This reckless greed of the few harms the future of the many

 

 

The government must act firmly to control an industry that destabilises all our lives with its naked pursuit of huge profits

Will Hutton
Sunday January 27, 2008
The Observer

Never in human affairs have so few been allowed to make so much money by so many for so little wider benefit. Across the globe, societies and governments have been hoodwinked by a collection of self-confident chancers in the guise of investment bankers, hedge and private equity fund partners and bankers who, in the cause of their monumental self-enrichment, have taken the world to the brink of a major recession. It has been economic history's most one-sided bargain.
Last week's financial panic was further evidence of the extreme foolhardiness with which global finance has been organised and managed. There was the biggest one-day fall in Wall Street since 11 September, which spilled over into every world stock market and the largest single cut in American interest rates for 25 years as an emergency attempt to stop the rout. A new crisis emerged in an obscure American insurance business (monoline, it is called). To cap it all, there was the £3.7bn bank fraud at Société Générale.
The growing realisation of how exposed the financial system is - and from transactions that should never have taken place - is reinforcing the mounting credit crunch, which, in turn, is spooking stock markets. The US economy is weakening while in Britain new mortgage lending is at a 10-year low. The staples of a settled life - jobs, pensions and house prices - are all under threat.
The availability of credit is one of the fundamental pillars of any economic system. Like the delivery of gas, electricity and water, finance should be regarded as a utility and after the credit-crunch disasters of the 1930s, following the free-market 1920s, it was regulated as one. But Anglo-American financiers have used the theories of the free-market fundamentalists to argue that it should be liberated from such regulatory 'shackles' and again run as a business like any other.
Yet finance is not like any other business. When a bank makes a mistake, the ramifications for the rest of the financial and economic system are so severe that it has to be bailed out - witness Northern Rock. Because of this truth, financiers have organised themselves so that actual or potential losses are picked up by somebody else - if not their clients, then the state - while profits are kept to themselves. An industry that socialises losses while privatising profit, and that has the capacity to create booms and busts alike, has to be as closely regulated as any utility.
I was reminded of the system's proclivities by a consultant friend who was hired to arbitrate over a performance bonus between a hedge fund and one of its asset managers. The individual in question was paid a base salary of some $100,000, but the investment funds he managed had done well over 2007, rising in value by more than $500m. His bonus was $206m and he felt that to conform to industry norms, his bonus should be nearer $250m - the cause of the dispute.
What, I asked, would happen in 2008 if the assets he managed fell in value? He would get paid his base salary and no bonus came the reply. And would he be required to repay any of the $250m he had pocketed this year? Of course not.
This is the one-way, short-term bet that is endemic in the way the financial services industry rewards itself and which incentivises recklessness. Raghuram Rajan, former chief economist of the IMF, differentiated between two sources of wealth generation in the financial markets in an insightful article in the Financial Times earlier this month. There is run-of-the-mill 'beta' value created because stock markets and the economy are set fair and going up; then there is special 'alpha' value generated by investors such as American billionaire Warren Buffett who see opportunities others do not.
The problem is that while we know a priori that there are only one or two Buffetts around who deserve alpha-style pay, this has become the way the entire financial system's executive class rewards itself - being paid as if just one year's performance revealed them to be alpha superstars when, in truth, most are ordinary beta performers. It takes longer than a year to reveal who is alpha and who is beta, whatever executives like the hedge-fund manager in dispute over his bonus may claim.
The remuneration structure is a disaster. One of the reasons why rogue trader Jérôme Kerviel faked a stunning £3.7bn of transactions at SocGen may have been because he regarded himself as being paid as a beta when he should have been paid as an alpha like everybody else. Moreover, he was able to fool the bank by trading in the daffy instruments that the financial system created to persuade national governments that it is not running excessive risks, an insurance that laid off risks to others. Hence the casino character of many new financial markets, which essentially operate as bookmakers accepting differing bets on future prices. Underneath their technical names - monoline insurance, derivatives, debt securitisation - lies little more than bookie principles and practice.
But selling off bad risks doesn't mean the catastrophe won't occur. And when the balloon goes up, the financial system screams for government intervention - to cut interest rates aggressively and to bail out stricken banks and insurance companies. Indeed, better still for the financiers, a gullible government can be persuaded to assume the risk, the exact principles of the Goldman Sachs-devised bail-out of Northern Rock - lubricated by excessive fees to the partners.
Thirteen years ago, I tried to blow the whistle on financial market liberalisation in my book The State We're In. It was obvious then what is even more obvious now: financial market freedom embeds short-termism, guarantees lower investment, works against business building and innovation, generates booms and busts, inflates house prices, creates system-wide risk and excessively rewards those who work in them. I thought the Germans and Japanese were better than the British and Americans in the way they organised and regulated finance and that while Britain and America might look good in the short term, their economies would eventually come back to earth with a bump.
New Labour threw a protective mantle around the financial markets in a way it never would for industry and sceptics were patronised as backward-looking, Old Labour know-nothings. Let's hopes these new crises will prompt a root-and-branch rethink. Of course, like the Americans, the British need to respond by aggressively cutting interest rates, cutting taxes and lifting public spending.
But more, we need to regulate closely how the financial system deploys its capital, develops its loans and how its people are paid, an initiative that requires global support. We need the financiers to serve business and the economy rather than be its master.
This is not a question of helping the financial system better to understand the risks it runs through more 'transparency', the friendly diagnosis deployed by both the Governor of the Bank of England and the Prime Minister in speeches last week. This is about reworking the one-sided bargain between finance and our economies. Only then can we lay the foundations for recovery and bring some semblance of fairness and rationality to the way these plutocrats behave.

