: Rigged from inside and outside?

Edward Luce in The FT

“Nothing is fun until you are good at it,” said Amy Chua in her book Battle Hymn of the Tiger Mother. Eight years later the Yale professor continues to display her prowess. 

This week Sophia Chua-Rubenfeld, Ms Chua’s daughter, was hired as a Supreme Court clerk by Brett Kavanaugh — the judge for whom her mother vouched during his stormy Senate hearings last autumn. 

Ms Chua is a shrewd string-puller. A Supreme Court clerkship sets up a young lawyer for life. Whether she is enjoying the publicity is another matter. Overnight the Chuas have turned into emblems of what Americans distrust about their meritocracy. 

There is much more where that came from. What Ms Chua did was brazen. The liberal academic offered a very public endorsement of the conservative Mr Kavanaugh. As the head of the Yale committee that steers graduates into highly-coveted clerkships, Ms Chua boosted his credibility with her endorsement. 

But the apparent quid pro quo was legal. Actresses Lori Loughlin and Felicity Huffman, on the other hand, are accused of having broken the law. 

The first is alleged to have paid $500,000 to fake athletics records that would help her two daughters enter the University of Southern California. The second has pleaded guilty to paying $15,000 to cheat on her daughter’s standardised admission test. Both Hollywood actresses, and one of their husbands, face likely jail in the “Operation Varsity Blues” scandal. 

Americans would be forgiven for blurring the moral of these tales. 

On pure arithmetic, the average American’s chances of entering a top university are tiny if they are born into the wrong home. Studies show that an eighth grade (14-year-old) child from a lower income bracket who achieves maths results in the top quarter is less likely to graduate than a kid in the upper income bracket scored in the bottom quarter. This is the reverse of how meritocracy should work. Children from the wealthiest 1 per cent take more Ivy League places than the bottom 60 per cent combined. Being born under a roof like Ms Chua’s — with two high-achieving parents obsessed with your success — is almost impossible to match. 

That is how most of the world works. The US has erected three additional barriers. The first is legacy places. In contrast to most other democracies, America’s top universities credit an applicant if a parent, or grandparent, went to the school. A better name for this would be “hereditary preference”, which is antithetical to America’s creed. Roughly one in six Ivy League places are taken by children of alumni. This sharply reduces the places available to children of talent from disadvantaged backgrounds. 

The second is affirmative action. The courts will soon rule on an Asian-American class action suit alleging that Harvard University discriminated against them. A significant — though artfully selected — share of places are reserved for children of Hispanic and African-American backgrounds. The fact that some of those are also legacy applicants adds a layer of irony. Whichever way it goes, the case is likely to end up in the Supreme Court. Mr Kavanaugh, who is a legacy graduate of Yale, could prove the decisive vote on whether affirmative action will survive. That prospect, too, is rich in irony. 

The third barrier is brute wealth. If you endow a library, or a medical lab, the university will bend over backwards to admit your child. A prime example is Jared Kushner, Donald Trump’s son-in-law, whose poor SAT scores critics perceive may have been outweighed by his father’s $2.5m donation to Harvard. The US tax system even rewards such palm-greasing by making it tax-deductible. The fact that the best universities are richer than some countries (Harvard’s $38bn endowment is larger than the GDPs of El Salvador and Nicaragua combined) is no check on their ambitions. They always want more. 

The most egregious figure in the college admissions scandal is William McGlashan, a former partner at TPG, the private equity firm. He allegedly offered a bribe of $250,000 to get his son into a top university. His job was to head TPG’s social impact unit — capitalism’s virtue signalling arm. 

You do well by doing good, goes the saying. Which brings us back to Ms Chua. The best restraint on any elite is its sense of shame. Without that code, anything is possible. Everyone in America seems to know the system is rigged. The real distinction is whether you rig things from inside the law or outside.

How the British royal family killed off republicanism

The democratic case against the monarchy is clear, but even Labour knows it would be electoral suicide to make it writes Larry Elliott in The Guardian 

‘Trump’s appearance highlighted that the monarchy has made itself virtually impregnable and that the republican cause in Britain has rarely been weaker.’ Composite: AFP/Getty Images/Guardian design

From Harry Truman to Donald Trump, there have been 13 US presidents since the Queen came to the throne in 1952, so she has plenty of practice in hosting a state visit for the world’s most powerful man. Unsurprisingly, Trump loved the British establishment making a fuss of him – from the 41-gun salute to the British lamb washed down with vintage claret at the Buck House white-tie banquet. Both Downing Street and the White House considered the trip a great success, with talk – wildly premature – of a giant Anglo-American free trade deal.

But the real winner from the visit was not a lame duck Theresa May or Trump – who quickly moved on to other things – but the royal family. There was widespread praise for the way in which the Queen handled Trump, even using her speech at the banquet to big up the international institutions he so frequently derides. The occasion also showcased one of the UK’s few world-class industries: heritage. Tourists are money, as someone once said.

But there was more to it than that. Trump’s appearance highlighted that the monarchy has made itself virtually impregnable and that the republican cause in Britain has rarely been weaker.

Things looked rather different a couple of decades ago. When Princess Diana died in a Paris car crash in 1997, the Queen seemed ill-prepared for the national blubathon that followed. Her initial response to her daughter-in-law’s death was seen as cold and insensitive and – after what today would be called a social media storm – she was forced to go in front of the cameras to quell the public outrage.

Tony Blair, newly arrived as prime minister, was seen to have better captured the public mood with his depiction of Diana as the “people’s princess”. More significantly, Blair’s government was committed to a package of constitutional reforms, including devolution for Scotland and Wales. This created the opportunity to have a debate about whether Britain could really be modernised if it remained a monarchy.

As it happened, Blair was a royalist and would never have countenanced the idea of turning Britain into a republic, but that didn’t prevent the idea being canvassed. In 2000, this paper called for a referendum on what sort of head of state Britain should have after the Queen’s death. “People ought to be able to say whether they would prefer to have an elected head of state or to continue with a monarchy. Do they want to be citizens or subjects?” we asked.

