Will Nissan stay once Britain leaves? How one factory explains the Brexit business dilemma

David Conn in The Guardian

Earlier this year, when the British government’s assessments of the economic impact of Brexit were finally published, they revealed that the north-east of England was at risk of the deepest damage. Although the region still bears scars from the decline of heavy industry in the 1980s, today the north-east is the only part of Britain that exports more to European countries than it imports. And, amid the region’s new and rebuilt industries, such as pharmaceuticals, the most significant engine of recovery has been Nissan, the Japanese carmaker, which is housed in a giant factory complex just off the A19 at Washington, near Sunderland.

The plant was opened with great ceremony by Margaret Thatcher in 1986. Sharon Hodgson, now Labour MP for Washington and Sunderland West, which includes the plant, remembers that as a teenager, she was amazed when it was announced that Nissan would be setting up there. “Growing up in the north-east then, we had seen everything close – the mines, the shipyards, so many people put out of work. It was the cruellest, most awful time,” she said. “As a young woman, I remember the feeling of hope and optimism when Nissan came, the shock and surprise that we were actually going to get something.”

Since then, Nissan’s operation has expanded to cover a 800-acre site, running two production lines that produce 519,000 cars per year – about 55% for export to other EU countries. According to the company’s most recent annual report, for 2016-17, Nissan’s UK operation generated £6.4bn from sales, employed 7,755 people and paid these workers, mostly living in the north-east, £427m in wages. Companies supplying parts to Nissan employ a further 30,000 people across Britain.

“Nissan hasn’t been able to bring full recovery to the area; decline and deprivation are still prevalent,” said Hodgson. “But they are a massive employer, providing good jobs, including the supply chain which is so important. You have father and son working there now, a real sense of pride, and that productivity and quality is why it has been so successful.”

Yet today, there is serious concern at Nissan that Brexit threatens to damage its operation in Sunderland. The clearest explanation of how its UK business depends on EU membership was provided in February 2017 by Nissan executive Colin Lawther, appearing before parliament’s international trade committee. Lawther, a chemist by training, began his career with Nissan in 1985, as one of the key workers responsible for setting up the laboratory operation in the Sunderland plant. He went on to become Nissan Europe’s senior vice-president for manufacturing, purchasing and supply-chain management, before retiring earlier this year.

To produce as many cars as it does, Lawther explained, Nissan Sunderland needs to receive and fit 5m parts each day. Of these parts, 85% are imported, mainly from Europe. The plant holds only enough parts for half a day’s production, because it is expensive to store them, so the whole multi-billion pound operation relies on these millions of parts arriving daily with no barriers or customs delays.

Because Britain is currently part of the EU, this is a straightforward process. Each of the 28 EU member states belongs to the single market, which has been designed to facilitate trade by removing tariffs, as well as other trade and customs barriers. Rather than having 28 different industrial safety regulations, for instance, there is a single set of regulations that applies across all member states. The single market means trade between 28 different countries is free, fast and “frictionless”, just as it would be if the EU were one very large country. “Frictionless trade has enabled the growth that has seen our Sunderland plant become the biggest factory in the history of the UK car industry, exporting more than half of its production to the EU,” Nissan said, in a statement for this article.

“We build two cars every minute,” Lawther told the committee in 2017. “So you have 5m parts coming in every day, and you have half a day’s worth of stock. Any disruption to that supply chain is a complete disaster.

“We are talking about plant efficiency, downtime efficiency – to be world-class, we have to be 97% efficient. We are talking about two, three, four, six minutes a day of downtime on the production line. More than that is a disaster. If you start talking about interruption of supply of parts for hours, that is completely off the scale.”

If Britain leaves the EU without securing an agreement for continued frictionless trade – the “hard Brexit” outcome – Britain’s trading relationships would be regulated by World Trade Organisation rules, which do not allow for agreed product standards, and therefore will require customs checks at the borders with Europe. The rules also impose tariffs, including 10% on cars, 4.5% on car parts. For Nissan’s Sunderland operation, Lawther told the committee, as well as likely new delays at the borders, the impact of tariffs will add up to around £500m per year of additional costs, which would be “pretty disastrous”.

According to the government’s assessments, published in March, a “hard Brexit” would lead to a 16% economic decline in the north-east. London, by contrast, with its much more varied economy and the financial power of the City, would suffer a drop of only 3%.

The key figure in deciding the fate of Nissan’s operation in Sunderland is Carlos Ghosn, a global business executive born in Brazil to Lebanese immigrant parents, then educated in France. Ghosn, who became known as “le cost killer” after he restored the fortunes of Renault in the 1990s with his relentless efficiency drives, is not only chairman of Nissan, but also chairman of Renault and Mitsubishi, and of the Renault-Nissan-Mitsubishi Alliance that allows the three companies to work together to save costs. Renault owns 43.4% of Nissan, which in turn has bought a 15% stake in Renault, and 34% of Mitsubishi.

Since the vote to leave the EU, which was a shock to Nissan and other carmaking companies, Ghosn has consistently emphasised two main points in his occasional public statements. First, Nissan will not make further investments when they do not know what Britain’s future trading arrangements will be. Second, if leaving the EU significantly raises costs and trade barriers, Nissan will consider reducing its British operations. Sunderland is by far Nissan’s largest European plant, but the company has other factories in Europe. The current priority for the alliance, overseen by Ghosn, is a €10bn (£8.9bn) global cost-cutting programme to be implemented by 2022. It is increasingly moving towards a standard manufacturing method that can make both Renault and Nissan models. Already the Renault factories at Flins and Le Mans in France are making the Nissan Micra, in huge numbers.

Although it has invested £4bn since 1986 to make Sunderland its European base, Ghosn has said it will be reviewed if Britain becomes uncompetitive due to Brexit. “I don’t think any company can maintain its activity if it is not competitive,” Ghosn said in June. “If competitiveness is not maintained, little by little you’re going to have a decline. It may take some time, but you’re going to have a decline.”

Nissan’s Washington car plant does not look grand; it is a no-frills operation. Beyond the security gates and high railings, which are punctuated with turnstiles where the workers enter, the vast site consists of blank, imposing production sheds and basic office blocks. The main reception is a bare, functional lobby that has the feel of a 1980s school entrance. There, on a shelf, sit two Japanese Daruma dolls, which by tradition had their first eye painted – by Prince Charles and his then wife, Diana – when construction began in 1984, and the second – by Margaret Thatcher – when the plant opened on 8 September 1986.

In her landmark speech that day, Thatcher portrayed Nissan’s arrival as a British victory over the rest of Europe. “It was confirmation from Nissan,” she said, “that within the whole of Europe, the United Kingdom was the most attractive country – politically and economically – for large-scale investment.”

 

Margaret Thatcher painting the eye of the Daruma doll at the opening of the Nissan plant in 1986. Photograph: Alamy

Thatcher did not mention that Britain’s membership of the European Community (as the EU was then known) was crucial to Nissan’s decision. Yet she was fully aware of it, as were other government ministers. In a meticulously researched history of the plant’s funding via EU and UK government public money since the 1980s – adding up to almost £800m – Kevin Farnsworth of York University and his co-authors Nicki Lisa Cole and Mickey Conn (no relation) unearthed a 1980 memo to Thatcher from her industry minister, Keith Joseph. Nissan had by then decided to build a European plant in Britain, and Joseph explained:

“The deal [is] tangible evidence of the benefits to the UK of membership of the European Community; Nissan [has] chosen the United Kingdom because it [gives] them access to the whole European market. If we were outside the community, it is very unlikely that Nissan would have given the United Kingdom serious consideration as a base for this substantial investment.”

