Behind glitz and hype, how India’s private universities over-promise & under-deliver

 

Nepotistic privilege should be a matter of social shame

Woke young millennials should start looking down upon friends who take the easy route of following up on their parents’ careers writes SHIVAM VIJ in The Print 

We don’t know for sure the reason why Bollywood actor Sushant Singh Rajput took his own life, but the resulting debate on nepotism is a turning point in Indian society. Rajput was not only an outsider to the joint family called Bollywood, but an outsider from Patna. As a result, nepotism has now become a Hindi word found in Hindi papers.

Before Rajput’s suicide, it was Kangana Ranaut who took up the matter. Outside of Bollywood, India’s public discourse often discusses ‘dynasty’ and ‘dynastic privilege’ in Indian politics.

This is an opportunity for Indian society to broaden the discussion. Given a chance, we are all nepotistic. There is nobody who won’t promote their children’s careers in the same field as theirs. This is part of our tradition of caste and kinship. To bring down the edifice of nepotism in Bollywood and politics, we have to question nepotism in society at large.

A drain on the GDP

This is a serious issue with implications not only for equality of opportunity but also for India’s economic progress. Nepotism promotes mediocrity, and thus low productivity.

The Congress party insists on being led by Indira Gandhi’s grandchildren, regardless of whether they are the best people suited for the role. The result is for all to see: a most ineffective opposition. Similarly, the Bollywood marketing machine will force you to watch an Arjun Kapoor movie, even if he has the same face and same expression throughout the movie. He can’t act, but the movie will still make a profit thanks to the marketing machine. And even if it flops, he will still get another role. The result is that India has a lot of terrible cinema.

India’s legal profession is said to be controlled by some 500 families. If you are a young lawyer, you have to struggle for years at a pittance of a salary with senior lawyers before the profession will let you stand on your feet. Meanwhile, the fraternity is full of third-rate lawyers who keep getting cases and corporate retainerships only because their fathers or mothers are famous advocates. 

When an internship is a phone call away

In much the same way, nepotistic privilege affects the overall quality of many parts of the Indian economy. Our newsrooms are full of children of journalists and even politicians. A well-known journalist’s son or daughter gets an internship with a phone call whereas those without such access keep emailing their CVs with no one bothering to even open their emails.

The unfairness does not stop there. The other day, I saw a prominent academic promote a senior journalist’s daughter on Twitter, praising her with superlatives for an ordinary cub reporter’s work. Nepotistic privilege is thus a life-long privilege. You get a free pass because you are the son or daughter or relative of XYZ. It’s bad enough that she has the advantage of getting story ideas, leads and contacts at home while an ‘outsider’ in the same newsroom will have to struggle much harder to be at the same level. But for your father’s powerful friends to be promoting you on Twitter blindly is absolutely distasteful.

We are all complicit

It is time for all of us to look within. Do we take someone more seriously because their father or mother is successful in the same field? We do, we often do. This is part of our ethos as a caste society. There is, for example, a huge amount of curiosity among the public about star kids. We reward nepotism. Someone with nepotistic privilege may be competent, but you haven’t even tried an ‘outsider’.

We need to flip this formula, not just to provide equality of opportunity but also because every job should have the most competent person doing it. That is why nepotism is an economic issue.

Copy-paste woke culture

To flip it, we need to start seeing nepotistic privilege as a matter of shame. India’s woke millennials, Gen Z and Gen Alpha tend to learn political correctness from American shores. But nepotism is not such a big social issue in the US. We need some originality in our woke politics to start shaming nepotistic privilege. When woke millennials say ‘check your privilege’, they don’t include nepotism because American news sites haven’t yet written about it yet.

In the way that woke people go around ‘cancelling’ those who are misogynistic or homophobic or fatphobic or those who think skin colour defines beauty… yeah, riding pillion on your dad’s career should be seen like that.

If you are a young adult planning your career, and you are planning to take up the same career as your parents, you should feel some shame about it. And your friends should judge you for it.

And you should definitely stop your mom and dad from making the phone call that gets you the free pass. Name dropping shouldn’t get you a job — your CV and work should.

Of all the professions in the world, your inner calling turns out to be the same as your parent’s? Where’s the originality, the rebellion, where’s your individualism?

Similarly, parents successful in a profession should encourage their children to find a different profession. In a country where the caste system is literally about profession, this is key to social democratisation.

It will be your turn next

Maybe you really, really want to follow the same profession as your parent. Here’s the challenge. Can you do it on a different turf? If you are a Bollywood star kid, can you ‘launch’ your career in a country other than India or with a less-known, less-glitzy banner? If your father is prominent in national politics but inactive in state politics, can you build your own mass popularity in state politics? If your mother is a criminal lawyer, can you at least go work in a corporate law firm?

If you are literally doing what your dad does, just taking on his clients, just running his business, you should, yes, be a little ashamed of yourself. You are occupying a seat that could be occupied by someone more competent than you, no matter how good you think you are at your work.

You should know that the world judges you for it but doesn’t say it yet. Just like the silence about nepotistic privilege has been broken in politics and Bollywood, one day it will be broken in your profession too.

Sad Story on Indian Generic Pharmaceutical Manufacturers

What is productivity and why is the UK's so poor?

Larry Elliot in The Guardian

The shortfall in productivity compared with other developed economies has long been Britain’s economic achilles heel. It is a problem that Conservative and Labour chancellors have been grappling with for decades.

Productivity is a guide to how good a country is at delivering the goods and services that are bought and sold. Technically, it is the rate of output per unit of input, measured per worker or by the number of hours worked. In layman’s terms, it is a measure of what goes in and what comes out.

In some sectors, productivity is easy to measure. A factory that makes 1,000 cars a day with 50 workers is twice as productive as a factory that requires 100 workers to do the same job. In other parts of the economy, assessing whether productivity has improved is harder and less objective.

At face value a fast-food joint that employed the same number of chefs to cook the same number of hamburgers as they did a year earlier would not be showing any increase in productivity. But if the quality of the hamburgers improved, that would be a productivity gain and statisticians would try to capture the improvement in the official figures.

There are a number of ways in which a firm can make itself more productive. It can invest in new machinery that makes the production process more efficient. It can employ more highly skilled staff. It can train workers so that they can fully exploit the equipment they are using.

It is through productivity improvements that living standards rise. For many years, the annual increase in productivity in the UK averaged around 2%, although there were periods when it was lower and periods when it was higher.

Each year since the early 1990s, the Office for National Statistics has published an international comparison of productivity. This showed that UK productivity was 9% lower than the average of the other six members of the G7 (the US, Japan, Germany, France, Italy and Canada) but this gap narrowed to 4% by the time of the 2007 financial crisis.

Since then, however, productivity in the UK has barely grown and the gap with the rest of the G7 has widened to 18%. The gap with Germany is 35% and with the US 30%.