The arguments in favour of turning Britain into a republic are no different from what they were 19 years ago. They involve democracy, power, governance, class and distribution of wealth. It is difficult, if not impossible, to have a proper discussion about tackling inequality while leaving the monarchy out of the equation. But in 2000 there was a realistic possibility of change. The royal family was rather like one of those long-established high street businesses that have fallen on hard times as a result of the retail revolution. The product looked a bit out of date; those in charge of running the business were old and stale; customers seemed less happy with the service they were getting.

But since then, two things have buttressed the monarchy’s position. First, external events have been helpful. At the turn of the millennium, the world economy was in the middle of a long boom marked by rising living standards, low inflation and falling unemployment. The absence of an economic crisis created the political space to think about other issues. But since 2007, Britain has been in a semi-permanent state of economic and political crisis, with the deep recession of 2008-09 followed by post-2010 austerity and Brexit. Even had there been a growing drumbeat of support among voters for a republic, Westminster would have had other priorities.

‘There was widespread praise for the way in which the Queen handled Trump.’ Photograph: Pool/Reuters

But while this was happening, the House of Windsor provided other struggling businesses with a masterclass in how to reinvent themselves. First, it understood that the underlying strength of the brand meant there was no need to panic. Britain has always tended to be a conservative country wary of radical change, which is one of the reasons the vote to leave the EU came as such a surprise in 2016. Despite all its problems in the 1990s – including the bitter divorce between Prince Charles and Diana, and the row over the Queen’s tax bill – there was always strong residual support for the monarchy. Had there been a referendum in 2000 on whether to have an elected head of state, it would almost certainly have gone in favour of the status quo.

Second, there was a change in the management team, with the older members of the royal family being replaced in the public spotlight by William and Harry. This was a smart move. The Windsors didn’t want to end up with all its most avid supporters gradually dying out: it saw the need to appeal to a younger audience.

If that meant embracing social media then so be it; the royals embraced new technology. Whereas previous royal babies have been announced through the mainstream media, the Duke and Duchess of Sussex announced the birth of their son on Instagram.

Third, the royals have had the nous to avail themselves of the best image consultants and PRs that money could buy. The idea has been to show that the new generation of royals – William and Kate, Harry and Meghan – have the same commitment to public duty as the Queen, but with a bit more of the touchy-feely empathy demanded today.

If it all seems to have worked, that is in large part due to the weakness of the competition. Persuading Britain to dispense with the monarchy would be tough in any circumstances. Persuading Britain to choose a replacement for the Queen from the current crop of politicians, tarnished as they are by economic torpor, the expenses scandal and Brexit, would be a complete non-starter.

In his diaries, Tony Benn describes watching the establishment gather for the service in St Paul’s cathedral to mark the Queen’s silver jubilee in 1977. “We haven’t removed the grip of this crowd from British society, far from it, but on the other hand the public accepts it all and the press plays it up to divert people from unemployment and the cost of living and the EEC and so on. It is a very important ingredient in British life and it has to be thought about.”

It certainly does need thinking about, but there will be no referendum on the monarchy’s future any time soon. There was no mention of republicanism in Labour’s 2017 election manifesto and it’s hard to envisage the next one being any different. As things stand, it would be electoral suicide.

മതങ്ങൾക്കും ദൈവങ്ങൾക്കുമുള്ള പ്രസക്തി എന്താണ്...? | What is the relevance of Religions and God?

Ballatha Pahayan

Wednesday, 12 June 2019

Anyone who wants to be prime minister should have a course of therapy first

Our toxic political system rewards all the wrong traits and produces the worst possible leaders writes George Monbiot in The Guardian 

‘Toxic personalities thrive in toxic environments.’ John Bercow (centre) mediates during a Commons debate on the EU withdrawal bill. Photograph: Mark Duffy/AFP/Getty Images

Who in their right mind would want the job? It is almost certain to end, as Theresa May found, in failure and public execration. To seek to be prime minister today suggests either reckless confidence or an insatiable hunger for power. Perhaps we need a reverse catch-22 in British politics: anyone crazy enough to apply for this post should be disqualified from running.

A few years ago, the psychologist Michelle Roya Rad listed the characteristics of good leadership. Among them were fairness and objectivity; a desire to serve society rather than just yourself; a lack of interest in fame and attention; and resistance to the temptation to hide the truth or make impossible promises. Conversely, a paper in the Journal of Public Management and Social Policy has listed the characteristics of leaders with psychopathic, narcissistic or Machiavellian personalities. These include: a tendency to manipulate others; a preparedness to lie and deceive to achieve your ends; a lack of remorse and sensitivity; and a desire for admiration, attention, prestige and status. Which of these lists, do you think, best describes the people vying to lead the Conservative party?

In politics, almost everywhere we see what looks like the externalisation of psychic wounds or deficits. Sigmund Freud claimed that “groups take on the personality of the leader”. I think it would be more accurate to say that the private tragedies of powerful people become the public tragedies of those they dominate. For some people, it is easier to command a nation, to send thousands to their deaths in unnecessary wars, to separate children from their families and inflict terrible suffering, than to process their own trauma and pain. What we appear to see in national politics around the world is a playing out in public of deep private distress.

This could be a particularly potent force in British politics. The psychotherapist Nick Duffell has written of “wounded leaders”, who were separated from their families in early childhood when they were sent to boarding school. They develop a “survival personality”, learning to cut off their feelings and project a false self, characterised by a public display of competence and self-reliance. Beneath this persona is a profound insecurity, which might generate an insatiable need for power, prestige and attention. The result is a system that “consistently turns out people who appear much more competent than they actually are”.

The problem is not confined to these shores. Donald Trump occupies the most powerful seat on Earth, yet still he appears to seethe with envy and resentment. “If President Obama made the deals that I have made,” he claimed this week, “the corrupt media would be hailing them as incredible … With me, despite our record-setting economy and all that I have done, no credit!” No amount of wealth or power seems able to satisfy his need for affirmation and assurance.

