Margaret Thatcher began Britain's obsession with property. It's time to end it

Right to buy helped to turn the UK into a nation that saw houses as something to make money from, not to live in. Now we are at crisis point – and the government must step in 

• 
• • Rowan Moore
  • The Observer, Sunday 6 April 2014

Margaret Thatcher takes tea with former GLC council house tenants in Balham in 1978. Photograph: Kenneth Saunders for the Guardian

In 1975, in her first speech as leader to the Conservative party conference, Margaret Thatcher declared her belief in a "property-owning democracy". She didn't invent the phrase – the 1920s Tory MP Noel Skelton should take the credit for that, and the American liberal philosopher John Rawls picked it up before she did – but it became the most distinctive of all her many distinctive ideas, the one that most succinctly describes the Britain she wanted to create.

Through thrift and hard work, went the theory, ordinary families should be able to buy their own homes. It would give them security, dignity and freedom and liberate them from the nannying of local council landlords. It would make them better citizens, with their own stake in the economic wellbeing of the country, they would have an incentive to contribute to national prosperity. It exemplified her belief that capitalism was good not only for the rich, but for people on modest incomes. As the then environment secretary, Michael Heseltine, put it later: "Home ownership stimulates the attitudes of independence and self-reliance that are the bedrock of a free society."

So Thatcher allowed council tenants to buy their own homes at reduced prices, and sincethe right to buy was introduced, about 1.5m have been bought. She presided over an economy in which house buying became a national obsession and home ownership went up from 9.7m to 12.8m. Fundamental to her idea was that government, which had built between a third and a half of all homes for the previous three decades, should step back. Councils could no longer build council housing. The market would provide. Houses would be built by housebuilders, to use the standard term for the companies that buy land, win planning permission and then (sometimes) put homes on it.

Thatcher's idea is now at a point of crisis. Housebuilders are not building enough houses, and the proportion of people owning their own homes has been falling since 2007. People have long ago found that it does not always make you free to be shackled to a mortgage, still less if you cannot cross the increasingly high threshold into ownership. In London and the south-east, businesses lament the effects on them of expensive housing caused by the lack of mobility of potential workers.

Debt and speculation have been encouraged more than thrift and people who only wanted a home were forced to be gamblers in a turbulent market. The property-owning democracy is not turning out to be democratic, excluding as it does the large minority who don't own homes. In a sick practical joke, people have been encouraged to take on long-term mortgages at the same time that secure lifetime employment, which might pay for them, is disappearing. As for public spirit, with rising house prices goes rising nimbyism, as owners seek to protect their investment from all possible threats, above all the threat of more homes being built nearby that other people might live in.

Over three decades, a culture has been created in which the price of homes colours almost every aspect of life. It affects people's decisions about whether and when to live together, stay together and have children. An economy has been created in which inflation, otherwise frowned upon, is desirable in house prices, even essential. Property values are used as the principal tool of urban regeneration and, when those values fail to materialise, so does the regeneration. The infamous bedroom tax regards a few square metres of spare space as such a great asset that it must be wrenched from the grasp of the undeserving poor. "Values", indeed, is a telling word – we use it more to describe property than anything to do with ethical or social ideals.

It is amazing, beyond satire, that the two biggest stories in housing are on the one hand the bedroom tax and on the other the streets and squares of empty houses in Belgravia and Kensington, bought as investments by owners who rarely visit. At the same time that, when it comes to poor people, vacant rooms are deemed an offence to be expunged, they grow unchecked in the most desirable parts of London.

At almost every level, the market isn't working, from ex-industrial towns in northern England, where the values are too low to justify repairs to existing houses, to the under-supply and high prices in London, where an average home now costs £458,000, or 13 times the median full-time income. Hidden favelas are growing up in suburbs such as Newham and Southall, with unauthorised developments in back gardens and flats occupied at many times the levels for which they were designed.

 Newham, London: favela-style housing is on the increase in suburbs such as Newham and Southall, with severe overcrowding and unauthorised developments in back gardens and yards. Photograph: Newham Council/Archant

A system has been created with a few winners, for sure, but not the people excluded from the market, nor those barely able to pay for their homes, some of whom will drown when interest rates start going up. Even those who bought early enough to have a profit on their home find it to be largely nominal, impossible to realise without removing themselves or their children from the all-important property ladder.

Not even housebuilders are entirely happy, although recent government policies such as Help to Buy and the encouragement of easy credit have helped their share prices rise. They grumble that planning restrictions and regulations make their work unreasonably difficult and that the margins in their business are low. "It is a fantastically hard business," says one of those involved, because of its booms and busts. The most obvious winners were people such as Judith and Fergus Wilson, the Kent-based buy-to-let magnates said to be worth £180m. But here too there are losers – the people who got their fingers burned when this particular market crashed.

As Danny Dorling, in his recent book All That is Solid: The Great Housing Disaster has pointed out, the home is now seen as a commodity, as a unit of investment to be traded up or down. Attachment to a place, or the interconnectedness of units to make a community, is given little value. The pursuit of ideals, the idea of social or architectural betterment in the provision of housing, has all but disappeared.

Early in the last century, when Arts and Crafts architecture was flourishing and the first garden cities were being planned, the German architect Hermann Muthesius publishedThe English House, which was based on the premise that this country was particularly good at domestic architecture and that countries such as Germany should look and learn. It is unlikely anyone would want to do this now, as new British homes have, as well as the highest prices, the meanest dimensions to be found anywhere in Europe. What we have instead are a series of distinctive if largely inadvertent types, created by a warped market, which might be summarised thus:

Rural eyesore

An attempt to squeeze housing units into places where people want to live (the countryside in southern England), but the people there already don't want any more. Compromise ensues, in which new houses take on a huddled, crowded air and are given a traditional style to mitigate their intrusion. Making a new place with positive and exceptional qualities is out of the question, as all the developers' creative energies have gone into wrestling with the planning system to get their permission.

