No questions asked

 

  By Francesco Guerrera, Anuj Gangahar and Deborah Brewster

 
Published: December 19 2008 19:57 | Last updated: December 19 2008 19:57

 
Looking down on a sunlit Manhattan skyline from the seaplane carrying him to work, Bernard Madoff must have felt on top of the world.
 
In the late 1980s, when his morning routine involved a short hop from Long Island to the East River, a stone's throw from his office in New York's financial district, Mr Madoff was just another successful Wall Street operator.
 
A prominent member of the securities industry with deep ties to the wealthy Jewish community that divides its time between New York and Florida, Mr Madoff had an otherwise fairly ordinary lifestyle and could have been forgiven the extravagant touch of an aerial commute.
But after last week, when US prosecutors say he confessed to what could be the largest fraud ever perpetrated, nothing will ever be ordinary again for the 70-year-old Mr Madoff.
 
There will be no more seaplanes after a court ordered Mr Madoff to submit to electronic monitoring and remain in his Manhattan duplex daily from 7pm to 9am. Gone, too, is the adulation of the rich investors who used to beg "Bernie" to take their money – replaced by the shock and pain of huge financial losses and betrayal of trust.
 
As details begin to emerge of a "Ponzi scheme" that is alleged to have swindled up to $50bn (£33bn, €36bn) from investors ranging from HSBC, the giant UK bank, to the charity of Steven Spielberg, the film director, one central question remains unanswered. How could Bernie have duped so many investors for so long?
 
Those who met Mr Madoff during a career that began in 1960, when he founded his securities firm with $5,000 earned installing garden sprinklers and patrolling Long Island beaches, talk of a private, self-effacing man. "The last thing Bernie Madoff wanted was publicity," says one of his fellow travellers on the East River seaplane.
 
Affable and polite but not overly talkative, Mr Madoff was active on the social and charity scenes in Manhattan and Palm Beach – the Florida town that serves as an escape hatch for rich New Yorkers.

Wrapped up: Bernard Madoff returns to his New York apartment on Tuesday after a court imposed a curfew

Yet despite his wealth – he owns a yacht and houses in Palm Beach and Cap d'Antibes in France as well as his Upper East Side apartment – Mr Madoff did not stand out from the crowd of well-off middle-aged people with whom he socialised. "He was low-key," recalls Charles Gradante, a hedge fund adviser who met him regularly on the Palm Beach social circuit. "When I saw him at cocktail parties, he would be in the corner and investors would sometimes go over to him. He didn't have a charismatic presence; he wasn't exuding confidence."
Senio Figliozzi, owner of the Ever­glades Barber Shop in Palm Beach, cut his hair and gave him facials, manicures and pedicures for 17 years but rarely heard him talk about business. He describes Mr Madoff as a "very nice man who was always polite and gentlemanly" and tipped the standard 20 per cent.
 
But behind that everyman persona, Mr Madoff weaved a complex web of connections that lured more and more investors into his fold. Ponzi schemes – pyramid arrangements named after the Italian immigrant to the US who first attempted the scam in the 1920s – are relatively unsophisticated frauds in which the organisers repay old investors not with genuine gains but with funds from new investors. Investigators allege that Mr Madoff's was in operation from at least 2005.
 
If he did indeed craft one, there were no outward signs when, more than a decade ago, Mr Madoff added an investment firm to his brokerage house and later moved to the tall, thin midtown skyscraper known as the Lipstick Building. With a reputation as a leading market-maker – the middle-man between buyers and sellers – on Nasdaq, the stock market he chaired for a few years, Mr Madoff was not unusual in moving from broking to investing.
 
Nor did it seem strange that, as a self-made man of a certain standing in the Jewish community, Mr Madoff's should tap his friends and acquaintances in New York society and Palm Beach's exclusive Country Club.
 
To be sure, Mr Madoff did not move in the top circles of American social life – the parties dominated by film celebrities, tycoons such as Donald Trump or super-rich donors such as Sandy Weill, the former Citigroup chief. His was a more intimate, less flashy group, according to David Patrick Columbia, the editor of NewYorkSocialDiary.com – a tightly-knit community centred on Upper East Side synagogues and charitable organisations.
Many of these pious, often elderly, people looked to increase their retirement nest-eggs without taking too many risks and thought they had found the holy grail in Mr Madoff's enviable record: he consistently beat other fund managers and the market, year after year.
 
"This is a community of affluent Jewish people who basically socialise with each other. They are very philan­thropic and all support each other's charities," Mr Columbia says. "Even though Mr Madoff was not a top member of this community, his business made him the man to know. He became an icon of financial success for them."
 
But after a few years, word of Mr Madoff's ability to generate steady returns, by employing a seemingly simple strategy of buying shares in large companies and selling options on the same names to mitigate risk, began spreading beyond his inner circle. Yet as more and more people wanted in on Mr Madoff's outstandingly consistent performance, he played it cool. "He never pushed investing with him: he would turn people away sometimes or tell them, 'it is not for you', recalls Mr Gradante. "That all added to the mystique and made people want to get in."
 
Barbara Rosenthal, a Palm Beach property agent, says Mr Madoff's standing was such that people felt "you had to be lucky for him to talk to you", while another resident recalls that many people joined the Country Club "so they could meet this guy". Experts on "affinity frauds" say the strong demand for Mr Madoff's services – and the fact that many investors were coming in through "friends" – had a crucial consequence: those who did get in felt they had a special deal and were less inclined to ask questions.
 
But as the friends and family network became inadequate to satisfy investors' craving for a piece of Mr Madoff's miraculous returns, an informal marketing system began to take shape. In Palm Beach, one of the main middlemen for Mr Madoff's business was Robert Jaffe, according to several investors. Dapper and well-spoken, Mr Jaffe got a number of individuals and charities to place their money with Bernard Madoff Investment Securities.
Mr Jaffe is the son-in-law of Carl Shapiro, founder of the Kay Windsor clothing company and a renowned Boston philanthropist. Mr Shapiro's foundation is believed to have lost nearly half of its $345m in assets and both he and his family are thought to have suffered significant losses as a result of the collapse of Mr Madoff's firm.
 
There is no suggestion that either Mr Jaffe or any members of his family knew about Mr Madoff's alleged fraud. A spokeswoman for Mr Jaffe did not return calls.
 
As the years went by without any sign of a dip in performance, the tentacles of Mr Madoff's operations began stretching beyond Palm Beach's manicured lawns and Manhattan's skyscrapers. The long list of potential victims of his alleged actions includes Swiss and Austrian private banks, hedge funds owned by large insurance companies such as MassMutual's Tremont Capital Management, as well as famous names such as Fred Wilpon, owner of the New York Mets baseball team.
 
Other high-profile investors, such as Mr Spielberg's Wunderkinder foundation and several charitable organisations that now face ruin, went in through the more traditional route of their long-standing financial advisers.
 