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She said what? About who? Shameful celebrity quotes on Search Star!

Economic Growth: Where next when we are already sated with luxury?

Yet iPods were launched as long ago as 2001, and I now read that Apple has sold more than 100 million of them and fears the market has reached saturation. I had thought I was part of an exclusive world club of those who would spend a considerable sum on something that was pure luxury. But this is not the case at all. In the years since its invention it has become part of competitive consumerism: "I have one... he has one... oh, you mean you don't have one?"

Every parent will be familiar with the pattern, just as every advertiser will know how to prompt and tease people into feeling socially inferior simply because they haven't acquired something that basically they don't need but have been pressured into wanting.

Faced with a saturated market for iPods, Apple is worried. iPod sales in the US have been no higher than they were last year. Eager to keep people wanting new ones they have fiddled with the design and added more so-called "features". Being up to date is a key part of marketing psychology: the sense of being left behind threatens people's self-confidence and is a powerful blackmailing tool especially effective for use against parents. It is a totally pernicious trend encouraged by a market that puts the need for growth as its first priority. Apple's latest version, the iPod Touch, has touch-screen technology capable of playing videos and of downloading from computers without a cable connection. Who needs it?

I am not saying it isn't fun to have these things. But to seek to build industrial growth and marketing strategies around ever-diminishing returns of fancy refinements to objects that are not really needed in the first place, must surely get the whole balance of economic effort wrong.

It is all fine and dandy when world economies are favourable, but we are not in such times. We are bombarded daily by doom-merchants hanging in there with malicious glee in expectation of a slump. By midweek we were being told of a growth rate of 4 per cent in the last quarter, and "significant risk" of a downturn in the economy. George Soros declared that we are heading for recession, and business gurus were on hand to analyse the latest trends in the FTSE and movements in the housing market.

A corporation that doesn't declare perpetual growth is seen to be in trouble, and in need of attention. Step forward private equity to help turn round enterprises that aren't meeting the norms of economic expectations. We are on a treadmill of economic behaviour that is failing to answer what the world needs, which is to satisfy the needs of its peoples rather than the wants of the already affluent. Does it have to be like that? Indeed, I would say that the imperatives of the planet – finite resources, pressures on the environment – are such that now is the very time to conceive of other economic patterns.

China has proudly announced an 11 per cent growth in the past year, but at what cost, not only to its citizens but also in pollution of the atmosphere. The gadgets we so enjoy are being manufactured by working populations whose conditions and outlook are shaped by the need for growth. When I was in China in early 1980 the country's economy seemed to be focused on meeting the needs of its people: not just reasonable housing, fresh water and subsistence living, but literacy and social cohesion. The policy of the one-child family was merely the most ruthless strategy to deal with its internal problems. Globalisation – the international movement of capital and business – has served to extend the problems worldwide.

There are plenty of places where people's needs are not being met. But all too often their economic effort goes to supplying the luxury wants of the rest of us. Yes, yes, I know all about trade, and investment, overseas aid and companies based in the developed world bringing employment to the undeveloped. But it all serves the goddess of growth. Surely it's time for a radically new approach to the planet's resources and how to deploy them.

Global shortages have already given us wars over oil. We are on the brink of wars over water. I bet they have plenty of iPods in Davos, but how many in Darfur? Competitive consumerism doesn't seem to be the answer. Is asking, "How can we restore growth" the right question?

Economic Growth: Where next when we are already sated with luxury?

Yet iPods were launched as long ago as 2001, and I now read that Apple has sold more than 100 million of them and fears the market has reached saturation. I had thought I was part of an exclusive world club of those who would spend a considerable sum on something that was pure luxury. But this is not the case at all. In the years since its invention it has become part of competitive consumerism: "I have one... he has one... oh, you mean you don't have one?"