Those who should be least trusted with power are most likely to win it

I believe that anyone who wants to stand in a national election should receive a course of psychotherapy. Completing the course should be a qualification for office. This wouldn’t change the behaviour of psychopaths, but it might prevent some people who exercise power from imposing their own deep wounds on others. I’ve had two courses: one influenced by Freud and Donald Winnicott, the other by Paul Gilbert’s compassion-focused approach. I found them both immensely helpful. I believe almost everyone would benefit from such treatment.

The underlying problem is the system through which such people jostle. Toxic personalities thrive in toxic environments. Those who should be least trusted with power are most likely to win it. A study in the Journal of Personality and Social Psychology suggests that the group of psychopathic traits known as “fearless dominance” is associated with behaviours that are widely valued in leaders, such as making bold decisions and bestriding the world stage. If so, we surely value the wrong characteristics. If success within the system requires psychopathic traits, there is something wrong with the system.

In designing an effective politics, it could be useful to work backwards: to decide what kind of people we would like to see representing us, then create a system that would bring them to the fore. I want to be represented by people who are thoughtful, self-aware and collaborative. What would a system that elevated such people look like?

It would not be a purely representative democracy. This works on the principle of presumed consent: “You elected me three years ago, therefore you are presumed to have consented to the policy I’m about to implement, whether or not I mentioned it at the time.” It rewards the “strong, decisive” leaders who so often lead their nations to catastrophe. A system that tempers representative democracy with participative democracy – citizens’ assemblies, participatory budgeting, the co-creation of public policy – is more likely to reward responsive and considerate politicians. Proportional representation, which prevents governments with minority support from dominating the nation, is another potential safeguard – though no guarantee.

In rethinking politics, let us develop systems that encourage kindness, empathy and emotional intelligence. Let us ditch systems that encourage people to hide their pain by dominating others.

Tuesday, 11 June 2019

How India could sidestep the Middle Income Trap

Rathin Roy - Economic Adviser to the Indian Government

It’s a fight between Hindus

THE assault by the Rashtriya Swayamsevak Sangh (RSS) on West Bengal Chief Minister Mamata Banerjee has roots in India’s pre-Partition intra-Hindu battle lines. While the most cited example of this bitter rivalry is Mahatma Gandhi’s murder by Nathuram Godse, the pre-Independence standoff continues to stalk Indian society just as menacingly writes Jawed Naqvi in The Dawn

The murders of Gauri Lankesh and her rationalist colleagues — allegedly by members of a Brahminical group suspected in Gandhi’s assassination — confirms this narrative. Theatre icon Girish Karnad who died of a prolonged illness on Monday was on the hit list of the group.

Banerjee is a Bengali Brahmin of a secular hue and the RSS is a Brahmin-led body of the Hindu right with origins in the intense intra-Brahmin rivalry that goes back to pre-Independence Poona, now Pune. It was here that nationalist leader B.G. Tilak took a violently hostile stance against M.G. Ranade’s social reformist interventions at annual Congress sessions. Tilak’s men would raid Ranade’s camps with sticks and stones, not dissimilar to the hooligans unleashed by the Hindu right today.

Given the spurious but all-pervasive critique of Indian liberalism under way, blaming them for the opposition’s rout by Narendra Modi, this equation between Brahmins and Brahmins (or Hindus and Hindus) needs to be clearly borne in mind. In today’s context, Prime Minister Modi is vocal about a Congress-free India, which in the Hindutva echo chamber may sound like Muslim-free India.

It is difficult to understand the grudge against Indian liberalism, when that is all one has to save and fight for.

But the real targets are reformist and secular Hindus. Tilak wanted a Ranade-free India. W.C. Bonnerjee, the socially regressive president of the Indian National Congress, would have preferred a Brahmo Samaj-free India. The Samaj was the progenitor of reformist Ishwarchand Vidyasagar, whose bust was razed by Hindutva hooligans in their anti-Mamata melee recently. Likewise, in ancient India, the nastiks or non-believers (from the Hindu fold) challenged Brahmin hegemony and suffered for it.

Gleaning from several recent reviews of the landslide Modi win, it appears to have become fashionable to accuse an imagined airy-fairy, unintelligent intellectual class, supposedly unconnected with the masses and allegedly confined to the upmarket Khan Market and British-built Lutyens’ Delhi, for the political debacle of the Congress and the left. The truth is that barring the excellent Bahri bookshop that still holds true to its intellectual purpose, Khan Market was transformed into a hub of flashy consumerism bereft of any thinking capacity from the 1990s, offering a fertile ground for the arriving right-wing menace to grow and prosper. As for Lutyens’ Delhi, that is where Hindutva leaders reside, including Prime Minister Modi, mostly in quarters vacated by assorted architects of Nehru’s India. It is difficult to understand the grudge against Indian liberalism, when that is all one has to save and fight for.

The flip side is just as true. The point apparently missed by Muslim votaries of Partition to everyone’s detriment in the subcontinent was that the more real fight had existed towards the end of British rule not between Hindus and Muslims, but between Hindus and Hindus and between Muslims and Muslims. Imagine if Jinnah had met Gauri Lankesh or Girish Karnad and joined their fight against regressive Hinduism. What if they had struck up an alliance with the Dravida social justice movement of southern India and other equally progressive Hindu (though some called themselves anti-Hindu ideologues)? The Muslim League might have had a different view about the future of a united India.

Just as there emerged regressive forces to disrupt Jinnah’s secular quest in Pakistan, the intense rivalry between Tilak and Ranade presaged the contest between a secular opposition and the RSS. Tilak represented British India’s reactionary impulses laced in narrow nationalism, which were to be co-opted by Hindutva forces.

Many of his heirs have lurked on in the Congress. They include those who bear hostility towards Dalit reformist Ambedkar and other progressive groups. Ranade, the reformist stalwart, embodied the best in India’s quest for social equality, an amalgam of progressive forces set into motion in Bengal by Ram Mohan Roy, and in Maharashtra by Jyotiba Phule and several others.