There have been a number of explanations for the dramatic deterioration in productivity: the availability of unskilled cheap labour has deterred firms from investment; the poor quality of UK roads, railways and broadband network; the shrinkage of the financial sector, which had been a source of high-productivity jobs in the boom before the 2007 crisis; and the misallocation of capital to “zombie” firms kept alive by ultra-low interest rates rather than to dynamic new enterprises.

The government’s autumn statement document states that improving productivity is the “central long-term economic challenge” for the UK. Philip Hammond, the chancellor, has identified better infrastructure, technology and skills as the foundations for doing so, which is why he unveiled a new £23bn national productivity investment fund and backed Sir Charlie Mayfield’s productivity council in his autumn statement. But this is a goal that requires long-term investment and commitment.

Why bad science persists?

From The Economist

IN 1962 Jacob Cohen, a psychologist at New York University, reported an alarming finding. He had analysed 70 articles published in the Journal of Abnormal and Social Psychology and calculated their statistical “power” (a mathematical estimate of the probability that an experiment would detect a real effect). He reckoned most of the studies he looked at would actually have detected the effects their authors were looking for only about 20% of the time—yet, in fact, nearly all reported significant results. Scientists, Cohen surmised, were not reporting their unsuccessful research. No surprise there, perhaps. But his finding also suggested some of the papers were actually reporting false positives, in other words noise that looked like data. He urged researchers to boost the power of their studies by increasing the number of subjects in their experiments.

Wind the clock forward half a century and little has changed. In a new paper, this time published in Royal Society Open Science, two researchers, Paul Smaldino of the University of California, Merced, and Richard McElreath at the Max Planck Institute for Evolutionary Anthropology, in Leipzig, show that published studies in psychology, neuroscience and medicine are little more powerful than in Cohen’s day.

They also offer an explanation of why scientists continue to publish such poor studies. Not only are dodgy methods that seem to produce results perpetuated because those who publish prodigiously prosper—something that might easily have been predicted. But worryingly, the process of replication, by which published results are tested anew, is incapable of correcting the situation no matter how rigorously it is pursued.


The preservation of favoured places

First, Dr Smaldino and Dr McElreath calculated that the average power of papers culled from 44 reviews published between 1960 and 2011 was about 24%. This is barely higher than Cohen reported, despite repeated calls in the scientific literature for researchers to do better. The pair then decided to apply the methods of science to the question of why this was the case, by modelling the way scientific institutions and practices reproduce and spread, to see if they could nail down what is going on.

They focused in particular on incentives within science that might lead even honest researchers to produce poor work unintentionally. To this end, they built an evolutionary computer model in which 100 laboratories competed for “pay-offs” representing prestige or funding that result from publications. They used the volume of publications to calculate these pay-offs because the length of a researcher’s CV is a known proxy of professional success. Labs that garnered more pay-offs were more likely to pass on their methods to other, newer labs (their “progeny”).

Some labs were better able to spot new results (and thus garner pay-offs) than others. Yet these labs also tended to produce more false positives—their methods were good at detecting signals in noisy data but also, as Cohen suggested, often mistook noise for a signal. More thorough labs took time to rule these false positives out, but that slowed down the rate at which they could test new hypotheses. This, in turn, meant they published fewer papers.

In each cycle of “reproduction”, all the laboratories in the model performed and published their experiments. Then one—the oldest of a randomly selected subset—“died” and was removed from the model. Next, the lab with the highest pay-off score from another randomly selected group was allowed to reproduce, creating a new lab with a similar aptitude for creating real or bogus science.

Sharp-eyed readers will notice that this process is similar to that of natural selection, as described by Charles Darwin, in “The Origin of Species”. And lo! (and unsurprisingly), when Dr Smaldino and Dr McElreath ran their simulation, they found that labs which expended the least effort to eliminate junk science prospered and spread their methods throughout the virtual scientific community.

Their next result, however, was surprising. Though more often honoured in the breach than in the execution, the process of replicating the work of people in other labs is supposed to be one of the things that keeps science on the straight and narrow. But the two researchers’ model suggests it may not do so, even in principle.

Replication has recently become all the rage in psychology. In 2015, for example, over 200 researchers in the field repeated 100 published studies to see if the results of these could be reproduced (only 36% could). Dr Smaldino and Dr McElreath therefore modified their model to simulate the effects of replication, by randomly selecting experiments from the “published” literature to be repeated.

A successful replication would boost the reputation of the lab that published the original result. Failure to replicate would result in a penalty. Worryingly, poor methods still won—albeit more slowly. This was true in even the most punitive version of the model, in which labs received a penalty 100 times the value of the original “pay-off” for a result that failed to replicate, and replication rates were high (half of all results were subject to replication efforts).

The researchers’ conclusion is therefore that when the ability to publish copiously in journals determines a lab’s success, then “top-performing laboratories will always be those who are able to cut corners”—and that is regardless of the supposedly corrective process of replication.

Ultimately, therefore, the way to end the proliferation of bad science is not to nag people to behave better, or even to encourage replication, but for universities and funding agencies to stop rewarding researchers who publish copiously over those who publish fewer, but perhaps higher-quality papers. This, Dr Smaldino concedes, is easier said than done. Yet his model amply demonstrates the consequences for science of not doing so.

Feet first, our NHS is limping towards privatisation

Polly Toynbee in The Guardian

A fish rots from the head, but the NHS may be rotting from the feet. Podiatry is not up there in the headlines, yet what’s going on in that unglamorous zone is an alarming microcosm of the downward path of the health service. This is a story of the NHS in England in retreat and the private sector filling the vacuum.

You know the big picture from the ever-worsening monthly figures: deteriorating A&E, ambulance and operation waiting times, and a steep rise in bed-blocking. As debts pass £2.5bn, the NHS feels the tightening financial tourniquet.

Now look at it through the prism of just one small corner, as seen from the feet up. Every week 135 people have amputations because diabetes has caused their feet to rot: their circulation goes and then the sensation in their feet, so they don’t notice damage done by rubbing shoes, stubbed toes or stepping on nails. Minor injuries turn into ulcers that if left untreated turn gangrenous, and so the toes, then the foot, then the leg are lost – horrific life-changing damage. Numbers are rising fast, with nearly three million diabetics. The scandal is that 80% of these amputations are preventable – if there were the podiatrists to treat the first signs of foot ulcers. But the numbers employed and in training are falling.

In his surgery, the head of podiatry for Solent NHS Trust, Graham Bowen, is unwrapping the foot of a lifelong diabetic to reveal a large missing chunk of heel, a great red hole nearly through to the bone. This man has already had some toes amputated. He has been having treatment with maggots, bandaged into his wound to eat the dead skin and help healing – and he is slowly improving. Everyone Bowen sees now is at similarly high risk. Small ulcers, incipient ulcers, the ones that need to be caught early (and cheaply) no longer get NHS treatment. “On the NHS we’re essentially firefighting the worst cases now,” says Bowen. “We are going through our lists and discharging all the rest of our patients.”