At that time, the north-east’s traditional industries were already being closed down. In 1980, British Steel shut its plant at Consett, putting 4,500 people out of work, a still powerfully remembered devastation. Shipbuilding on the river Tyne had long been declining and was parched of investment. Ashington, Easington and other communities built around coal, including Wearmouth colliery in Sunderland, were to suffer the agonising deprivations and defeat of the 1984-85 miners’ strike, which was called to fight closures. In 1992, Michael Heseltine, then president of the board of trade, would announce that 31 of the country’s remaining 50 pits would close, cutting 30,000 jobs.

When I spoke to Heseltine for this article, I asked if he conceded that his government was too brutal in these mass closures of longstanding industries. He reflected for a moment, then replied: “Probably it was too unthinking.” He said he regrets that there was no considered policy to improve these industries – through better management, company reforms and longer-term investment. “Unlike Germany, Japan, France, now China, there was never any stable industrial strategy. It was much easier to say ‘let the market rip’,” he said.

Against that landscape of collapses, Heseltine recalled the efforts to bring Nissan and other Japanese companies to Britain: “We were looking to attract anything that would help the economy. And it was a central part of the attraction to the Japanese that we were in the European Union.” The German and French governments were more protective of their own industries, Heseltine said, and the UK saw Japanese investment as an opportunity to get into the European market. Thatcher’s newly restrictive trade-union laws, which had been bitterly opposed by unions, were also part of her government’s pitch: that workers would be less able to strike and easier to lay off than in other European countries. The Washington plant has, however, always been strongly unionised.

For the Japanese companies, Heseltine said, the UK was the “soft underbelly” of Europe, a way in. Shinichi Iida, minister for public diplomacy and media at the Japanese embassy in London, confirmed that Japanese companies were courted by Thatcher’s government, telling me that many Japanese companies “have a strong sense that they came here at the invitation of the UK at that time”. In 1989, two other major Japanese car manufacturers followed Nissan’s lead: Honda, which now makes models of the Civic for export, about a third to the EU, from its factory in Swindon, and Toyota, which describes its car plant at Burnaston, near Derby, and its engine factory in Deeside, north Wales, as “European production centres”.

The English language was a big draw to the UK for Japanese manufacturing companies, as was its tradition of research and development, and “the very strict and open legal system”, Iida said – but it was “quite essential” that the UK was “a gateway to Europe”. Sir Ian Gibson, who was recruited by Nissan from Ford in 1984 to establish and run the Washington plant, confirms that: “The whole premise of the investment was that it was a European base; there would be free access to the European market.”

Ged Parker, who was on the negotiating team for the local regeneration authority, recalled their pitch to Nissan. They had a huge site available on an old airfield, the former RAF Usworth; they had the north-east’s industrial tradition and experienced workforce; there was proximity to the A19, the A1, Newcastle airport and – most crucially – the ports on the Tyne, Tees and Wear for shipping parts and finished cars to and from Europe.

The north of England development council had hired a representative in Japan, Ken Oshima, to drum up business, and Parker remembers the enthusiasm of the visiting Nissan executives. “The delegation were engineers – they were technical people and they had a reverence for British industry.” They could also see that the area was able to complete major construction projects; Washington new town had just been built, a planned layout of new housing, industrial estates and shops, near historic Washington village, where the first US president George Washington had his family roots.

The team deployed an array of winning tactics to impress Nissan. “The proposal document was the first we ever did on a word processor,” Parker said. The authority had bought two computers just a few weeks before Nissan’s visit. “It was leading-edge technology then.”

Crucial, though, were huge grants of public money, provided by the UK because the north-east was classified as a special development area, in need of investment. According to Farnsworth, by 1984 the government had pledged £112m from the regional development and selective financial assistance schemes, to secure and prepare the site for Nissan’s investment. The airfield was classed as agricultural land, and sold at a heavy discount.

On 30 March 1984, Nissan finally signed the agreement to invest in Washington. “It was an unbelievable feeling,” said Parker. “It was a career high for me. The north-east has always felt hard done by, and it almost changed morale overnight. What Nissan has done since, expanded so much, particularly in recent years, dragged more industry up here, spread good practice, has been huge for the region.”

The first model made at the plant in 1986, when it employed 430 people, was the Nissan Bluebird. Gibson said they began with a target of 24,000 cars a year. The Primera model replaced the Bluebird in 1990, and two years later, the plant began to make a second model as well, the Micra. By 2000, the plant was producing three models – and a total of 300,000 cars each year.

Although the financial crisis hurt Nissan and 1,200 jobs were axed in January 2009, the British plant’s fortunes recovered more quickly than others. The Juke, Leaf, Infiniti and Qashqai models were all commissioned at Washington from 2010 onwards, attracting more multi-million pound investment in plant and machinery by Nissan, and a new round of expansion.

 

Nissan workers prepare doors for the Qashqai car in Sunderland. Photograph: Reuters

When Nissan needs to decide on new investments, such as where new models are to be built, individual plants mount competing internal bids to the main board. “The plants with the best claim get the investment,” Gibson explained. “And the ones with the best claim have the least friction and risk. Sunderland, for a long time, was the best claim.”

Inside the basic, shed-like structure that houses the production lines is dizzyingly intricate, hugely expensive technology geared towards the “just in time” assembly of a car, mostly Qashqais, every minute. One of the Unite officials described the job on the line as “very hard, physically demanding”, and it looks it. The workers, mostly men, are on their feet throughout an eight-hour shift, tightly focused on machine-fitting engines, doors, dashboards and windscreens to the car bodies that come along the line each minute. Overhead, another line is sending down finished wheels, to be attached at the end of the process. Another team carries out rapid tests on the cars, then transporters take them out and to the port.

The Sunderland factory does not go in much for the modern trend of decorating the workers’ areas with ambient colours or motivational slogans, but there is one small sign next to the production lines. It says: “Nissan Sunderland Plant: SECOND TO NONE.”

In the months before the EU referendum, the Labour party’s official remain campaign, led by the former home secretary Alan Johnson, approached Nissan to ask if it could stage its north-east launch event at the Washington plant. The politicians wanted to showcase an economic, industrial and employment success that had clearly been built on EU membership.

Nissan declined. Despite the impact Brexit was likely to have on their businesses, senior executives at most major companies took the view that it was unlikely voters would decide to leave, and there was little to be gained by being too forthright on a political issue. When Nissan finally did make a statement, it was an exercise in restraint. “Our preference,” it said, “is, of course, that the UK stays within Europe – it makes the most sense for jobs, trade and costs. For us a position of stability is more positive than a collection of unknowns. While we remain committed to our existing investment decisions, we will not speculate on the outcome nor what would happen in either scenario.”

 

Nissan Qashqais and Leafs being inspected at the port of Tyne before export. Photograph: Bloomberg via Getty

Unite also told its members that the union favoured remaining in the EU. “The damage Brexit can do is a massive concern, and we did campaign to remain,” says Tony Burke, Unite’s assistant general secretary with responsibility for manufacturing. One Unite official at the plant, who did not want to be named due to the sensitivity, still, of talking about Brexit, said he felt Nissan’s statement was “very neutral” and did not communicate to the workers how much was at stake. He said they did their best with Unite’s message, but it was “just one voice, one hit, in months of hysteria ramped up by the media, particularly about hostility to immigrants. That’s what people were listening to.”