History is witness to this phenomenon on both sides of the border. Soon after the Quaid’s death, his dream of a secular state was smashed by those lurking in the shadows of Muslim revivalism. In India, Nehru, who dreamt like Jinnah of a parliamentary democracy with an egalitarian intent, was overwhelmed in his own cabinet by stubbornly regressive but powerful satraps. (Read Nehru’s desperate letters to the chief minister of Uttar Pradesh under whose watch the early Ayodhya-centric communal campaign was unleashed.)

Detractors of the Nehruvian worldview gained enormously from the rise of the Hindu right, which was spurred unwittingly by Manmohan Singh’s economic reforms, although he claims to be an ardent devotee of the first prime minister. Singh helped create a nouveau-riche middle class with definitive regressive and feudal social features. This new urban populace can hardly qualify as a liberal vanguard of anything. Rather it has swamped the main opposition Congress as much as it has spurred the consolidation of the RSS and its many arms, including the BJP.

It may disturb some in the left to be reminded that the neo-liberal consumer society did not spare their rank and file either. If after 70 years of struggle for the Orwellian sugar-candy mountain, all that the left have to show for their cultural legacy is the annual Durga Puja in Bengal, then it becomes easy to see how the cadres slip out occasionally to vote for the BJP or desert the party altogether. Worse, the left’s innate sectarianism does not allow for a pause to see that if Mamata Banerjee goes, the Hindutva sway over Bengal would be complete.

Rather than holding her alliance with Muslims responsible for the BJP’s victory in Bengal — a dishonest assessment — the left should make an existential accord with Mamata to stave off its own and ultimately India’s disastrous denouement.

Saturday, 8 June 2019

Bright star to black hole: the rise and fall of fund manager Neil Woodford

Rupert Neate in The Guardian

He was, the BBC declared in 2015, “the man who can’t stop making money”. He was the rock star of pensions and fund management, awarded a CBE for his services to the economy. But now, since Neil Woodford stopped investors from withdrawing their own money from his flagship fund, he is in the spotlight for all the wrong reasons.

His Woodford Equity Income Fund holds the pension savings and investments of tens of thousands of people. But it has been performing so badly that investors were withdrawing money at the rate of £10m a day.

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Last week, after 23 consecutive months in which withdrawals from the fund had been greater than the new money coming in, Woodford found he couldn’t realise cash quickly enough to meet the withdrawal requests – at least at a decent price. He closed the fund to withdrawals, leaving legions of investors angry and in limbo for 28 days.

In a YouTube video he posted on Wednesday to finally apologise to investors, he looked anything but the archetypal City fund manager, with his close-cropped hair and trademark casual jumper rather than suit and tie. In the video, filmed at his fund’s headquarters on an industrial estate near Oxford, Woodford said: “I’m extremely sorry that we’ve had to take this decision. We understand our investors’ frustration. All I can say in response to that is that this decision was motivated by your interests.”

Woodford said he had been forced to “gate” the fund because so many big investors were trying to pull money out that he wasn’t able to meet the demand. His funds hold unusually big stakes in smaller and early stage unlisted companies, which are hard to sell quickly.

The final straw had been Kent county council pension fund’s request to take out its £263m holding. The trustees of Kent’s pension fund – who had been trying to stem the losses Woodford had racked up for its 110,000 members – decided to pull out when it emerged at the end of last month that the flagship fund had shrunk by £560m to £3.77bn in just four weeks. At its peak the fund was worth more than £10bn.

Of the £560m lost, just under £190m was made up of withdrawals. The rest – more than £370m – represented yet further declines in the value of the investments held in the fund, which at the end of April was made up of stakes in 101 companies ranging from housebuilders such as Barratt Developments and Taylor Wimpey to logistics business Eddie Stobart and a large number of esoteric healthcare firms.

Under EU rules aimed at ensuring that funds which hold unquoted – and therefore potentially hard-to-sell – shares can retain their stability, these shares are permitted to make up no more than 10% of the portfolio. Woodford got around those rules, quite legally, by putting some of them into his separate, quoted Patient Capital investment trust – and taking Patient Capital shares into the main fund. He also listed some of them of the Guernsey stock exchange.

But the Kent fund had left it just too late: instead of getting its cash back, its request triggered Woodford’s suspension of trading in the fund.

The video apology, in which Woodford set and answered his own questions, followed months during which he had been dismissing the concerns of investors and financial experts about his fund’s prolonged poor performance.

In February, his Woodford Equity Income Fund was listed for the first time on a “Spot the Dog” list compiled by Bestinvest, which highlights underperforming “dog” funds. Bestinvest criticised some of his worst investments and described the fund as “a Great Dane-sized” new entrant to its list.

Just a few weeks later, Woodford told the Financial Times that the investors who were pulling out were making “appallingly bad decisions”, influenced by “a mountain of fake information and fake analysis” that “pisses me off”.

Neil Woodford apologises to investors in a still from his YouTube video last week. Photograph: Woodford Investment Management/PA

In December 2017 he said in an interview that they key to successful investing was to “have a sufficiently strong arrogant gene to back your judgment, back your conviction”.

That arrogance is now provoking widespread anger, not just from his investors but also among other fund managers, who say Woodford has tarred the whole industry with the same loss-making brush.

Last Wednesday the Financial Conduct Authority, the City’s watchdog, said it was considering a formal investigation into the fund, and the following day, Bank of England governor Mark Carney told an audience in Tokyo that funds such as Woodford’s (although he died not name him) needed closer scrutiny to lessen the risk of fire sales triggering market disruption. The Bank, he said, would start stress-testing funds to ensure they couldn’t threaten a system-wide crisis.

This is a staggering fall from grace for Woodford, who had been one of the UK’s very best and most reliable stock pickers. Anyone who invested £10,000 at the start of his quarter-of-a-century career at Invesco Perpetual would have seen their money grow to almost £250,000 by the time he left.

