Australia bet the house on never-ending Chinese growth. It might not end well

Lindsay Davis in The Guardian

Assumptions about coal and iron ore exports helped build Australian prosperity. But with China’s economy threatening to unravel, a less rosy picture is emerging

 

Chinese tourists in Sydney. The two countries have prospered through their close economic ties but there could also be a downside. Photograph: David Gray/REUTERS


Over the last couple of decades, China has undergone profound change and is often cited as an economic growth miracle. Day by day, however, the evidence becomes increasingly clear the probability of a severe economic and financial downturn in China is on the cards. This is not good news at all for Australia. The country is heavily exposed, as China comprises Australia’s top export market, at 33%, more than double the second (Japan at 15%).

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A considerable proportion of Australia’s current and future economic prospects depend heavily on China’s current strategy of building its way out of poverty while sustaining strong real GDP growth. To date, China has successfully pulled hundreds of millions of its people out of poverty and into the middle class through mass provision of infrastructure and expansion of housing markets, alongside a powerful export operation which the global economy has relied upon since the 1990s for cheap imports.

Though last week’s volatile falls on the Chinese stock markets alongside a weakening yuan sent shockwaves through the global markets, Australia’s exposure lies much deeper within the Chinese economy. The miracle is starting to look more and more fallible as it slumps under heavy corporate debts and an over-construction spree which shall never again be replicated in our lifetimes or that of our children.

As of the second quarter of 2015, China’s household sector debt was a moderate 38% of GDP but its booming private non-financial business sector debt was 163%.Added together, it gives a total of 201% and its climbing rapidly. This may well be a conservative figure, given it is widely acknowledged the central government has overstated GDP growth.

Australia, though it frequently features high on lists of the world’s most desirable locations, currently has the world’s second most indebted household sector, at 122% of GDP, soon to overtake Denmark in first place. Combined with private non-financial business sector debt, Australia has a staggering total of 203%, vastly larger than public debts at all levels of government.

Australia’s long-term bet on China was and still is conceptually simple – an incredibly flawed assumption that the country would never cease to consume increasingly more iron ore.

The assumption ran right to the top. Back during the Labor (Rudd/Gillard/Rudd) administrations of 2007-13, the bureaucrats at the Reserve Bank and the treasury, alongside the then treasurer Wayne Swan, forecast that China would import so much iron ore up to 2029 that the only way so much steel could be consumed was if they built more houses than there were people. There would also be infrastructure projects like airports, highways, exhibition centres and sports stadiums.

This was just the base forecast. The best-case scenario manufactured by Australian bureaucrats would liken parts of China to resemble the planet Coruscant from the Star Wars movies (the political centre of the galaxy, whose surface is covered by an entire city). With incredible complacency, politicians from both sides of parliament basked in the glory and reacted smugly when the US and the eurozone hit a brick wall.

So what did Australia do with this rosy outlook? Like a letter of guarantee, the financial services industry used it to convince the international wholesale lending community that the Australian economy was as safe as houses. Lenders around the world were facing an indefinite period of zero interest rates and were desperate for better yield. Australia must have seemed a good place to put their money.

For a time, the Australian bet looked good. The banking and financial system collected all the debt they could source from overseas wholesale lenders, underpinning increasingly greater expansion into Australia’s already grossly overvalued residential housing market.

Like most other nations in the Asia-Pacific region, the problem for Australia now is that riding on the back of China’s economic growth is no longer a “letter of guarantee” but a statement of significant overexposure to a bad bet and risky mortgage debt. The current downturn in China is smashing the Australian mining industry via lower demand for commodities amid increased global supply, especially in iron ore.

As well as hitting Australia hard, the mining export-driven states and territories (Western Australia, Queensland and the Northern Territory) will suffer the most.Population growth rates are falling in these regions, growth is softening and underutilization (unemployment and underemployment) is steadily rising. Spillover effects into the other states are likely, which could impact the country’s largest and most leveraged asset class: the housing market.