FacebookTwitterPinterest ‘On a 15-minute visit carers can’t check feet.’ Photograph: Andrew Bret Wallis/Getty Images

But not even all these acute patients get the same optimal treatments, due to the vagaries of the 2012 NHS Act. Solent, a community trust that covers mental health and a host of other services, is used by five different clinical commissioning groups (CCGs), including Southampton, Portsmouth and West Hampshire. Each has its own criteria for what it will pay for, and each is toughening those criteria. Depending on their address, some patients get the very best, others only get what their cash-strapped CCG pays for.

You need to know about diabetic feet to understand the difference in treatments: the conventional and cheapest treatment is a dressing and a removable plastic boot, and telling patients to keep their foot up for months. But patients who can’t feel their feet tend to take off the boot and hobble to make a quick cup of tea. “Ten minutes of putting pressure on the ulcer undoes 23 hours of resting it,” Bowen says, so it takes 52 weeks on average to heal ulcers that way. For £500 extra, a new instant fibreglass cast saves any pressure on ulcers and cures them within eight weeks.

Although the National Institute for Health and Care Excellence says this total-contact cast is the gold standard, most of Bowen’s CCGs won’t pay for it. I watched him putting one on a patient in under half an hour: after nine weekly replacements, that ulcer would be completely healed. For every 10 of the new casts, one amputation is prevented – and each amputation costs the NHS £65,000. Such is the madness of NHS fragmentation, divided between multiple commissioners and providers, all in serious financial trouble, that no one spends a bit more now for others to save later, even when the payback is so quick.

This clinic lost four podiatry posts to save money: though diabetic numbers soar, its budget has been static for five years. “Doing more for less,” he says with the same weary sigh you hear echoing through the NHS. As Bowen goes through the clinic’s books removing all but the most acute cases, he turns away diabetics whose problems should be caught early. He turns away others he used to treat: the old and frail who have become immobile due to foot problems; the partially sighted or people with dementia who have poor home care. On a 15-minute visit carers can’t check feet and find out if they are the reason someone doesn’t get out of bed, toes buckled in, leaving them needlessly incapacitated and heading for residential care sooner than necessary.

What happens to those he takes off his books? “They have to go private, if they can afford it. If not, then nothing.” He used to send them to Age UK, but lack of funds shut that service. Only 5% of podiatry is now done by the NHS so Bowen has set up TipToe, a private practice attached to his NHS clinic. It’s not what he wants, but it keeps prices low and all proceeds go to the NHS.

Alarm bells should ring here: how silently the NHS slides into the private sector. Labour leadership contender Owen Smith has flagged up his team’s research showing private practice has doubled since 2010. Now that many CCGs only pay for one cataract, how many go private for the second eye? As the Guardian’s health policy editor, Denis Campbell, has asked, how many more vital treatments will go this way?

Podiatry is the ground floor of the NHS hierarchy. The profession reckons the NHS in England needs 12,000 practitioners but only has about 3,000 – and that’s falling, despite so many high-risk diabetics needing weekly appointments. Next year podiatry trainees, like nurses, will no longer receive state bursaries, so fewer will apply. They tend to be older, with families, unable to take on a £45,000 debt for a job paying around £35,000 per year. Already student places have been cut by nearly a quarter in five years. Most of the 7,000 amputations a year are preventable. A shocking statistic: half of those who undergo amputations will die within two years.

Only in the details of what’s happening on the frontline can we understand the daily reality of Britain’s shrinking state. Step back and ask how it can be that a country still growing richer can afford less quality care than when it was poorer? Is that the country’s choice? As the NHS slides into the private sector, here is yet another public service in retreat.

Enough PhD’s, thank you

Pervez Hoodbhoy in The Dawn

When Freeman Dyson suggested we have lunch together at the Princeton University cafeteria on my next visit, I almost fell off my chair. To be invited by this legendary physicist, now 90-plus but sharp as ever, meant more than a banquet especially arranged for me by the Queen of England. Countless kings, queens, and generals have come and gone but only a tiny number of visionaries, Dyson included, actually make history.

Overwhelmed, I was about to blurt “thank you, Dr Dyson” but stopped in time. Else this would have violated an unstated protocol. We theoretical physicists address colleagues by their first name. And so I simply thanked him as Freeman. This avoided a still more serious error. Freeman Dyson does not have a PhD and has never sought or needed one.

Three books and biographies have been written on this PhD-less scientific genius. But, were he to apply to a Pakistani university, at best he might become an assistant professor. I thought of this while suffering through some lectures last week at an international physics conference in Islamabad.

Sadly, the presentations by most Pakistani PhD’s were uninteresting, others were wrong. One was even laughably wrong. Probably the worst was by a professor who was not just a ‘doctor’ but a ‘professor doctor’. This terrible pomposity, borrowed from some German tradition, is now routinely augmented with ‘distinguished professor’, ‘national professor’ and what-not. Like cartoon generals who have won no wars but have medals stuck to oversized chests, Pakistan now has legions of highly paid ignoramus cartoon professors.

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Pakistan now has legions of highly paid ignoramus cartoon professors.

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But wait, am I not being terribly unfair? Our professors are publishing huge numbers of research papers these days, almost 10 times more than a decade ago. Some produce as many as 40-60 every year (Dyson’s lifetime total is a mere 50). These appear in so-called international journals with high-impact factors, are well-cited, and seeming fulfil all requirements of high quality. The authors rake in cash prizes, national awards, and the Higher Education Commission (HEC) screams about the post-2002 ‘revolution’ at every opportunity.

But the truth forlornly begs to be heard: there is no actual research behind most of these so-called research papers. The internet has placed at an author’s fingertip vast amounts of literature from which to freely cut and paste, invent data, and plagiarise ideas. Although software checks like Turn-It-In exist, they are next to useless. True, the ideal journal referee is supposed to be a know-all. But in fact he is too hard-pressed to check everything, or may even be complicit. Publishing in fly-by-night journals, or arranging for your paper to be cited, is now a finely developed art form.

Crime in Pakistani academia has overtaken even the legendary bribery of our police departments or the easy corruption of income tax authorities. But dealing with academic heist, now organised and systematised, won’t be easy. Here’s why.

First, knowledge is increasingly specialised and to detect cheating isn’t easy. A molecular biologist might not fairly judge the work of an ethologist, or a plasma physicist that of a string theorist. In principle any academic community must police itself rather than be policed from outside. But the small number of genuine academics in Pakistan means that there are precious few policemen.

Second, a thoughtless government policy that pays by the number of research papers and PhD’s produced allows cheats to get rich. Unable to tell good from bad, the Pakistan Council for Science and Technology actively encourages our professors to pillage public property.

The same dynamics applies to PhD production. The basic subject knowledge of PhD candidates is rarely tested and, if ever, only perfunctorily. Although the referees of a candidate’s thesis are supposed to be impartial, they are often chosen by a supervisor for being cooperative. Of course, the reports can be appropriately doctored when necessary.