Investment silo

In London and some other big cities, dense apartment blocks are built with the primary purpose of creating vehicles for investment. Sometimes they are towers. In the previous decade, these developments were primarily aimed at British-based buy-to-let investors; currently the main target are overseas buyers. These projects typically have just enough decking, white paint and glass balustrades to allow good-looking young couples to be photographed inside them holding glasses of white wine, such that the adjectival nouns "luxury lifestyle" can be attached. They also have enough odd angles, or multicoloured cladding, to claim the adjective "iconic".

Affordable silo

Similar to an investment silo, to the extent that housing associations are now the main providers of affordable housing, and are also pressured to behave more and more like property developers. Their products therefore look increasingly like those of developers, although with some reductions in the luxury lifestyle and "iconic" elements. On the other hand, they tend to be built with better standards of space, as housing associations have to follow stricter rules than private developers.

Student silo

Exploiting loopholes in the planning and regulatory systems, which make fewer demands on student housing than other types, property companies have in recent years rushed into this market. Among the attractions of students to developers is that they can be put into even smaller spaces than anyone else. The typology is similar to other types of silo, but with still less in the luxury lifestyle department.

Northern disaster zone

 Parts of Liverpool and Gateshead have been demolished by the government, the old streets replaced with smaller numbers of new homes. The result? The uprooting of people who wanted to stay put and zones of demolished and empty buildings. Photograph: Nigel R. Barklie/REX

Parts of Liverpool or Gateshead, for example: places afflicted by the last government's Housing Market Renewal Pathfinder project, where about £2bn of public money was spent buying up streets in areas of low value, demolishing them, and replacing them with smaller numbers of new homes. The theory was that, under the laws of supply and demand, reduced supply would raise values. The reality was the breaking up ofcommunities, the uprooting of people who wanted to stay put and devastated zones of demolished and empty buildings.

Overcrowded London

Flats and backyards adapted to house as many people as possible.

Empty Belgravia

Extraordinarily expensive houses owned by people with properties in several other countries, such that they are usually unoccupied. Often also iceberg houses, with multifloor basements expensively created underneath, to create further quantities of void.

Nonexistent new town

Successive governments are lured to the attractive idea of the new town, as it enables large numbers of homes to be built while annoying fewer residents than if they have been spread over a wider area. It appeals to politicians' love of a visible gesture. The same governments then fail to provide the infrastructure and planning to make these towns happen. The last administration promised both a new city in the Thames Gateway, to the east of London, and a series of "ecotowns". Very little of either appeared.

It is not in fact so difficult to create good modern housing. There are well-known examples in continental Europe, often cited in discussions of the subject, such asHammarby Sjöstad in Stockholm, Vauban in Freiburg, and Borneo Sporenburg in Amsterdam. Peter Hall, the planning expert whose recent book, Good Cities, Better Lives, explores the best European examples, says that there is an "extraordinary similarity" between these schemes: they have good public transport, from which all homes are within easy walking distance, and "a good disposition of semi-public spaces", such as playgrounds and shared gardens.

 St Andrews in East London: housebuilder Barratt, not always a byword for design quality, is responsible for this project with its emphasis on robust detailing, balconies and shared space.

Nor is Britain incapable of decent developments. Barratt, a housebuilder not always associated with design quality, has built the St Andrews and Barrier Park projects in east London, albeit only after prodding from the London Development Agency, the public body that sold it the land. Richard Lavington, one of the architects of these developments, says that the aims were "to put a balcony on every unit, and to create a positive interface between private and public", by which he means placing family homes close to shared open spaces and streets in such a way that they might readily use them. He also sought "clear, robust detailing" that would be "straightforward to build".

Again, this is not complicated stuff and the developments live up to these claims. Cognoscenti of new housing will also know of fine, small-scale projects by the developers Crispin Kelly of Baylight and Roger Zogolovitch of Solidspace. Kelly says: "Big windows and high ceilings are a start, and lack of fussiness – having the confidence to do things simply." Inside, he likes bonus spaces – on a stair landing for example – where a child might do homework, and outside something as basic as a bench that encourages neighbours to meet. Like Kelly, Zogolovitch likes undesignated spots "where you might set up a cello or an easel or write a novel". He uses design to make small spaces feel larger and give them personality.

 Kevin McCloud at The Triangle housing project in Swindon. Photograph: Professional Images

In Swindon there is The Triangle, created with the help of Kevin McCloud's company Hab, which also stresses the importance of shared space and simple design. And, when you ask for examples of good new housing, you keep being referred back to Cambridge. Here is Accordia, which won the Stirling prize in 2008, and the university-backed £1bn plan to create 3,000 homes, half of them for key workers, on 150 hectares in the north-west of the city. Also in Cambridge are developments such as the "Scandinavian-style"Seven Acres, by the multinational construction company Skanska, which again is based on the virtues of simplicity and shared space.

But these bright spots are too rare and require favourable conditions, such as having a TV personality or an ancient university to back them. They tend to be in places such as London or Cambridge, where prices rise faster than elsewhere. This helps to pay for more quality, but by definition makes it harder to achieve.