Every parent will be familiar with the pattern, just as every advertiser will know how to prompt and tease people into feeling socially inferior simply because they haven't acquired something that basically they don't need but have been pressured into wanting.

Faced with a saturated market for iPods, Apple is worried. iPod sales in the US have been no higher than they were last year. Eager to keep people wanting new ones they have fiddled with the design and added more so-called "features". Being up to date is a key part of marketing psychology: the sense of being left behind threatens people's self-confidence and is a powerful blackmailing tool especially effective for use against parents. It is a totally pernicious trend encouraged by a market that puts the need for growth as its first priority. Apple's latest version, the iPod Touch, has touch-screen technology capable of playing videos and of downloading from computers without a cable connection. Who needs it?

I am not saying it isn't fun to have these things. But to seek to build industrial growth and marketing strategies around ever-diminishing returns of fancy refinements to objects that are not really needed in the first place, must surely get the whole balance of economic effort wrong.

It is all fine and dandy when world economies are favourable, but we are not in such times. We are bombarded daily by doom-merchants hanging in there with malicious glee in expectation of a slump. By midweek we were being told of a growth rate of 4 per cent in the last quarter, and "significant risk" of a downturn in the economy. George Soros declared that we are heading for recession, and business gurus were on hand to analyse the latest trends in the FTSE and movements in the housing market.

A corporation that doesn't declare perpetual growth is seen to be in trouble, and in need of attention. Step forward private equity to help turn round enterprises that aren't meeting the norms of economic expectations. We are on a treadmill of economic behaviour that is failing to answer what the world needs, which is to satisfy the needs of its peoples rather than the wants of the already affluent. Does it have to be like that? Indeed, I would say that the imperatives of the planet – finite resources, pressures on the environment – are such that now is the very time to conceive of other economic patterns.

China has proudly announced an 11 per cent growth in the past year, but at what cost, not only to its citizens but also in pollution of the atmosphere. The gadgets we so enjoy are being manufactured by working populations whose conditions and outlook are shaped by the need for growth. When I was in China in early 1980 the country's economy seemed to be focused on meeting the needs of its people: not just reasonable housing, fresh water and subsistence living, but literacy and social cohesion. The policy of the one-child family was merely the most ruthless strategy to deal with its internal problems. Globalisation – the international movement of capital and business – has served to extend the problems worldwide.

There are plenty of places where people's needs are not being met. But all too often their economic effort goes to supplying the luxury wants of the rest of us. Yes, yes, I know all about trade, and investment, overseas aid and companies based in the developed world bringing employment to the undeveloped. But it all serves the goddess of growth. Surely it's time for a radically new approach to the planet's resources and how to deploy them.

Global shortages have already given us wars over oil. We are on the brink of wars over water. I bet they have plenty of iPods in Davos, but how many in Darfur? Competitive consumerism doesn't seem to be the answer. Is asking, "How can we restore growth" the right question?

Unsentimental Education

Unsentimental Education

Unless the Labour party starts to show some mettle, we will be stuck with a system which cripples state education, preserves the class structure and permits a few thousand frightening, retentive people to rule over us.

GEORGE MONBIOT

If only the government would justify the paranoia of the ruling classes. They believe, as they have always believed, that they are under unprecedented attack. All last week the rightwing papers rustled with the lamentations of the privileged, wailing about a new class war. If only.

The whinge-fest was prompted by the publication of the Charity Commission’s new guidance about public benefits(1). If institutions want to retain their status as charities, they should demonstrate that they do good(2). The benefits they create should outweigh the harm they might do, the poor should not be shut out, and "charities should not be seen as ‘exclusive clubs’ that only a few can join". It hardly sounds radical: after all, what sort of charity is it that doesn’t meet these conditions? Well, it’s a distressed gentlefolks’ association called the private school, and it costs us £100m a year in tax exemptions(3).

Though they cannot meet even the crudest definition of charities, the commission - doubtless terrified of the force they can muster - grants private schools a series of escape clauses. Their charitable status will be preserved if they provide some subsidised places to poorer pupils or share some of their facilities with other schools, even if they charge for them(4). Thus, according to Melanie Phillips, Simon Heffer and a Telegraph leader, the commission has launched a "class war"(5,6,7), motivated (according to Heffer) by "government-orchestrated spite" or (a headteacher writing in the Telegraph) "the rhetoric of envy"(8). As seven of the Charity Commission’s nine board members were privately educated(9), this seems unlikely.

The private schools and their alumni have been fighting a class war for centuries. "Public schools" are so-called because this is what they once were. Eton was founded in 1442 exclusively for the children of paupers: no one whose father had an income of more than five marks could study there. Harrow, Winchester, Rugby and Westminster were also established as free schools for the poor(10). But they and their endowments were seized by the nobility, often by devious means, and the paupers were booted out. Today, private schools continue to capture public resources, by buying up the best teachers (trained at public expense) from the state sector(11). Under the Tories they received a further government subsidy, called the assisted places scheme.