This may leave little desire for international wholesale lenders to provide credit to the banking and financial system in the future as Australia’s economic prospects deteriorate. It is becoming obvious both domestically and internationally that the country is beset with a massive housing bubble, driven by debt-financed speculation. Without Australia’s lenders importing an ever increasing sum of credit, the overleveraged and overvalued housing market will run into trouble.

Government and industry have managed over the last decade and a half to instill severe complacency in Australia, hoping policymakers’ two big bets on the finance, property and mining sectors would continue to pay dividends far into the future. While these bets paid off in the short-term, genuine productivity-enhancing policies which would diminish the incredible and mostly unearned wealth millionaires and billionaires have siphoned off could then be ignored.

With the Chinese economy beginning to falter, the fear is Australians must now figure out where their economic future lies for the next generation who have been brainwashed into believing that digging up rocks and flipping houses by accumulating a gargantuan mountain of private debt is how a modern western country builds its future. The results will not be pretty.

China share turmoil: How it affects the rest of the world

Andrew Walker BBC World Service


Image copyrightAFP



A slump in Chinese shares has prompted stock markets across Asia, Europe and the US to fall sharply. Why is this so significant?

What's behind the fall in China?

The wider story is that China's economic growth is slowing and there are concerns that the transition to a slower and more sustainable rate of growth might be disruptive.

That was true of the period of several weeks of volatility the market experienced after it peaked in June last year.

It's true this time too and the link is perhaps rather more direct now.

Why? Because the immediate sparks for the latest bout of instability were warning signs about the wider economy.

The first day when trading was suspended, figures showing a continued decline in manufacturing were one of the factors that set things rolling downhill. On the second day of suspension it was the sliding currency which raised concerns about whether it was a sign that the economy was slowing down more sharply than thought.

Image copyrightGetty Images

What does this mean for the rest of the world?

The direct financial impact of lower share prices in China is moderate. There is not enough foreign investment in the Chinese market for it to be a major problem. The London consultancy Capital Economics has said foreigners own just 2% of shares

The issue is more about whether the financial turbulence shines a light on wider issues about the economic slowdown in China: is the economy heading for what's called a "hard landing", too sharp a slowdown?

China is now such a big force in the global economy that it would inevitably affect the rest of the world. It is the second largest economy and the second largest importer of both goods and commercial services.

Image copyrightAFP

It's not just stocks.

The prices of many commodities have been affected, notably crude oil. It's not just about China, for sure. Abundant supplies have been every bit as important in the oil market in the last eighteen months. But China's problems have been a significant factor adding further downward pressure to the price of crude oil. The price of Brent crude has fallen by about half since mid-June, when the first stage of the Chinese stock market slide began.

China is such a large buyer of industrial commodities that the possibility of lower-than-expected sales to the country has also undermined the prices of copper and aluminium, for example.

Gold has gained ground a little this week. It is seen by many as a safe investment, protection against both inflation and more general financial instability.

There is certainly a possibility of that kind of "safe haven" effect in other markets if the Chinese stock price falls make investors more wary about risks. In the currency markets, the most likely candidates are the yen and the Swiss franc. The dollar could also be affected, though the US currency already has a strong tailwind from the Federal Reserve's interest rate policy. The Fed started to raise rates last month and that has been encouraging investors to buy dollars. But it's a bit early to draw any firm conclusions.

Some of the currencies that investors might sell if they become more risk averse have shown some impact. Turkey, Brazil and South Africa all have problems of their own and their currencies have weakened in the last few days.

There is also some sign this week of investors putting money into safe government bonds or debts, those seen as having negligible risks of default, such as the US, Germany, the UK and Switzerland.

Image copyrightReuters

What about ordinary Chinese people?

Those who have borrowed money to buy shares in the last year have already been hit very hard. But most people don't own shares - only one person in 30 does, according to Capital Economics.

For most Chinese the wider issue is about the health of the country's economy. If China manages a smooth transition to a slower and more sustainable growth rate, it is likely to still be fast enough to generate rising living standards for most people. A more disruptive slowdown would mean many business failures and job losses.