Mark Dampier, director of research at stockbroker Hargreaves Lansdown, declared in 2015 that Woodford was “arguably the best fund manager of his generation”. Just weeks ago, despite the growing cloud surrounding Woodford, Hargreaves told its clients “we retain our conviction in him to deliver excellent long-term performance” and reminded them that he had “built his career by investing against the herd” and “shown an ability to get the big calls right”.

Hargreaves’s customers had £2bn invested with Woodford at the end of March – roughly a fifth of all the money in his three big funds.

Only when the fund was gated did Hargreaves, which has heavily promoted Woodford at discounted fees, finally drop Woodford Equity Income from its influential “Wealth 50” list of favourite funds, which it marketed to its more than a million clients.

FacebookTwitterPinterest Bank of England governor Mark Carney has suggested that funds such as Woodford’s need more scrutiny. Photograph: Hannah McKay/Reuters

Asked if he regretted his support for Woodford and the controversial discount fee structure, Dampier said: “Our aim is to enable our clients to choose the best-in-class funds at lower fees. Our favourite fund choices have, for the most part, beaten their sector averages and benchmarks. Not every fund has, and we share our clients’ disappointment and frustration when they don’t.”

Other big backers have also deserted Woodford. St James’s Place last week took its clients’ £3.5bn to another manager. On Thursday another supporter, Openworks, did the same with its £330m.

Woodford fell into fund management by accident. He had never even heard of the business until he rocked up in London in the 1980s, sleeping on his brother’s floor while looking for a job. He had left school wanting to fly fighter jets but couldn’t pass the RAF’s aptitude test, and instead read agricultural economics at the University of Exeter.

In 1988 he joined Invesco Perpetual and built a reputation as a brilliant contrarian investor. When others piled into dotcom shares at the turn of the century, he decided against, and backed more traditional companies. He made huge gains when the dotcom crash came. He eschewed banking stocks before the financial crisis – and avoided that crash too.

He held big stakes in giant companies, whose chief executives needed to retain his support. In 2012 his criticism of AstraZeneca chief executive David Brennan was widely regarded to have cost Brennan his job, and his criticism of BAE’s attempted £28bn merger with Airbus was seen as one of the reasons the deal collapsed.

In 2014, feeling that he had outgrown Invesco Perpetual, where he personally managed some £25bn of funds, he set up his own firm, Woodford Investment Management. Within two weeks of launching, he had raised £1.6bn, a UK record, and this quickly grew to £16bn. In its first year, his flagship fund made a 16% return and Woodford, a devotee of veteran US investor Warren Buffett, was called the “Oracle of Oxford”.

FacebookTwitterPinterest Woodford is a keen student of the US investor Warren Buffett. Photograph: Andrew Harnik/AP

But since then things have turned sour. Over the past four years, investors in Woodford Equity Income have collected a return of less than 1% – compared with 29% for the market as a whole. Over that same four-year period, Woodford has paid himself some £63m.

In the 2017-18 financial year alone, which was a dreadful period for his funds, Woodford Investment Management paid a £36.5m dividend to a company called Woodford Capital. Woodford holds 65% of that firm, and his business partner Craig Newman has the remaining 35%.

Woodford, who has spoken out against the huge bonuses awarded to other fund managers, and to the bosses of companies he has invested in, declined to answer any questions about his own pay, or to elaborate, beyond his YouTube video, on the fund’s tricky situation.

The firm’s public relations officer asked the Observer to point out that Woodford had donated some of his pay to charity. But he was unable to state how much money had been donated, or to which causes. The PR person declined to comment when asked whether Woodford would consider pumping any of his personal millions back into the fund.

Those who know Woodford say he is “decidedly unflashy” and that it is “difficult to fathom where all that money goes”. Well, a lot of it appears to go on horses. He and his wife Madelaine have a few dozen top showjumpers training at a vast equestrian complex near their home in the Cotswolds.

The house, near Tetbury, was built on land the Woodfords bought for nearly £14m in 2013. They moved to the Cotswolds after a planning application to construct a dressage arena and 28-horse stabling block near their previous estate, in Buckinghamshire, was rejected following a row with neighbours. One of those neighbours, the BBC’s Jeremy Paxman, described Woodford’s planned addition as “enormous, unsightly and environmentally unfriendly”.

The Tetbury venue, however, got the planners’ green light and includes a full-size manège (dressage arena). Woodford, who came to the sport only after meeting Madelaine – a keen rider whom he married in 2015 – has put in the hours at the manège and now often takes part in eventing competitions on a bay gelding called Willows Spunky. 

Woodford’s other passions are fast cars and racing bicycles. He starts up the Porsche at 5am every weekday to drive to his fund’s minimalist offices on an industrial estate in Cowley, Oxford. At weekends he drives it down to the couple’s £6.3m glass-walled holiday home in Salcombe, Devon.

Woodford’s huge pay and luxury lifestyle haven’t gone unnoticed by his investors, many of whom are relying on him to be a safe pair of hands and to increase the value of their retirement or rainy day fund.

A comment on his YouTube video, by someone with the username Platoreads: “Arrogance, Incompetence, Complacency and greed: your name is Woodford! You have failed, Neil. Return the funds to your investors (including that £37m bonus you pocketed this year despite a disastrous performance in all three funds).”

Luke Hilyard of the High Pay Centre said: “This particular instance of an investor making tens of millions while losing money for ordinary savers raises questions about the governance of the funds and platforms channelling other people’s money into Woodford’s fund, and the regulatory oversight of the process.

“The case is also a microcosm of our wider business culture and economic system, where superstar managers in investment, banking, retail, commodities and other industries have been treated like gods and rewarded accordingly, yet ultimately have shown themselves to be highly fallible mortals whose success was always partly contingent on timing and luck.”

Woodford, who made his name at Invesco by backing big companies, but then switched to a new strategy of investing in smaller and unquoted companies in his own funds, has now pledged to change direction.