No one who read Nick Davies’s investigation a few years ago into the state of our schools could doubt that the harm done by private education outweighs the benefits(12). Drawing on academic research, he found that the schools which fail are the ones whose pupils are overwhelmingly poor. "If the bright middle-class children are being siphoned off into private schools and a minority of state schools … then children in the rest of the system will fail to achieve comparable standards. The system fails because it is segregated, because it leaves the struggling children to struggle alone."(13) The Charity Commission’s loophole - private schools can keep their taxes if they subsidise places for the bright children of the poor - exacerbates the harm they inflict on the rest of the system.

But the damage goes far beyond this skimming. British private schools create a class culture of a kind unknown in the rest of Europe. The extreme case is the boarding prep schools, which separate children from their parents at the age of eight in order to shape them into members of a detached elite. In his book The Making of Them the psychotherapist Nick Duffell shows how these artificial orphans survive the loss of their families by dissociating themselves from their feelings of love(14).Survival involves "an extreme hardening of normal human softness, a severe cutting off from emotions and sensitivity."(15) Unable to attach themselves to people (intimate relationships with other children are discouraged by a morbid fear of homosexuality), they are encouraged instead to invest their natural loyalties in the institution.

This made them extremely effective colonial servants: if their commander ordered it, they could organise a massacre without a moment’s hesitation (witness the detachment of the officers who oversaw the suppression of the Mau Mau, quoted in Caroline Elkins’s book, Britain’s Gulag(16)). It also meant that the lower orders at home could be put down without the least concern for the results. For many years, Britain has been governed by damaged people.

I went through this system myself, and I know I will spend the rest of my life fighting its effects. But one of the useful skills it has given me is an ability to recognise it in others. I can spot another early boarder at 200 metres: you can see and smell the damage dripping from them like sweat. The Conservative cabinets were stuffed with them: even in John Major’s "classless" government, 16 of the 20 male members of the 1993 cabinet had been to public school; 12 of them had boarded(17). Privately-educated people dominate politics, the civil service, the judiciary, the armed forces, the City, the media, the arts, academia, the most prestigious professions, even, as we have seen, the Charity Commission. They recognise each other, fear the unshaped people of the state system, and, often without being aware that they are doing it, pass on their privileges to people like themselves.

The system is protected by silence. Because private schools have been so effective in moulding a child’s character, an attack on the school becomes an attack on all those who have passed through it. Its most abject victims become its fiercest defenders. How many times have I heard emotionally-stunted people proclaim "it never did me any harm"? In the Telegraph last year, Michael Henderson boasted of the delightful eccentricity of his boarding school. "Bad work got you an ‘order mark’. One foolish fellow, Brown by name, was given a double order mark for taking too much custard at lunch. How can you not warm to a teacher who awards such punishment? … Petty snobbery abounded," he continued, "but only wets are put off by a bit of snobbery. So long as you pulled your socks up, and didn’t let the side down, you wouldn’t be for the high jump. Which is as it should be."(18) A ruling class in a persistent state of repression is a very dangerous thing.

The problem of what to do about private schools and the class-bound system they create has been neatly solved by the Guardian columnist Peter Wilby(19,20). He proposes that places at the best universities should be awarded to the top pupils in each of the UK’s sixth forms, regardless of absolute results. Middle-class parents would have a powerful incentive to send their children to schools with poor results, then to try to ensure that those schools acquired good resources and effective teachers. They would have no interest in sending their children to private schools.

But who is prepared to fight the necessary class war? Not the government, or not yet at any rate. Not the Charity Commission. Unless the Labour party starts to show some mettle, we will be stuck with a system which cripples state education, preserves the class structure and permits a few thousand frightening, retentive people to rule over us. And this will continue to be deemed a public benefit.

Why share price falls will put the brake on consumer spending

Why share price falls will put the brake on consumer spending

By Jeff Randall
Last Updated: 6:47am GMT 23/01/2008

Have your say Read comments

Yesterday morning, I nearly threw the radio out of the bathroom window. The cause of my temper tantrum was yet another air-head contributor claiming that what was going on in the City - sharply falling share prices - had nothing to do with life in the real world.
# Read more by Jeff Randall

It's a view that you might have expected from a 1970s social affairs lecturer, but not in post-Thatcherite Britain.


What happened on Monday, when the stock market fell by 5.5pc, its biggest one-day drop since the terror attacks of 9/11, will have a very immediate impact on ordinary consumers. Not just through a downturn in sentiment but via the pockets of millions who hold shares directly or in pension pots, tax-free Isas and other savings plans.