The housing crisis is one of both quantity and quality. Some 250,000 new homes a year are said to be needed, but after 2008 the number fell below 100,000, mostly built by private housebuilders but also by housing associations. In the postwar peak in the late 60s, more than 400,000 were created a year, many of them by the councils later banned from building by Margaret Thatcher. Meanwhile, the private sector built at a reasonably steady rate from the late 1950s on, between 150,000 and 250,000 a year. Until the 2008 crash, that is, when output plummeted to a level not seen for half a century.

Blame for this lack of supply is usually placed on the planning system. There is nowhere in southern England for new housing to go or, rather, nowhere where voters and therefore politicians want it to go. Suggestions of building anything on the green belt bring accusations of desecration of a national treasure and similarly with rural locations further from big cities. The theory that brownfields, that is ex-industrial sites, could answer all housing need has proved challenging in practice. Such sites are not always where people want to live.

Suggestions for fixing the problem include, as always, the new town or, as George Osborne likes to call it, the "garden city". He used the term when repackaging existing proposals for Ebbsfleet in Kent, and presenting them as his invention, but his duplicity should not obscure the possibility that it might be a good idea. Peter Hall passionately believes that the principal hope for housing is building new towns and town-size extensions to existing cities. The new towns created in the 1960s, of which Milton Keynes is the biggest and best known, may have become the butt of patronising jokes, but, says Hall, "were really rather successful". They did their job of relieving pressure and "all the evidence shows that people like living there".

Another idea is to fit more homes into London, which is several times less densely populated than, for example, Paris. Another is to encourage people to build their own houses, which currently accounts for a minute proportion of the total. Another, popular with the current government, is the "neighbourhood plan". Here, local communities (usually rural) put together their own proposals for development so that some of the proceeds go to shared benefits and growth is no longer an aggressive intervention by outsiders. It might also help if we moved away from the preoccupation of home ownership with the help of decent properties for private rent. Michael Heseltine once said that "there is in this country a deeply ingrained desire for home ownership", but in 1900 90% of homes, at almost every level of price, were rented.

All these suggestions have merit and the answer is almost certainly to embrace all of them and more. We have to go from our current culture, where new housing is treated as pollution, and something to be squeezed through the planning system with the greatest difficulty, to one where it is seen as a positive asset. There is a vicious circle – new development is poor because it takes so much effort to overcome objections and people object to it because it is poor.

But none of these ideas will happen without the thing the coalition has been least willing to employ, which is active and forward-looking public intervention. It is hard to build a new town, or a well considered rural expansion, without things such as compulsorily buying land, paying professionals to plan it or providing transport. As Dickon Robinson, formerly of housing association the Peabody Trust puts it: "The market has failed. It's time to put some controversial ideas out there."

The compulsory purchase by government from private landowners sounds communist, but it was used (for example) in the "renewal" of northern cities. It is just that politicians are more reluctant to wield it in Kent than in Gateshead. If we are sceptical about the power of planners to achieve their objectives, we only need to look at the Netherlands. There, they had a similar scale of housing shortage, in proportion to the country's size, to the one that has been diagnosed in Britain for the past 15 years. Unlike Britain, they fixed it, by building nearly half a million new homes.

Planning apart, there is a deep flaw with the idea that the market alone will meet all the country's housing needs. The problem is not only to do with the numbers supplied, but with how much each home costs and housebuilders cannot be expected to lead a process that results in the value of their product going down. They would rather sit on their land until such time as its price goes up, which means that some other agency has to do what they won't, which means, in effect, that the government has to intervene more actively in promoting building – by acquiring land, producing considered plans for its development, and then promoting such development.

Given that in much of Britain the price of homes is high, a slow deflation might be desirable; the ideal could be that prices stay the same, so that they gently fall in real terms. But the coalition's big idea is the opposite. With Help to Buy, changing pension rules and other measures, they have stimulated demand without a corresponding increase in supply, such that prices go up further. As the Financial Times has said, this is economically illiterate. It would be a useful first step to reverse these policies.

We are now at a moment similar to the 1970s, when ideas about housing that had lasted a generation stopped working. Then it was the legacy of Clement Attlee's postwar government, which believed in massive state provision of housing, but which ended up restricting freedoms and too often creating homes people didn't like. Thatcher's policies were a necessary corrective, and had real benefits, but now they too are failing. It is time for something new.

It's not easy to champion planning, as it tends to summon images of faceless bureaucrats and grandiose visions gone wrong. But, as Hermann Muthesius recognised in the early 1900s, and as Peter Hall argues about 1960s new towns, it is not un-British to plan and design new communities well. The national dependency on high house prices has, in its effects, become an economic, social and cultural disaster. Active intervention is needed. As someone once said, there is no alternative.

Wanted: mentors, not coaches

Elite sportsmen today don't lack motivation, nor do they need to be whipped into shape. What they need from their coaches is tact, judgement and clear speaking

Ed Smith

March 30, 2014

 

	The best way for a coach to win the support of his players is to convince them that he can help them play better © Getty Images  Enlarge

Imagine you are about to make a putt to win the Masters. The gallery is packed, millions are watching on TV, there is an eerie silence as the Georgia sun sets. You stand over a nasty ten-footer, the moment of truth. And then, at the peak of concentration, you see your coach jumping up and down, beating his chest, shouting at you, "Just don't miss! Put it in the hole! Show some guts! Don't back down now! Make bloody sure you don't bottle this one! What kind of man are you?"

Now imagine you are the first violinist, about to make your debut at the Royal Opera House. Just before the first chord, with the curtain about to rise, the conductor turns to you and whispers, "If you make a mistake today, any mistake at all, I'll stab you in the eye with my baton. Now let's play Don Giovanni with freedom and expressiveness!"