Most PhD supervisors never get caught while doctoring. But if by rare chance someone does, he gets little more than a tap on the wrist. A colleague, a former professor of biology at Quaid-i-Azam University, then also the dean, was caught red-handed while faking referee reports for his PhD students. He admitted guilt but was not terminated and retained all retirement benefits. The administration and other colleagues shrugged off the incident; why be strict to one of your own kind? The man moved on to become dean at another university, and then emerged yet again as vice chancellor at still another university.

This ‘kindness’ has put the cancer of corruption into metastasis. Arresting further growth will require a harsh chemotherapy regime. As the very first step, rewarding authors of research papers with cash should be stopped. PCST, as well as other government organisations deliberately fuelling academic corruption, should be closed down and their directors charge-sheeted.

Transparency should be non-negotiable. While it cannot end abuse, it can discourage. So, before the author of a research paper gets any kind of credit, such as for promotion, he must give a presentation that anyone can freely attend. This should be video-recorded and archived for open access on HEC’s website. Whereas HEC’s present chairman privately agreed to my suggestion nearly two years ago, and then publicly on television a year later, I see no signs of implementation.

Still more radical therapy may be needed. As with a driving licence, all PhD degrees (including my own) should be de-recognised every 10 years, and re-recognised only after passing a literacy test in that particular discipline. Administered by some trustable overseas organisation, the written test should be at the level of an undergraduate examination equivalent to that taken by students after their first year of studies at a good foreign university. Will this reduce our current PhD population by 50 per cent? Eighty per cent?

No country becomes wealthy by printing a mountain of paper currency. And no university system becomes better by dishing out substandard PhD degrees, or by accepting vacuous research papers as valid. Instead, the way forward lies in adhering to strict ethical standards, cultivating excellence, rejecting mediocrity, and nurturing a spirit of inquiry and intellectual excitement.

The economic case for legalising cannabis

The public wants it and it would be good for the economy. Why has the law not been changed?

Paul Birch in The Telegraph

Channel 4’s Drugs Live programme promises to examine what cannabis does to the brain. Many of us have already seen the clips of Jon Snow struggling after a massive dose of high strength marijuana (the equivalent of forcing a teetotaller to down a bottle of vodka and then asking him how he feels).

But beyond the effects of cannabis on the brain, isn’t it time for a wider discussion on the potential effects of safe, regulated cannabis consumption on society?

How much is cannabis worth these days? According to the Institute for Economic and Research, up to £900m could be raised annually through taxation of regulated cannabis market.

Meanwhile £361 million is currently spent every year on policing and treating users of illegally traded and consumed cannabis.

It seems a lot to spend on punishing people for an activity most of us barely believe should be a crime any more. And that’s even before one factors in the potential benefit legalisation and regulation of cannabis could have for the UK exchequer.

Then, there is the job creation potential. In Colorado, which legalised marijuana at the beginning of 2014, 10,000 now work in the marijuana industry: growing and harvesting crops, working in dispensaries, and making and selling equipment. Crime has fallen: in the first three months after legalisation in Denver, the city experienced a 14.6 per cent drop in crime and specifically violent crime is down 2.4 per cent. Assaults were down by 3.7 per cent.

This reduction led to further savings and allowing stretched police forces to concentrate on more serious issues. Meanwhile, cannabis use by young people actually decreased, an uncomfortable fact for prohibitionists who argue that legalisation would simply encourage more teens to take up cannabis.

In an age when every penny of government spending is fought for, the demonstrated potential savings and revenues at very least deserve serious investigation. Revenue raised from a regulated cannabis trade could be directed towards education on safe use of cannabis.

That’s why the next government – regardless of who it is led by, should set up a Royal Commission into drug legislation.

Why a Royal Commission? Because I firmly believe this is a way forward for our fractured politics. A non-partisan commission can help politicians take hold of an issue and look at the evidence beyond the fears of being blindsided by attacks from the other side. Parties can agree to participate, evidence can be heard, everyday people can submit and read facts, opinions and analysis: it’s a real opportunity to create the “evidence-based policy” to which every party claims they aspire.

Major party leaders are reluctant to grasp the nettle of drug legislation. It’s understandable, given the current association of drugs with criminality. Half of people in the UK think cannabis contributes to street crime. But this association is inevitable as long as cannabis itself is illegal. Only a dispassionate discussion on the merits of cannabis legalisation and regulation can break that link.

Cista is standing for election on this issue because we believe the practical evidence has reached tipping point. Legalisation and regulation of cannabis can benefit the economy, lift the burden on the criminal justice system, encourage education about healthy, informed choices, and help recreational and medicinal cannabis users to enjoy a clean, safe product without being forced to engage with the underworld. Cannabis in itself is not the problem: our current law is. And we’re all paying the price.

How much can a captain influence short-term performance?

Ed Smith in Cricinfo

People who don't believe that the media indulges honeymoon periods should consider the relative treatment of Alastair Cook and Eoin Morgan. Having survived a media storm as Test captain in the summer of 2014, Cook was eventually sacked as ODI captain at the 11th hour before the World Cup. Most pundits felt this was a good idea, even though it left Cook bereft of his dream of captaining in a World Cup, and left Morgan very little time to put his stamp on the team.

Now Morgan has scored three noughts in his last four innings and four noughts in his last seven. Many of those who called for Cook's sacking seem very relaxed about this, citing's Morgan superb natural talent and better track record as an ODI match-winner. Yet Cook's resilience and capacity for enduring pressure was equally well-established. In short, I'm less convinced that Morgan's bad form exists in a different category from Cook's.

The reasons given for Cook's sacking were: 1) his poor form with the bat, and 2) the need to protect his long-term prospects as an England player. The selectors felt that continuing with Cook for the World Cup might radically deplete his resources. Effectively it would burn through too many miles on the clock, racing Cook towards a hastier exit from the English game. Though no one seemed to notice at the time, exactly the same arguments could have been presented as reasons for not making Morgan captain either. If Cook was in danger of ending the World Cup exhausted and short of confidence, Morgan might end it disillusioned and disengaged, one step closer to a career oriented to the roving life of a T20 specialist. It is far too early to be certain - England could still win the competition with Morgan as its hero - but it is a very real possibility that in sacking one captain England will end up undermining two careers.

There is a much deeper question. How much does the captaincy, over the short term, affect performance? Morgan or Cook? Bailey or Clarke? Everyone has a view and can marshal the evidence to support their prejudices. It makes a nice "talking point", as the saying goes. That does not, however, mean the decision under review is important in explaining events.

Put differently, what if England would have lost anyway on Saturday, whoever was captaining? And suppose that Australia would have won, whichever of their strong captaincy candidates was in charge? In obsessing about the psychodrama at the top, we ignore the underlying fundamentals.

There are two central trends in the evolution of professional sport and its coverage. The odd thing, however, is that the two movements are contradictory, indeed irreconcilable.

The first is the cult of personality the hero, the champion, the winner, the master of mind games, the tactical wizard, the leader of men, blessed with the Midas touch. This is the way elite sport is frequently presented and analysed. Why? First, because it fits the modern obsession with celebrity; secondly, because it is endlessly useful as a media "talking point" - big personalities are always easier to discuss than systems or ideas.