What might the Chinese authorities do next?

They have several options to stimulate the economy which can affect the stock markets. They could cut interest rates, they could relax the rules on bank lending or they could increase spending. They could also encourage the currency, the yuan, to fall further to stimulate exports. There are problems with these options. Anything that encourages more lending could mean more distressed borrowers in the future. A falling currency has already fed into the stock market drama.

In addition the authorities have taken steps more specifically targeted on the stock market. They have extended restrictions on large investors selling shares. State investment funds have been buying shares. These measures can have an impact but they are unlikely to provide a definitive solution.
How worried should we be?

Views vary about how healthy the Chinese economy is. Capital Economics have been consistently relatively upbeat about China and they said in a note to clients this week:

"We continue to believe that growth is more likely to pick up than weaken over coming months."

But the investor George Soros is more gloomy, telling an economic forum in Sri Lanka:

"China has a major adjustment problem. I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008."

A crisis there would be serious for the rest of the world, particularly countries and firms that export to China.

How much inequality is too much?

BBC Business

Image copyrightiStock

The richest 10% of Americans earn half of all of income. In Britain, the top 10% hold 40% of all the income.

Inequality isn't just an issue for rich countries: a billion people have been lifted out of poverty since 1990, but inequality has also been rising in many countries too.

Four experts talk to the BBC World Service Inquiry programme about the effect inequality has on growth and prosperity.

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Deirdre McCloskey: Capitalism is not the enemy

Deirdre McCloskey is Distinguished Professor of Economics, History, English, and Communication at the University of Illinois at Chicago. The daughter of a Harvard Professor, her brother became a university cleaner.

"You can't force people to take advantages that are placed in front of their nose, and that's my brother's case. No amount of income redistribution or socialist schemes to give my brother more opportunities would have made any difference at all to his life.

Image copyrightGetty Images

Image captionOccupy protesters have highlighted the gap between the wealthiest 1% and the other 99%

"If people strive, some of them succeed and get rich, at least momentarily until other people strive and compete with them. This striving turns out to be good for all of us.

"The percentage of people in the world living on $2 (£1.30) a day - an appalling level of income - has halved in the last 30 years. That's not by foreign aid or redistribution. It's by letting the economy function in a more innovative way.

"The wrong way to cure inequality is to attack the people who are taller, or have better parents, or live in richer countries. The way to do it is to uplift the poor. I approve of being taxed to help the very poor. But I don't want to kill the goose that laid the golden eggs. Capitalism is not the problem, it's the solution.

"The growth in the last couple of centuries has been astounding. It's a factor of 30 - about 3,000% per head for the average English or American person. Explosive, unprecedented growth. Meanwhile, inequality has gone up and down a little bit.

"If you were to make a rule that the chief executive could only earn 50 times the shop floor employee, that would not reduce inequality substantially.

"I'm very relaxed about [inequality] as long as it's not force or fraud that caused it."

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Jared Bernstein: Inequality impedes growth

Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities in Washington DC, and a former economic advisor to President Obama.

"I was a member of the President's economics team during the worst recession we've had since the Great Depression. The responsibility to try to turn that around was huge.

"This wedge of inequality between growth and the income of working families undermines the basic incentive that hard work will be rewarded.

Image copyrightGetty Images

"I call it the shampoo cycle - bubble, bust, repeat. And because middle and low income families lack the income growth they used to see, they borrow to make the difference. That creates large leverage bubbles which explode and hurt growth.

"Once wage inequality gets too high, and you have lots of low income people stuck in tough neighbourhoods that are segregated by income and race, and they have fewer libraries and a more difficult learning environment, you begin to see this connection between high levels of inequality and barriers to opportunity.

"You don't necessarily see that in today's economy because that's a cumulative process, but it's very possible that we'll see that in economies 20 years from now when these children come into the job market.

