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Tuesday, 26 March 2013

Property, theft and how we must breach this sacred line



The 'private good, public bad' madness sees a bedroom tax foisted on the poor while the rich amass vast property wealth
Daniel Pudles
'By focusing on income rather than property we have gravely underestimated the extent of inequality.' Illustration: Daniel Pudles for the Guardian
On Easter Monday, in the wake of a festival of resurrection and redemption, between 600,000 and 900,000 households will either have to move out of their homes or have their benefits cut. The reason is that they are deemed to be under-occupying their property: in other words they have one or more spare rooms. The bedroom tax will hit some of the poorest people in Britain.
Two years ago I proposed something similar. Nearly 8 million homes in England, I found, had two or more spare bedrooms. But only 11% of this under-occupation was in public or social housing. The rapid growth in half-empty homes, according to the government"is entirely due to a large increase within the owner-occupied sector".
Because of the desperate shortage of housing, especially for larger families, I suggested a bedroom tax for owner-occupiers. It was a much gentler measure than next week's tax, as it would apply only to those with at least two spare rooms and would affect only those most able to pay.
The response was an explosion of fury in the rightwing press and blogosphere: the places where the current bedroom tax finds its only supporters. In the Telegraph, Ed West remarked that my idea was "far closer to fascism than the ethno-centric populism of the European radical Right … The state has no business in people's bedrooms – ever." I am still waiting for Ed to denounce the state's intrusion into the bedrooms of the poor.
The difference, of course, is that because housing benefit is paid by the government, the government is deemed to possess the right to withdraw it. But much of the wealth of private householders has also been provided by the state. The value of our homes, for example, has been greatly enhanced by the infrastructure and public services the state provides. Yet the proposal to reclaim some of this unearned wealth through a land value tax is angrily dismissed by the party promoting a bedroom tax for the poor.
Similarly, every year taxpayers in this country spend £3.6bn on farm subsidies. We could by now have bought all the farmland in Britain several times over. But this money has earned us no property rights: farmers still feel entitled to announce at public meetings that "it's my land and I will do what I want with it". Most of the land in this country, if you go back far enough, was seized from other people – often, in the case of the commons, from entire communities. Much of the law we abide by today was drafted to formalise these seizures.
There is a sacred line that divides the world into public and private property. The line is arbitrary and moves every year: ever further across the public realm. But it is policed religiously. As soon as you can bundle the public wealth you've snatched over the line and into the hallowed ground of the private sector, you can claim sanctuary.
Among the Russian government's backers are oligarchs who were enriched by acquiring government assets at a fraction of their value. Their political alliances have ensured that their wealth is neither questioned nor reclaimed by the government. But when the government of Cyprus plans to acquire some of the assets stashed by tax-avoiding oligarchs, the Russian prime minister denounces it as "stealing".
When the threshold is crossed, everything changes. Money spent in the private sector is deemed by politicians and the media to be a good thing. Money spent in the public sector is deemed a bad thing, even though (or perhaps because) it is more effective at distributing wealth. If you are on the right side of the line, the government will deregulate your business. If you are on the wrong side of the line (schools and hospitals, for example), it will subject you to ever more draconian regulation, with cruel and unusual punishments for the slightest resistance to its crazy targets and intrusive inspections.
Gagging clauses in NHS employment contracts are rightly denounced by ministers. But what of the gagging clauses deployed by banks or oil companies or insurance firms, which shield their malpractice from public scrutiny? Where in the media or in government have you heard a call for those to be removed? And why should freedom of information laws stop at the fence marked "private: keep out"? Why, for example, should we not have the right to know what the banks are cooking up?
Take a look at the astonishing chart of property wealth published by the New Economics Foundation and you get an inkling of why attempts to challenge the concentration of private property are denounced as fascism. The graph, using government statistics, suggests that the average property wealth of the top 1% of households is £15m. "The 1% are worth more than the bottom 99% put together." By focusing on income rather than property we have gravely underestimated the extent of inequality.
All this is blasphemy: a trespass into the holy shrine, which has been sanctified by a thousand speeches and editorials. But there is nothing inherently sacred about the veil of the temple that divides the two realms; nothing, as Easter approaches, that must forbid it from being rent in twain.