Then there is the underlying reality of how professional sport is actually evolving. Every top team now employs a massive backroom staff of coaches, physios and analysts, all of whom are trying to find a tiny incremental advantage, a fraction of 1% here or there, to help their team. The idea that one single mind controls the whole team is laughably out of date. Even in football, where the manager is like the cricket captain, coach and selection panel rolled into one, he actually sits atop a vast coaching machine. Yes, he steers the wheel, but there are many more cogs in the machine than ever before.

In cricket, the captain's power and control are increasingly shared with other influences on the team. He can still make a difference, of course. But he exists in a highly professional context in which control is shared widely.

I was recently asked to write a new introduction to the reissue of Mike Brearley's iconic book The Art of Captaincy. One thing that struck me was how much more control Brearley had over his teams than any captain would have today. On being recalled as England captain in 1981, one of his first acts was to restore the pre-match warm-up and stretching routine. It is unimaginable today - given the number of physios and trainers - that this area of team life would be the preserve of the captain.

Critics of captains today lightly ignore a contradiction: modern captains certainly have less power than ever, yet they are still held overwhelmingly accountable for decisions and tactics that usually originated in discussions with the team's whole top table.

We have not yet mentioned by far the biggest constraint of all on any captain: the form and quality of the players.

In his post-match interview, Morgan was asked by Andrew Strauss why the England death bowlers favoured the bouncer over the yorker. Morgan's answer was that the boundaries at the MCG are shorter straight (65 yards) than square of the wicket (85 yards). Yorkers tend to be hit down the ground, whereas short balls are often hit square of the wicket. So as the fielding captain, Morgan was trying to force batsmen to play the harder, riskier shot. Had England bowled well, this would have sounded shrewd and canny. Because England bowled badly, it sounded too clever by half. In other words, it is the bowlers who make and unmake the success of tactics, not captains.

I will always believe in the power of great leadership, especially by gradually improving team culture over the long term. Right now, however, the correct answer to the question "Bailey or Clarke?" and "Morgan or Cook?" is: "Nice talking point, but it doesn't explain very much about the result."

Questions about India’s drug industry

NARAYAN LAKSHMAN in the hindu

 

Change that supports measures such as surprise checks on manufacturing facilities, and greater transparency in and policing of drug approval processes and clinical trials is a must. Photo: M. A. Sriram

 

Unless a deeper, institutional change is ushered in to break the nexus between drug companies and the regulatory regime, Indians consuming drugs may be exposing themselves to serious risks

Even before I walked into the Mayflower Hotel in the heart of Washington on a crisp autumn afternoon to meet Dinesh Thakur, whistle-blower and former director of India-based pharmaceutical giant Ranbaxy, I had a hunch that this conversation would spark some troubling questions on India’s malfunctioning drug industry.

On May 13, 2013, Ranbaxy pleaded guilty to seven felonies relating to drug manufacturing fraud and agreed to cough up $500 million to settle the case brought by the U.S. Department of Justice (DoJ) after eight years of investigation. The vast evidence in the case, some of it supplied by Mr. Thakur and marshalled by the U.S. Food and Drug Administration (FDA), included inspection reports compiled after multiple FDA visits to Ranbaxy plants in India — in Paonta Sahib, Himachal Pradesh, and Dewas, Madhya Pradesh.

Ranbaxy makes a long list of generic medications — 200 different “molecules”, according to its website — everything from anti-retroviral drugs to treat HIV-AIDS to commonly used antibiotics such as Amoxicillin and Cephalexin (Mox and Sporidex in India). It makes generic combinations of Paracetamol and Ibuprofen, and sells numerous over-the-counter products, such as pain relief gel Volini and cosmetic product Revital in India.

While it is apparent that Indians consume Ranbaxy drugs at a prolific rate — accounting for approximately Rs.2,600 crore, or 18 per cent of the company’s global revenue for 2012 — what is less clear is why the Indian government has not launched a vigorous investigation into the current Good Manufacturing Practices (cGMP) violations that the U.S. authorities found at multiple Ranbaxy facilities.

Go-slow approach

The Drug Controller General of India (DCGI), G.N. Singh, said in June: “When the issue has been flagged, as a regulator it is our duty to see that whatever medicines have been produced here are of assured quality.” But he did not specify the date by which a “review” of Ranbaxy’s past drug applications would be completed, leave alone committing himself to holding surprise visits to facilities aimed at investigating manufacturing standards.

This go-slow approach is all the more baffling given that, despite assurances by Ranbaxy after its admission of guilt in May that all of its other facilities adhered to the required process quality standards, a third plant, this time in Mohali, Punjab, was slapped with an import alert by the U.S. in September.

If any doubt remains about the seriousness of the claims made by the FDA so far, it is worth taking a quick look at the dossier of evidence submitted by the DoJ in the case against Ranbaxy.

Settlement documents make it clear that Ranbaxy admitted that had the seven felony charges brought by the DoJ gone to trial, the government “would have proven … beyond a reasonable doubt” that the company in 2006 had “knowingly made materially false, fictitious and fraudulent statements,” with regard to the stability testing of drugs, and in 2003, it “with intent to defraud and mislead,” failed to submit timely field reports to the FDA.

FDA investigation

According to the FDA’s investigation, Ranbaxy acknowledged violations of cGMP regulations with regard to a U.S.-distributed drug, Sotret, even as far back as 2003. That was at a time when the billionaire brothers Malvinder and Shivinder Singh owned the company. The Singh brothers sold Ranbaxy to Japanese Daiichi-Sankyo in 2008 and walked away with a cool $4.6 billion.

Nevertheless, the Sotret episode marked the beginning of a series of FDA investigations of Ranbaxy facilities in India, particularly of the two that focussed on production for U.S. markets: Paonta Sahib and Dewas, where Ranbaxy manufactured Sotret and two other popular drugs, Gabapentin and Ciprofloxacin.

Inspecting Paonta Sahib in February 2006, the FDA found no fewer than eight deviations from cGMPs. These included failure to include a complete record of all drug testing data as required by FDA guidelines, and failure to establish an adequate testing programme for the stability characteristics of drugs — essential to determine drug storage conditions and expiration dates.

Dewas was also investigated the same month and the FDA found not only a similar unavailability of quality-control data but also a “failure to extend investigations into any unexplained discrepancy,” such as testing deviations noted for specific drug batches.

Quality issues

Additional inspections of the Dewas facility in 2008 unearthed a range of quality problems. For example, there were no separately defined areas for the production and packaging of penicillin that could prevent microbiological contamination of this drug from exposure to other drugs in the vicinity. Again, quality control test failures of certain drugs were not thoroughly investigated.

These early hints ought to have set alarm bells ringing at FDA headquarters: prescribed procedures were not being followed; the required data documenting these procedures were not being compiled; and where deviations were noted, they were not being investigated. They did not appear to raise the red flag — or at least not enough of them.