Earlier this week, I had a chat with Lucy Neville-Rolfe, a Tesco director, who told me that of the company's 300,000-plus UK employees, 179,000 own Tesco shares, most of which were accumulated through a save-as-you-earn scheme. These are not "free" options for senior managers, but small stakes in the company bought by supermarket staff who are not earning fortunes.

Tesco's shares have held up well compared with those of most of its retail rivals. Even so, the price has fallen by 15pc in recent weeks. By contrast, shares in Sainsbury's (with 60,000 employee investors) are down by nearly 40pc. At Marks & Spencer, 25,000 staff have seen their investments in the business fall by 45pc from last spring's peak. Where's St Michael when you need him?

Aside from retail, Britain's other main private-sector employer is financial services. At the big five banks, being a staff investor has proven less rewarding than dealing with an account manager in a Bangalore call centre. Many workers are nursing horrible losses on their employers' shares, which have fallen by 40pc-50pc. Money in the bank is not what it was.
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Add all this up, and you have yet another nasty turn of the screw on consumers' thumbs. Already feeling the pain of falling house prices, rising mortgage bills and higher utility payments, their hopes of easing the torture by cashing in profits from staff share schemes have been cruelly cut off.

This is not the parallel universe of venture capitalists, private-equity bosses, hedge-fund managers, investment bankers and futures traders. It is the unpleasant downside of being a bit-part player in a share-owning democracy.

It is true life - right here, right now - the upshot of which is that hundreds of millions, perhaps billions, of pounds of disposable income have vanished. In some cases, the cash has already been spent, exacerbating debt worries. Or, as a friend at Barclays (40,000 staff shareholders) told me:

"I have a keen appreciation of how much poorer I am than I was at this time last year."

For the Endowment Generation, those, like me, who were told by mortgage advisers in the mid-1980s that the best way to fund a new home was through an endowment policy, the stock market's wobble spells double trouble.

We are relying on rising share prices to pay back a 25-year debt, but it's not happening. When these schemes still had more than 10 years to run, stock market "corrections" were merely a notional destruction of wealth. But as the clock ticks down to pay day - mine has only 18 months left - red-faced insurance companies are sending out urgent warnings to many thousands of policy-holders, informing them that what has been built up in their accounts will fall well short of the amount required to clear the mortgage.

Given that between 1977 and 1999, stock markets enjoyed their greatest-ever bull run - 21 years of growth, with only two years of decline - many leading fund managers have performed miserably. They lost so much ground in the dark days after the World Trade Centre atrocities that even though share prices later recovered strongly, with four positive years between 2004 and 2007, millions of endowment policies are full of holes, made worse by Monday's nervous breakdown.

So please, whatever your view on the rights and wrongs of council-estate capitalism, let's have no more comments about anxiety over falling share prices being the preserve of a Square Mile squirearchy. You may loathe Tesco and all that it stands for, but its shares are probably underpinning your pension.

If that's the case, you enjoyed temporary relief yesterday after the US Federal Reserve cut interest rates by 0.75pc, the biggest reduction for more than 20 years. Tesco's shares jumped by 16p to 426½p, as London responded positively. For the market as a whole, however, it still looks like a long haul back to the FTSE 100's peak of 6,900 in December 1999. The index closed last night at 5740.

In America, where stock market indices have outperformed their British counterparts since the bursting of the dot.com bubble, not even the prospect of much cheaper money could lift the gloom. If anything, the Fed's move has dented confidence further because it had a whiff of desperation.

The world's pre-eminent central bank is supposed to be driving the car, steering it away from dead ends and holes in the ground. Instead, the Fed's chairman, Ben Bernanke, looks increasingly like a back-seat instructor, screaming conflicting messages as the vehicle lurches dangerously.

Just as prime minister John Major did in the dying days of the last Conservative government, Bernanke appears to be responding to headlines, making up monetary policy to fit the latest poll on consumer confidence or dip in share prices.

As a result, many on Wall Street are losing faith in the Fed's ability to avoid a crash.

The Bank of England, under Mervyn King, should not go down the same road. It would be completely inappropriate to start slashing interest rates here, where the threat of inflation is real. There is no premium in panic.

India's poor hold the key to its future

By Peter Foster
Last Updated: 12:01am GMT 23/01/2008

Have your say Read comments

Worldstage: New Delhi

In a week when Gordon Brown has visited India and world markets have been rocked by fears of global recession, the stark contrasts between rich and poor in new India are more striking than ever.
# Peter Foster: Till we meet again

As this correspondent leaves the country for the last time, the disparities of wealth remain so vast, they are sometimes dizzying. How do you make sense of a world where you fly to Mumbai in the private jet of one of India's richest men one day and then spend the next in the teeming slums where nine million people live in conditions that, in Europe, would be declared unfit for animals?