The immigration debate: evidence-free and more rancid than ever



The three big parties are pushing cowardly, populist policies as they compete to sound as tough as Ukip
Nigel Farage at Ukip conference, Exeter 23 Mar 2013
Nigel Farage: the three main political parties are falling over themselves to match his tough stance on immigration, says Ian Birrell. Photograph: Stuart Clarke/Rex Features
Nigel Farage must have been smiling to himself as he supped his pint of real ale last night. His party has no members of parliament, a situation unlikely to change at the next election, and offers promiscuous and profligate policies that add up to errant nonsense as a platform for government. Yet suddenly he seems to be running the country.
How else can you explain the way all three mainstream parties, panicking as Farage's Ukip insurgency picks up a few points in the polls, are falling over themselves to show they support his tough stance on immigration? Scarcely a day goes by without another apology for past failures, another gimmicky new policy, another sordid attempt to grab headlines.
Today it was the turn of the Tories. The prime minister, using buzzwords beloved by focus groups, announced a raft of restrictions on benefits, social housing and so-called health tourism. The speech bore all the fingerprints of Lynton Crosby, the party's new campaign manager, a proven master in the darkest political arts of exploiting voters' fears.
Never mind that migrants tend to be young and come here to make money, that statistics show they are far less likely to claim benefits than the indigenous population – even after working here for several years. Or that studies have shown they contribute more to the public purse than they take out. Or, indeed, that eastern Europeans I know fly home rather than risk the NHS, even for minor ailments and dentistry.
Nor is there any decent analysis of last month's disastrous Eastleigh byelection. The Tory campaign with a rightwing candidate revolved around immigration, with ceaseless talk of sending back foreign prisoners, cracking down on legal aid abuse and restricting benefits. Yet the party slipped to third place behind Ukip in a seat it once held; all the hardline talk did was revive the nasty-party image and deter moderate voters, while those wanting Ukip voted for the real thing.
Meanwhile, a masochistic Labour party indulges in self-flagellation. It apologises for failing to curb immigration in office instead of explaining that foreigners came here in unprecedented numbers because Britain was booming and played a key role in our success. Their positive contribution to public finances was greater than predicted. Migrants did not increase unemployment, even among unskilled workers, nor make an impact significantly on wages. Yet now Labour, too, talks of constricting benefits, a popular theme because it conjures up two demons: immigrants and welfare scroungers.
Even the Liberal Democrats have joined this rhetorical arms race, ripping apart their threadbare integrity. Nick Clegg last week abandoned his support for an amnesty for illegal immigrants and demanded a discriminatory £1,000 bond for those visiting from "high-risk" countries. All this would do is deter the likes of Nigerians, the fourth-highest overseas spenders in our shops, while preventing huge numbers of Britons from being able to host their relatives for a wedding or family holiday.
Clegg's despicable move highlights how all three parties are twisting themselves into contorted knots, such is their desperation to look tough. So the Liberals propose illiberal policies, Labour targets the poor and the Tories impose bureaucratic and statist solutions. And the voters do not trust any of them. Such scepticism is unsurprising when we learn theUK Border Agency is so incompetent it has a 24-year backlog of asylum and immigration cases. Inadequate border controls render any immigration policies irrelevant. It could also be pointed out that pressures on social housing, for instance, are caused by the long-term failure of politicians to ensure the building of enough new homes. Let us not forget that the real reason for Ukip's corrosive rise is the perceived collective failure of our political classes, not that party's ragtag collection of policies.
Britons think they have a natural right to travel, live and work wherever they want in the world. But amid talk of a global race in which developing nations are surging forward while Europe gazes morosely at its navel, our insecure politicians are proposing isolationist policies that have an impact on national prosperity and indicate hostility to the rest of the planet. They are also guilty of poor long-term politics: this pandering to cheap populism is significantly less liked by younger, more tolerant, sections of the electorate.
For the dwindling numbers of us still retaining faith in Westminster, this is a depressing state of affairs – as most politicians know in their hearts. Every speech has lines praising hardworking migrants, of course, but the overall tone of this cowardly discourse emits a rancid stench. This is fast becoming the most toxic political debate we have endured for decades, one that demeans the protagonists, debases politics and defeats the national interest.