"If you go back to the period where productivity and incomes for middle class families were growing together - in the US that would be back to the mid 1970s - you'll see that the top 1% held about 10% of all income.

"Now it's 20 times that. That's too much. I'm not saying we necessarily have to get back to the late 1970s level, but I do think that a good metric here would be that the income of middle income families would grow closer to the rate of productivity growth, and that's something that we haven't seen for a while."

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Jonathan Ostry: Opportunity more important than inequality

Jonathan Ostry is deputy director of the Research Department of the International Monetary Fund.

"We don't have a threshold level for how much inequality is too much. We don't have a magic number. Sometimes a rise in inequality is perfectly compatible with healthy growth and prosperity, and in other cases the rise has gone way too far.

"When China opened up, it not only took off in terms of economic growth, but there was a marked and quite significant increase in income inequality. I'd be prepared to venture that was a good increase in inequality. Sometimes you need to have a little bit more inequality in order to get growth going as part of deregulating of your economy.

Image copyrightGetty Images

Image captionThe Bolsa Familia programme to tackle poverty was a centrepiece of former Brazilian President Lula's social policy

"Think of the very high levels of inequality that prevailed in Brazil when President Lula came to office, and the steps he took with the Bolsa Familia conditional cash transfer programmes. His policies were successful without jeopardising economic growth.

"I would want to be sure that in a country with a lot of inequality those at the bottom still had opportunities to be well-educated, to have adequate nutrition, and were not shut out from credit and banks. Likewise if there was a fair degree of equality, but nevertheless those at the bottom didn't have adequate opportunities, I'd be concerned.

"So for me it would be more a question of whether there were adequate opportunities for the less well-off in society. Provided that was the case I wouldn't be overly concerned that a given level of inequality was causing great harm.

"[However] it turns out that income equality is an important factor in separating countries that have been successful at sustaining growth for long periods, versus those that have enjoyed spurts of growth which have fizzled out rather quickly. Too much inequality can undercut the ability to sustain growth.

"In more equal societies, those that are more socially cohesive, governments are able to take measures that have buy-in from the population at large. Therefore they can right their economies more quickly.

"In more unequal, less socially cohesive societies, people don't buy the notion that if the economic ship is righted, everyone will benefit. They're more likely to oppose the painful short-term measures that governments need to take to right the economic ship. And so righting that ship becomes much more difficult in less equal societies."

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Branko Milanovic: Beware rising inequality within countries

Professor Branko Milanovic has spent his career studying inequality, and is now a visiting professor at the City University of New York.

"We need inequality. Perfect equality, everybody having the same income, doesn't exist anywhere, nor has it. Obviously some countries - maybe China during the cultural revolution - came relatively close, but some inequality has always existed.

"Without inequality you lack incentives to do practically anything - to work, to invent new things or to invest. Nobody is going to do things for nothing and we know that monetary rewards are really crucial, so this is the good part of inequality. We should not forget that inequality is indispensible for the development of a society.

"Globalisation has been very good for the middle classes in the emerging markets - China in particular, parts of India, Thailand, Indonesia. They are still not level in terms of income with the middle class in the rich world, but it's improving, On the other hand, we have essentially a stagnation of middle class incomes in rich countries, a very interesting and a potentially politically destabilising development.

Image copyrightGetty Images

Image captionThe economic disparity between the wealthiest and poorest in China is stark

"If the gaps keep on increasing as they've increased in the last 20 years, you would end up with two types of societies within a single country. If there is no sufficient middle class and if the poor really are very far from the rich, then you really cannot speak of a single society.

"We could end up with a kind of a global plutocracy, this global one per cent or even half a per cent that are very similar among themselves, but really belong to different nations.

"We might have a situation that most of global inequality is due to inequalities within nations which was more or less the situation 200 years ago. So we may be really going back to the situation that existed before the industrial revolution."