Cows rest among the traffic in a busy street in India
Education and healthcare can remove the grinding poverty that afflicts most of India

One particular night, two years ago, the jet belonged to Vijay Mallya, owner of the Kingfisher beer brand and the man often styled as "India's Branson".

He was exhausted but very happy, having a few hours previously signed off on a new airline that would see his ever-present corporate banner take to the skies. He was brimming with excitement about the new India, a business story "of such humungous proportions", he said, that people in Europe and America "cannot comprehend".

As we lounged on the monogrammed upholstery, sipping a fine Chablis, Mallya punched a button on his arm-rest. A plasma screen television came to life and played a pilot of an advertisement for the new airline. It starred Mallya, exhorting would-be customers to "Fly the Good Times" with him, the self-styled "King of Good Times" in boom-town India.

As the plane touched down, its wing-tips seemed almost to brush the tin-roofed shanties that crowd the perimeter of Mumbai's airport, their sweet stink filtering through the air-conditioning system of Mallya's private Boeing.

On the tarmac, we went our separate ways - Mallya to his Bentley and penthouse; me and my notebook to a couple living in a hovel under a bridge in Dharavi slum.
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Shenaz and her husband, Subir, both in their early twenties, made their living sifting household rubbish for metal, squatting on the floor of their shack searching for anything that might be worth a few precious rupees - an iron bed spring, a brass door catch, a few strands of copper wire - anything that had a price with the scrap dealers. Like millions of others, they had come from a village in rural India to scratch a living in the city.

Theirs was - is - a pitiful existence, but as I rapidly came to realise on my travels in India, pity is a commodity that most people, however poor, don't have much time for.

Shenaz and Subir lived on the edge of an open sewer, in a wooden box not much bigger than two large packing cases, actually and metaphorically at the bottom of India's billion-man economic dust-heap. Surely village life was preferable to this, I wondered? Shenaz smiled. "Here we eat every night," she said, "and we even save some money."

Development, as the economists say, is a "messy business", but in India that particular truism is all too often an excuse for inaction and indifference.

Foreign visitors to India (and plenty of wealthy Indians besides) often allow themselves to think that India's poor - some 700 million people, depending on where you draw the line - are content in their poverty; that they know nothing else and somehow manage to keep smiling. But in my experience, that is not the case.

The truth is that India's poor are angry, and rightly so. Their schools are too often empty of teachers - India sits only above Uganda for absenteeism, according to a UN survey this year - and, without education, the poor have no chips to join in the game of global capitalism.

Public health is a disaster - almost half of all children in India are malnourished - a fact that can largely be ascribed to the fact that their political masters are running a kleptocracy, often of African proportions. Why else did the World Bank withhold £550 million in health-project loans to India last year, a humiliation also meted out to Chad, Kenya and Congo?

At times over the past four years it has been hard to love India (though very rarely Indians themselves), such is the contempt with which much of the country's elite treats the unwashed poor. Ministers deliver laudable speeches almost daily, economic summits are attended with back-slapping fanfare but the gap between intention and action remains Brahmaputra-wide.

Perhaps it is caste discrimination - still endemic in 80 per cent of Indian villages, says Human Rights Watch - that allows such indifference to the poor to prevail. Perhaps it is just that India's middle classes are enjoying themselves so much - the stock market increased by 50 per cent this year - that they don't see the connection between rural poverty and their own futures.

But like it or not, while the poor are India's burden today, they are also the key to it tomorrow. More than 70 per cent of Indians believe their country will be an economic superpower by 2020, according to a survey published last month by a German research organisation.

But that commonplace prediction won't come to pass unless and until Shenaz and Subir, and several hundred million people like them, receive the health and education they need to become the next generation of consumers and workers.

It is a matter of pressing self-interest, not charity, for India's elite classes, because, without that investment in the human foundations of India's economy, Mr Mallya and his customers might not be "flying the good times" for as long as they currently seem to think.

Infidelity : 'Being unfaithful keeps me happy'

Infidelity : 'Being unfaithful keeps me happy'

Last Updated: 12:01am GMT 22/01/2008

Continuing her investigation into Britain's adultery epidemic, Angela Levin talks to professional women who have affairs to bolster their marriages - and revitalise flagging sex lives
# The Infidelity files: Day 1 - Desperately seeking someone

Sylvia, 43, has a highly paid job in the City. Her husband is supportive and they have two children. She entertains at weekends, enjoys luxury holidays twice a year and has time for her friends.

Get some spice in you life: Many women turn to affairs to cope with a loveless marriage
Get some spice in you life: Many women turn to affairs to cope with a loveless marriage

To those in her circle, she seems to have an enviable life and to have mastered the difficult art of balancing work with home and family. What they don't know is that she has a higher libido than her husband and regularly takes a lover.