Politically, Sunderland is overwhelmingly Labour: its three constituency MPs all represent the party, and in 2016, Labour won 67 of the 75 seats on Sunderland city council. The MPs and council campaigned for Britain to remain in the EU, but on the doorsteps, they found that people were planning to vote leave in large numbers.

In the referendum, 61% of Sunderland’s voters chose leave. When I visited the plant recently, I talked to several workers as they came off a shift. Most had voted leave. One young man, 24, who, like the others I spoke to, did not want to be named, said he had voted remain because he preferred stability and he “thought we’re fine as we are”, but that older workers around him had voted leave. “They said that they didn’t see a change from before and after we joined the EU, and some said they didn’t like the EU making rules for us.”

An older man, 55, pointed to one of the huge sheds behind us and said, like others, that Nissan’s multi-million pound investment in it shows the Sunderland plant is secure. He said he had voted leave to stop immigration, “EU interference”, and because the north-east gets “bugger all money” from the EU.

In fact, after Cornwall, the north-east receives England’s second-highest amount of EU structural funding proportionate to its population, according to a report compiled before the referendum for Sunderland’s public and private sector partnership, the Economic Leadership Board. The current round of EU funding, being managed by the region’s local enterprise partnership, is £437m between 2014 and 2020. Nissan itself, according to Farnsworth’s research, has received £450m in loans from the European Investment Bank, and £347m in grants and other public funding, from the UK and EU.

Another Nissan worker, 63, sitting on a barrier waiting for his lift home, said he had voted leave, like many of his colleagues, because he was “sick of the EU deciding our laws”. I asked him if he accepted that leaving was damaging to the car industry, and to Nissan. He did, he replied, then smiled, and said that would still not prompt him to change his mind.

Since the referendum, Nissan’s chairman, Ghosn, has regularly made public warnings that the operations in Sunderland will be reduced over the long term if Brexit makes the UK uncompetitive. Gibson says Britain’s lack of preparation and chaotic political process is creating “a terrible impression” with the Japanese.

Gibson knows the company intimately. After helping to establish the Sunderland plant, he went on to become president of Nissan Europe, and the first European to join the main Nissan board in Japan. “Of course, it is realistic that Nissan could stop investing in the plant; it’s the most likely outcome,” he said. “Now it is a three-company alliance; there are lots of Renault plants screaming out for future models, and Nissan plants in Spain. Why go to Sunderland, which will have more frictions and risk, and be isolated?”

During his time at Nissan – he left in 2001, after 17 years – Gibson was struck by the way Japanese business culture focused single-mindedly on careful scrutiny of the data. “They have a very rational decision-making culture,” he said. “They examine the evidence, and have a very tough debate to reach a rational conclusion.” Iida, the Japanese embassy minister, agreed with Gibson’s assessment: “It takes time for them to take a decision, but once they do, they simply don’t waver it so easily.”

Within the car industry there is exasperation, and even disdain, for the pro-Brexit argument that British-based companies will be freed from ties with the EU to “go global”. Nissan and the other major manufacturers, including suppliers, are already global; they have huge plants in the US, China, Japan, Mexico, Brazil, Argentina, India and Russia. The Sunderland plant was allocated one model, the Infiniti, for export to the US, and sells some other cars around the world, but as Ghosn has emphasised, the plant is there principally to serve Europe, not to ship expensively to other continents where Nissan already has plants. Car manufacturers locate a factory in one country to serve that geographical region; Ghosn has consistently referred to Nissan’s Sunderland plant as “a European investment based in the UK”.

In September 2016, Ghosn suggested that the company’s plan to select Sunderland as the European plant to assemble its new Qashqai and X-Trail models was at risk following the referendum, and stated that the government needed to provide “commitments for compensation” if Brexit increased costs. In response, the government scurried to reassure Nissan. May met Ghosn personally, and the business secretary, Greg Clark, flew to Japan to meet senior executives. There then followed a period of correspondence that has still not been made public.

Following this government effort, on 27 October Nissan’s global headquarters in Yokohama announced that it would indeed build its new Qashqai and X-Trail models in England, “securing and sustaining the jobs of more than 7,000 workers at the [Sunderland] plant”.

Nissan has since insisted that Ghosn’s call for “compensation” was misunderstood, and was never a request for direct subsidy. However, the government has allocated considerable further UK and EU funding that has had the effect of helping Nissan. One of Nissan’s priorities, emphasised by Colin Lawther in his evidence in parliament, has been to bring more suppliers to the north-east, saving the company costs of importing and transport. In January 2017, only a few months after its intense period of correspondence with Nissan, £41m of EU funding was allocated by the north-east local enterprise partnership towards the construction of a new international advanced manufacturing park (IAMP), across the road from the Washington plant. Nissan suppliers are planned to locate on the site, where initial construction began in August.

That grant accounted for more than 80% of the £50m EU funding the local enterprise partnership had to spend in that round, so other regional infrastructure projects lost out. The chair, Andrew Hodgson, said he has never asked to see the exchange of letters between Nissan and the government, but that: “It was very clear, from a north-east perspective, we needed to invest in the IAMP.”

In March 2017, the BBC managed to uncover a small part of the correspondence between Nissan and the government. Paul Willcox, then chair of Nissan Europe, had proposed the need for more investment in electric vehicles, of which Nissan’s Leaf model is a market leader. Soon after the exchange of letters, the government announced that it would be making a multi-million pound investment in more charging points and other incentives to develop electric cars. Clark’s department for business, energy and industrial strategy has said that commitment followed general policy and was not specific to helping Nissan.

Farnsworth, the York University academic who has researched the public funding for Nissan in the UK, suggests that Brexit is already leading the British government to be defensive, desperate to keep the investment the country already has. Brexit, his report says, “gives Nissan nearly unprecedented bargaining power with the UK government. These circumstances put the government in the position of having to give Nissan exactly what it wants in order for the company to remain in the UK.”

Despite the government’s efforts to reassure Nissan, Ghosn has repeated warnings that further investment decisions are on hold. It was in June, speaking to the BBC, that he warned of gradual decline if competitiveness is damaged. “So far we have absolutely no clue how this is going to end up,” he also said. “We don’t want to take any decisions in the dark. We don’t want to take any decisions we might regret in future”.

In their statement for this article, Nissan, still quite restrained, nevertheless echoed Ghosn’s warning. “Today we are among those companies with major investments in the UK who are still waiting for clarity on what the future trading relationship between the UK and the EU will look like,” it said. “As a sudden change from those rules to the rules of the WTO will have serious implications for British industry, we urge UK and EU negotiators to work collaboratively towards an orderly, balanced Brexit that will continue to encourage mutually beneficial trade.”

Iida, at the Japanese embassy, said the priority is to avoid a hard Brexit: “Japanese companies have been seriously taking risk-hedge measures,” he said. “For example, Japanese financial institutions have already submitted business applications to cities such as Frankfurt and Amsterdam, and Japanese manufacturing companies are very quietly holding off their future investment plans.”

Since the referendum, and particularly since the publication of the government’s impact assessments earlier this year, James Ramsbotham, chief executive of the north-east chamber of commerce since 2006, has been voicing increasingly urgent warnings about the threat to the region’s economy. None of the government’s responses, or its conduct of the negotiations since, he says, have reassured him.