And how would you treat a surgeon about to conduct a life-saving operation on your wife or child? Would you threaten, bully and intimidate the doctor? Or would you try to avoid adding further anxiety to an already fraught situation? In all these three situations it is widely accepted that no sane coach, mentor or observer would seek to add to the anxiety or effort of the protagonist. It is taken as a given that the golfer, surgeon or musician is already trying hard enough - perhaps too hard.

And yet in most sporting contexts, the default position of coaches - and pundits who judge coaches in the media - is to assume that the problem afflicting a team or an individual player is usually caused by a lack of effort. If only players cared more, tried harder, felt disappointment more deeply. That sentiment, so widespread in sport, gives rise to the knee-jerk response: give them all a good bollocking; expect there will be plenty of strong words in the dressing room after that shot; wouldn't want to be standing near the manager at half-time.

We will soon look back on that view of how to improve professional athletes as comically old-fashioned, a cul-de-sac in the evolution of elite sport. After all, epic levels of discipline and commitment are non-negotiable if you want to survive as a professional sportsman today. The era of flabby, lazy athletes coasting through their careers while focusing more intently on hard living and nightclubs is pretty much over. Today's professional athletes are generally exceptionally disciplined, committed and determined. Given the scrutiny they face and the scientific testing of their bodies, there is no alternative. As a consequence, the "edge" - as gamblers describe the tiny opportunities for strategic advantage - will not reside in bullying and shouting at players but in honing their skills and freeing up their talents.

	In most sporting contexts, the default position of coaches - and pundits who judge coaches in the media - is to assume that the problem afflicting a team or an individual player is usually caused by a lack of effort: if only players cared more, tried harder, felt disappointment more deeply

It is time to re-classify elite sport and stop seeing sportsmen as a rabble of unmotivated wastrels in search of a sergeant-major to whip them into shape. Athletes in highly skilled sports, in fact, have more in common with surgeons and violinists. They need mentors, wise advisors, trusted confidants. Consider the art of batsmanship. What kind of discipline is it? It requires touch, feel, finesse, trust, freedom, poise and balance. On a spectrum (with skill at one end and brute force at the other) batsmanship has more in common with playing a musical instrument than it does with punching someone in the face.

There is surprisingly little consensus about how to help elite performers to get better. Musicians, once they have reached the top, tend not to have full-time professional coaches. They rely instead on trusted mentors, people who might spot a tiny difference or lack of form. They refer to these mentors as their "outside ears", as top musicians admit that what they hear in their own heads can be different from the "real" music that reaches the audience. The mentor, though not in a position of authority over the artist, is able to see and hear with objective clarity. The relationship is based on trust not power.

Something similar - though it is called "coaching" - happens in many individual sports. In golf and tennis, the coach works for the athlete, not vice versa. This is not only a reflection of economic forces. When Roger Federer hired Stefan Edberg, he did not want the Swede to shout at him, "Try harder, Rog!" That would be useless, indeed counter-productive. Federer sought a new dimension to his net play, and Edberg, as the greatest volleyer of his generation, was asked to supply his unique perspective. The foundation of the relationship was knowledge and mutual respect.

In team sports, there is obviously a complication. The coach is usually the selector, collective tactician, and effectively in charge of hiring and firing. That changes the coach-player relationship. But not entirely. Over the long term, the best way for a coach to win the support of his players is to convince them that he can help them to play better. Appealing to their rational self-interest is the most reliable way of getting athletes on side.

The problem, of course, is that helping players score more runs and take more wickets is a rare and difficult skill. It requires astute observation, tact, judgement, and a talent for clear exposition and metaphor. Good coaches are able to articulate the same point in many different ways - until, finally, one phrase or description clicks for the athlete. A great coach, then, has more in common with a teacher than a conventional boss or employee. Ultimately, his contribution is expressed through the sum total of the improvements he makes to his players.

I never met a sportsman who preferred failure to success, nor one who didn't suffer pain at disappointment. Rare is the modern sportsman who is indifferent about the chance to get better. In today's ultra-professional and highly disciplined era, the starting point for all coaches should be the presumption: these people want to get better, how can I help them?

Think welfare spending is spiralling out of control? You're wrong

Britain's welfare spending is actually about average, while claims that it is wasteful should be seriously challenged

• 
• • Ha-Joon Chang
  • The Guardian, Friday 28 March 2014

Labour support for the welfare bill lies in the fact it 'exempts “cyclical” spending, such as unemployment benefit'. Photograph: Matt Cardy/Getty Images

With Labour voting for the government's bill to cap welfare spending, the debate on the welfare state has taken a decisively wrong turn. The issue is not the cap itself, its level, or even its design. The problem lies in the very way in which the welfare state is understood.

Even if one accepts the need for the cap, there are many problems with the way in which it is designed. Many people have rightly pointed out that the capping scheme is not as "recession proof" as it is portrayed. One defence of the bill offered by the government – and accepted by Labour as the key justification for its support – is that it exempts "cyclical" spending, such as unemployment benefit (now given the Orwellian name jobseekers' allowance). But there are other elements of welfare spending that increase in economic downturns that won't be exempt. For example, recessions may increase the need for disability benefit because more people are incapacitated due to the psychological and physical impact of unemployment, poor diet, and lack of heating.

The need for disability benefit can also be increased by an ageing population, which is one of the structural factors that are not recognised by the bill and drive up the costs of certain elements of welfare spending. It has also been pointed out that capping could be a false economy because it may increase the demands for other public services, such as education and social services, that are not covered by the bill.