Sylvia belongs to a small but growing group of alpha woman - financially independent, confident and uninhibited - who, like men, have developed a similar pro-active, almost cynical approach to sex.

For them, it is no big deal to seek sexual fulfilment outside marriage and they claim to be able to separate lust from love.

"I am one of those women who want it all," she laughs. "My life is very hectic and I thrive on adrenaline. I really enjoy sex, but I don't want any complications. So I am only interested in men, preferably married, who want the same."
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Just how many women today are having sex with men who are not their husband is hard to pin down, but some sex researchers are claiming it is as high as 60 per cent.

Whatever the numbers, much has changed since Emma Bovary decided she couldn't take the humiliation of living life being branded an adulteress and committed suicide by taking arsenic.

The hard-nosed, predatory female of today is perhaps the evolutionary reality of a phrase originally coined by author Erica Jong in her taboo-busting 1973 bestseller, Fear of Flying.

She described a sexual encounter for its own sake, without emotional involvement or commitment and between two previously unacquainted persons, as a "zipless f***"; she also said it was "rarer than the unicorn".

Nearly 35 years on, these encounters are available with a click of the mouse.

Over a five-month period, I talked to almost 100 middle-class professionals, both male and female, who confessed to being unfaithful.

What was remarkable was that not one of the women said they felt guilty. And those who believed they might get emotionally involved tried to work out hard-headed strategies of dealing with it.

Although it would seem that no-strings-attached sex is the emotional equivalent of McDonald's - in that it can satisfy a certain hunger but is quickly forgotten and doesn't do you much good - many of the women I spoke to saw it as a better option than having an affair with someone they work with, which could put their career at risk.

Nor did they want to get involved with a family friend.

Lynne, a 45-year-old married administrator, thinks the growing popularity among women of no-strings relationships is a result of their success in the workplace. "Now we are as successful as men at work and other areas of life, women like me think, 'Why the hell not?' My lover won't jeopardise my work or family life. I am doing something that makes me happy, which, in turn, makes home happier, too.

"Women have come a long way in the last 20 or 30 years, so why should taking a lover without commitment be a male preserve? I just think, 'Lucky me.'?"

Jenny, 48, who runs her own business, thinks the trend for uninvolved sex is part of today's have-it-all society.

"In the past," she says, "a wife would think, 'I've got a decent husband and live in a presentable house, so I can't expect too much.' But now our expectations are much higher and we don't want to compromise. I've done it and don't feel guilty at all.

"I spend a lot of time caring for my husband and child and running my business, and I think of this as something for me. Women have always had sexual needs, but culturally we've not been encouraged to attend to them. Now we are more willing and able to make decisions about what happens to us. Some of us might choose to go to the cinema for a night out. Others might prefer to have sex."

So while more men are in tune with their feelings and want more from an extra-marital relationship - emotional companionship as well as physical contact - some women want less. Less involvement, less friendship, and more sex.

But can women really be quite so matter-of-fact and unemotional about infidelity? Can evolution be gradually turning women, whose priority was once to build nests and care and be cared for, into hunter-gatherers?

Are Byron's words: "Man's love is of man's life a thing apart; 'tis woman's whole existence" really no longer valid?

Possibly. Most women are sexually experienced before marriage. They are financially independent. Nor is there a stigma attached to the adulterous woman.

As recently as 1970, if a woman was found to have had an extra-marital affair, she not only forfeited her right to maintenance but also risked losing her children.

It was a penalty Diana, Princess of Wales's mother, Frances, discovered to her cost. After years of an unhappy marriage to Earl Spencer, in the late 1960s she had an affair with wallpaper merchant Peter Shand Kydd.

She left her husband, taking their four children with her. He felt so humiliated by her adultery that although, at the time, women were routinely given custody of the children, he fought her in the courts and won.

The judge made much of branding her as an adulteress and seemed to take no account of her cross-petition on the grounds of cruelty. Now, when couples divorce, any sexual misdemeanours by the woman are considered on a par with a man's.

We do not yet, however, have a no-fault-based divorce system like Spain or Canada.

Nor are women who have extra-marital relationships confined to a particular age group.

While today's women of 40 and younger see having great sex as their right (some studies show that the more sexual partners a person has before marriage, the more likely she or he is to cheat on a spouse), many fifty- or even sixtysomething women, in common with their male counterparts, don't want to be left out.

These are the generation of women whose children have left home. They are fitter and better looking than their predecessors, thanks to HRT, Botox and plastic surgery, and seek new challenges.

While some choose physical challenges, a recent report from Germany cited that one in three fiftysomething women are looking for a sexual adventure. Perhaps they are catching up on all they missed during those sleep-deprived times when their children were small.