When I told him that Michael Heseltine had reflected on the 1980s closures of the north-east’s coal mines and heavy industry as “too unthinking”, Ramsbotham instinctively drew a parallel with Brexit: “Aren’t we in danger of doing the same unthinking thing now?” he responded. “Delivering another potentially catastrophic shock to the economy, without sufficient thinking, planning or foresight?”

Finance, the media and a catastrophic breakdown in trust

John Authers in The Financial Times


Finance is all about trust. JP Morgan, patriarch of the banking dynasty, told Congress in the 1912 hearings that led to the foundation of the US Federal Reserve, that the first thing in credit was “character, before money or anything else. Money cannot buy it. 

“A man I do not trust could not get money from me on all the bonds in Christendom,” he added. “I think that is the fundamental basis of business.” He was right. More than a century later, it is ever clearer that, without trust, finance collapses. That is no less true now, when quadrillions change hands in electronic transactions across the globe, than it was when men such as Morgan dominated markets trading face to face. 

And that is a problem. Trust has broken down throughout society. From angry lynch mobs on social media to the fracturing of the western world’s political establishment, this is an accepted fact of life, and it is not merely true of politics. Over the past three decades, trust in markets has evaporated. 

In 1990, when I started at the Financial Times, trust in financiers and the media who covered them was, if anything, excessive. Readers were deferential towards the FT and, particularly, the stone-tablet certainties of the Lex column, which since the 1930s has dispensed magisterial and anonymous investment advice in finely chiselled 300-word notes. 

Trainee bankers in the City of London were required to read Lex before arriving at the office. If we said it, it must be true. Audience engagement came in handwritten letters, often in green ink. Once, a reader pointed out a minor error and ended: “The FT cannot be wrong, can it?” I phoned him and discovered this was not sarcasm. The FT was and is exclusively produced by human beings, but it had not occurred to him that we were capable of making a mistake. 

Back then, we made easy profits publishing page after page of almost illegible share price tables. One colleague had started in the 1960s as “Our Actuary” — his job was to calculate, using a slide rule, the value of the FTSE index after the market closed. 

Then came democratisation. As the 1990s progressed, the internet gave data away for free. Anyone with money could participate in the financial world without relying on the old intermediaries. If Americans wanted to shift between funds or countries, new online “ fund supermarkets” sprung up to let them move their pension fund money as much as they liked. 

Technology also broke the hold of bankers over finance, replacing it with the invisible hand of capital markets. No longer did banks’ lending officers decide on loans for businesses or mortgages; those decisions instead rested in the markets for mortgage-backed securities, corporate paper and junk bonds. Meanwhile, banks were merged, deregulated and freed to re-form themselves. 

But the sense of democratisation did not last. The crises that rent the financial world in twain, from the dotcom bubble in 2000 through to the 2008 Lehman debacle and this decade’s eurozone sovereign debt crisis, ensured instead that trust broke down. That collapse appears to me to be total: in financial institutions, in the markets and, most painfully for me, in the financial media. Once our word was accepted unquestioningly (which was unhealthy); now, information is suspect just because it comes from us, which is possibly even more unhealthy. 

To explain this, let me tell the story of the most contentious trip to the bank I have ever made. 

Two days after Lehman Brothers declared bankruptcy, in September 2008, I went on an anxious walk to my local bank branch. Working in New York, I had recently sold my flat in London and a large sum had just landed in my account at Citibank — far more than the insured limit, which at that point was $100,000. 

It did not seem very safe there. Overnight, the Federal Reserve had spent $85bn to bail out the huge insurance company AIG, which had unwisely guaranteed much credit now sitting on banks’ books. Were AIG to go south, taking its guarantees with it, many banks would suddenly find themselves with worthless assets and become insolvent. 

Meanwhile, a money market fund had “broken the buck”. Money market funds were treated like bank accounts by their clients. They switch money between very safe short-term bonds, trying to find higher rates than a deposit account can offer. Each share in the fund is worth $1, interest is distributed and the price cannot dip below $1. As the funds did not pay premiums for deposit insurance, they could pay higher interest rates for no perceived extra risk. 

Thus there was outright panic when a large money market fund admitted that it held Lehman Brothers bonds, that its price must drop to 97 cents and that it was freezing access to the fund. Across the US, investors rushed to pull their money out of almost anything with any risk attached to it, and poured it into the safest investments they could find — gold and very short-term US government debt (Treasury bills, or T-bills). This was an old-fashioned bank run, but happening where the general public could not see it. Panic was only visible to those who understood the arcana of T-bill yields.

Our headline that day read “Panic grips credit markets” under a banner about the “banking crisis” in red letters. 

There was no time to do anything complicated with my own money. Once I reached my lunch hour, I went to our local Citi branch, with a plan to take out half my money and put it into rival bank Chase, whose branch was next door. This would double the amount of money that was insured. 

This is how I recounted what happened next, in a column for the FT last month: 

“We were in Midtown Manhattan, surrounded by investment banking offices. At Citi, I found a long queue, all well-dressed Wall Streeters. They were doing the same as me. Next door, Chase was also full of anxious-looking bankers. Once I reached the relationship officer, who was great, she told me that she and her opposite number at Chase had agreed a plan of action. I need not open an account at another bank. Using bullet points, she asked if I was married and had children. Then she opened accounts for each of my children in trust and a joint account with my wife. In just a few minutes I had quadrupled my deposit insurance coverage. I was now exposed to Uncle Sam, not Citi. With a smile, she told me she had been doing this all morning. Neither she nor her friend at Chase had ever had requests to do this until that week.” 

Ten years on, this is my most vivid memory of the crisis. The implications were clear: Wall Streeters, who understood what was going on, felt they had to shore up their money in insured deposits. The bank run in the trading rooms was becoming visible in the bank branches down below. 

In normal circumstances, the tale of the bank branch would have made an ideal anecdote with which to lead our coverage, perhaps with a photo of the queue of anxious bankers. Low T-bill yields sound dry and lack visual appeal; what I had just seen looked like a bank run. (Although technically it was not — nobody I saw was taking out money.) 

But these were not normal circumstances, and I never seriously considered writing about it. Banks are fragile constructs. By design, they have more money lent out than they keep to cover deposits. A self-fulfilling loss of confidence can force a bank out of business, even if it is perfectly well run. In a febrile environment, I thought an image of a Manhattan bank run would be alarmist. I wrote a piece invoking a breakdown in trust between banks and described the atmosphere as “panic”, but did not mention the bank branch. Ten years later, with the anniversary upon us, I thought it would be an interesting anecdote to dramatise the crisis. 

In the distrustful and embittered world of 2018, the column about what I saw and why I chose not to write about it provoked a backlash that amazed me. Hundreds of responses poured in. Opinion was overwhelmingly against me. 

One email told me: “Your decision to save yourself while neglecting your readership is unforgivable and in the very nature of the elitist Cal Hockley of the Titanic scrambling for a lifeboat at the expense of others in need.” One commenter on FT.com wrote: “This reads like Ford trying to explain why pardoning Nixon was the right thing to do.” 

“I have re-read the article, and the comments, a couple of times,” wrote another. “And I realised that it actually makes me want to vomit, as I realise what a divide there is between you and I, between the people of the establishment like yourself, and the ordinary schmucks like myself. The current system is literally sickening and was saved for those who have something to protect, at the expense of those who they are exploiting.” 