Some of the funds that fed international money into Mr Madoff's operation were run by well-known financiers such as Walter Noel, the founder of Fairfield Greenwich Group. A Harvard-educated former banker, Mr Noel had the ability to reach investors around the globe, partly thanks to the help of Andres Piedrahita, a well-connected banker who is Mr Noel's son-in-law and runs Europe and Latin America for Fairfield.
 
Fairfield, which is the largest potential victim of Mr Madoff's alleged fraud with some $7.5bn invested in his firm, declined to comment.
Ascot Partners, a hedge fund run by Ezra Merkin, also chairman of GMAC, General Motors' former finance arm now owned by Cerberus, the private equity group, was also an active recruiter of funds for Mr Madoff's enterprise. Ascot and Mr Merkin could not be reached.
 
The "feeder funds", whose returns were augmented by billions of dollars in loans from banks such as HSBC and Royal Bank of Scotland, had a powerful incentive to persuade investors to place money with Mr Madoff: lucrative returns. He forwent the standard 20 per cent cut on profits demanded by most fund managers and, by and large, charged feeder funds only commissions on trades.
 
Crucially, not many of the investors appear to have challenged that unusual structure, let alone Mr Madoff's suspiciously good returns over the years.
Those who did were less than impressed with Mr Madoff's answers. Jim Hedges, an asset manager, said that when they met in the late 1990s, Mr Madoff was unable to explain his winning strategy. "He made little conversation – he looked interested in ending the meeting as soon as possible," says Mr Hedges, who decided against investing.
 
Another hedge fund expert recalls that he once approached Mr Madoff at a party and quipped that his performance was too good to be true. Mr Madoff chuckled and replied: "A lot of people say that."
 
Now, as investors contemplate the ruins of the financial edifice he built, the tragedy is that among that "lot of people", so few paused to ask themselves why.
 

---

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The devil and Bernard Madoff

By Spengler

Now that the whole horrible truth has come to light, I have no more reason to conceal my true identity. I am Bernard Madoff.

Well, not really. But I wish I were. Few Americans have done more to punish stupidity, pretension and complacency than Madoff, whose apparent US$50 billion swindle calls to mind the caper by Mephistopheles in the second part of Goethe's Faust. The fictional devil persuaded the emperor to issue paper money against buried treasured yet to be discovered.

This month, I cited Benedict XVI's 1985 essay on morality and economics, in which the future pope warned that the decline of ethics "can actually cause the laws of the market to collapse". (See Benedict XVI is magnificently right, Asia Times Online, December 9, 2008). In counterpoint to that message from our sponsor, satanic laughter pealed through the marketplace on December 12, when Madoff's apparent misdeeds came to light. That was just the sort of thing for which God summoned the devil into being, as the Lord explained to Mephistopheles in the prologue to Faust, for man seeks unconditional rest and needs a provocateur as companion. Mephisto is an Old Testament devil, drawn from the Book of Job, who is part of the Divine Court.

Madoff, 70, a former Nasdaq chairman, was arrested by federal prosecutors last week in relation to what he reportedly told his sons was a long-running Ponzi scheme - that is one in which investors are paid high returns from money paid in by subsequent investors.

Most gratifying is the fleecing of the rich and famous - director Steven Spielberg, producer Jeffrey Katzenberg, and even actress Uma Thurman's financier boyfriend Arpad Busson got stung, along with a list of supposedly savvy investment firms. The man deserves a medal. Deplorable, to be sure, is the ruin of hundreds of families who entrusted Madoff with their life savings, not to mention charities and school endowments. Call them collateral damage. I have never been squeamish about killing civilians when urgent military objectives are at stake. We give medals all the time to people who cause innocent death in war. Tough on them if they can't take a joke, as the artillery likes to say about friendly-fire casualties.

The very rich believe what F Scott Fitzgerald said about them, that "the very rich are different from you and me". Serried ranks of lawyers, accountants and financial advisors surround them and keep them from harm. Madoff proved otherwise, making a few of them into paupers and humiliating a very large number of them. Not because of what they do, but because of who they are, the very wealthy consider themselves above the fate of ordinary people. They know the right people, they join the right clubs, and they have access to the right advice. Sometimes it takes a national catastrophe to teach them otherwise. The slaughter of the subalterns in World War I destroyed the flower of the English gentry, and the Russian revolution left counts driving taxicabs in Paris. There was no recuperation from such punishment.

Madoff has given Americans a lesson in humility that is cheap and painless by comparison. America's elite - the people characterized as "one-trick wizards" who lived off leverage (see Obama's one-trick wizards, Asia Times Online, November 25, 2008) - turn up as a self-satisfied, feckless gang of incompetents who could not spot the wolf within their own sheepfold.

After the fact, it is obvious that it was physically impossible for Madoff to produce the returns he reported. "While Mr Madoff's stated strategy was valid, it would have been impossible to execute with the amount of money he was managing ... Mr Madoff's firm couldn't have bought and sold the options he claimed because those totals would have outstripped total trading volume those days," according to the The Wall Street Journal on December 16. Nonetheless, his wealthy dupes believed that he could spin straw into gold year-in, year-out.

If that sounds deluded, what shall we say about hedge-fund investing for the masses, who believed that American home prices would double every 10 years, as the National Association of Realtors continues to claim in television advertisements? Perhaps they should call themselves Sur-realtors. Madoff offered small change compared to Mom and Pop America, who put 10% down on a home that appreciated 10% each year, for an annualized return on capital of 100%.

Americans luxuriated in a trillion dollars a year of capital inflows. The aging savers of Europe and Japan viewed American markets (and American brick and mortar) as a source of returns in a moribund world, while the newly prosperous savers of China and the emerging world saw America as a safe haven. The world threw money at Americans, and Americans threw the money into a housing bubble. The idea was absurd that Americans could fund their collective retirement by bidding up the price of each others' houses and then cash out at the same moment. But it was no more absurd than Madoff's claim to make a steady 10%-15% by trading illiquid stock options.

There weren't a tenth the number of stock options traded to carry out Madoff's putative strategy, as anyone with a complete set of fingers, let alone a pocket calculator, could determine without great difficulty. For that matter, there weren't enough families to keep the home price-bubble going. Americans are retiring faster than they are forming families, and aging Americans whose children have left the home ("empty nesters" ) typically sell large homes and buy smaller ones. A very crude comparison below shows Americans aged 25-50, when they are most likely to raise children and buy larger homes, against those aged over 50, who are more likely to sell large homes.

Demographers have been warning for 10 years of a home price collapse in America's suburbs. Whistleblowers first warned the American authorities about Madoff's machinations in 1999. There is no way to make either case less embarrassing than it is. Among defenders of the market mechanism, there is a half-hearted effort to blame the collapse of the American housing market on the machinations of Democrats and the government-sponsored housing lenders, Fannie Mae and Freddie Mac.