Two-thirds of Tory MPs want Britain to quit European Union

Toby Helm and Henry McDonald in The Guardian


Party sources say Brexit support is rising – despite David Cameron’s preference for staying in EU – but U-turns are possible

 

David Cameron with the European commission president Jean-Claude Juncker. Photograph: Ints Kalnins/Reuters

Two-thirds of Conservative MPs now support Britain’s exit from the European Union, despite David Cameron’s clear preference for staying in, according to senior sources within the party.

Key figures in Tory high command say analysis of public statements and private views expressed by their 330 MPs shows that at least 210 now believe that the UK would be better off “out”.

The surge in support within the parliamentary party for leaving will greatly encourage “out” campaigners, who believe many people will take their lead from local MPs when they decide which way to vote. However, party managers say the total number of Tory MPs who will join the campaign to leave could turn out to be significantly fewer – around 110 – if in the next few months opinion polls begin to point towards a close result or a win for the pro-EU side.

“Certainly at least two-thirds want to leave as it stands,” said a senior party figure. “But if things are very tight some will be bought off by offers of patronage and will be reluctant to take a different line to the prime minister. Plenty will not want their careers blighted by being on the wrong side of such an important debate.” The Observer has also been told that soundings taken by MPs show the “vast majority” of grassroots activists now want to quit the EU – and that most will not be swayed by whatever deal Cameron achieves in his attempt to renegotiate UK membership.

EU referendum expected in September as hopes fade of deal next month



Last week Cameron, in effect, conceded that his party was split from top to bottom over Europe when he agreed that members of his government, including cabinet ministers, would be allowed to speak out against the official line during the campaign, which is expected to be later this year.

While the holders of the top offices of state – including the chancellor, George Osborne, the foreign secretary, Philip Hammond and the home secretary, Theresa May – are likely to back staying in, other senior ministers, including the work and pensions secretary, Iain Duncan Smith, the leader of the House of Commons, Chris Grayling, and the Northern Ireland secretary, Theresa Villiers, want to campaign to leave.

The spotlight will inevitably now turn to Boris Johnson, who attends cabinet in his role as mayor of London and sees himself as a future leader of the party. A longstanding critic of the EU, Johnson has yet to indicate whether he will campaign to stay in or leave.

The ability of Villiers to remain as Northern Ireland secretary if she sides with the “out” campaign was being called into question on Saturday night as opposition MPs said leaving the EU would not be in Northern Ireland’s interests, could harm the peace process and damage Northern Ireland’s economy. The Liberal Democrat MEP Catherine Bearder, who speaks for her party on the referendum campaign, said Villiers should stand down, saying a Brexit would not be compatible with her role. “It would be highly inappropriate for Theresa Villiers to remain in her post while campaigning to leave the EU,” Bearder said. “Leaving Europe would risk stoking sectarian tensions and undoing years of peace-building, much of it funded through EU peace programmes.

“It would also fundamentally transform the UK’s relationship with the Republic of Ireland and put at risk the open land border we currently share. Government ministers should not be able to campaign for an EU exit if this completely goes against their role and responsibilities.”

Osborne: PM giving ministers free rein on EU referendum is not a U-turn



The only Irish nationalist party represented in the House of Commons also questioned whether Villiers could remain in her post. Colum Eastwood, new leader of the Social Democratic and Labour party, said Britain’s departure from the EU could put at risk Northern Ireland’s £1.6bn of trade with the Irish Republic. “While Theresa Villiers is obviously entitled to engage in the internal and long-running Tory battles over Europe, her role as secretary of state for Northern Ireland places upon her a separate responsibility. That role should require her to represent the best interests of people in the north. A Brexit is not in our interest. It is not in the interest of our economy or in the interest of our society,” he said.

“All the evidence, all the major voices in our agricultural and business communities, have warned that a Brexit would devastate the fundamentals of our economy.”

Meanwhile, the EU spokesman of the strongly Eurosceptic Danish People’s party, Kenneth Kristensen Berth, said he did not believe the UK should leave. “I fully understand the British people’s scepticism, but the answer is not to leave now. The answer is to work within the EU framework to slim down the EU cooperation, and that’s a job that will be significantly harder without the British.”