Feedback carried on and on in this vein. How could we in the media ever be trusted if we did not tell the whole truth? Who were we to edit the facts and the truth that were presented? Why were we covering up for our friends in the banks? Newspaper columns attacking me for my hypocrisy popped up across the world, from France to Singapore. 

I found the feedback astonishing and wrong-headed. But I am now beginning to grasp the threads of the problem. Most important is the death of belief in the media as an institution that edits and clarifies or chooses priorities. Newspapers had to do this. There was only so much space in the paper each day. Editing was their greatest service to society. 

Much the same was true of nightly half-hour news broadcasts in pre-cable television. But now, the notion of self-censorship is alien and suspect. People expect “the whole truth”. The idea of news organisations with long-standing cultures and staffed by trained professionals deciding what is best to publish appears bankrupt. We are not trusted to do this, and not just because of politicians crying “fake news”. 

Rather, the rise of social media has redefined all other media. If the incident in the Citi branch were to happen today, someone would put a photo of it on Facebook and Twitter. It might or might not go viral. But it would be out there, without context or explanation. The journalistic duty I felt to be responsible and not foment panic is now at an end. This is dangerous. 

Another issue is distrust of bankers. Nobody ever much liked “fat cats”, but this pickled into hatred as bankers avoided personal criminal punishment for their roles in the crisis. Bank bailouts were, I still think, necessary to protect depositors. But they are now largely perceived merely as protecting bankers. My self-censorship seemed to be an effort to help my friends the bankers, not to shield depositors from a panic. 

Then there is inequality. In my column, I said that I “happened to have a lot of money in my account” but made no mention of selling my London flat. People assumed that if I had several hundred thousand dollars sitting in a bank account, I must be very rich. That, in many eyes, made my actions immoral. Once I entered the FT website comments thread to explain where the money had come from, some thought this changed everything. It was “important information”. “In the article where moral questions [were] raised, the nature of the capital should have been explained better,” one commenter said. 

The hidden premise was that if I were rich, I would not have been morally entitled to protect my money ahead of others lacking the information I was privy to. Bear in mind that to read this piece, it was necessary to subscribe to the FT. 

Put these factors together, and you have a catastrophic breakdown in trust. How did we get here? 

The democratisation of finance in the 1990s was healthy. Transparency revealed excessive fees that slowly began to fall. For us at the FT, in many ways an entrenched monopoly, this meant lost advertising and new competition from cable TV, data providers and an array of online services. 

But that democratisation was tragically mishandled and regulators let go of the reins far too easily. In 1999, as the Nasdaq index shot to the sky, the share prices of new online financial media groups such as thestreet.com shot up with them. On US television, ads for online brokers showed fictional truck drivers apparently buying their own island with the proceeds of their earnings from trading on the internet. By 2000, when I spent time at business school, MBA students day-traded on their laptops in class, oblivious to what their professors were saying. 

Once that bubble burst, the pitfalls of rushed democratisation were painfully revealed. Small savers had been sucked into the bubble at the top, and sustained bad losses. 

Trust then died with the credit crisis of 2008 and its aftermath. The sheer injustice of the ensuing government cuts and mass layoffs, which deepened inequality and left many behind while leaving perpetrators unpunished, ensured this. 

The public also lost their trust in journalists as their guides in dealing with this. We were held to have failed to warn the public of the impending crisis in 2008. I think this is unfair; the FT and many other outlets were loudly sceptical and had been giving the problems of US subprime lenders blanket coverage for two years before Lehman Brothers went down. In the earlier dotcom bubble, however, I think the media has more of a case to answer — that boom was lucrative for us and many were too credulous, helping the bubble to inflate. 

Further, new media robbed journalists of our mystique. In 1990, readers had no idea what we looked like. Much of the FT, including all its stock market coverage, was written anonymously. The only venue for our work was on paper and the only way to respond (apart from the very motivated, who used the telephone) was also on paper. The rule of thumb was that for every letter we received, at least another hundred readers felt the same way. 

Now, almost everything in the paper that expresses an opinion carries a photo. Once my photo appeared above my name on the old Short View column, my feedback multiplied maybe fivefold. The buzzword was to be “multimodal”, regaling readers with the same ideas in multiple formats. In 2007 we started producing video. 

My readers became my viewers, watching me speak to them on screen every day, and my feedback jumped again. Answering emails from readers took over my mornings. Often these would start “Dear John”, or even just “John”, as though from people who knew me. So much for our old mystique. 

By 2010, social media was a fact of life. Writing on Twitter, journalists’ social network of choice, became part of the job. People expected us to interact with them. This sounds good. We were transparent and interactive in a way we had not been before. But it became part of my job to get into arguments with strangers, who stayed anonymous, in a 140-character medium that made the expression of any nuance impossible. 

Meanwhile, the FT hosted social media of its own. Audience engagement became a buzzword. If readers commented, we talked back. Starting in 2012, I started debating with readers and I learnt a lot. FT readers are often specialists, and they helped me understand some arcane subject matter. Once, an intense discussion with well over a hundred entries on the subject of cyclically adjusted price/earnings multiples (don’t ask) yielded all the research I needed to write a long feature. 

Now, following Twitter, comments below the line are degenerating into a cesspit of anger and disinformation. Where once I debated with specialists, now I referee nasty political arguments or take the abuse myself. The status of the FT and its competitors in the financial media as institutions entrusted with the task of giving people a sound version of the truth now appears, to many, to be totally out of date. 

Even more dangerously for the future, the markets and their implicit judgments have been brought into the realm of politics (and not just by President Trump). This was not true even 20 years ago; when Al Gore faced off against George W Bush in 2000, only months after the dotcom bubble burst, neither candidate made much of an issue of it. 

But now, following Lehman, people understand that decisions made in capital markets matter. That makes markets part of the political battlefield; not just how to interpret them, but even the actual market numbers are now open to question. 

Brexit rammed this home to me. During the 2016 referendum campaign, Remainers argued that voting to leave would mean a disastrous hit for sterling. This was not exactly Project Fear; whether or not you thought Brexit was a good idea, it was obvious that it would initially weaken the pound. A weaker currency can be good news — the pound’s humiliating exit from the EU’s exchange rate mechanism in 1992, for example, set the scene for an economic boom throughout the late 1990s. 

But reporting on the pound on the night of the referendum was a new and different experience. Sitting in New York as the results came in through the British night, I had to write comments and make videos, while trying to master my emotions about the huge decision that my home country had just taken. Sterling fell more than 10 per cent against the dollar in a matter of minutes — more than double its previous greatest fall in the many decades that it had been allowed to float, bringing it to its lowest level in more than three decades. Remarkably, that reaction by foreign exchange traders has stood up; after two more years of political drama, the pound has wavered but more than two years later remains slightly below the level at which it settled on referendum night. 

As I left, at 1am in New York, with London waking up for the new day, I tweeted a chart of daily moves in sterling since 1970, showing that the night’s fall dwarfed anything previously seen. It went viral, which was not surprising. But the nature of the response was amazing. It was a factual chart with a neutral accompanying message. It was treated as a dubious claim. 

“LOL got that wrong didn’t you . . . oops!” (There was nothing wrong with it.) “Pretty sure it was like that last month. Scaremongering again.” (No, it was a statement of fact and nothing like this had happened ever, let alone the previous month.) 

“Scaremongering. Project Fear talking us down. This is nothing to do with Brexit, it’s to do with the PM cowardice resignation.” (I had made the tweet a matter of hours before David Cameron resigned.) 