In his video he said he would now be targeting bigger companies, especially FTSE 100 stocks – even though only a few weeks ago he was insisting that his approach was the correct one and that the best investment opportunities were “absolutely not” in large companies.
Big bad bets

Woodford bought big stakes in many companies that performed very poorly. They include:
• Kier (construction) -74% in 12 months; Woodford funds own 20%
• Circassia (biotech) -74%; Woodford owns 28.5%
• Prothena (biotech) -36%; Woodford owns 29.9%
• Stobart Group -46%; Woodford owns 18.8%
• Redde (support services) -39%; Woodford owns 28%
• Allied Minds (technology) -31%; Woodford owns 27%
• Spire Healthcare -51%; Woodford owns 5%
• Utilitywise, energy broker that collapsed in Feb 2019; Woodford owned 29%

What Woodford investors say:
“I invested £60,000 three years ago and have lost over 20%. Luckily I sold nearly half my investment the week before the fund closed. I’m going to hold my remaining units until after Brexit as a high-risk bet.”
Simon, 51, Brighton

“I‘m getting married on 10 August and we’ve been saving for over two years. My final bill to the venue and suppliers is due at the start of July. If I can’t withdraw my money I’m going to be looking to beg, borrow or steal until I can get it released.”
James M, 28, Newcastle

“I inherited some money, and chose on a stocks and shares Isa, following suggestions from Hargreaves Lansdown, then watched the value dwindle. On 31 May I decided to take the hit and sell. The deal was shown as “pending” until Wednesday morning, but that disappeared and I was told I wouldn’t be able to sell my units. I don’t think I’ll be getting much back when trading opens again.”
Sally Williams, 53, London

Thursday, 6 June 2019

‘Socialism for the rich’: the evils of bad economics

The economic arguments adopted by Britain and the US in the 1980s led to vastly increased inequality – and gave the false impression that this outcome was not only inevitable, but good writes Jonathan Aldred in The Guardian

In most rich countries, inequality is rising, and has been rising for some time. Many people believe this is a problem, but, equally, many think there’s not much we can do about it. After all, the argument goes, globalisation and new technology have created an economy in which those with highly valued skills or talents can earn huge rewards. Inequality inevitably rises. Attempting to reduce inequality via redistributive taxation is likely to fail because the global elite can easily hide their money in tax havens. Insofar as increased taxation does hit the rich, it will deter wealth creation, so we all end up poorer. 

One strange thing about these arguments, whatever their merits, is how they stand in stark contrast to the economic orthodoxy that existed from roughly 1945 until 1980, which held that rising inequality was not inevitable, and that various government policies could reduce it. What’s more, these policies appear to have been successful. Inequality fell in most countries from the 1940s to the 1970s. The inequality we see today is largely due to changes since 1980.

In both the US and the UK, from 1980 to 2016, the share of total income going to the top 1% has more than doubled. After allowing for inflation, the earnings of the bottom 90% in the US and UK have barely risen at all over the past 25 years. More generally, 50 years ago, a US CEO earned on average about 20 times as much as the typical worker. Today, the CEO earns 354 times as much.

Any argument that rising inequality is largely inevitable in our globalised economy faces a crucial objection. Since 1980 some countries have experienced a big increase in inequality (the US and the UK); some have seen a much smaller increase (Canada, Japan, Italy), while inequality has been stable or falling in others (France, Belgium and Hungary). So rising inequality cannot be inevitable. And the extent of inequality within a country cannot be solely determined by long-run global economic forces, because, although most richer countries have been subject to broadly similar forces, the experiences of inequality have differed.

The familiar political explanation for this rising inequality is the huge shift in mainstream economic and political thinking, in favour of free markets, triggered by the elections of Ronald Reagan and Margaret Thatcher. Its fit with the facts is undeniable. Across developed economies, the biggest rise in inequality since 1945 occurred in the US and UK from 1980 onwards.

The power of a grand political transformation seems persuasive. But it cannot be the whole explanation. It is too top-down: it is all about what politicians and other elites do to us. The idea that rising inequality is inevitable begins to look like a convenient myth, one that allows us to avoid thinking about another possibility: that through our electoral choices and decisions in daily life we have supported rising inequality, or at least acquiesced in it. Admittedly, that assumes we know about it. Surveys in the UK and US consistently suggest that we underestimate both the level of current inequality and how much it has recently increased. But ignorance cannot be a complete excuse, because surveys also reveal a change in attitudes: rising inequality has become more acceptable – or at least, less unacceptable – especially if you are not on the wrong end of it.

Inequality is unlikely to fall much in the future unless our attitudes turn unequivocally against it. Among other things, we will need to accept that how much people earn in the market is often not what they deserve, and that the tax they pay is not taking from what is rightfully theirs.

One crucial reason why we have done so little to reduce inequality in recent years is that we downplay the role of luck in achieving success. Parents teach their children that almost all goals are attainable if you try hard enough. This is a lie, but there is a good excuse for it: unless you try your best, many goals will definitely remain unreachable.

Ignoring the good luck behind my success helps me feel good about myself, and makes it much easier to feel I deserve the rewards associated with success. High earners may truly believe that they deserve their income because they are vividly aware of how hard they have worked and the obstacles they have had to overcome to be successful.

But this is not true everywhere. Support for the idea that you deserve what you get varies from country to country. And in fact, support for such beliefs is stronger in countries where there seems to be stronger evidence that contradicts them. What explains this?

Attitude surveys have consistently shown that, compared to US residents, Europeans are roughly twice as likely to believe that luck is the main determinant of income and that the poor are trapped in poverty. Similarly, people in the US are about twice as likely as Europeans to believe that the poor are lazy and that hard work leads to higher quality of life in the long run.

Ronald Reagan and Margaret Thatcher in 1988. Photograph: Reuters

Yet in fact, the poor (the bottom 20%) work roughly the same total annual hours in the US and Europe. And economic opportunity and intergenerational mobility is more limited in the US than in Europe. The US intergenerational mobility statistics bear a striking resemblance to those for height: US children born to poor parents are as likely to be poor as those born to tall parents are likely to be tall. And research has repeatedly shown that many people in the US don’t know this: perceptions of social mobility are consistently over-optimistic.