Important though these criticisms are, the biggest issue is the very way in which the "problem" of the British welfare state has been defined and understood. The cap is based on the view that the UK needs "to prevent welfare costs spiralling out of control", given the wasteful nature of such spending. This is not backed up by the evidence.

The British, having supposedly invented the modern welfare state (a debatable proposition), have the mistaken notion that they have an exceptionally generous welfare state, as evidenced by the widespread worries about "welfare scrounging" and "welfare tourism". However, measured by public social spending (eg income support, pensions, health) as a proportion of GDP, Britain's is not much bigger than the OECD average; 24.1% against 22.1% as of 2009. And the OECD includes among its 34 members a dozen or so relatively poor economies – Mexico, Chile, Turkey, Estonia and Slovakia, for example – where the welfare state is much smaller for various reasons (eg younger population, weaker parties of the left).

Even when it comes to income support for the working-age population – the element targeted by the new bill – the UK is not a particularly generous place. In 2007 it spent 4.5% of GDP for the purpose. This was only slightly above the OECD average (3.9%) and way below other rich European economies: the figures were 7.2% for Belgium, 7% for Denmark, 6% for Finland and 5.6% for Sweden.

And it is not even as if the need for social spending goes away if you reduce the welfare state. For many British supporters of a smaller welfare state the role model is the US, which has a very small welfare state (considering its level of income), accounting for only 19.2% of GDP as of 2009. However, it has a huge level of private spending on social expenditure, especially medical insurance and private pensions, which is equivalent to 10.2% of GDP. This means that, at 29.4%, the US has total social spending that is almost as high as that of Finland, which spends 30.7% of GDP on it (29.4% public and 1.3% private). Moreover, if the cost is "spiralling out of control" anywhere, it is in the largely private US healthcare system, thanks to over-treatment of patients, rising insurance premiums and soaring legal costs.

Most importantly, the view that social spending is wasteful needs to be seriously challenged. The frequently used argument against the welfare state is that it reduces economic growth by making the poor workshy and the rich reduce their wealth creation, given the tax burden involved.

However, there is no general correlation between the size of the welfare state and the growth performance of an economy. To cite a rather striking example, despite having a welfare state that is 50% bigger than that of the US (29.4% of GDP as against 19.2% of GDP in the US, in 2009), Finland has grown much faster. Between 1960 and 2010 Finland's average annual per capita income growth rate was 2.7%, against 2% for the US. This means that during this period US income rose 2.7 times while Finland's rose by 3.8 times.

The point is that the welfare state – if well designed and coordinated with labour market policies to re-train people and get them back into work – can encourage people to be more accepting of change, thereby promoting growth. Firms in countries such as Finland and Sweden can introduce new technologies faster than their US competitors because, knowing that unemployment need not mean penury and long-term joblessness, their workers do not resist these changes strongly.

Most American workforces are not organised and thus incapable of resisting technological changes that create unemployment – but the minority that are organised, such as the automobile workers, resist them tooth and nail because they know that if they lose their jobs, they will not even be able to afford to go to hospital, and will find it extremely difficult to get back into the labour market at the same level.

The British debate on the welfare state needs to be recast. The false premise that the country has a particularly generous welfare state whose cost is spiralling out of control needs to be abandoned. The structural factors driving up welfare costs, such as ageing, should be accepted – rather than denied and so putting undue pressure on other elements of social services.

Above all, the debate should be redirected into reforming the welfare state in a way that promotes structural change and economic growth.

INTERESTS IN CONFLICT - The Supreme Court and Mr Srinivasan

 