The reaction showed a willingness to doubt empirical facts. Many also felt that the markets themselves were being political and not just trying to put money where it would make the greatest return. “Bankers punish Britons for their audacity in believing they should have political control of their own country.” (Forex traders in the US and Asia were probably not thinking about this.) 

“It will recover, this is what uncertainty does. Also the rich bitter people upset about Brexit.” (Rich and bitter people were unlikely to make trades that they thought would make them poorer, and most of that night’s trading was by foreigners more dispassionate than Britons could be at that point.) 

So it continued for days. Thanks to the sell-off in sterling, the UK stock market did not perform that badly (unless you compared it with others, which showed that its performance was lousy). Whether the market really disliked the Brexit vote became a topic of hot debate, which it has remained — even as the market verdict, that Brexit is very bad news if not a disaster, becomes ever clearer. 

After Brexit, of course, came Trump. The US president takes the stock market as a gauge of his performance, and any upward move as a political endorsement — while his followers treat any fall, or any prediction of a fall by pundits such as me, as a political attack. The decade in which central banks have bought assets in an open attempt to move markets plays into the narrative that markets are political creations. 

This is the toxic loss of trust that now vitiates finance. Once lost, trust is very hard to retrieve, which is alarming. It is also not clear what the financial media can do about it, beyond redoubling our efforts to do a good job. 

All the most obvious policy responses come with dangers. Regulating social media from its current sick and ugly state would have advantages but would also be the thin end of a very long wedge. Greater transparency and political oversight for central banks might rebuild confidence but at the risk of politicising institutions we desperately need to maintain independence from politicians. And an overhaul of the prosecutorial system for white-collar crime, to avert the scandalous way so many miscreants escaped a reckoning a decade ago, might work wonders for bolstering public trust — but not if it led to scapegoating or show trials. 

On one thing, I remain gloomily clear. Without trust in financial institutions themselves, or those who work in them, or the media who cover them, the next crisis could be far more deadly than the last. Just ask JP Morgan.

Do not blame accounting rules for the financial crisis

Hans Hoogervorst in The Financial Times

Ten years after the outbreak of the financial crisis, there are still persistent arguments about the role that accounting standards may have played in its genesis.

Some critics of International Financial Reporting Standards argue that they gave an overly rosy picture of banks’ balance sheets before the crisis and are still not prudent enough despite improvements since then. These same critics also argue that excessive reliance on fair value accounting, which reflects an asset’s current market value, has encouraged untimely recognition of unrealised profits.

They want to require banks to make upfront provisions for all expected lifetime losses on loans and, presumably, a return to good old historical cost accounting, which values assets at the price they were initially purchased.

Though superficially appealing, these changes would weaken prudent accounting, rather than strengthen it.

The British bank HBOS, which collapsed and was taken over by Lloyds Banking Group during the crisis, has been presented as an example of failing pre-crisis accounting standards. The truth is that HBOS met bank regulators’ capital requirements, and its financial statements clearly showed that its balance sheet was supported by no more than 3.3 per cent of equity. For investors who cared to look, the IFRS standards did a quite decent job of making crystal clear that many banks had wafer-thin capital levels and were accidents waiting to happen.

However, the crisis did reveal that the existing standards gave banks too much leeway to delay recognition of inevitable loan losses. In response, the International Accounting Standards Board developed an “expected loss model” that significantly lowered the thresholds for recognising loan losses. The new standard, IFRS 9, requires banks to initially set aside a moderate provision for loan losses on all loans. This prevents them from recognising too much profit up front. Then if a loan experiences a significant increase in credit risk, all the losses that can be expected over the lifetime of the loan must be recognised immediately. Normally, that will happen long before actual default.

In developing this standard, the IASB did consider whether to require banks to recognise full lifetime losses from day one. We rejected this approach for several reasons.

First, accounting standards are designed to reflect economic reality as closely as possible. Banks do not suffer losses on the very first day a loan has been made, so recording a full lifetime loss immediately is counter-intuitive. Moreover, in bad economic times, when earnings are already depressed, banks would have an incentive to cut back on new lending in order to avoid having to recognise large day one losses. Just when you need it most, the economy would probably be starved of credit.

Second, future losses are notoriously difficult to predict, so any model based on expected losses many years later would be subjective. Before the crisis, Spanish regulators required their banks to provision for bad times on the basis of lifetime expected losses. But their lenders underestimated and were still overwhelmed by the tide of bad loans. This kind of accounting also tempts banks to overstate losses in good times, creating reserves that could be released in bad times. That may seem prudent at first but could mask deteriorating performance in a later period, when investors are most in need of reliable information.

Critics also allege that IFRS has been too enamoured of fair value accounting. In fact, banks value almost all of their loan portfolios at cost, so the historical cost method remains much more pervasive.

Fears that fair value accounting lead to improper early profit recognition are also overblown. IFRS 9 prohibits companies from doing that when quoted prices in active markets are not available and the quality of earnings is highly uncertain. Moreover, fair value accounting is often quicker at identifying losses than cost accounting. That is why banks lobbied so actively against it during the crisis.

This does not mean that the accounting standards are infallible. Accounting is highly dependent on the exercise of judgement and is therefore more an art than a science. Good standards limit the room for mistakes or abuse, but can never entirely eliminate them. The capital markets are full of risks that accounting cannot possibly predict. This is certainly the case now, with markets swimming in debt and overpriced assets. For accounting standards to do their job properly, we need management to own up to the facts — and auditors, regulators and investors to be vigilant.

Our cult of personality is leaving real life in the shade

George Monbiot in The Guardian

By reducing politics to a celebrity obsession – from Johnson to Trump to Corbyn – the media misdirects and confuses us 

Illustration: Ben Jennings


What kind of people would you expect the newspapers to interview most? Those with the most to say, perhaps, or maybe those with the richest and weirdest experiences. Might it be philosophers, or detectives, or doctors working in war zones, refugees, polar scientists, street children, firefighters, base jumpers, activists, writers or free divers? No. It’s actors. I haven’t conducted an empirical study, but I would guess that between a third and a half of the major interviews in the newspapers feature people who make their living by adopting someone else’s persona and speaking someone else’s words.

This is such a bizarre phenomenon that, if it hadn’t crept up on us slowly, we would surely find it astounding. But it seems to me symbolic of the way the media works. Its problem runs deeper than fake news. What it offers is news about a fake world.

I am not proposing that the papers should never interview actors, or that they have no wisdom of their own to impart. But the remarkable obsession with this trade blots out other voices. One result is that an issue is not an issue until it has been voiced by an actor. Climate breakdown, refugees, human rights, sexual assault: none of these issues, it seems, can surface until they go Hollywood.

This is not to disparage the actors who have helped bring them to mainstream attention, least of all the brave and brilliant women who exposed Harvey Weinstein and popularised the #MeToo movement. But many other brave and brilliant women stood up to say the same thing – and, because they were not actors, remained unheard. The #MeToo movement is widely assumed to have begun a year ago, with Weinstein’s accusers. But it actually started in 2006, when the motto was coined by the activist Tarana Burke. She and the millions of others who tried to speak out were, neither literally nor metaphorically, in the spotlight.

At least actors serve everyone. But the next most-interviewed category, according to my unscientific survey, could be filed as “those who serve the wealthy”: restaurateurs, haute couturists, interior designers and the like, lionised and thrust into our faces as if we were their prospective clients. This is a world of make-believe, in which we are induced to imagine we are participants rather than mere gawpers.