Thus, in November 2011, the FDA did not see it fit to hold Ranbaxy back from selling generic Lipitor, the popular cholesterol-reducer. Blessed with a six-month exclusivity grant, the company went on to rake in $600 million in sales revenue. Only when “fate” appeared to intervene and glass particles were discovered in samples of the drug did Ranbaxy issue a massive recall notice.

Yet, if the FDA only scratched the surface of drug quality problems at three Ranbaxy facilities, then there is an enormous question mark over the extent to which other Ranbaxy facilities beyond the ken of U.S. authorities are similarly involved — a matter of great importance to the 150-odd countries in which Ranbaxy sells its products, including India.

Poor enforcement in India

In this context, the Indian drug control authorities must share some of the blame for not coming down harder on fraud. The institutional reasons for poor enforcement in India are well known. In the context of drug regulation, the point was made most poignantly by the department-related Rajya Sabha Standing Committee on Health and Family Welfare in its 59th report, on the functioning of the Central Drugs Standard Control Organization (CDSCO).

In 2012, the Standing Committee lambasted the “collusive nexus between drug manufacturers, some functionaries of CDSCO and some medical experts,” citing in one case the spurious nature of the approvals process for new drug applications made by pharmaceutical companies.

While there is much more that the DCGI and CDSCO could do, it would be unfair to say they haven’t been jolted into action by l’affaire Ranbaxy, and then again by the FDA issuing import alerts against another Indian generics company, Wockhardt.

Earlier this month, the DCGI reportedly ordered a third pharmaceutical major, Sun Pharmaceutical, to suspend clinical research activities and new drug filings and applications at its Mumbai-based bio-analytic laboratory, “after discovering that Sun didn’t have the requisite approval from the Central government for operating the laboratory.”

However, until a deeper, institutional change takes place to break the nexus between drug companies and India’s regulatory regime — a change that incorporates everything from surprise checks on manufacturing facilities to greater transparency in, and policing of, drug approvals processes and clinical trials — there is a strong likelihood that Indian consumers of drugs made by these companies have poison coursing through their veins.

How I bought drugs from 'dark net' – it's just like Amazon run by cartels

Last week the FBI arrested Dread Pirate Roberts, founder of Silk Road, a site on the 'dark net' where visitors could buy drugs at the click of a mouse. Though Dread – aka Ross Ulbricht – earned millions, was he really driven by America's anti-state libertarian philosophy?

• 
• • Carole Cadwalladr
  • The Observer, Sunday 6 October 2013

The FBI alleges Ross Ulbricht ran the vast underground drug marketplace Silk Road for more than two years. Photograph: theguardian.com

Dear FBI agents, my name is Carole Cadwalladr and in February this year I was asked to investigate the so-called "dark net" for a feature in this newspaper. I downloaded Tor on to my computer, the anonymous browser developed by the US navy, Googled "Silk Roaddrugs" and then cut and pasted this link http://silkroadvb5piz3r.onion/ into the address field.

And bingo! There it was: Silk Road, the site, which until the FBI closed it down on Thursday and arrested a 29-year-old American in San Francisco, was the web's most notorious marketplace.

The "dark net" or the "deep web", the hidden part of the internet invisible to Google, might sound like a murky, inaccessible underworld but the reality is that it's right there, a click away, at the end of your mouse. It took me about 10 minutes of Googling and downloading to find and access the site on that February morning, and yet arriving at the home page of Silk Road was like stumbling into a parallel universe, a universe where eBay had been taken over by international drug cartels and Amazon offers a choice of books, DVDS and hallucinogens.

Drugs are just another market, and on Silk Road it was a market laid bare, differentiated by price, quality, point of origin, supposed effects and lavish user reviews. There were categories for "cannabis", "dissociatives", "ecstasy", "opioids", "prescription", "psychedelics", "stimulants" and, my favourite, "precursors". (If you've watched Breaking Bad, you'll know that's the stuff you need to make certain drugs and which Walt has to hold up trains and rob factories to find. Or, had he known about Silk Road, clicked a link on his browser.)

And, just like eBay, there were star ratings for sellers, detailed feedback, customer service assurances, an escrow system and a busy forum in which users posted helpful tips. I looked on the UK cannabis forum, which had 30,000 postings, and a vendor called JesusOfRave was recommended. He had 100% feedback, promised "stealth" packaging and boasted excellent customer reviews: "The level of customer care you go to often makes me forget that this is an illegal drug market," said one.

JesusOfRave boasted on his profile: "Working with UK distributors, importers and producers to source quality, we run a tight ship and aim to get your order out same or next day. This tight ship also refers to our attitude to your and our privacy. We have been doing this for a long time … been playing with encryption since 0BC and rebelling against the State for just as long."

And so, federal agents, though I'm sure you know this already, not least because the Guardian revealed on Friday that the National Security Agency (NSA) and GCHQ have successfully cracked Tor on occasion, I ordered "1g of Manali Charras [cannabis] (free UK delivery)", costing 1.16 bitcoins (the cryptocurrency then worth around £15). I used a false name with my own address, and two days later an envelope arrived at my door with an address in Bethnal Green Road, east London, on the return label and a small vacuum-packed package inside: a small lump of dope.

It's still sitting in its original envelope in the drawer of my desk. I got a bit stumped with my dark net story, put it on hold and became more interested in the wonderful world of cryptocurrencies as the value of bitcoins soared over the next few months (the 1.5 bitcoins I'd bought for £20 were worth £300 at one point this spring).

Just under a month ago I was intrigued to see that Forbes magazine had managed to get an interview with "Dread Pirate Roberts", the site's administrator. And then, last week, came the news that Dread Pirate Roberts was 29-year-old Ross Ulbricht, a University of Texas physics graduate who, according to the FBI's documents, had not just run the site – which it alleges earned him $80m in commission – but had hired a contract killer for $80,000 to rub out an employee who had tried to blackmail him.

If that sounds far-fetched, papers filed last Thursday show that he tried to take a contract on a second person. The documents showed that the FBI had access to Silk Road's servers from July, and that the contract killer Ulbricht had thought he'd hired was a federal agent. It's an astonishing, preposterous end to what was an astonishing, preposterous site, though the papers show that while the crime might have been hi-tech, cracking it was a matter of old-fashioned, painstaking detective work.

Except, of course, that it's not the end of it. There are two other similar websites already up and running – Sheep and Black Market Reloaded – which have both seen a dramatic uplift in users in the last few days, and others will surely follow. Because what Silk Road did for drugs was what eBay did for secondhand goods, and Airbnb has done for accommodation: it created a viable trust system that benefited both buyers and sellers.

Nicholas Christin, a professor at Carnegie Mellon University in Pittsburgh, Pennsylvania, who conducted six months of research into the site, said that what surprised him most was how "normal" it was. "To me, the most surprising thing was how normal, when you set aside the goods being sold, the whole market appears to be," he said. And, while many people would be alarmed at the prospect of their teenagers buying drugs online, Silk Road was a whole lot more professional, regulated and controlled than buying drugs offline.