It was disappointing to see the usually astute Michael Novak resort to this fairy-tale in the January 2009 issue of First Things. Novak is an estimable political philosopher - I have cited his work in the past - but he vastly overestimates the extent to which "the political system helped create this mess" by mandating low-quality loans. Novak simply doesn't know the details of the mortgage market; he repeats, inaccurately, what he has heard from Republican apologists in Washington. He attributes part of the problem to the fact that "some too brilliant Wall Streeters got the clever idea of buying Fannie Mae mortgages and packaging them to sell in large bundles". In fact, this bundling began in the mid-1980s and helped finance the quarter-century economic boom inaugurated by president Ronald Reagan.

The problem, rather, was that the investment banks began packaging low-quality "subprime" mortgages with high credit risk, and the credit rating agencies knowingly represented dicey packages as default-proof triple-A credits. The bankers knew they were cheating, as much as did Madoff, and the ratings agencies knew they were selling their soul for revenues, as an unnamed official stated in an e-mail made public by a US congressional committee. They got away with this because the childless dystopias of Europe and Japan needed investments in places where families still were formed, and were willing to ship their money to the American subprime market without asking too many questions, just like Madoff's investors.

There were underlying causes, but the human factor that should have sent up alarm bells simply was not present - not at the Securities and Exchange Commission in the case of Madoff, nor at the Federal Reserve in the case of the banks. The American public got greedy and lazy, and is getting what it deserved. It is comforting that America's elite also is getting what it deserved, thanks in part to Madoff, who ensured that a representative sampling of the very rich learned that Scott Fitzgerald was wrong.

The Federal Reserve's strategy for economic revival reduces to trying to put air back into the bubble, by forcing mortgages rates so low that Americans will return to punting on houses. That goes against common sense, for Americans who have lost their nest egg in the housing market will not soon return, and against demographics. "When the Baby Boomers were young, families with children made up more than half of households ... The Boomers themselves are becoming empty-nesters, and many have voiced a preference for urban living. By 2025, the US will contain as many single-person households as families with children," wrote Christopher Leinberger in the March 2008 Atlantic Monthly, citing academic research that predicted a 40% surplus of large-lot single-family homes by 2025.

Like Mephistopheles' invention of paper money, the Federal Reserve's ballooning balance sheet will not restart the American economy. In Goethe's play, the emperor distributes paper money and finds that his courtiers use it to drink, gamble, or otherwise dissipate more than they otherwise would have. He complains (in lines 6150-54, Walter Arndt's translation):

I hoped for pluck and zest for ventures new;
I should have known you, and what each would do;
For all new bloom of wealth, it's plain to see
That each remains just what he used to be.

America's economy will remain in the monetary equivalent of an iron lung until Americans show "pluck and zest for ventures new", or what John Maynard Keynes called "animal spirits". There is no more trend to ride. Wealth now will require sweat, brains and guts.

Global economy: The age of obligation

By Niall Ferguson

Published: December 18 2008 19:10 | Last updated: December 18 2008 19:10




In the Old Testament Book of Leviticus, God commands the children of Israel to observe a jubilee every 50 years. Nowadays we tend to associate the word with celebrations of royal anniversaries such as Queen Elizabeth’s golden jubilee in 2002. But the biblical conception of a jubilee was more precise: that of a general cancellation of debts.

This point is spelt out in Deuteronomy: “Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the Lord’s release.”

Such injunctions may strike the modern reader as utopian. How could any sophisticated society function if all debts were cancelled twice a century – much less, as Deuteronomy seems to suggest, every seven years? Yet we know that such general cancellations of debt really did happen in the ancient world. In 1788 BC, for example, about 500 years before the time of Moses, King Rim-Sin of Ur issued a royal edict declaring all loans null and void, wiping out some of history’s earliest known moneylenders.

The idea of a generalised debt cancellation is not wholly unknown in modern times. The late Gerald Feldman, the world’s leading authority on the German hyperinflation of 1923, drew a parallel between the ancient Hebrew yovel and the wiping out of all paper mark-denominated debts as a result of the collapse of the German currency (though, as he was quick to point out, those whose savings were wiped out were far from jubilant).

In the hope of avoiding the mark’s meltdown, the economist John Maynard Keynes had repeatedly called for a general cancellation of the war debts and reparations arising from the first world war. Though no such intergovernmental jubilee was ever proclaimed, debt cancellation was effectively what happened after 1931, beginning with President Herbert Hoover’s one-year moratorium on both war debts and reparations.

As 2008 draws to a close, there are many people on both sides of the Atlantic who yearn for such a simple solution to the problem of excessive indebtedness. Parallels with the interwar period are not inappropriate. It is all but inevitable that we shall see serious political and geopolitical upheavals in 2009, as the recession takes its toll on weak governments (Thailand and Greece are already reeling) and raises the stakes in inter-state rivalries (India-Pakistan). In the words of Hank Paulson, the US Treasury secretary: “We are dealing with a historic situation that happens once or twice in 100 years.” The stakes are high indeed. Has the time arrived for a once-in-50-years biblical jubilee?

Excessive debt is the key to this crisis; it is the reason we are confronting no ordinary recession, curable by a simple downward adjustment of interest rates. It is the reason we still have to fear, if not a second Great Depression, then very likely the biggest recession since the 1930s. We are living through the painful end of an age of leverage which saw total private and public debt in the US rise from about 155 per cent of gross domestic product in the early 1980s to something like 342 per cent by the middle of this year.

With average household debt rising from about 75 per cent of annual disposable income in 1990 to very nearly 130 per cent on the eve of the crisis, a large proportion of American families are submerging under the weight of their accumulated borrowings. British households are in even worse shape.

Looking back, we now see just how big a proportion of US growth since 2001 was financed by mortgage equity withdrawals. Without that as a means of financing consumption, the economy would barely have grown at 1 per cent a year under President George W. Bush. Looking forward, we see just how hard it will be to stabilise property prices and the prices of the securities based on them. Already, at the end of September, one in 10 American home owners with a mortgage was either at least a month in arrears or in foreclosure. One in five mortgages exceeds the value of the home it was used to purchase.


The financial sector’s debts grew even faster as banks sought to bolster their returns on equity by “levering up”. According to one recent estimate, the total leverage ratios (on- and off-book assets and exposure divided by tangible equity) for the two biggest US banks were 88:1 for Citibank and 134:1 for Bank of America. The bursting of the property bubble caused such ratios, which were already too high on the eve of the crisis, to explode as off-balance-sheet commitments and pre-arranged credit lines came home to roost. Only by borrowing from the Federal Reserve on an unprecedented scale have the banks been able to stay in business.

With estimates of total losses on risky assets now ranging from $2,800bn (£1,850bn, €1,960bn) to $6,000bn, a chain reaction is under way that will leave no sector of the world economy untouched. The American economy is contracting at an annualised rate of 5 per cent. Commercial property is following the residential market into freefall. The Standard & Poor’s 500 index is down 43 per cent since its peak in October last year. The market for credit default swaps is pointing to a surge in defaults on corporate bonds. The automotive industry is already (against the will of Congress and the original intention of the Treasury) on life support. The US is at the centre of the crisis but Europe and Japan may suffer even larger aftershocks. As for the much feted emerging market “Brics” – Brazil, Russia, India and China – their stock markets have been dropping like, well, bricks.