The spotlight effect is bad enough on the culture pages. It’s worse when the same framing is applied to politics. Particularly during party conference season, but at other times of the year as well, public issues are cast as private dramas. Brexit, which is likely to alter the lives of everyone in Britain, is reduced to a story about whether or not Theresa May will keep her job. Who cares? Perhaps, by now, not even Theresa May.

Neither May nor Jeremy Corbyn can carry the weight of the personality cults that the media seeks to build around them. They are diffident and awkward in public, and appear to writhe in the spotlight. Both parties grapple with massive issues, and draw on the work of hundreds in formulating policy, tactics and presentation. Yet these huge and complex matters are reduced to the drama of one person’s struggle. Everyone, in the media’s viewfinder, becomes an actor. Reality is replaced by representation.

Even when political reporting is not reduced to personality, political photography is. An article might offer depth and complexity, but is illustrated with a photo of one of the 10 politicians whose picture must be attached to every news story. Where is the public clamour to see yet another image of May – let alone Boris Johnson? The pictures, like the actors, blot out our view of other people, and induce us to forget that these articles discuss the lives of millions, not the life of one.

The media’s failure of imagination and perspective is not just tiresome: it’s dangerous. There is a particular species of politics that is built entirely around personalities. It is a politics in which substance, evidence and analysis are replaced by symbols, slogans and sensation. It is called fascism. If you construct political narratives around the psychodramas of politicians, even when they don’t invite it, you open the way for those who can play this game more effectively.

Already this reporting style has led to the rise of people who, though they are not fascists, have demagogic tendencies. Johnson, Nigel Farage and Jacob Rees-Mogg are all, like Donald Trump, reality TV stars. The reality TV on which they feature is not The Apprentice, but Question Time and other news and current affairs programmes. In the media circus, the clowns have the starring roles. And clowns in politics are dangerous.

The spotlight effect allows the favoured few to set the agenda. Almost all the most critical issues remain in the darkness beyond the circle of light. Every day, thousands of pages are published and thousands of hours broadcast by the media. But scarcely any of this space and time is made available for the matters that really count: environmental breakdown, inequality, exclusion, the subversion of democracy by money. In a world of impersonation, we obsess about trivia. A story carried by BBC News last week was headlined “Meghan closes a car door”. 

The BBC has just announced that two of its programmes will start covering climate change once a week. Given the indifference and sometimes outright hostility with which it has treated people trying to raise this issue over the past 20 years, this is progress. But business news, though less important than environmental collapse, is broadcast every minute, partly because it is treated as central by the people who run the media and partly because it is of pressing interest to those within the spotlight. We see what they want us to see. The rest remains in darkness.

The task of all journalists is to turn off the spotlight, roll up the blinds and see what’s lurking at the back of the room. There are some magnificent examples of how this can be done, such as the Windrush scandal reporting, by the Guardian’s Amelia Gentleman and others. This told the story of people who live far from where the spotlight falls. The articles were accompanied by pictures of victims rather than of the politicians who had treated them so badly: their tragedies were not supplanted by someone else’s drama. Yet these stories were told with such power that they forced even those within the spotlight to respond.

The task of all citizens is to understand what we are seeing. The world as portrayed is not the world as it is. The personification of complex issues confuses and misdirects us, ensuring that we struggle to comprehend and respond to our predicaments. This, it seems, is often the point.

How did Sri Rama's idols suddenly appear in Babri Masjid on 22 December 1949?

Krishna Jha and Dhirendra K Jha in The Wire.In


The night was almost over. Ayodhya was still numb with sleep. Piercing through the quiet, a young sadhu, drenched in sweat, came scampering from Hanumangarhi, a fortress-like Hindu religious establishment housing over five hundred sadhus in Ayodhya. He had been sent to summon Satyendra Das to his guru, Abhiram Das, who seemed to be breathing his last. Those were the early hours of 3 December 1981, and a curtain was coming down over a few forgotten pages of history.

Dharam Das, the other disciple who stayed with Abhiram Das in his one-room tenement, the asan in Hanumangarhi, had asked for him so that they could be with their guru in his last moments. The news did not come as a shock. Satyendra Das had been almost awaiting the moment, since he had known for long that his guru was nearing the end of his journey. He had been at his bedside the whole day and the signs were not encouraging. Even when he had left Abhiram Das’s asan to get a breather after hours of tending to the terminally ill, he had a premonition that his guru – the man who had led a small band of Hindus to surreptitiously plant the idol of Lord Rama in Babri Masjid on yet another December night three decades ago – might not live long. After he had come away from the bedside, unwilling but tired to the bones, Satyendra Das was restless and unable to sleep. He dreaded the moment, yet knew that someone would knock on his doors with the news any time, and when it came, he responded fast, wrapped a quilt around himself and ran out along with the young sadhu who had come to fetch him.

It was very cold outside. The winter night was fading into a dense fog that smothered everything in its folds. Nothing was visible. The duo, almost running in total invisibility, knew the nooks and crannies of Ayodhya like the back of their hands. As Satyendra Das arrived at the asan, he saw Abhiram Das lying in the middle of the room on a charpoy, surrounded by a few sadhus from Hanumangarhi. No one spoke; it was very quiet. Only Dharam Das moved close to him and murmured softly that their guru had passed away minutes before he had stepped in. Slowly, as the day began to break, devotees and disciples started pouring into the room. Soon, preparations for the last rites of the deceased were begun with the help of some residents of Hanumangarhi.

The rituals for the final journey of ascetics are not the same as those for non-ascetic Hindu grihasthas, particularly in north India. Sadhus, unlike Hindu grihasthas, are rarely cremated. There are two options: either their bodies are smeared with salt and buried sitting in a meditative posture or they are dropped down a sacred river tied with a rock or sacks full of sand. The fact that sadhus who take vows of complete renunciation are not cremated symbolizes their separation from the material world. The claim goes that cremation for sadhus is superfluous since they have already burnt their attachments through ascetic initiation, opting for a life of austerities and renunciation.

In Ayodhya, the normal ascetic practice has been to immerse the body of a sadhu in the Sarayu – the name given to the river only as long as it touches the shores of the town. Before and after Ayodhya, the river is known as the Ghaghara. The reason for this nomenclatural confusion lies in a particular Hindu belief. As mythology has turned Ayodhya into the birthplace of Lord Rama, the river owing by it has also assumed the mythical name of Sarayu – the stream that is believed to have owed through the kingdom of Lord Rama.

Back in Hanumangarhi, by the noon of 3 December 1981, Abhiram Das’s disciples and friends had completed all preparations and were ready to initiate the final rituals for the deceased. Outside the asan, the body of Abhiram Das had been placed on a platform made of bamboo in a seated posture, his face frozen into a mask of self-control, his eyes half-closed as if he were deep in meditation. A saffron piece of cloth that had the name of Lord Rama printed all over – a particular kind of cotton or silk material called ramnami – had been carefully wrapped around his body. A similar cloth covered three sides of the arch made out of split bamboo that rested on the hard bamboo platform holding the corpse. The bamboo structure – euphemistically called viman to symbolize the mythical transporter of souls to the heavenly realm – had been kept uncovered on one side to enable people to have a last glimpse of the deceased.

Slowly, a group of sadhus lifted the viman on their shoulders and climbed up the flight of stairs leading to the temple of Lord Hanuman in the centre of Hanumangarhi. At the temple, the group swelled further and as the viman was taken out of Hanumangarhi, the motley crowd accompanying it chanted, ‘Ramajanmabhoomi Uddharak amar rahen (Long live the saviour of the birth place of Rama).’