What's apparent from Dread Pirate Roberts's interview with Forbes and comments he made on the site's forum is that the motivation behind the site does not seem to have been making money (though clearly it did: an estimated $1.2bn), or a belief that drugs hold the key to some sort of mystical self-fulfillment, but that the state has no right to interfere in the lives of individuals. One of the details that enabled the FBI to track Ulbricht was the fact that he "favourited" several clips from the Ludwig von Mises Institute, a libertarian Alabama-based thinktank devoted to furthering what is known as the Austrian school of economics. Years later, Dread Pirate Roberts would cite the same theory on Silk Road's forum.

"What we're doing isn't about scoring drugs or 'sticking it to the man'," said Dread Pirate Roberts in the Forbes interview. "It's about standing up for our rights as human beings and refusing to submit when we've done no wrong."

And it's this that is possibly the most interesting aspect of the story. Because, while Edward Snowden's and the Guardian's revelations about the NSA have shown how all-encompassing the state's surveillance has become, a counterculture movement of digital activists espousing the importance of freedom, individualism and the right to a private life beyond the state's control is also rapidly gaining traction.

It's the philosophy behind innovations as diverse as the 3D printed gun and sites as mainstream as PayPal, and its proponents are young, computer-savvy idealists with the digital skills to invent new ways of circumventing the encroaching power of the state.

Ulbricht certainly doesn't seem to have been living the life you imagine of a criminal overlord. He lived in a shared apartment. If he had millions stashed away somewhere, he certainly doesn't seem to have been spending it on high-performance cars and penthouses.

His LinkedIn page, while possibly not the best arena for self-expression for a man being hunted by the FBI, demonstrates that his beliefs are grounded in libertarian ideology: "I want to use economic theory as a means to abolish the use of coercion and aggression amongst mankind," he wrote. "The most widespread and systemic use of force is amongst institutions and governments … the best way to change a government is to change the minds of the governed … to that end, I am creating an economic simulation to give people a firsthand experience of what it would be like to live in a world without the systemic use of force."

Silk Road, it turns out, might have been that world. Anybody who has seen All the President's Men knows that, when it comes to criminality, the answer has always been to "follow the money". But in the age of bitcoin, that's of a different order of difficulty. Silk Road is just one website; bitcoin is potentially the foundation for a whole new economic order.

Uruguay - the first country to create a legal market for drugs

Uruguay has taken a momentous step towards becoming the first country in the world to create a legal, national market for cannabis after the lower chamber of its Congress voted in favour of the groundbreaking plan.

The Bill would allow consumers to either grow up to six plants at home or buy up to 40g per month of the soft drug – produced by the government – from licensed chemists for recreational or medical use. Previously, although possession of small amounts for personal consumption was not criminalised in the small South American nation, growing and selling it was against the law.

The Bill passed by 50 votes to 46 shortly before midnight on Wednesday after a 14-hour debate as pro-legalisation activists crowded the balconies above the legislature floor. 

Uruguay’s Senate, where the ruling left-wing coalition has a larger majority, is now expected to approve the measure. President José Mujica, an octogenarian former armed rebel – who has previously overseen the passing of measures to allow abortion and gay marriage – backs the move.

Proponents of the Bill argue marijuana use is already prevalent in Uruguay and that by bringing consumers out of the shadows the government will be better able to regulate their behaviour, drive a wedge between them and peddlers of harder, more dangerous drugs, and tax cannabis sales.

They also believe that it closes the loophole that outlaws growing or buying cannabis while turning a legal blind eye to its consumption. Currently, judges in Uruguay have discretion to decide whether an undefined small quantity of the drug is for personal use or not.

Campaigners for an end to prohibition were quick to claim the vote as a landmark in the international push for drug policy reform. “Sometimes small countries do great things,” said Ethan Nadelmann, executive director of the New York-based Drug Policy Alliance, whose board includes entrepreneur Richard Branson, but also the late President Ronald Reagan’s former Secretary of State, George Shultz.

“Uruguay’s bold move does more than follow in the footsteps of Colorado and Washington,” added Mr Nadelmann, referring to the two Western US states that recently also permitted recreational cannabis use. “It provides a model for legally regulating marijuana that other countries, and US states, will want to consider.”

Hannah Hetzer, the Drug Policy Alliance’s Americas coordinator, who is based in Montevideo, added: “At the heart of the Uruguayan marijuana regulation Bill is a focus on improving public health and public safety. Instead of closing their eyes to the problem of drug abuse and drug trafficking, Uruguay is taking an important step towards responsible regulation of an existing reality.”

Nevertheless, the measure has divided Uruguay and in the run-up to the vote few dared predict its outcome, with the 99-member house almost split down the middle. All 49 opposition deputies had agreed to vote against the measure en bloc, while the 50 members of President Mujica’s ruling coalition were due to back it.

One of the government deputies, Darío Pérez, a doctor by training, had warned that cannabis is a gateway drug to harder substances and feared that fully legalising it would trigger a mushrooming of Uruguay’s already serious problems with crack and other cheaper, highly addictive cocaine derivatives.

In the most keenly awaited speech of the debate, Mr Pérez attacked the Bill but said he would vote in line with the coalition whip, although he could not have made his displeasure clearer. “Marijuana is manure,” he told the chamber. “With or without this law, it is the enemy of the student and of the worker.”

Mr Pérez was also unhappy with what he saw as a broken promise by Mr Mujica not to foist the law on a society that was not yet ready for it, citing a recent survey by pollsters Cifra that found 63 per cent of Uruguayans opposed cannabis legalisation while 23 per cent backed it.

Last December, the president had temporarily placed the measure on the back burner to give advocates a chance to rally public opinion. “The majority has to come in the streets,” he said then. “The people need to understand that with bullets and baton blows, putting people in jail, the only thing we are doing is gifting a market to the narco-traffickers.”

But those arguments failed to convince Gerardo Amarilla, a deputy for the conservative opposition National Party, who told the chamber: “We are playing with fire. Maybe we think that this is a way to change reality. Unfortunately, we are discovering a worse reality.”

Official studies from Uruguay’s National Drugs Board have found that of the country’s population of 3.4 million, around 184,000 people have smoked cannabis in the last year. Of that number, 18,400 are daily consumers. But independent researchers believe that may be a serious underestimate. The Association of Cannabis Studies has claimed there are 200,000 regular users in Uruguay.

One thing that no one disputes is that Uruguay has a serious and growing problem with harder drugs, principally cocaine and its highly addictive derivatives flooding into the Southern Cone and Brazil, mainly from Peru and Bolivia. That, in turn, has fuelled a crime wave as addicts seek to fund their cravings. Breaking the link between them and cannabis users is one of the government’s principal justifications for marijuana legalisation.

Under the measure, registered users will be able to buy cannabis from the nation’s chemists, cultivate plants at home and form cannabis clubs of 15 to 45 members to collectively grow up to 99 plants. Although the high would depend on the strength of the cannabis, which can vary significantly, the 40g per month limit would allow a user to potentially smoke several joints every day. To prevent cannabis tourism, such as that which has developed in Amsterdam, only Uruguayan nationals will be able to register as cannabis purchasers or growers.