What makes this crisis of burning interest to financial historians is the knowledge that we are witnessing a real-time experiment with not one but two theories about the Depression.

On one side, Ben Bernanke, Fed chairman, is applying the lesson of Milton Friedman’s and Anna Schwartz’s A Monetary History of the United States, which argued that the Depression was in large measure the fault of the central bank for failing to inject liquidity into an imploding financial system. Mr Bernanke has not merely slashed the federal funds rate to below 0.25 per cent. He has lent freely to the banks against undisclosed but probably toxic collateral. Now he is buying securities in the open market.

The result has been an explosion of the Fed’s balance sheet and of the monetary base. With assets approaching $2,263bn and capital of less than $40bn, the Fed increasingly resembles a public hedge fund, leveraged at more than 50:1.

How fallow years led to a golden jubilee

Every seven years, God told Moses, the children of Israel should neither sow their fields nor prune their vineyards – a kind of self-imposed recession. After seven such sabbatical years, the trumpet of jubilee should be sounded: “And ye shall hallow the fiftieth year, and proclaim liberty throughout all the land unto all the inhabitants thereof: it shall be a jubilee unto you; and ye shall return every man unto his possession.”

Land that had been sold was to be redeemed or returned to the original seller and the poor were to be relieved: “If thy brother be waxen poor, and hath sold away some of his possession, and if any of his kin come to redeem it, then shall he redeem that which his brother sold ... If thy brother be waxen poor ... then shalt thou relieve him: yea, though he be a stranger ... Take thou no usury of him ...” In addition, Jews who were slaves were to be set free.

To modern eyes, however, the most striking of these divine injunctions was that debts were to be cancelled as part of “the Lord’s release”.

On the other side, Mr Paulson has emerged as an unwitting disciple of Keynes, running a huge government deficit in an effort not merely to bail out the financial sector but also to provide a public sector substitute for sharply falling private sector consumption. Even before President-elect Barack Obama launches his promised infrastructure investment programme, estimates of next year’s deficit run as high as 12.5 per cent.

Once, monetarism and Keynesianism were considered mutually exclusive economic theories. So severe is this crisis that governments all over the world are trying both simultaneously.

Although commentators like to draw parallels with Franklin Roosevelt’s New Deal, in truth the measures taken since the crisis began in August 2007 more closely resemble those taken during the world wars. After 1914, and again after 1939, there was massive government intervention in the financial system. Banks and bond markets were reduced to mere channels for the financing of huge public sector deficits. That is what is happening today, but without the stimulus to manufacturing that the world wars provided. We are having war finance without the war itself.

Yet the effect of these policies is essentially to add a new layer of public debt to the existing debt mountain. Added together, the loans, investments and guarantees made by the Fed and the Treasury in the past year total about $7,800bn, compared with a pre-crisis federal debt of about $10,000bn. The Treasury may have to issue as much as $2,200bn in new debt in the coming year.

For the time being, the distress-driven demand for dollars and risk-free assets is pushing down the cost of all this borrowing. Treasury yields are at historic lows. But it is not without significance that the cost of insuring against a US government default has risen 25-fold in little over a year. At some point, with most big economies adopting the same fiscal policy, global bond markets are going to start choking.

Is it really plausible that the cure for excessive leverage in the private sector is excessive leverage in the public sector? Might there not be a simpler way forward? When economists talk about “deleveraging” they usually have in mind a rather slow process whereby companies and households increase their savings in order to pay off debt. But the paradox of thrift means that a concerted effort along these lines will drive an economy such as that of the US deeper into recession, raising debt-to-income ratios.

The alternative must surely be a more radical reduction of debt. Historically, such reductions have been done in one of four ways: outright default, restructuring (for instance, bankruptcy), inflation or conversion. At the moment, more and more American households are choosing the first as a way of dealing with the problem of negative equity, while more and more companies are being driven towards bankruptcy. But mass foreclosures and bankruptcies are not a pretty prospect.

Inflation, by contrast, is hard to worry about in the short term, not least because the Fed’s expansion of the monetary base is leading to no commensurate expansion of the broad money supply; the banks would rather shrink than expand their balance sheets.

That leaves conversion, whereby, for example, all existing mortgage debts could be wholly or partly converted into long-term, low and fixed-interest loans, as recently suggested by Harvard’s Martin Feldstein. (In his scheme, the government would offer any homeowner with a mortgage the option to replace 20 per cent of the mortgage with a low-interest loan from the government, subject to a maximum of $80,000. The annual interest rate could be as low as 2 per cent and the loan would be amortised over 30 years.

At the very least, this would rescue many homeowners from the nightmare of negative equity. A similar operation might also be contemplated for the debts of those banks that have been partially or wholly recapitalised by the state. This would not add to the federal debt in net terms and would reduce the interest burden, if not the absolute debt burden, of households.

Such radical steps would naturally represent a haircut for creditors, notably the holders of mortgage-backed securities and bank bonds. Yet they would surely be preferable to the alternatives. And they would certainly be a less extreme solution than the general debt cancellation envisaged in the Old Testament.

Financially, 2008 has been an annus horribilis. The answer may be to make 2009 a true jubilee year.

The writer is a professor at Harvard University and Harvard Business School, a fellow of Jesus College, Oxford, and a senior fellow of the Hoover Institution, Stanford

Copyright The Financial Times Limited 2008

100 top sites for the year ahead

 

 

Two years after we last picked the web's cream of the crop, our latest selection finds that location-based services, work-anywhere collaboration and video are prominent

• Charles Arthur, Jack Schofield, Victor Keegan, Aleks Krotoski, Keith Stuart, Greg Howson, Mike Anderiesz and Michael Cross
• The Guardian, Thursday 18 December 2008
• larger | smaller
• Article history