George Osborne is using Britons as economic cannon fodder



This is a dangerous time to push the property market. The chancellor won't invest – yet he's happy for us to
George Osborne
Britons are already up to their eyes in debt … George Osborne. Photograph: Stefan Wermuth/Reuters
Massive public debt: bad. Massive private debt: excellent. Gordon Brown's bubble: economic ruin. George Osborne's potential bubble: economic salvation. Benefits for non-home-owners: unaffordable. Cash bungs for property buyers: essential.
Recite this catechism often and loudly, and over time you too will appreciate the wisdom of the coalition's economic policy.
The consensus over Wednesday's budget was that it was a do-nothing affair, a feeble huddle of small measures washed away in a sea of red ink and broken targets. In terms of central government giving and taking – the traditional stuff of Red Books – it was as small beer as that penny off a pint indicates. But stack up the announcements that don't touch the public balance sheets and the chancellor was strikingly radical.
Because it turns out that Osborne does believe in that apparent epitome of economic loucheness, borrowing to invest. He just wants you and me to do it, using our own wee savings. Sure, No 11 will give us a leg-up, by guaranteeing over £100bn of our loans and sloshing easy money through the banks. But, despite all Vince Cable's exhortations, the chancellor will not do the obvious and less risky thing of public investment.
Have a look at the supplementary document on Help to Buy that the Treasury issued alongside the budget. Billed as a "technical paper", it's not half as innocuous as that sounds. Rather, it's one of the biggest state interventions in the mortgage market in Britain's postwar history.
Help to Buy builds on (no pun intended) existing, largely failed, schemes to help first-time buyers purchase a newly built home. This is in itself problematic, since it's really a bung for the likes of Taylor Wimpey and Barratts and all the other purveyors of identikit housing estates. But warning signs really start flashing with Osborne's proposal to offer banks government guarantees on £130bn of mortgages where the borrowers have low deposits. This isn't just for new homes, it's for any house worth up to £600,000 and it's available not just to first-time buyers, but to people moving up the property ladder.
When the scheme was announced, Ed Miliband's troops successfully got ministers squirming over whether it would be offered to those buying a second home. But that is to miss the bigger point. The first is the risk to public finances: if the property market turns seriously sour, the government stands to make a loss. But the second is the way that ordinary Britons are now being used as economic cannon fodder. Osborne may say, as he did last week, that "you can't cure a crisis caused by debt with more debt". But he doesn't really mean that, because he's just about to launch a policy aimed to get Britain out of its depression – and it relies on households sinking into the red to take part in a property Ponzi scheme.
As I say, the policy is new – but the strategy it's part of has been knocking around for about three decades. The postwar British state used to protect citizens against market failure through the welfare state, through government pump-priming of the economy and through rising wages. But after Thatcher, it was increasingly left to Britons to protect themselves by taking on shares in privatised utilities, by buying up council houses – and by taking on debt, with all the attendant risks. This is what the political economist Colin Crouch has dubbed "privatised Keynesianism": debt is used to reflate the economy, but it is taken on not by the public sector but by individuals, couples, families.
Privatised Keynesianism sounds a bit joyless, but the political classes found something to give it extra zap. Call it housing-market heroin: the special high the Brits get when property prices are really taking off and Sarah Beeny is on the telly explaining how we can all cash in. Thatcher was the first PM to really push housing-market heroin with her right-to-buy programme and her Lawson boom but, with their love of aspiration and Home Ownership Task Force, Blair and Brown knew its potency, too.
Osborne's strategy combines both privatised Keynesianism and housing-market heroin. Yet this is a particularly dangerous time for him to push either. For a start, Britons are already up to their eyes in debt and, outside London, the housing market is flat on its back.
The estate agency Knight Frank estimates that it will take until at least 2019 before property prices are back to the levels of 2007. Add to that the Office for Budget Responsibility's forecast that real wages in Britain in 2015 will be 9% lower than they were in 2010. So the housing market looks less of a sure thing than at any time since 1994, and Britons' personal finances are a wreck. Osborne may think he's found an update of right-to-buy, but it looks more like right-to-be-repossessed.
Still, back to that coalition catechism. Government borrowing to build council housing: forbidden. Individual borrowing to buy an overpriced two-bed flat: encouraged. The way to make the economy stronger is to make it more fragile. And we're all in it together, except really, when it comes to managing your way through this depression, you're on your own.