European countries have, on average, more redistributive tax systems and more welfare benefits for the poor than the US, and therefore less inequality, after taxes and benefits. Many people see this outcome as a reflection of the different values that shape US and European societies. But cause-and-effect may run the other way: you-deserve-what-you-get beliefs are strengthened by inequality.

Psychologists have shown that people have motivated beliefs: beliefs that they have chosen to hold because those beliefs meet a psychological need. Now, being poor in the US is extremely tough, given the meagre welfare benefits and high levels of post-tax inequality. So Americans have a greater need than Europeans to believe that you deserve what you get and you get what you deserve. These beliefs play a powerful role in motivating yourself and your children to work as hard as possible to avoid poverty. And these beliefs can help alleviate the guilt involved in ignoring a homeless person begging on your street.

This is not just a US issue. Britain is an outlier within Europe, with relatively high inequality and low economic and social mobility. Its recent history fits the cause-and-effect relationship here. Following the election of Margaret Thatcher in 1979, inequality rose significantly. After inequality rose, British attitudes changed. More people became convinced that generous welfare benefits make poor people lazy and that high salaries are essential to motivate talented people. However, intergenerational mobility fell: your income in Britain today is closely correlated with your parents’ income.

If the American Dream and other narratives about everyone having a chance to be rich were true, we would expect the opposite relationship: high inequality (is fair because of) high intergenerational mobility. Instead, we see a very different narrative: people cope with high inequality by convincing themselves it is fair after all. We adopt narratives to justify inequality because society is highly unequal, not the other way round. So inequality may be self-perpetuating in a surprising way. Rather than resist and revolt, we just cope with it. Less Communist Manifesto, more self-help manual.

Inequality begets further inequality. As the top 1% grow richer, they have more incentive and more ability to enrich themselves further. They exert more and more influence on politics, from election-campaign funding to lobbying over particular rules and regulations. The result is a stream of policies that help them but are inefficient and wasteful. Leftwing critics have called it “socialism for the rich”. Even the billionaire investor Warren Buffett seems to agree: “There’s been class warfare going on for the last 20 years and my class has won,” he once said.

This process has been most devastating when it comes to tax. High earners have most to gain from income tax cuts, and more spare cash to lobby politicians for these cuts. Once tax cuts are secured, high earners have an even stronger incentive to seek pay rises, because they keep a greater proportion of after-tax pay. And so on.

Although there have been cuts in the top rate of income tax across almost all developed economies since 1979, it was the UK and the US that were first, and that went furthest. In 1979, Thatcher cut the UK’s top rate from 83% to 60%, with a further reduction to 40% in 1988. Reagan cut the top US rate from 70% in 1981 to 28% in 1986. Although top rates today are slightly higher – 37% in the US and 45% in the UK – the numbers are worth mentioning because they are strikingly lower than in the post-second-world-war period, when top tax rates averaged 75% in the US and were even higher in the UK.

Some elements of the Reagan-Thatcher revolution in economic policy, such as Milton Friedman’s monetarist macroeconomics, have subsequently been abandoned. But the key policy idea to come out of microeconomics has become so widely accepted today that it has acquired the status of common sense: that tax discourages economic activity and, in particular, income tax discourages work.

This doctrine seemingly transformed public debate about taxation from an endless argument over who gets what, to the promise of a bright and prosperous future for all. The “for all” bit was crucial: no more winners and losers. Just winners. And the basic ideas were simple enough to fit on the back of a napkin.

One evening in December 1974, a group of ambitious young conservatives met for dinner at the Two Continents restaurant in Washington DC. The group included the Chicago University economist Arthur Laffer, Donald Rumsfeld (then chief of staff to President Gerald Ford), and Dick Cheney (then Rumsfeld’s deputy, and a former Yale classmate of Laffer’s).

While discussing Ford’s recent tax increases, Laffer pointed out that, like a 0% income tax rate, a 100% rate would raise no revenue because no one would bother working. Logically, there must be some tax rate between these two extremes that would maximise tax revenue. Although Laffer does not remember doing so, he apparently grabbed a napkin and drew a curve on it, representing the relationship between tax rates and revenues. The Laffer curve was born and, with it, the idea of trickle-down economics.

The key implication that impressed Rumsfeld and Cheney was that, just as tax rates lower than 100% must raise more revenue, cuts in income tax rates more generally could raise revenue. In other words, there could be winners, and no losers, from tax cuts. But could does not mean will. No empirical evidence was produced in support of the mere logical possibility that tax cuts could raise revenue, and even the economists employed by the incoming Reagan administration six years later struggled to find any evidence in support of the idea.

George Osborne, who lowered the UK’s top rate of tax from 50% to 45% in 2013. Photograph: Matt Cardy/PA

Yet it proved irresistible to Reagan, the perennial optimist, who essentially overruled his expert advisers, convinced that the “entrepreneurial spirit unleashed by the new tax cuts would surely bring in more revenue than his experts imagined”, as the historian Daniel T Rodgers put it. (If this potent brew of populist optimism and impatience with economic experts seems familiar today, that might be explained in part by the fact that Laffer was also a campaign adviser to Donald Trump.)

For income tax cuts to raise tax revenue, the prospect of higher after-tax pay must motivate people to work more. The resulting increase in GDP and income may be enough to generate higher tax revenues, even though the tax rate itself has fallen. Although the effects of the big Reagan tax cuts are still disputed (mainly because of disagreement over how the US economy would have performed without the cuts), even those sympathetic to trickle-down economics conceded that the cuts had negligible impact on GDP – and certainly not enough to outweigh the negative effect of the cuts on tax revenues.

But the Laffer curve did remind economists that a revenue-maximising top tax rate somewhere between 0% and 100% must exist. Finding the magic number is another matter: the search continues today. It is worth a brief dig into this research, not least because it is regularly used to veto attempts to reduce inequality by raising tax on the rich. In 2013, for example, the UK chancellor of the exchequer George Osborne reduced the top rate of income tax from 50% to 45%, arguing Laffer-style that the tax cut would lead to little, if any, loss of revenue. Osborne’s argument relied on economic analysis suggesting that the revenue-maximising top tax rate for the UK is about 40%.