Illustration: Jan Kallwejt

The online world has changed dramatically even since we last drew up a list of 100 useful sites in December 2006. In the interim, there has been a revival of the browser wars - with Google's Chrome and Apple's Safari making surprising inroads into the Windows monopoly, and offering a new vision of what browsing can be like.
Many of the sites listed here were not available when we did our last list; although longevity is a mark of pride online, it is difficult for companies set up in the 1990s to reinvent themselves quickly enough to take advantage of new technologies. Although of course rapid change brings casualties too: it's possible that with all the economic turbulence going on that some of the sites here won't be around in a year from now, or that their now free services will have become paid-for. That doesn't diminish their usefulness, though; it just underlines their determination to survive.
The biggest changes since 2006 have been in the fields of collaborative online services that let people in different locations work simultaneously on projects. Collaboration in 2006 was very much focused on words, but now you can create presentations that look as though they were made with expensive packages. And then you can share those presentations, or look at other work that people have done - and even download them. You can convert files without needing expensive systems. Collaborative working has never been easier, even across different platorms. The web really is becoming the operating system, as the rise of the "netbooks" (aka ultraportables, aka Liliputers) emphasises.
The growth of location-based services - particularly those which you can choose to log yourself in and out of, thus protecting your privacy - has been rapid. A parallel growth has come with the mobile web; there's no escaping the fact that Apple's iPhone has revolutionised how its users, in their millions, think about the internet. For them, it is no longer something that is experienced well on a computer and then badly on their mobile phone; the mobile version of Safari has made browsing on the move an altogether more pleasant experience, which it never was before.
That opens up new vistas: location-aware task managers can adjust the order of your to-do list based on what the GPS unit in the phone is telling you, so that while you're in the supermarket it will remind you about the cereal you need, but in the office it will tell you to send that important memo right away.
Video, of course, is now everywhere. YouTube was already dominant in 2006, but now the BBC's iPlayer is taking over. If it makes its technology available to all, perhaps the UK will become a nation of video makers and watchers.
So here are our 100 revised best sites to see you through the next couple of years. They're organised roughly along those lines.

Blogging

Now as easy as falling off a log.
Bloglines bloglines.com for reading web feeds. Smart and clean.
Wordpress wordpress.com free, and most importantly spam-free, blogging.

Browsers

A newly revived category, thanks to Chrome and Safari.
Chrome google.com/chrome newly out of beta, though Windows-only.
Firefox mozilla.com/firefox infinitely malleable, with fewer security holes.
Flock flock.com with an emphasis on linking to social networks.
Opera opera.com growing in importance for mobiles.
Safari apple.com/safari Apple's contender; a leader in mobile web access.

Cartoons

Everyone needs some relaxation.
Dilbert dilbert.com hi, cube-dwellers.
Alex alexcartoon.com amid the financial crisis, Alex the banker remains reliably self-interested.
Doonesbury doonesbury.com the cartoon you'll also find in that printed newspaper thing.
The Joy of Tech geekculture.com/joyoftech well-drawn, witty near-daily takes on Apple and computing life.
XKCD xkcd.com "Stick-figure strip featuring humour about technology, science, mathematics and relationships."

Create/collaborate

The main change from last time: whatever you want to do, wherever you are.
Dipity dipity.com build timelines and add text, pictures and videos.
Zoho zoho.com everything in one place, from documents to presentations.
Rememberthemilk rememberthemilk.com online task/to-do management.
Netvibes netvibes.com your to-do lists, news, weather and photos on one page.
280slides 280slides.com create presentations online. Very slick.
Zamzar zamzar.com convert files from one format to another.

Gaming

A field where handheld, bedroom and Flash games are becoming mainstream
Eurogamer eurogamer.net reportage, with breadth, if not always depth.
The Independent GamingSource tigsource.com a great place to pick up on tomorrow's breakthrough hits.
Pocket Gamer pocketgamer.co.uk still by far the best site on handheld gaming.
Metacritic metacritic.com/games industry touchstone and useful one-stop buying guide.
Jay is Games jayisgames.com passionate, well-designed and knowledgeable.

Geek squad

Stack Overflow stackoverflow.com where programmers gather.
The Daily WTF thedailywtf.com daily despatches from the coding warzone.
Joel On Software joelonsoftware.com essays by a former Microsoftie.

Government/public services/politics

Streetwire streetwire.org hyperlocal information including planning alerts, crime and public safety, traffic, local news and postings to FixMyStreet.com.
Recycle Now recyclenow.com winner of the Show Us A Better Way competition.
British and Irish Legal Information Institute bailii.org a database of laws. Only survives hand-to-mouth on voluntary donations; where's yours?
What Do They Know? whatdotheyknow.com makes filing a Freedom Of Information request as easy as sending an email. Too easy, some in power think.
Upmystreet upmystreet.com all the detail on your area you could ever want.

Location, location

Services like these blossom with a mobile phone that can access the internet
Dopplr dopplr.com "share your future travel plans with friends and colleagues", then find out if others will be there too.
Qype qype.com localised search for pubs, restaurants, etc; also a bit of a social network.
Loopt loopt.com "transforms your mobile phone into a social compass".
Brightkite brightkite.com a "location-based social network".

Maps

The flip side of location-based services: seeing where you are.
OpenStreetMap openstreetmap.org a rights-free map created by people like you. Remarkably detailed and precise.
Walkit walkit.com walking directions for all sorts of routes.
Google Maps Street View maps.google.com/help/maps/streetview soon to have the UK as well.
Noise pollution map noisemapping.defra.gov.uk how noisy is it in the area around your house?
Where's The Path? wheresthepath.googlepages.com/wheresthepath.htm Let down by OS's absurd OpenSpace restrictions.

Money/finance/ consumer fightback

We all need someone on our side.
Money Saving Expert moneysavingexpert.com does what it says on the tin.
BView bview.co.uk review businesses before you use them.
Say No to 0870 saynoto0870.com direct-dial numbers, not expensive national-rate ones.
Consumer Direct consumerdirect.gov.uk government site for consumers.
Zopa zopa.com a human-centred way to loan money to people in the developing world.

Music

Last.fm last.fm British-made, CBS-owned, music recommendation station.
Amazon amazon.co.uk now has its own MP3 store in the UK as well as the US.
7Digital 7digital.com music downloads in MP3 format - so not tied to iPods.
Passionato passionato.com classical music MP3 downloads, slowly building momentum.
Songkick songkick.com find out where your favourite bands are playing next, based on your music library.
Blip.fm blip.fm be your own DJ and create a social network from your choices and recommendations.

News recommendation

Digg digg.com still the reigning champion.
Reddit reddit.com slightly upmarket from Digg; slightly below...
Techmeme techmeme.com technology news chosen by computer, though it's now adding human editors.
Popurls popurls.com aggregating the aggregators: the web in a window.
Slashdot slashdot.org still attracts a big, and often knowledgable, audience.

Offbeat

The Onion theonion.com still the satirical newspaper of record.
B3TA b3ta.com beyond classification; its forum has spawned many memes... and trolls.
Lolcats icanhazcheezburger.com captioned cats and other animals.
PostSecret postsecret.blogspot.com notes of secrets sent by people who want them posted. So they are.
Passive-Aggressive Notes passiveaggressivenotes.com would it be too much trouble for you to have a look?

Photography

Flickr flickr.com the granddaddy of photo-sharing sites.
Picnik picnik.com photo editing in your browser.
Picasa picasa.com Google's photo organisation and editing tool. Windows only.

Physical from virtual

Moo moo.com Moo business cards have become a calling card in themselves.
Blurb blurb.com coffee-table book publishing of your books.
Lulu lulu.com book, photobook, calendars and other sorts of publishing.
Cafepress cafepress.com badges, T-shirts etc. US-only at present.
Spreadshirt spreadshirt.net design your own T-shirt or sweatshirt and get it printed.