Teresa, who is 52, is one example. She has been married 27 years and, when her youngest left home she decided she wanted more excitement in her life.

"I have a good husband, but I have spent my life lying on my back thinking of England when we have sex. He's never been any good in the bedroom. He has a low libido and little interest. I knew that when I married him and he is a good man in every other respect.

"For years, I kept wondering what it would be like to meet someone who was really exciting in bed. Then about nine months ago I placed an ad on the internet just for the fun of it. I was inundated with replies, but mostly from losers. There was only one man who stood out. We met and there was instant chemistry between us. We met again on an occasional basis, but then I realised that psychologically I wasn't the type to be unfaithful. I would hate my husband to find out, so I stopped. But I don't regret it."

Julie, 49, who is married with one son and has a senior position in a health authority, knew she wanted more out of an extra-marital relationship than just sex.

"My husband and I haven't had sex for years," she explained. "He is 15 years older than me and although it wasn't a problem when we first got married 20 years ago, his approach to life now is that of an old man. We sleep in separate bedrooms and I don't think he sees me when he looks at me.

"For much of our marriage, I put my needs to one side and concentrated on my work and looking after my family. But about five years ago, I began to feel increasingly unhappy and unsettled. I wanted to do something about it, but didn't know how to go about it. The only men I met were my husband's colleagues or fathers of my children's friends. So I contacted a dating agency for married people. I was a little nervous of the interview, so I took along a close girlfriend.

"I only wanted to meet married men who wanted to stay married. I want to be happier, but not wreck my marriage. Although I'm not in love with my husband any more, he's becoming elderly and I wouldn't want him to be a lonely old man. I wanted to take a lover to keep me happy.

"I was offered a choice of three men. I contacted each one, we met for a drink, and I then spent about five months getting to know the man I most liked. It was important for me to develop a friendship and trust before we had sex. If I had just wanted sex, I could have tried to pick up someone in the local pub."

The relationship wasn't, however, as manageable as she hoped. "I broke off with him after a year because I found myself getting too emotionally involved and realised I would get more so if I continued. Although my partner, who is also married, enjoyed being with me very much, he didn't feel involved with me in the same way."

Other women, like Mary, 55, claim to have affairs to help them stay with their husbands until the children leave home. "I know that eventually I will leave my husband, but I don't want to while our children are still at home," she explained.

"I have a lover, our relationship has lasted two years, and I hope I don't have to have another one. Although it has made me slightly distant with my husband, I am also less irritable and if something happens in the relationship I don't like, I tell myself that I have different pleasures."

Others, like Anne, who is 54, chose to have an affair because she wanted to be indulged and spoilt. "I entered into a relationship because I wanted to be adored, desired and given lots of attention - all things I don't get at home. And that is what I have found.

"I meet my lover every two or three weeks in a hotel. He always pays and nearly every time buys me presents - nothing that would be awkward to explain, but perfume, chocolates and flowers. Of course, I can never take the flowers home and after our couple of hours together they end up in the bin in the hotel room, but he understands that."

Getting caught is not a pressing worry. "I hope I don't live to regret this," she continued. "But I honestly don't think it would occur to my husband that anything could be going on. If he did discover I've been unfaithful, he would probably be crushed. It makes me feel uncomfortable but not guilty. Guilt is a pointless feeling. Nor do I feel guilty about my lover's wife. His relationship with her is quite poor. He hadn't had sex with her for years, not just for a month or two.

"My daughter is a different kettle of fish. A short while ago, she commented that I seemed much happier than I had been. I fobbed it off. She once picked up my mobile and started playing with it. It gave me a fright as my lover regularly sends me sexy texts. I've since changed the pin number. I would hate to go down in her estimation."

She admits she doesn't always practise safe sex. "At the beginning of our relationship, I made sure he used a condom but when it looked as if it would work out, we both went to a clinic and got ourselves checked, showed each other the results, and then stopped using protection."

Several women, including Mary, mentioned how much they enjoyed the feel-good factor that comes from a fulfilling sexual relationship. "I've relearnt how to be a sexually confident woman, which is a good thing," she said. "I also take much more care of my appearance."

If a woman starts to feel vulnerable, Anne, 45, believes in handling it rationally. "Women are naturally more emotionally vulnerable than men," she conceded, "so we have to exercise self-discipline. Everything in life has its disadvantages and we have to learn to cope. It is easy to get too involved but we just have to stop ourselves and know where to draw the line.

"There's no reason why a multitasking woman can't handle extra-marital relationships in a similar way to a man. I multitask to an astonishing degree in my business life, and all I am doing is taking that ability into my personal life. It isn't a big deal.

"The point is, I don't believe one person, man or woman, can meet all your needs for the duration of your life. And having a discreet affair is one way of handling that."