James McGrory, chief campaign spokesman for Britain Stronger In Europe, said: “It shows how isolated Ukip and the Leave campaigns are when even rightwing Eurosceptics in other countries are arguing that Britain should remain in Europe.

“Europe needs reform, but leaving altogether would take us to very extreme fringes of the international community, where even far-right outfits like the Danish People’s party don’t want to be.”

Is China really devaluing its currency?

China's foreign exchange reserves have fallen from a gigantic $4 trillion in the first half of 2014 to around $3.2 trillion today Photo: Reuters

By Mehreen Khan in The Telegraph

What's happened to the renminbi?

Since the summer, investors have been keeping an uneasy eye on the value of the Chinese currency.

In August, Beijing decided to tweak its exchange rate peg with the dollar, making the renminbi float in a wider band against the greenback.

This sparked immediate market panic that China was entering into the world's currency wars.

But the devaluation in itself was small. Allaying fears further, the Chinese began to immediately intervene to prop up the RMB to stop it falling too fast by drawing down their reserves.

But devaluation fears are returning. The country's export performance has stuttered, while the dollar has rocketed on the back of a stronger US economy.

In response, on January 7, authorities set their "daily fix" against the dollar 0.51pc lower. This was the single biggest move since August and set off a new bout of mass stock market hysteria.

Overall, the RMB has weakened by around 10pc against the dollar over the last two years.

"Over half of the weakness has come in the last four months," says Sean Yokota at SEB.

"We are heading to 6.83; the level China pegged to the dollar post the global financial crisis of 2008."

Kevin Lai at Daiwa Capital expects the RMB to fall even further. He forecasts it will hit 7.50 by the end of the year.

"There is likely still to be plenty of depreciation to come," he said.

Does it really matter?

China has said it is not in the business of competitive currency devaluation.

The central bank, The People's Bank of China (PBOC), has said its main exchange rate target is against a broader basket of currencies and it's not fixated on the greenback.

The PBOC has repeated this claim again, saying that it is happy to let the yuan-to-dollar rate have a more "market determined value".

It wants to ensure that when measured against a wider basket of currencies - which includes sterling and the yen - the RMB remains "stable."

What's happened to the trade weighted value?

In worrying signs for the Politburo, the RMB's weakness is being reflected across the board - and not just against the dollar.

The chart below shows how the exchange rate against a basket of currencies has broadly tracked the dollar rate since the start of last summer.

Are the Chinese losing control?

Beijing has been intervening heavily to support its currency and latest evidence suggests it has been drawing down on its reserves on a massive scale.

The latest December figures show reserves fell by a record $108bn. Such steep falls are also evidence of worsening capital flight in the country.

Net outflows reached $140bn last month, surpassing the previous peak seen in August, says Mark Williams, at Capital Economics.

The Communist party has responded to mass capital outflows by using the full force of the state to punish those it accuses of "illegal cash transfers" out of the country.

Some claim that the Chinese are beginning to lose control over their exchange rate and their economic policy.

Burning through reserves exerts a tightening effect on the economy. This has been offset in the past by cutting interest rates. However, rate cuts only hasten capital outflows and so the vicious cycle continues.

China's exchange rate policy, it could be said, has put the country in a bind.

Hashim Amla did the honourable thing by jettisoning his burden

Mike Selvey in The Guardian

It may be unusual to change captains at the midpoint of a series but Hashim Amla has chosen a good moment to concede his position and drop back into the ranks. A resignation after the massive defeat in Durban would have represented capitulation even if he had been contemplating it for a while.

Now though he has done so on the back of a stirring fightback from the side he led, and an emphatic return not so much to form (he had not looked out of touch in the second innings in Durban) as to relentless run-gathering. It is a little too strong to describe the outcome of a Test that had yet to complete its third innings as a “winning draw” for South Africa. With the conditions finally giving the bowlers some lateral movement on the final day, we can only surmise what the England bowlers might have managed had they been defending, say, 200 and their colleagues rediscovered the art of catching but at least we know there will be an almighty scrap now up on the highveld.