Reference

CIA Factbook cia.gov/library/publications/the-world-factbook all the data you need on pretty much anywhere.
Wikipedia wikipedia.com still a first port of call on most topics.
Rotten Tomatoes rottentomatoes.com check the film you plan to see here.
Internet Archive/Wayback Machine archive.org the web in aspic.
Wikileaks wikileaks.org anonymous source of leaked documents.

Search

Google still dominates.
Clusty clusty.com results in clouds.
CoolIris cooliris.com image-based searching - a new way to use the web.

Social software

Chances are high you're a member of at least one, and perhaps all, of these sites.
Facebook facebook.com virtually everyone's your friend here.
Myspace myspace.com hangout for all the teenagers. And Kirk Douglas.
LinkedIn linkedin.com mainly for business.
Friends Reunited friendsreunited.co.uk the original social network.

Twitter, and associated

Twitter has proved itself over and over this year as a vector for news.
Twitter twitter.com the ur-site, where you can create an identity (or several).
Monitter monitter.com watch keywords on Twitter. A brand, your name, a meme? No login required at present.
Matt themattinator.com post to multiple Twitter accounts. Requires your password; only give if you trust the site.
Twitterfeed twitterfeed.com posts blog contents to Twitter. Requires password; only give if you're sure that you trust the site. We do.
Twitter Grader twitter.grader.com find how you rank on Twitter.

Video

BBC iPlayer bbc.co.uk/iplayer already taking up 10% of UK network traffic.
YouTube youtube.com dominant provider of video content online.
Vimeo vimeo.com better rights control than YouTube and a cleaner interface.
Worldtv.com worldtv.com set up your own global TV channel.
Qik qik.com video-sharing from your mobile.
Joost joost.com internet TV via a browser plugin.
Videojug videojug.com a sort of social network of informational video.
Seesmic seesmic.com short video conversation: another social network.

Virtual worlds/MMORPGs

Runescape runescape.com amazingly successful MMORPG.
Entropia Universe entropiauniverse.com set in a distant future on the untamed planet of Calypso.
Club Penguin clubpenguin.com minigame-tastic virtual world for kids.
Moshi Monsters moshimonsters.com "educational" virtual world for kids.

Visualisation

DabbleDB dabbledb.com create online databases and analyse them.
Google Visualisation tools code.google.com/apis/visualization/documentation/gallery.html dozens of tools for making data more comprehensible.
Many Eyes manyeyes.alphaworks.ibm.com/manyeyes/page/Visualization_Options.html IBM's visualisation tools, similar to Google's.

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Pin-Striped Pirates

 Pin-Striped Pirates


Over a quarter of the world's tax havens are British property. More than half of Britain's colonial territories and dependencies are tax havens. Is that why the UK retains a handful of colonies? To destroy the world's taxation systems.


GEORGE MONBIOT

If you want to know why Britain has never completed the process of decolonisation, look at two lists side by side. One is the official register of tax havens, compiled by the OECD (1). The other is the list of British overseas territories and crown dependencies (2). Over a quarter of the world's tax havens are British property. More than half of Britain's colonial territories and dependencies are tax havens. Strip out Antarctica, the military bases and the scarcely-habited rocks and atolls, and of the 11 remaining properties, only the Falkland Islands is not a recognised haven. The obvious conclusion is that Britain retains these colonies for one purpose: to help banks, corporations and the ultra-rich to avoid tax. These figures scarcely do justice to the UK's responsibility for this menace. The website Shelter Offshore, which helps people to avoid their obligations to society, has just published its list of the world's "top 5 tax havens"(3). Jersey, Guernsey and the Isle of Man come first. "These highly respectable British offshore tax havens," the site tells us, "can be very attractive indeed", offering "superior levels of investor privacy". Privacy is the polite word for the secrecy and obstruction that helped to bring down the world's financial systems. Last month the British government announced that it will introduce new laws to prevent piracy: the armed forces will be allowed to detain ships and arrest suspected robbers on the high seas(4). Yet the same government offers an attractive portfolio of tropical and temperate islands in which pinstriped pirates can bury their treasure. That comparison is unfair – to pirates. The freebooters who use these havens are responsible for thousands of times more deaths even than the notorious Abdul Hassan, known on the Somali coast as "the one who never sleeps"(5). Because of the secrecy surrounding the treasure islands, no one knows how much money they divert from developing countries. Christian Aid's estimate – of $160 billion a year – is the lowest figure(6), though 60% greater than the international aid the poor world receives(7). The Pope suggests $255bn(8); the US research group Global Financial Integrity proposes $900bn(9). In all cases we're talking about the means by which hundreds of thousands of lives could have been preserved in the world's poorest countries. But Britain's network of tax havens permits multinational companies, dodgy businessmen and corrupt leaders to snatch money from the poor. Gordon Brown wrings his hands over the plight of the poor, and urges impoverished countries to earn more money through trade. But by keeping our tax havens open for business, this mumbling Christian hypocrite ensures that even when the poor nations do trade successfully, they are unable to keep hold of the income. This authorised theft, of course, affects us too. We are robbed twice by these gangsters: once when they avoid the taxes the rest of us have to pay, again when the tax havens' secret banking arrangements cause the crises which oblige us to rescue the banks. As the Tax Justice Network points out, the banking system collapsed because it became indecipherable. The banks lost confidence in each other when they could no longer tell who owns what or who owes whom, and could no longer trust each other's financial statements(10). Nothing has done more to promote this distrust than the lucrative secrecy the tax havens offer to their clients. Organised crime also depends on tax havens. The OECD uses four criteria to determine whether a place is a haven: it imposes no tax, there's a lack of transparency, it has laws preventing the effective exchange of information with other governments, and the money which changes hands bears no relation to the business done there(11).The last three criteria are all essential prerequisites for large-scale crime. In fact it's doubtful whether the traditional piracy now flourishing off the Horn of Africa would be possible without the more respectable piracy taking place in the English Channel, the Irish Sea and off the Spanish Main. Anyone who wanted to stamp out drug smuggling, kidnapping, gun-running and fraud would start by shutting down tax havens. But the crime havens have become so respectable that even the British government is now depriving itself of revenue. It has become the major shareholder in the Royal Bank of Scotland, which has offshore subsidiaries in Jersey, Guernsey, the Isle of Man and Gibralter(12). Have the bank's new owners, in return for our generosity in bailing it out, demanded that it shuts these operations? No. And that's not the worst of it. The Inland Revenue, responsible for collecting tax in this country, signed a private finance initiative deal transferring its buildings to a company called Mapeley Steps(13). Mapeley Steps, which is registered in one tax haven (Bermuda) is owned by Mapeley, registered in another (Guernsey). Mapeley has boasted of paying no income or corporation tax in any jurisdiction(14). Why does the government keep these havens open? There's an answer in Geraint Anderson's book Cityboy – a crude but gripping exposure by a former research analyst at a City bank. "Eighteen years out of power has made these jokers so paranoid about being viewed as old Labour that every time Cityboys and entrepreneurs asked for business-friendly reforms they rolled over and allowed tax and regulatory changes"(15). There is a standard British procedure for dealing with problems like this: by which I mean problems that generate bad publicity but which you don't want to address. You commission a review and you choose the right man to conduct it. Confronted with a vocal international campaign and a new US president determined to tackle this issue(16), the government has selected a man called Michael Foot (not the former Labour leader). Until last year, Foot was the inspector of banks and trust companies for the Central Bank of the Bahamas in Bermuda, a British tax haven(17). Though the review was launched only a fortnight ago, he already seems to have decided what it will say. Speaking about tax havens to the magazine Accountancy Age, he claimed that they had been given a clean bill of health by the IMF, and observed, "I can't see where the regulation failure is supposed to be."(18) The Tax Justice Network maintains that throughout his long career in Bermuda, at the Financial Services Authority and elsewhere, he has never raised any public concerns about systemic problems in the financial sector(19). The identity of the person the government appoints is an index to the outcome it desires. Foot sounds like just the man for the job. Even as it was commissioning this review, Brown's government tried to undermine international efforts to address the problem. Teaming up with that revolting little monarchy Liechtenstein, the UK sought to strike out a paragraph from the Doha trade agreement which aimed to eradicate tax evasion(20). Thanks in part to British lobbying, the draft commitment was substantially weakened(21). Were Britain to release its remaining colonies, they would quickly succumb to pressure from the Obama government and the European countries trying to stamp out international evasion and organised crime. We hold onto the Falkland Islands for their oil and fish. We hold onto the other territories for something far more valuable: secrecy. www.monbiot.com References: 1. OECD, viewed 15th December 2008.Jurisdictions committed to transparency and effective exchange of information. oecd.org 2. Foreign and Commonwealth Office, viewed 15th December 2008. List of Crown Dependencies & Overseas Territories. fco.gov.uk 3. Shelter Offshore, 12th December 2008. Top 5 Tax Havens. shelteroffshore.com 4. The Prime Minister's spokesman, 19th November 2008. Morning press briefing. 5. guardian.co.uk 6. Olivia McDonald, 9th December 2008. Casting the first stone. 7. uk.reuters.com 8. Nick Mathiason, 7th December 2008. Pope attacks tax havens for robbing poor. The Observer. 9. Nick Mathiason, 30th November 2008. Tax evasion robs developing countries of $900bn a year. The Observer. 10. Richard Murphy and John Christensen, 10th October 2008. The threat lying offshore. The Guardian. 11. OECD, viewed 15th December 2008. Tax Haven Criteria. 12. Private Eye, 5th December 2008. Offshore Alistair. In The Back, page 26. 13. Stefan Armbruster, 23rd September 2002. Revenue sell-off to tax haven firm. BBC News Online. 14. Jim Pickard, 10th May 2006. Tax-free Mapeley to reject Reit status. Financial Times. 15. Geraint Anderson, 2008. Cityboy: Beer and Loathing in the Square Mile, page. Headline, London. 16. Nick Mathiason and Heather Stewart, 9th November 2008. Obama backs crackdown on tax havens. The Observer. 17. HM Treasury, 2nd December 2008. Independent Review into British Offshore Financial Centres. Press release. 18. Michael Foot, quoted by Judith Tydd, 11th December 2008. Regulation can tackle havens, says review chief. Accountancy Age. 19. John Christensen, Tax Justice Network, pers comm. 20. Tax Justice Network, 30th October 2008. UN Tax Committee - why it matters; UK backs Liechtenstein. taxjustice.blogspot.com  21.Tax Justice Network, 11th December 2008. Doha: a cup half full. taxjustice.blogspot.com