Uruguay’s move comes as pressure grows across Latin America for a new approach to Washington’s “war on drugs”, which has ravaged the region, seeing hundreds of thousands die in drug-fuelled conflicts from Brazil’s favelas to Mexico’s troubled border cities.

Colombia President Juan Manuel Santos has called for a discussion of the alternatives while his Guatemalan counterpart Otto Pérez Molina has openly advocated legalisation. Meanwhile, Felipe Calderón, President of Mexico from 2006 to 2012, has also called for a look at “market” solutions to the drug trade.

Crucially, all three are conservatives with impeccable records as tough opponents of the drug trade. Mr Pérez Molina is a former army general with a no-nonsense reputation, while Mr Santos served as Defence Minister for his predecessor, the hard-right President Álvaro Uribe. Meanwhile, Mr Calderón was widely criticised during his time in power for the bloodbath unleashed by his full-frontal assault on the drug cartels, a conflict which cost an estimated 60,000 lives during his presidency.

Schumpeter's long revenge

By Chan Akya in Asia Times Online

News about major retail chains such as HMV and Blockbuster closing shop inevitably attract greater than usual attention because they sell media content and therefore operate on the edge of the world of entertainment. That said, the demise was fairly obvious to anyone who had read their balance sheets, which have been decimated by technological changes led essentially by Apple but more generically by the broader applications of the Internet and improved hardware. 

Selling and renting films respectively, HMV and Blockbuster were a key part of all retail malls and "high" streets in the UK with similar brands in other countries including in Hong Kong and Singapore. The advent of amazon.com was the first shot across their bows; one that both chains failed to heed. As the business of selling books through bookstores evaporated in the late '90s, the retail chains selling and renting movies and music failed to make the connection between the physical world and the augmented reality shopping of the Internet. 

The process was to accelerate with improved software - Apple's iTunes comes to mind - even as hardware continued to provide an underwhelming experience. The inability to bridge the quality gaps in films and music (or else apply them to an environment where more people were using crummy mobile devices for enjoying the same) simply meant that all competition ended up being about price. This was the wrong battleground and, much like Napoleon's forces marooned in the harsh Russian winter 200 years ago, the retail chains were destroyed. 

Oddly enough, HMV also played a small part in the global financial crisis; one of the largest lawsuits from that era pertained to Guy Hands' private equity firm Terra Firm filing suit for misrepresentations against its banker, Citibank, over its purchase of EMI from which HMV had been spun off to a separate listing in 1998. 

Although the suit was pretty quickly dismissed, opportunities for mirth abounded from the materials provided as part of the proceedings. Such large leveraged buyouts generated billions in loans that were purchased by collateralized loan obligation vehicles, which in turn were partly funded by the shadow banking system that helped to fell the global economy in 2007-08. 

In any event, the various reorganization plans filed by HMV management provided fodder for private equity firms on its own; in parallel, Blockbuster went through its own interaction with the forces of competition. While the global business of Blockbuster went into administration in 2010, the company continued to operate in many parts of the world. Last week's closure of the UK business is a continuation of the global process. 

The circle of stupidity

On the other end of the scale from market forces is the circle of stupidity that underpins global monetary policy today. 

An industrial version of the HMV/ Blockbuster process of creative destruction is Japan, an article about which I wrote late last year, touching upon the effects of competitive landscape changes ushered in by the pincer grip of South Korea and China at the branded and generic ends of manufacturing respectively; even as sclerotic politics and inane monetary policies end up accelerating the decline. (See The end of Japan as we know it, Asia Times Online, November 27, 2012). 

Following the elections, Japan's monetary policy impetus has moved into aggressive easing as the government and the Bank of Japan attempt to push the yen sharply lower by easing quantitative policy and accelerating the purchase of bonds issued by the US and European governments (the Italians and the Spanish sent a couple of "thank you" notes to the new government, presumably). 

Meanwhile, other Asian countries - primarily Korea and China - are increasing their own purchase of Japanese government bonds to offset the effect of a falling yen on their own currencies. And all along, Federal Reserve chairman Ben Bernanke and European Central Bank president Mario Draghi are cheerfully printing money by the trillions to support yawning fiscal deficits and to keep their currencies from rising. 

Think of the average pensioner anywhere in the Group of Eight leading industrialized nations and the picture is downright depressing. With regular income from bonds and bank accounts whittled down to barely nothing, they are being forced to take on financial risks by purchasing "high dividend" stocks or worse, corporate bonds. These are not folks who are equipped to analyze such risks, let alone manage them. 

Businesses go bust when they run out of liquidity, not when they run out of "capital" or any such esoteric concept. Granted that HMV and Blockbuster were so bad that not even all the money sloshing around the global financial system could save them, but that also raises the question of how many companies and governments survive today because of the excess money sloshing around. 

At the very least, we know that interest rates and risk premia are severely depressed in G-8 countries and, as a result, across much of the financial world. There are countries that would be considered borderline default where government bond spreads are trading well under 5%, an anomaly that makes no sense irrespective of the "base" funding rate. Similarly, equity markets are getting record inflows at a time when valuations aren't exactly cheap anywhere in the world. 

Such conditions are usually spelt b-u-b-b-l-e; and I entirely hold Bernanke, Draghi and their kin responsible for this state of affairs. There will be time of reckoning later, but for now we will have to live with all the Keynesian rationalization. 

Why is Schumpeter important

One of the key defenses used by those seeking to broaden the ambit of monetary policy whilst emptying government coffers is that corporate closures are bad form and cause disruptions for employees and other stakeholders alike. This is indeed true over the short term, but over the longer term the truth is perhaps in the opposite direction and in line with the views of Austrian economist Joseph Schumpeter on "creative destruction". 

Systems that weed out inefficient capital users end up deploying funds to more deserving users thereby reducing the overall risk of the system and increasing the gap between risky and less risky ventures; this extra compensation therefore ends up attracting more robust capital - and perhaps more appropriate capital for risky ventures. 

In contrast to this, folk who lend money to French companies - typically only other French folk - see their risk analysis dulled by constant government intervention and corporate subsidies (internally) to their worst divisions. When the car firm Peugeot decided to shutter some plants and fire workers recently, the howls of protest were loudest from the country's socialist government, which may however not have quite realized that by denying the company such internal efficiencies they inevitably put the firm at a longer-term disadvantage that increases the chances of a comprehensive collapse at a later date. 

Investors in such countries will also be confused as to the correct risk premium for a loss-making company compared to that for a profitable company; because debt is about getting one's funds back, the question becomes academic if loss-makers are routinely bailed out. This dulls the calculation of risk, inevitably driving inappropriate funds - pension funds and the like - towards risky assets. 

That is the reason why the HMV and Blockbuster stories are important. By providing a timely reminder that bad businesses will not survive even the easiest of monetary conditions, they have served to remind all of us of events likely to unfold when the price of money starts adjusting towards more appropriate levels.