Mukul Kesavan in The Telegraph

Earlier this week, the Supreme Court told lawyers representing the Board of Control for Cricket in India that if the Board’s president, N. Srinivasan, didn’t step down from his post voluntarily, the court would pass orders compelling him to step down. The court went further; it declared that it was “nauseating” that Srinivasan was still in office. It didn’t stop there; referring to the earlier inquiry commissioned by the BCCI into the scandal (conducted by two retired judges of the Madras High Court), the court asked rhetorically, “Can we say that the probe report was managed and if we say so, then what will be the consequences?” The uncompromising ‘go, or else’ tone, the unusually strong language and the startling suggestion of impropriety seemed to spring from the bench’s exasperation with Srinivasan’s refusal to step aside as president for the duration of the investigation. The judges believed that the investigation into the fixing and betting scandal involving Srinivasan’s IPL club franchise, the Chennai Super Kings and his son-in-law, Gurunath Meiyappan, couldn’t be fairly conducted while he remained in office. The story of the CSK scandal has been the chronicle of a fall foretold. If the Supreme Court had intervened decisively a few years ago, there mightn’t have been a scandal at all. The large reason why matters came to this pass is this: Indians have the greatest difficulty in agreeing upon what constitutes a conflict of interest. The squalid sequence of events that culminated in the CSK scandal was set in motion, ironically, when the BCCI decided to amend an excellent provision in its constitution expressly intended to insulate Board officials from conflicts of interest. The clause laid down that “No administrator shall have, directly or indirectly, any commercial interest in the matches and events conducted by the Board”. The amended version specifically excluded the IPL, the Champion’s League and Twenty20 cricket. This amendment was passed retrospectively, eight months after the inaugural bidding for the IPL franchises, to regularize N. Srinivasan’s ownership of the CSK franchise. When A.C. Muthiah, a former president of the BCCI moved the Supreme Court arguing that an administrator of the cricket board shouldn’t be allowed to own an IPL franchise because of the obvious conflict of interest, a two-judge bench of the Supreme Court delivered a split verdict. This meant that till the matter was resolved by a larger bench of the court, Srinivasan was free to simultaneously own CSK and function as president of the BCCI. Justice J.M. Panchal was one of the judges on the two-judge bench that delivered the split verdict. His reasons for rejecting Muthiah’s petition are instructive. He ruled that no conflict of interest existed because a) no member of the BCCI or franchisee had objected to the amendment, b) the rules were framed long before the IPL was conceived of and therefore didn’t apply and c) the BCCI had suffered no financial loss because of the “so-called conflict of interest”. To judge the force of Justice Panchal’s arguments, we need a working definition of “conflict of interest”. The standard definition cited by Wikipedia goes like this: “A conflict of interest is a set of circumstances that creates a risk that professional judgement or actions regarding a primary interest will be unduly influenced by a secondary interest.” By the terms of this definition it seems plain that Srinivasan’s position as the treasurer of the BCCI at the time when franchises were allotted created a clear conflict of interest because as a BCCI official, he would be involved in administering a tournament in which he owned a franchise. The fact that the IPL didn’t exist when the BCCI’s conflict of interest rules were framed should have had no bearing on their applicability to the tournament.  The whole point of having written rules is to lay down principles that allow an organization negotiate novel circumstances in an ethical way. You could even argue that the framers of the rule that Srinivasan had amended were prescient because they anticipated an IPL-like circumstance and sought to forestall it. The absence of objections from other franchisees or members of the BCCI should have made no difference to the application of the principle. A circumstance that creates a conflict of interest exists independently of the opinions or responses of people who might be affected by it. A bunch of franchisees keen to feed at the IPL trough weren’t likely to antagonize a powerful BCCI official determined to own a franchise. Good rules — like the conflict of interest clause — help organizations achieve ethical outcomes without the need for individual heroism. Justice Panchal’s third reason for dismissing Muthiah’s petition was that Srinivasan’s dual role hadn’t caused the board any financial loss. This conviction that a conflict of interest objection is valid only if that conflict of interest has caused actual material harm is widespread. It is also, I think, misplaced. As the Wikipedia entry on the subject goes on to say, “[t]he presence of a conflict of interest is independent of the occurrence of impropriety. Therefore, a conflict of interest can be discovered and voluntarily defused before any corruption occurs” (emphasis added). The reason the Supreme Court should have upheld Muthiah’s objection is not because Srinivasan’s double role as administrator and franchisee had caused the BCCI any harm at the time but precisely to ensure that it didn’t harm the BCCI in the future. The risk of wrongdoing, the fact that conflicting interests can potentially corrupt motivation should have been reason enough to force Srinivasan to choose between being a franchisee or a board official. The split verdict saw the case referred to a larger bench and in the interim Srinivasan rose to become president of the board. The rest is history. The tendency to dismiss conflict of interest charges while indignantly waving the standard of personal integrity, is epidemic in Indian cricket. Thus K. Srikkanth saw no difficulty in simultaneously being the chief of the national team and the brand ambassador of the Chennai Super Kings; Kumble was comfortable with being the chairman of the National Cricket Academy, the president of the KSCA and the director of a player management company and Dhoni, India’s captain in all three formats of the game was briefly a shareholder in a player management firm called Rhiti that counted R.P. Singh and Suresh Raina amongst its clients. These are intelligent, successful men who seem to view the conflict of interest caution as an allegation of corruption, when it is, in fact, a principle intended to safeguard their reputation and integrity. This isn’t surprising: people take their cues from the men at the top and BCCI’s president isn’t just the supremo of Indian cricket and the owner of Chennai Super Kings, he is about to become the chairman of the International Cricket Council. If Srinivasan’s colossal conflict of interest could be retrospectively legitimized and glossed over by the BCCI without swift corrective action by the courts, why should anyone involved in Indian cricket declare a pecuniary interest for the sake of transparency or recuse himself from situations that create a conflict of interest? Now that the Supreme Court, spurred on by the Justice Mudgal report, has brusquely declared that Srinivasan’s presidency can’t be reconciled with a fair investigation of the CSK scandal, the scandal begins to seem like a cautionary tale. Instead of talking about the potential for wrong-doing created by Srinivasan’s conflict of interest and trying to forestall it, the courts and the police are now dealing with allegations of actual wrong-doing. The amendment that gelded the conflict-of-interest clause by exempting the IPL was the original sin: it led directly to Srinivasan’s fall and it’s responsible for the collateral damage to cricket’s credibility. Will the example of the apex court encourage Indian cricket’s many publicists to press for a reinstatement of the original clause? Will it help them speak truth to power? I wouldn’t hold my breath: Lalit Modi’s downfall didn’t reform the BCCI: its publicists and clients switched their loyalties to Srinivasan without missing a beat. Conflicts of interest can be fixed; servility is a permanent condition.

Inherited wealth is an injustice. Let's end it

Inheritance, which rewards the wealthy for doing nothing, is once again becoming a key route to riches – just as it was in the Victorian era

• 
• • James Butler
  • theguardian.com, Wednesday 26 March 2014 15.08 GMT

'The transfer of wealth between generations allows access to privileges that are otherwise beyond reach.' Photograph: Cultura Creative (RF) / Alamy/Alamy

Inherited wealth is the great taboo of British politics. Nobody likes to talk about it, but it determines a huge number of outcomes: from participation in public life, to access to education, to the ability to save or purchase property. When David Cameron recently promised to raise the threshold for inheritance tax to £1m and praised "people who have worked hard and saved", he is singing from the hymn sheet of inherited inequality: it is, after all, easier to save if you inherit substantial sums to squirrel away, or if you can lock money in property that is virtually guaranteed to offer huge returns. Hard work has very little to do with it.