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The man who conned the world

 

December 16, 2008

 

Banks, billionaires, charities and film stars are among the victims of the '$50bn fraudster', whose exposure deals a fresh blow to financial confidence, according to one tycoon facing a $9bn loss.

 
Investors around the world are counting the spiralling cost of the biggest fraud in history, a $50bn scam that has ensnared billionaire businessmen and tiny charities alike and whose tentacles have stretched further and deeper than anyone imagined.
 
The fallout from the arrest of the Wall Street grandee Bernard Madoff was continuing to grow last night, as institution after institution detailed the extent of their possible losses, and the victims in the UK were headlined by HSBC and the Royal Bank of Scotland, which is majority-owned by the British Government.
A charity set up by the Hollywood director Steven Spielberg was among those revealed to be among the victims, along with a foundation set up by Mort Zuckerman, one of the richest media and property magnates in the United States, dozens of Jewish organisations, sports team owners and a New Jersey senator.
 
But the biggest confessions were coming from Wall Street, from the City of London and from the headquarters of European banks and from banks around the world. They have poured billions of dollars into Mr Madoff's too-good-to-be-true investment fund, which appeared to post double-digit annual returns come rain or shine.
 
RBS said that it could take a hit of £400m if American authorities find there is nothing left of the money Mr Madoff had pretended to be investing for many years. HSBC, Britain's largest bank, said a "small number" of its clients had exposure totalling $1bn in Mr Madoff's funds.
 
The Spanish bank Santander, which owns Abbey and the savings business of Bradford & Bingley in the UK, could be on the hook for $3.1bn. Japan's Nomura said it has hundreds of millions of dollars at risk. City analysts said that even banks who invested only on behalf of clients could end up on the hook, because clients are almost certain to sue for bad advice.
 
Mr Madoff confessed last week that his business was "all one great big lie". The investment returns were fake, and he had been paying old clients with money from new ones. In its conception, the scam is a classic. In its size, it is breathtaking, eclipsing anything seen before. He personally estimated the losses at $50bn, according to the FBI, and as investors owned up to their exposure yesterday that did not seem impossible. For 48 years, until Thursday morning, Mr Madoff was one of Wall Street's best-respected investment managers, able to harvest money from a vast network of contacts and to trade on his name as a former chairman of the Nasdaq stock exchange.
 
His arrest has further shaken confidence in the barely regulated hedge fund industry, which is already suffering some of the worst times in its short history. Mr Madoff – who is now on a $10m bail and under orders not to leave the New York area – was able to operate his fraud under the noses of regulators for many years.
 
Mort Zuckerman, the owner of the New York Daily News and one of the 200 richest Americans, said that one of the managers of his charitable trust had been so taken by Mr Madoff that he invested $9bn with him, including all the money from Mr Zuckerman's trust. "These are astonishing numbers to be placed with one fund manager," he said. "I think we have another break in whatever level confidence needs to exist in money markets."
 