Monday, 25 March 2013

Cyprus - Treasure Island Trauma



Paul Krugman in The New York Times

A couple of years ago, the journalist Nicholas Shaxson published a fascinating, chilling book titled “Treasure Islands,” which explained how international tax havens — which are also, as the author pointed out, “secrecy jurisdictions” where many rules don’t apply — undermine economies around the world. Not only do they bleed revenues from cash-strapped governments and enable corruption; they distort the flow of capital, helping to feed ever-bigger financial crises.
Fred R. Conrad/The New York Times
Paul Krugman
 
Opinion Twitter Logo.

 

One question Mr. Shaxson didn’t get into much, however, is what happens when a secrecy jurisdiction itself goes bust. That’s the story of Cyprus right now. And whatever the outcome for Cyprus itself (hint: it’s not likely to be happy), the Cyprus mess shows just how unreformed the world banking system remains, almost five years after the global financial crisis began.
So, about Cyprus: You might wonder why anyone cares about a tiny nation with an economy not much biggerthan that of metropolitan Scranton, Pa. Cyprus is, however, a member of the euro zone, so events there could trigger contagion (for example, bank runs) in larger nations. And there’s something else: While the Cypriot economy may be tiny, it’s a surprisingly large financial player, with a banking sector four or five times as big as you might expect given the size of its economy.
Why are Cypriot banks so big? Because the country is a tax haven where corporations and wealthy foreigners stash their money. Officially, 37 percent of the deposits in Cypriot banks come from nonresidents; the true number, once you take into account wealthy expatriates and people who are only nominally resident in Cyprus, is surely much higher. Basically, Cyprus is a place where people, especially but not only Russians, hide their wealth from both the taxmen and the regulators. Whatever gloss you put on it, it’s basically about money-laundering.
And the truth is that much of the wealth never moved at all; it just became invisible. On paper, for example, Cyprus became a huge investor in Russia — much bigger than Germany, whose economy is hundreds of times larger. In reality, of course, this was just “roundtripping” by Russians using the island as a tax shelter.
Unfortunately for the Cypriots, enough real money came in to finance some seriously bad investments, as their banks bought Greek debt and lent into a vast real estate bubble. Sooner or later, things were bound to go wrong. And now they have.
Now what? There are some strong similarities between Cyprus now and Iceland (a similar-size economy) a few years back. Like Cyprus now, Iceland had a huge banking sector, swollen by foreign deposits, that was simply too big to bail out. Iceland’s response was essentially to let its banks go bust, wiping out those foreign investors, while protecting domestic depositors — and the results weren’t too bad. Indeed, Iceland, with a far lower unemployment rate than most of Europe, has weathered the crisis surprisingly well.
Unfortunately, Cyprus’s response to its crisis has been a hopeless muddle. In part, this reflects the fact that it no longer has its own currency, which makes it dependent on decision makers in Brussels and Berlin — decision makers who haven’t been willing to let banks openly fail.
But it also reflects Cyprus’s own reluctance to accept the end of its money-laundering business; its leaders are still trying to limit losses to foreign depositors in the vain hope that business as usual can resume, and they were so anxious to protect the big money that they tried to limit foreigners’ losses by expropriating small domestic depositors. As it turned out, however, ordinary Cypriots were outraged, the plan was rejected, and, at this point, nobody knows what will happen.
My guess is that, in the end, Cyprus will adopt something like the Icelandic solution, but unless it ends up being forced off the euro in the next few days — a real possibility — it may first waste a lot of time and money on half-measures, trying to avoid facing up to reality while running up huge debts to wealthier nations. We’ll see.
But step back for a minute and consider the incredible fact that tax havens like Cyprus, the Cayman Islands, and many more are still operating pretty much the same way that they did before the global financial crisis. Everyone has seen the damage that runaway bankers can inflict, yet much of the world’s financial business is still routed through jurisdictions that let bankers sidestep even the mild regulations we’ve put in place. Everyone is crying about budget deficits, yet corporations and the wealthy are still freely using tax havens to avoid paying taxes like the little people.
So don’t cry for Cyprus; cry for all of us, living in a world whose leaders seem determined not to learn from disaster.