Yet the assumptions behind this number are shaky, as most economists involved in producing such figures acknowledge. Let’s begin with the underlying idea: if lower tax rates raise your after-tax pay, you are motivated to work more. It seems plausible enough but, in practice, the effects are likely to be minimal. If income tax falls, many of us cannot work more, even if we wanted to. There is little opportunity to get paid overtime, or otherwise increase our paid working hours, and working harder during current working hours does not lead to higher pay. Even for those who have these opportunities, it is far from clear that they will work more or harder. They may even decide to work less: since after-tax pay has risen, they can choose to work fewer hours and still maintain their previous income level. So the popular presumption that income tax cuts must lead to more work and productive economic activity turns out to have little basis in either common sense or economic theory.

There are deeper difficulties with Osborne’s argument, difficulties not widely known even among economists. It is often assumed that if the top 1% is incentivised by income tax cuts to earn more, those higher earnings reflect an increase in productive economic activity. In other words, the pie gets bigger. But some economists, including the influential Thomas Piketty, have shown this was not true for CEOs and other top corporate managers following the tax cuts in the 1980s. Instead, they essentially funded their own pay rises by paying shareholders less, which led in turn to lower dividend tax revenue for the government. In fact, Piketty and colleagues have argued that the revenue-maximising top income tax rate may be as high as 83%.

The income tax cuts for the rich of the past 40 years were originally justified by economic arguments: Laffer’s rhetoric was seized upon by politicians. But to economists, his ideas were both familiar and trivial. Modern economics provides neither theory nor evidence proving the merit of these tax cuts. Both are ambiguous. Although politicians can ignore this truth for a while, it suggests that widespread opposition to higher taxes on the rich is ultimately based on reasons beyond economics.

When the top UK income tax rate was raised to 50% in 2009 (until Osborne cut it to 45% four years later) the composer Andrew Lloyd Webber, one of Britain’s wealthiest people, responded bluntly: “The last thing we need is a Somali pirate-style raid on the few wealth creators who still dare to navigate Britain’s gale-force waters.” In the US, Stephen Schwarzman, CEO of private equity firm Blackstone, likened proposals to remove a specialised tax exemption to the German invasion of Poland.

While we may scoff at these moans from the super-rich, most people unthinkingly accept the fundamental idea behind them: that income tax is a kind of theft, taking income which is rightfully owned by the person who earned it. It follows that tax is, at best, a necessary evil, and so should be minimised as far as possible. On these grounds, the 83% top tax rate discussed by Piketty is seen as unacceptable.

There is an entire cultural ecosystem that has evolved around the idea of tax-as-theft, recognisable today in politicians’ talk about “spending taxpayers’ money”, or campaigners celebrating “tax freedom day”. This language exists outside the world of politics, too. Tax economists, accountants and lawyers refer to the so-called “tax burden”.

But the idea that you somehow own your pre-tax income, while obvious, is false. To begin with, you could never have ownership rights prior to, or independent from, taxation. Ownership is a legal right. Laws require various institutions, including police and a legal system, to function. These institutions are financed through taxation. The tax and the ownership rights are effectively created simultaneously. We cannot have one without the other.

FacebookTwitterPinterest ‘There’s been class warfare going on for the last 20 years, and my class has won’ … US billionaire Warren Buffett. Photograph: Kevin Lamarque/Reuters

However, if the only function of the state is to support private ownership rights (maintaining a legal system, police, and so on), it seems that taxation could be very low – and any further taxation on top could still be seen as a form of theft. Implicit in this view is the idea of incomes earned, and so ownership rights created, in an entirely private market economy, with the state entering only later, to ensure these rights are maintained. Many economics textbooks picture the state in this way, as an add-on to the market. Yet this, too, is a fantasy.

In the modern world, all economic activity reflects the influence of government. Markets are inevitably defined and shaped by government. There is no such thing as income earned before government comes along. My earnings partly reflect my education. Earlier still, the circumstances of my birth and my subsequent health reflects the healthcare available. Even if that healthcare is entirely “private”, it depends on the education of doctors and nurses, and the drugs and other technologies available. Like all other goods and services, these in turn depend on the economic and social infrastructure, including transport networks, communications systems, energy supplies and extensive legal arrangements covering complex matters such as intellectual property, formal markets such as stock exchanges, and jurisdiction across national borders. Lord Lloyd-Webber’s wealth depends on government decisions about the length of copyright on the music he wrote. In sum, it is impossible to isolate what is “yours” from what is made possible, or influenced, by the role of government.

Talk of taxation as theft turns out to be a variation on the egotistical tendency to see one’s success in splendid isolation, ignoring the contribution of past generations, current colleagues and government. Undervaluing the role of government leads to the belief that if you are smart and hard-working, the high taxes you endure, paying for often wasteful government, are not a good deal. You would be better off in a minimal-state, low-tax society.

One reply to this challenge points to the evidence on the rich leaving their home country to move to a lower tax jurisdiction: in fact, very few of them do. But here is a more ambitious reply from Warren Buffett: “Imagine there are two identical twins in the womb … And the genie says to them: ‘One of you is going to be born in the United States, and one of you is going to be born in Bangladesh. And if you wind up in Bangladesh, you will pay no taxes. What percentage of your income would you bid to be born in the United States?’ … The people who say: ‘I did it all myself’ … believe me, they’d bid more to be in the United States than in Bangladesh.” 

Much of the inequality we see today in richer countries is more down to decisions made by governments than to irreversible market forces. These decisions can be changed. However, we have to want to control inequality: we must make inequality reduction a central aim of government policy and wider society. The most entrenched, self-deluding and self-perpetuating justifications for inequality are about morality, not economy. The great economist John Kenneth Galbraith nicely summarised the problem: “One of man’s oldest exercises in moral philosophy … is the search for a superior moral justification for selfishness. It is an exercise which always involves a certain number of internal contradictions and even a few absurdities. The conspicuously wealthy turn up urging the character-building value of privation for the poor.”