Nicola Horlick, the British fund manager known as Superwoman for juggling her high-flying City career with bringing up five children, turned her fire on US regulators. Her Bramdean Alternatives investment fund had put 9 per cent – about £10m – with Mr Madoff. She told BBC Radio: "This is the biggest financial scandal, probably in the history of the markets."

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Socialism's Comeback

 

December, 12 2008

By Neil Clark
Source: New Statesman (UK)

 

At the beginning of the century, the chances of socialism making a return looked close to zero. Yet now, all around Europe, the red flag is flying again.

 

"If socialism signifies a political and economic system in which the government controls a large part of the economy and redistributes wealth to produce social equality, then I think it is safe to say the likelihood of its making a comeback any time in the next generation is close to zero," wrote Francis Fukuyama, author of The End of History, in Time magazine in 2000.

 

He should take a trip around Europe today.

 

Make no mistake, socialism - pure, unadulterated socialism, an ideology that was taken for dead by liberal capitalists - is making a strong comeback. Across the continent, there is a definite trend in which long-established parties of the centre left that bought in to globalisation and neoliberalism are seeing their electoral dominance challenged by unequivocally socialist parties which have not.

 

The parties in question offer policies which mark a clean break from the Thatcherist agenda that many of Europe's centre-left parties have embraced over the past 20 years. They advocate renationalisation of privatised state enterprises and a halt to further liberalisation of the public sector. They call for new wealth taxes to be imposed and for a radical redistribution of wealth. They defend the welfare state and the rights of all citizens to a decent pension and free health care. They strongly oppose war - and any further expansion of Nato.

 

Most fundamentally of all, they challenge an economic system in which the interests of ordinary working people are subordinated to those of capital.

 

Nowhere is this new leftward trend more apparent than in Germany, home to the meteoric rise of Die Linke ("The Left"), a political grouping formed only 18 months ago - and co-led by the veteran socialist "Red" Oskar Lafontaine, a long-standing scourge of big business. The party, already the main opposition to the Christian Democrats in eastern Germany, has made significant inroads into the vote for the Social Democratic Party (SPD) in elections to western parliaments this year, gaining representation in Lower Saxony, Hamburg and Hesse. Die Linke's unapologetically socialist policies, which include the renation alisation of electricity and gas, the banning of hedge funds and the introduction of a maximum wage, chime with a population concerned at the dismantling of Germany's mixed economic model and the adoption of Anglo-Saxon capitalism - a shift that occurred while the SPD was in government.

 

An opinion poll last year showed that 45 per cent of west Germans (and 57 per cent of east Germans) consider socialism "a good idea"; in October, another poll showed that Germans overwhelmingly favour nationalisation of large segments of the economy. Two- thirds of all Germans say they agree with all or some of Die Linke's programme.

 

It's a similar story of left-wing revival in neighbouring Holland. There the Socialist Party of the Netherlands (SP), which almost trebled its parliamentary representation in the most recent general election (2006), and which made huge gains in last year's provincial elections, continues to make headway.

 

Led by a charismatic 41-year-old epidemiologist, Agnes Kant, the SP is on course to surpass the Dutch Labour Party, a member of the ruling conservative-led coalition, as the Netherlands' main left-of centre grouping.

 

The SP has gained popularity by being the only left- wing Dutch parliamentary party to campaign for a "No" vote during the 2005 referendum on the EU constitutional treaty and for its opposition to large- scale immigration, which it regards as being part of a neoliberal package that encourages flexible labour markets.

 

The party calls for a society where the values of "human dignity, equality and solidarity" are most prominent, and has been scathing in its attacks on what it describes as "the culture of greed", brought about by "a capitalism based on inflated bonuses and easy money". Like Die Linke, the SP campaigns on a staunchly anti-war platform - demanding an end to Holland's role as "the US's lapdog".

 

In Greece, the party on the up is the Coalition of the Radical Left (SYRIZA), the surprise package in last year's general election. As public opposition to the neoliberal economic policies of the ruling New Democracy government builds, SYRIZA's opinion-poll ratings have risen to almost 20 per cent - putting it within touching distance of PASOK, the historical left-of-centre opposition, which has lurched sharply to the right in recent years. SYRIZA is particularly popular with young voters: its support among those aged 35 and under stands at roughly 30 per cent in the polls, ahead of PASOK.

 

In Norway, socialists are already in power; the ruling "red-green" coalition consists of the Socialist Left Party, the Labour Party and the Centre Party. Since coming to power three years ago, the coalition - which has been labelled the most left-wing government in Europe, has halted the privatisation of state-owned companies and made further development of the welfare state, public health care and improving care for the elderly its priorities.

 

The success of such forces shows that there can be an electoral dividend for left-wing parties if voters see them responding to the crisis of modern capitalism by offering boldly socialist solutions. Their success also demonstrates the benefits to electoral support for socialist groupings as they put aside their differences to unite behind a commonly agreed programme.

 

For example, Die Linke consists of a number of internal caucuses - or forums - including the "Anti-Capitalist Left", "Communist Platform" and "Democratic Socialist Forum". SYRIZA is a coalition of more than ten Greek political groups. And the Dutch Socialist Party - which was originally called the Communist Party of the Netherlands, has successfully brought socialists and communists together to support its collectivist programme.

 

It is worth noting that those European parties of the centre left which have not fully embraced the neoliberal agenda are retaining their dominant position. In Spain, the governing Socialist Workers' Party has managed to maintain its broad left base and was re-elected for another four-year term in March, with Prime Minister José Luis Rodríguez Zapatero promising a "socialist economic policy" that would focus on the needs of workers and the poor.

 

There are exceptions to the European continent's shift towards socialism. Despite the recent election of leftist Martine Aubry as leader of the French Socialist Party, the French left has been torn apart by divisions, at the very moment when it could be exploiting the growing unpopularity of the Sarkozy administration.

 

And, in Britain, despite opinion being argu ably more to the left on economic issues than at any time since 1945, few are calling for a return to socialism.

 

The British left, despite promising initiatives such as September's Convention of the Left in Manchester, which gathered representatives from several socialist groups, still remains fragmented and divided. The left's espousal of unrestricted or loosely controlled immigration is also, arguably, a major vote loser among working-class voters who should provide its core support. No socialist group in Britain has as yet articulated a critique of mass immigration from an anti-capitalist and anti-racist viewpoint in the way the Socialist Party of the Netherlands has.

 

And even if a Die Linke-style coalition of progressive forces could be built and put on a formal footing in time for the next general election, Britain's first- past-the-post system provides a formidable obstacle to change.

 

Nevertheless, the prognosis for socialism in Britain and the rest of Europe is good. As the recession bites, and neoliberalism is discredited, the phenomenon of unequivocally socialist parties with clear, anti- capitalist, anti-globalist messages gaining ground, and even replacing "Third Way" parties in Europe, is likely to continue.

 

Even in Britain, where the electoral system grants huge advantage to the established parties, pressure on Labour to jettison its commitment to neoliberal policies and to adopt a more socialist agenda is sure to intensify.

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