Hashim Amla resigns as captain of South Africa after drawn second Test

 

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Sometimes it is only in the aftermath of such a decision that the extent of the burden is revealed. Those who were there in the dining room at Edgbaston remember the red eyes of Nasser Hussain, that most passionate of England captains. There were Michael Vaughan’s tears at the ECB centre of excellence at Loughborough. Such is the responsibility, beyond simply a job, that comes with captaining one’s country or even just playing. It is only around nine months since Jonathan Trott, a man whose implacable demeanour hid inner turmoil, was lbw in what was to prove his final innings for England. He positively skipped from the field and sprinted up the pavilion steps, a man clearly content it was finally over. So there should be no surprise that in Amla’s case, he conducted a press conference that was a long way from the soul-searching of others and simply that of a man happy in the decision at which he had arrived and itching to get on with the job at which he truly excels.

There is absolutely no question of Amla being coerced into applying for the job in the first place on account of his ethnicity. With Graeme Smith’s retirement, he, as a senior player, put his name forward with others, including AB de Villiers. He did so because he believed he could make a difference, and after due process, was installed. It would also be wrong though to assume that, all things being equal, this was not the choice that would be made, convenient for South African cricket that he had applied.

It would also be erroneous to deduce that after the strong rumours in Durban that things were in some disarray on and off the field that he had been pushed out of the job. There was some fierce external criticism, most prominently from Smith in his role as media pundit, to which the response of Cricket South Africa was to invite him into the camp. But Smith’s remarks, while trenchant, would surely have been taken on board by Amla, a trusted colleague in Smith’s teams: there is a difference between being pushed and being encouraged.

A decade ago, when England were in India, I went to stay with their then coachGreg Chappell, and conducted an interview with him, which in part resonates now with the situation in which Amla found himself. At the time, Chappell had been dividing opinion in the country because of his fractious relationship with the former captain Sourav Ganguly, who had been struggling desperately for batting form with one Test hundred, in Bulawayo, in two-and-a-half years. He had been replaced as the captain by Rahul Dravid and the coach was portrayed as the man who sacked him, which was far from the truth.

“We clashed,” Chappell told me, “because his needs as a struggling player and captain and those of the team were different. I’m not the hard-nosed control freak that I have been portrayed. I’m thorough, a realist, a pragmatist and I’m honest. Much has been written and said, a lot of it misleading, but in essence I told Sourav that if he wanted to save his career he should consider giving up the captaincy. He was just hanging in there. Modest innings were draining him. He had no energy to give to the team, which was helping neither him nor us. It was in his own interest to give himself mind space to work on his batting so that it could be resurrected.”

Here we have in Ganguly and Amla two captains at opposite ends of the spectrum: the one desperate to hang on to his position at all costs; the other understanding his leadership may not be in the best interests either of the side or himself. Serene and understated, Amla had taken over a side who were in inevitable transition after the loss of some of the greatest players the game has seen. So a downturn in performance was not entirely unexpected. But he has nonetheless presided over the longest winless streak, eight matches, in South Africa’s Test history, mitigation coming only in the state of the Bangladesh weather and the pitches in India. Certainly in this, Amla has seen the broader picture.

Where they share a common theme is the impact, as Chappell said of Ganguly, that it was having on his batting and the team. Until his redemptive double hundred in Cape Town, Amla’s previous 13 matches as captain had brought him an average of 40.76 against a career average 10 points or so higher. Since the start of the tour of India that preceded the current series, nine innings had brought him five single figure scores and a top score of 43.

Whether, like Ganguly, his tribulations with the bat were impacting on the team in a manner other than simply the lack of runs is doubtful. If the captaincy itself, and all that it entailed, was affecting the capacity to do the job at which he truly excelled, then Amla is understanding enough to be able to arrive at the conclusion he has. It is an honourable thing to have done, which may well be to the detriment of England. That he has been able to do so on the back of a momentous innings, played perhaps with the release that comes with already having made a decision, merely serves to highlight it.