Sunday, 24 March 2013

Why Ukip, the Tea party and Beppe Grillo pose a threat to the mainstream



These populists are asking the right questions, but they don't have the answers. Mainstream parties must revitalise and respond
Eastleigh by-election
Ukip supporters with 'Thank you' leaflets in Eastleigh, where the party came second in the recent byelection. Photograph: Stefan Rousseau/PA
The rise of populism across western Europe and the US – especially in its radical right form – poses more fundamental questions for democrats than has been acknowledged. Whether we are talking about UkipBeppe Grillo's Five Star Movement or the Tea Party, populists of all kinds are exposing old and hidden fault lines in democracy, and mainstream democrats need a greater alertness to the nature of the threat. Modern democracy, like a hot-air balloon untethered from the ground, is suddenly floating free and its destination is not yet known.
Populists pose a basic question: why is democracy not run as the true expression of a morally pure "will of the people" against a self-serving and corrupt political, bureaucratic, plutocratic or legal elite? This is a forceful question as old as democracy itself and it reveals what has become liberal democracy's unspoken compromise – democracy is bounded by institutions, laws and constitutional limits. It is democracy through pluralism and compromise; "minorities rule" as the American democratic theorist, Robert Dahl, described it. For populists, the problem with this notion is that they have their eyes on what they perceive as the majority (it usually isn't, in fact) against constitutional, legal or international constraints that have been placed on the "general will".
Mainstream democrats take their cue from American republican democracy with its checks and balances and self-restraint. This is an impediment to the true democracy for populists. They wish to sweep away any barrier to their desired ends – whether of the left or the right.
So the Tea Party proposes a radical reduction of the role of the federal government in the US political system. The FPÖ challenged the authority of Austrian courts with respect to upholding minority rights. Ukip demands a UK withdrawal from the EU. The Front National drives an anti-Islamic and anti-Gypsy agenda in France. Geert Wilders' PVV – following in the footsteps of Pim Fortuyn – also confronts fears over the growth of Islam and its purported incompatibility with Dutch values. Venezuela's Hugo Chavez created a parallel state and augmented his own constitutional power. Viktor Orbán's Fidesz rewrote the Hungarian constitution to give the executive more authority over the courts and to safeguard "traditional family values".
The binding element to all of these movements and parties is that they are not simply seeking to compete for ideas, policies and power but want to change the rules of the democratic game in favour of executive, majority rule. They are democrats but majority rule is their guiding force rather than a legally enshrined pluralism with minority protection. As my new Policy Network report, Democratic Stress, the Populist Signal and Extremist Threat shows, the upshot is modern (liberal) democracy in a state of stress.
Underlying the growth of these populist movements is a series of stressors that come to bear on liberal democracy and its mainstream party systems. They are socioeconomic, cultural and political in nature.
As the economy has moved away from mass production and many have lost out, socioeconomic change has loosened the ties of parties. Austerity looms large but is one factor among many. The rise of a politics of plural cultural identities catalysed by modern technology, transport, communications and media has further loosened the grip of mainstream parties on a solid and predictable base. Finally, political changes such as the expansion of the EU's acquis communautaire and the increasing comfort of mainstream parties within the system has created an opening for political challenger brands. Those challenger brands are the populists – more so than the green movement and even nationalists.
Mainstream parties have to prove that republican, pluralistic democracy, despite its frustrations and complexities, can be navigated through the trade-offs that all societies face better than populism can. More often than not, populists have simplistic and, in the worst case, highly damaging policies which if ever enacted, could cause significant harm. The desire for a return to economic growth, a sustainable welfare state or reducing debts is just as great as controlling immigration more tightly or seizing significant powers back from the EU. Mainstream parties can cope with these trade-offs between these demands and needs better than populists can – as long as they craft a viable statecraft.
Just maybe there is some truth in the populist critique of political elites – in Brussels, Washington and right through western democracies – and the way they have embedded their own self-interest in the system. Mainstream parties have lost their edge. They have grown comfortable, closed and politically nepotistic – relying on voters having nowhere else to go. That works for a while but becomes progressively more difficult to sustain. Mainstream democracy needs to become a contact sport again – with greater openness and engagement between the people and those who seek to represent them. Parties need to open up to real change and diversity.
Populism doesn't have the answers – you don't need to be Thomas Jefferson, James Madison or even Edmund Burke to see that. In many ways, however, it is posing some of the right questions. New policy approaches are necessary but not sufficient. The political mainstream needs to ask more fundamental questions of itself and its ability to govern with real legitimacy. That is if they are not to continue to age as the societies around them age. People will be left with a choice between a tired political mainstream elite and populists with all of the answers but few solutions. It's not a choice many will savour.