In 2010-11, the most recent period for which we have figures, 15,584 estates of 259,989 notified for probate paid inheritance tax. That is approximately 3% of all deaths that year. Already, inheritance tax is paid by a tiny fraction of all estates. The asset composition of these estates remains stable over time, with property composing about 50% of taxable estates; a disproportionate number of these are located in London and the south-east, reflecting the rocketing house prices in that corner of the country. The "nil-rate threshold" – the value under which inherited wealth is untouched by tax – currently stands at £325,000, frozen since April 2009. But that's only half the story. Since 2007, it has been possible for spouses to transfer their unused nil-rate band allowance to their surviving partner. This has lifted many estates in the £300-500,000 band out of inheritance tax altogether: at this point we are beginning to talk about substantial, indeed life-altering, sums of money.

Beyond these key figures lies a hinterland of tax-minimisation strategies through which assets can be exempted from tax, including various types of trust and business property relief. Despite nominal efforts to curb this kind of minimisation, there remains a booming market in financial advice tailored to avoidance. The knock-on effects of this minimisation are huge: it permits further concentration of wealth in the hands of those who already possess it, rewarding those cunning enough to avoid taxation, and cushioning their children with an influx of unearned wealth. There are obvious uses to which this can be put: paying off student loans early, thus avoiding interest, investing in buy-to-let property, or high-return financial products. It permits the children of the middle classes to sustain themselves through unpaid internships or unfunded study into secure middle-class careers, while locking these off from those without such resources. Given the chancellor's recent changes to pensions, the flow of cash into property as a secure income stream for the already wealthy is only likely to increase. Again, despite the rhetoric, this has little to do with hard work, but the preservation of wealth gaps between classes.

Why do we permit this? The transfer of wealth between generations is an injustice: it is a reward for no work, and a form of access to privileges that are otherwise beyond reach. Professor Thomas Piketty, in his new book Capital in the Twenty-First Century, makes the argument that, after a social-democratic blip in the middle of the last century, inheritance is once again becoming the key route to wealth. Piketty argues that if wealth is concentrated and the return on capital is higher than the economy's growth rate, inherited wealth will grow more rapidly than that stemming from work. This returns us to the terrain of Balzac and Austen, where the road to financial security is to target those who already possess wealth and, where possible, marry them. The data Piketty analyses – a huge and comprehensive set – suggests that the proportion of people receiving a sum in inheritance larger than the lifetime earnings of the bottom 50% is set to return to 19th-century levels in the next couple of decades. Pleasant news for our neo-Victorian government; less pleasant for the rest of us, and a disaster for anyone who cares about inequality.

It is difficult to justify inherited wealth from anything other than a class-partisan position. It is the point where the already threadbare veil of "meritocracy" falls off to reveal a fiscal system designed to reward already concentrated pots of wealth. Far from a Keynesian "euthanasia of the rentier", we are seeing the triumph of a rentier economy: in such conditions, rather than further accumulation by the sons and daughters of the wealthy, we should instead demand an end to inherited wealth entirely.

The banality of evil

NISSIM MANNATHUKKAREN

  

The HinduIllustration: Deepak Harichandan

 

When carnage is reduced to numbers and development to just economic growth, real human beings and their tragedies remain forgotten.

Empires collapse. Gang leaders/Are strutting about like statesmen. The peoples/Can no longer be seen under all those armaments — Bertolt Brecht

German-American philosopher Hannah Arendt gave the world the phrase, “the banality of evil”. In 1963, she published the book Eichmann in Jerusalem: A Report on the Banality of Evil, her account of the trial of Adolf Eichmann, a Nazi military officer and one of the key figures of the Holocaust. Eichmann was hanged to death for war crimes. Arendt’s fundamental thesis is that ghastly crimes like the Holocaust are not necessarily committed by psychopaths and sadists, but, often, by normal, sane and ordinary human beings who perform their tasks with a bureaucratic diligence.

Maya Kodnani, MLA from Naroda, handed out swords to the mobs that massacred 95 people in the Gujarat riots of 2002. She was sentenced to 28 years in prison. She is a gynecologist who ran a clinic, and was later appointed as Minister for Women and Child Development under Narendra Modi.

Jagdish Tytler was, allegedly, one of the key individuals in the 1984 pogrom against the Sikhs. He was born to a Sikh mother and was brought up by a Christian, a prominent educationist who established institutions like the Delhi Public School. A Congress Party leader, he has been a minister in the Union government. The supposedly long arm of law has still not reached him. Guess they never will, considering that the conviction rate in the cases for butchering nearly 8000 Sikhs is only around one per cent.

For every “monstrous” Babu Bajrangi and Dara Singh, there are the Kodnanis and Tytlers. Evil, according to Arendt, becomes banal when it acquires an unthinking and systematic character. Evil becomes banal when ordinary people participate in it, build distance from it and justify it, in countless ways. There are no moral conundrums or revulsions. Evil does not even look like evil, it becomes faceless.

Thus, a terrifyingly fascinating exercise that is right now underway in the election campaign is the trivialisation and normalisation of the Gujarat pogrom, to pave the way for the crowning of the emperor, the Vikas Purush. If there was some moral indignation and horror at the thought of Narendra Modi becoming prime minister until recently, they have been washed away in the tidal wave of poll surveys, media commentaries, intellectual opinion, political bed-hopping, and of course, what the Americans think, all of which reinforce each other in their collective will to see Modi ascend to power.