By the end of my first year as a doctor, I was ready to kill myself

An Anonymous junior doctor in The Guardian


On my morning drives to the hospital, the tears fell like rain. The prospect of the next 14 hours – 8am to 10pm with not a second’s respite from the nurses’ bleeps, or the overwhelming needs of too many sick patients – was almost too much to bear. But on the late-night trips back home, I’d feel nothing at all. Deadbeat, punch-drunk, it was utter indifference that nearly killed me. Every night, on an empty dual carriageway, I had to fight with myself to keep my hands on the steering wheel. The temptation to let go – of the wheel, the patients, my miserable life – was almost irresistible. Then I’d never have to haul myself through another unfeasible day at the hospital.


By the time I neared the end of my first year as a doctor, I’d chosen the spot where I intended to kill myself. I’d bought everything I needed to do it. All my youthful enthusiasm for healing, big dreams of saving lives and of making a difference, had soured and I felt an astronomic emptiness. Made monumentally selfish by depression, I’d ceased even to care what my husband would think of me, or that my little boy would grow up without his mother.


Doctor suicide is the medical profession’s grubby little secret. Female doctors aretwice as likely as the general population to take our own lives. A US study shows our suicide rate appears higher than that of other professional groups, with young doctors at the beginning of their training being particularly vulnerable. As I wrestled silently with the urge to kill myself, another house officer in my trust went right on and did it. To me, that monstrous waste of young life seemed entirely logical. The constant, haunting fear of hurting my patients, coupled with relentless rotas at work, had rendered me incapable of reason.


Though we know large numbers of doctors kill themselves, what is less clear are the reasons why, when dedicated to preserving human life, some doctors silently plot their own deaths. A 2006 study at the University of Pennsylvania identified that during their first year as doctors, young physicians experienced skyrocketing rates of burnout, with symptoms of emotional exhaustion, depersonalisation, and reduced sense of personal accomplishment soaring from 4% to 55%.


For me, the explanation ran deeper. I was entrenched in a hospital system that brutalised young doctors. Working on my hospital’s surgical emergency unit, there were simply too few of us to cope with the daily onslaught of patients. Officially eight or 10-hour days ran routinely into 13, 14 or 15 hours as we house officers worked at fever pitch to provide what was, at best, a mediocre service for our patients. Run ragged, we fought to keep our patients safe, but their numbers outstripped ours 20 or 30 to one, and the efforts this took were superhuman. The nurses knew, the consultants knew, even the hospital management knew, yet no one seemed to give a damn.

It wasn’t just exhaustion that drove me into depression. Plenty of jobs are busy. But there is something uniquely traumatic about being responsible for patients’ lives, while being crushed under a workload so punitive it gives neither the time nor space for safe assessment of those patients. Days were bad enough, but nights on call were terrifying. I remember running from the bed of one patient, still haemorrhaging blood from her surgical wound, to another whose heart rate had plummeted to 20, perilously close to a cardiac arrest. Two stricken patients, but only one doctor, wracked with the knowledge that if something went wrong, the guilt would be hers alone.


I was lucky. I was pushed by the colleague in whom I finally confided into seeking professional help. It took anti-depressants, therapy and a narrowly-avoided psychiatric inpatient admission to bring me back to the land of the living.




 Now, on the cusp of junior doctors’ first national strike in 40 years, I’m astounded the health secretary persists in ignoring unanimous condemnation of his new contract from juniors and medical leaders alike. If he gets his way, Jeremy Hunt will make it easier for hospitals to abuse their juniors, by stripping away the safeguards that stop hospitals overworking us, fining those that do. Under his new contract, our hours will become even longer, even more antisocial – at a time when we simply have nothing more to give. And as we are pushed to treat more and more patients, faster and faster, fatigue and psychological distress will dull our competence: your lives will be less safe in our hands. And our own? Take it from someone who’s been there. Watch the suicide rate climb.