Thursday, 21 March 2013

The placebo effect is present in every medical intervention



The western concept of an autonomous self does not account for how a doctor's beliefs can influence the patient's health
Doctor treats patient
'A contributing factor of the effectiveness of the placebo is the reputation, charisma and convictions of the doctor administrating it.' Photograph: Stockbyte/Getty Images
A recently published study declared that 97% of 783 GPs admitted that they had recommended a sugar pill or a treatment with no established efficacy. This is not a scandal because a placebo is an effective, proven intervention that stimulates our bodies' own capacity to heal itself.
The placebo effect is present in every medical intervention, not just those procedures, such as sugar pills, where the placebo effect is the only known agent at work. To understand exactly how it works would be the equivalent of understanding in full how our mind influences our physical heath, and I expect we still have plenty more to discover in that area.
The concept of the self being an autonomous being is a deeply held belief in western civilisation, but we affect each other all the time. If our doctors wholeheartedly believe that the treatments they are giving us have every chance of working, we are more likely to believe it too. I don't know if this is the effect of mirror neurons or quantum physics, but it happens. It's not that the doctor is just a technician treating our disease, but is also a person who influences us. Bedside manner is more than an optional add-on luxury. If a doctor's influence makes us feel more positive about our health, it will make us more optimistic, and our optimism has a direct effect on our health. For example, research has shown our expectations about recuperation or complications significantly serve as self-fulfilling prophecies for how we recover after surgery.
In 1955, the inventor of the double-blind design form of testing, Henry K Beecher, discovered that 35% of patients found satisfactory relief from a placebo. It is thought that a contributing factor of the effectiveness of the placebo is the reputation, charisma and convictions of the doctor administrating it, as these affect a patient's belief system. In Beecher's study, this might have been missing, because the dispenser of the drug would have known that the drug might just be a sugar pill – so this 35% may be a conservative estimate of the efficacy of placebo.
These days, when testing the placebo effect, we can get the MRI scanner in on the act. Tor D Wager conducted a study in 2004 with a placebo cream he told the subjects would take away pain. He then inflicted pain on them and watched them in the scanner. Those who had been given the cream (the control group had nothing) showed "placebo effect patterns" in the prefrontal cortex. This part of the brain activates when anticipating pain relief and triggers a reduction of activity in pain-sensing areas of the brain. Wager suggests that this interplay within the prefrontal cortex may also trigger a release of pain-relieving opioids in the midbrain.
So when you look your toddler in the eye and kiss his boo boo better, you are probably setting this process into play. You could say, "let me trigger a reduction in your pain sensing brain activity", but "mummy kiss it better" works fine.

Cricket - Imran Khan on Pataudi


  

PTI  
Former Pakistan skipper Imran Khan revealed that during his formative years he looked up to Mansoor Ali Khan Pataudi for inspiration.
Addressing a gathering at the Tiger Pataudi Memorial Lecture here on Monday, Imran said there was certain enigma about Tiger Pataudi whose academic qualification was equally noteworthy as his cricketing exploits.
“I grew up admiring two persons. One was my first cousin Javed Burki and the other being Mansoor Ali Khan... The duo played together at the Oxford University about a decade before me.”
“My idol (Burki) would tell me if Mansoor Ali Khan had not lost vision in one eye, he would have broken all the records. The quality of strokes he could play with one eye, mere mortals cannot play...”
He further said that what made Pataudi different was he had quality education along with playing international cricket, something that had helped on the field.
“I had always looked up to him. Excelling in education and playing international sport is the most difficult thing to. It takes incredible willpower. But once you do it you have huge advantage,” he said.
“We were in awe of Tiger. He was so casual. Cricket was not his bread and butter. If it become your profession, you would never take the risk to achieve great heights. You would always try to play safe. You aim high, take risks and develop this fearlessness. What makes you invincible is self-belief.”
Imran believes that Tiger Pataudi's on-field flamboyance had a lot to do with the fact that he believed that cricket was a game which should be enjoyed.
“Tiger treated cricket as something which was to be enjoyed. That's why he was so flamboyant and had the charisma.”