Banalisation of evil happens when great human crimes are reduced to numbers. Thus, for example, scholars Jagdish Bhagwati and Arvind Panagariya write a letter to The Economist on the latter’s article on Modi: “You said that Mr. Modi refuses to atone for a ‘pogrom’ against Muslims in Gujarat, where he is chief minister. But what you call a pogrom was in fact a ‘communal riot’ in 2002 in which a quarter of the people killed were Hindus”. So, apparently, if we change the terminology, the gravity of the crime and the scale of the human tragedy would be drastically less!

This intellectual discourse is mirrored in ordinary people who adduce long-winded explanations for how moral responsibility for events like the Gujarat pogrom cannot really be attributed to anybody, especially the chief minister, who is distant from the crime scene. No moral universe exists beyond the one of “legally admissible evidence”. To be innocent means only to be innocent in the eyes of law. But what does evidence mean when the most powerful political, bureaucratic, and legal machineries are deployed to manipulate, manufacture and kill evidence as seen in both the 2002 and 1984 cases?

Another strategy of banalisation is to pit the number of dead in 2002 with that of 1984 (Bhagwati and Panagariya go onto assert that 1984 “was indeed a pogrom”). Modi’s infamous response to post-Godhra violence is countered with Rajiv Gandhi’s equally notorious comment after his mother’s assassination. In this game of mathematical equivalence, what actually slip through are real human beings and their tragedies.

Banalisation of evil happens when the process of atonement is reduced to a superficial seeking of apology. Even when that meaningless apology is not tendered, we can wonder to what extent reconciliation is possible.

The biggest tool in this banalisation is development. Everyday, you see perfectly decent, educated, and otherwise civil people normalise the Gujarat riots and Modi, because he is, after all, the “Man of Development”. “Yes, it might be that he is ultimately responsible for the riots, but look at the roads in Gujarat!” It is a strange moral world in which roads have moral equivalence to the pain of Zakia Jaffrey and other victims.

Ironically, along with evil, development itself becomes banal. Development becomes hollowed and is reduced to merely economic growth. E.F. Schumacher’s famous book Small is Beautiful has a less famous subtitle, A Study of Economics as if People Mattered. But when development is banal, people do not matter. Nor does the ecosystem. There are no inviolable ethical principles in pursuit of development. If Atal Behari Vajpayee was the mask of the BJP’s first foray into national governance, development becomes the mask of the Modi-led BJP’s present attempt, and a façade for the pogrom.

But what is fascinating is how such a banal understanding of development has captured public imagination. The most striking aspect of the Gujarat model is the divergence between its growing economy and its declining rank on the Human Development Index (HDI). For instance, in the UNDP's inequality-adjusted HDI (2011) Gujarat ranks ninth in education and 10th in health (among 19 major states). On gains in the HDI (1999-2008), Gujarat is 18th among 23 states. In the first India State Hunger Index (2009), Gujarat is 13th out of 17 states (beating only Chhattisgarh, Bihar, Jharkhand and Madhya Pradesh).

Yet, shockingly, prominent economists like Bhagwati participate in this banalisation by glorifying the Gujarat model. His response to the poor record of Gujarat is that it “inherited low levels of social indicators” and thus we should focus on “the change in these indicators” where he finds “impressive progress”. If so, how is it that many other states starting off at the same low levels have made much better gains than Gujarat without similar economic growth?

These figures and others about a whole range of human deprivation are in the public domain for some time, but, astonishingly, are not a matter of debate in the elections. Even if they were, they would not apparently dent the myth of the “Man of Development”. Such is the power of banalisation that it has no correlation with facts.

Even as the developed countries are realising the catastrophic human and environmental costs of the urban, industrial-based models of boundless economic growth (in America, the number of new cancer cases is going to rise by 45 per cent in just 15 years), we are, ironically, hurtling down the same abyss to a known hell — India fell 32 ranks in the global Environmental Performance Index to 155 and Delhi has become the most polluted city in the world this year! The corporate-led Gujarat model is an even grander industrial utopia based on the wanton devastation of mangroves and grazing lands.

In a recent election opinion poll, the three most important problems identified by the voters in Punjab were drug addiction (70 per cent), cancer caused by pesticides (17 per cent) and alcoholism (nine per cent)! This is shocking and unprecedented, and it stems from the fact than an estimated 67 per cent of rural population in Punjab had at least one drug addict in each household. Nevertheless, the juggernaut of development as economic growth careens on.

Disturbingly, the scope of questioning this banalisation of evil and development diminishes everyday. Many reports emerge about the self-censorship imposed by media institutions already in preparation for the inauguration of a new power dispensation. A book which raises serious questions about the Special Investigation Team’s interrogation of Modi hardly gets any media attention and, instead, is dismissed as propaganda against the BJP. It does not matter that the same journalist subjected the investigation in the anti-Sikh pogrom to similar scrutiny. And the pulping of the book on Hinduism by a publisher portends dangerous tendencies for the freedom of speech and democracy in the country.

The vacuity of the attempts to counter the banalisation of development is evident in the media discourse on elections. Just sample the much-lauded interview conducted by the nation’s conscience keeper with Rahul Gandhi. In a 90-minute conversation, Arnab Goswami could ask only a single question on the economy — on price rise. This is in a nation, which, on some social indicators, is behind neighbours like Sri Lanka, Nepal and Bangladesh. Elections are not about the substantive issues of human well being, environmental destruction, and ethics, but are reduced to a superficial drama of a clash of personalities.

Fascism is in the making when economics and development are amputated from ethics and an overarching conception of human good, and violence against minorities becomes banal. Moral choices are not always black and white, but they still have to be made. And if India actually believes this election to be a moral dilemma, then the conscience of the land of Buddha and Gandhi is on the verge of imploding.