Three decades back, on the morning of 23 December 1949, the First Information Report (FIR) registered by Ayodhya Police following the planting of the idol of Lord Rama in Babri Masjid on the night before had named Abhiram Das as the prime accused. He had also been tried for the crime he and his friends had committed that night, but the case had remained inconclusive. In course of time, many Hindus in Ayodhya had started calling him Ramajanmabhoomi Uddharak.


Krishna Jha and Dhirendra K. Jha, Ayodhya – The Dark Night, Harper Collins

The slogan-shouting grew louder as the viman reached the entrance of Babri Masjid, where it was carefully laid down. The priests of Ramajanmabhoomi, the temple that operated inside Babri Masjid ever since the idol was planted in it, as well as those of nearby Hindu religious establishments already knew about the demise of the sadhu, and they came out and garlanded the corpse and paid their homage to the departed soul.

By and large, however, Ayodhya remained unaware of Abhiram Das’s death. Though some residents looked at this funeral procession with curiosity, for the majority it was the demise of yet another old sadhu. After three decades, the historical facts associated with the developments in 1949 had slipped into obscurity. e propaganda of All India Hindu Mahasabha and Rashtriya Swayamsevak Sangh (RSS) – that the idol had never been planted and Lord Rama had manifested Himself at His place of birth – had gained ground among devout Hindus by now, largely delinking Abhiram Das from what he had done in the dark hours of that fateful night. Booklets and pamphlets written by Hindu communalists during the intervening period had flooded the shops of Ayodhya and had gone a long way in reinforcing the myth of ‘divine exercise’. For legal reasons, even those who had a role in that surreptitious act found it convenient to let the myth grow and capture popular imagination. e law, after all, could catch human conspiracies, but a ‘divine exercise’ was beyond its reach. Yet, to a small group of Hindus in Ayodhya, Abhiram Das continued to remain till his death Ramajanmabhoomi Uddharak or simply Uddharak Baba.

Whatever be the case, the lack of interest among locals could not be missed by many present in the cortège as it wound down the narrow lanes of Ayodhya and moved towards the banks of the Sarayu. On the bank, where the cortège reached at around two that afternoon, those carrying the viman on their shoulders bent down to put their burden on the ground. The sadhu’s body was taken out of it, bathed in the river and, after being smeared with ghee all over, was wrapped in a fresh white cloth. Two sand-filled sacks were tied to the back of the body, one beneath the shoulder and the other under the waist, which was then gently laid out in the boat that sailed o the moment Satyendra Das, Dharam Das and three other sadhus of Hanumangarhi boarded it. Within minutes, the boat reached the centre of the river, where it was no longer shallow and which had traditionally been used for such water burials. Those present on the boat performed the final rites before lifting Abhiram Das’s body and casting it into the cool, calm waters of the Sarayu.

II

The indifferent response that Abhiram Das’s death evoked among the local populace in 1981 was at odds with the atmosphere the town had witnessed three decades ago, during the years following Independence. At that time, many in Ayodhya, as in several other parts of the country, had seen things differently. The communal frenzy which had accompanied the partition of India had intensely brutalized the atmosphere. No less important was the role played by organizations which saw the immediate aftermath of Partition as an opportunity to derail the secular project of independent India. e conspirators associated with these organizations and the conspiracies they hatched had already resulted in major national tragedies.

One such was the gruesome murder of Mahatma Gandhi on 30 January 1948. The hands that pumped bullets into the chest of the Mahatma were that of Nathuram Godse, but, as was proved later, the assassination was part of a conspiracy hatched by top Hindu Mahasabha leaders, led by V.D. Savarkar, whose prime objectives were to snatch political initiative from the Congress and destabilize all efforts to uphold secularism in India. The conspiracy to kill Gandhi could not remain hidden for long even though the trial, held immediately after the assassination, had failed to uncover its extent.

The surreptitious occupation of the Babri Masjid was an act planned by almost the same set of people about two years later – on the night of 22 December 1949. It was, in many ways, a reflection of the same brutalized atmosphere that saw Gandhi being murdered. Neither the conspirators nor their underlying objectives were different. In both instances, the conspirators belonged to the Hindu Mahasabha leadership – some of the prime movers of the planting of the idol had been the prime accused in the Gandhi murder case – and their objective this time too was to wrest the political centre stage from the Congress by provoking large-scale Hindu mobilization in the name of Lord Rama.

Yet the two incidents differed – as much in the modus operandi used by Hindu communalists as in the manner in which the government and the ruling party, the Congress, responded to them. While the Mahatma was killed in full public view in broad daylight, the Babri Masjid was converted into a temple secretly, in the dead of night. Apparently, the quick and massive government reprisal in the aftermath of Gandhi’s assassination had taught the Hindu Mahasabha leaders several lessons. One was to avoid confrontation with the government so that they could extract maximum political advantage out of their act. Another was to involve a section of the Congress that was sympathetic to their cause. So when, two years later, they set out to execute the Ayodhya project, they remained extremely careful, keeping themselves in the backstage until the mosque was actually impounded and ensuring a large-scale mobilization of Hindus in the immediate aftermath without wasting any time. Though the political objective they had planned through this act of communal aggression in Ayodhya could not be achieved in the manner they had hoped for, they greatly succeeded in keeping the story of the night and the conspiracy behind it a secret, for it never came out in its entirety.

Also, while the conspiracy to kill the Mahatma was probed thoroughly by a commission set up by the Government of India albeit two decades later, no such inquiry was conducted to unmask the plot and the plotters behind the forcible conversion of the Babri Masjid into a temple. As a result, an event that so remarkably changed the political discourse in India continues to be treated as a localized crime committed spontaneously by a handful of local people led, of course, by Abhiram Das, a local sadhu. It was, however, a well-planned conspiracy involving national-, provincial- and local-level leaders of the Hindu Mahasabha undertaken with he objective of reviving the party’s political fortunes that were lost in the aftermath of the Gandhi assassination.

Time has further pushed the secret story of the Hindu Mahasabha’s Ayodhya strategy into obscurity, leaving only what is most apparent for public debate. The unending process of litigation which it triggered completely shifted the focus away from that fateful night and has now become the basis of communal politics in the country. Incidentally, the most crucial part of the controversy – the hidden one – remains an ignored area of research. For instance, the White Paper on the Babri Masjid–Ramajanmabhoomi dispute of the Government of India dismissed the incident of 1949 – legally the root cause of the dispute – in just one paragraph. Issued in the aftermath of the demolition of the mosque on 6 December 1992, the document does not have more to say on the incident:


The controversy entered a new phase with the placing of idols in the disputed structure in December 1949. The premises were attached under Section 145 of the Code of Criminal Procedure. Civil suits were led shortly thereafter. Interim orders in these civil suits restrained the parties from removing the idols or interfering with their worship. In effect, therefore, from December 1949 till December 6, 1992 the structure had not been used as a mosque.

It seems impertinent to say that so little is known about the night of 22–23 December 1949 since, in a sense, almost the entire dispute over the mosque emanates from the appearance of the idol of Rama inside that structure. Nevertheless, it is true that there has been little research by contemporary or later writers to fill the gap. This missing link of history remained out of focus till the issue was politically revived and strengthened by the Vishwa Hindu Parishad (VHP) in the mid-1980s. And by then the story of the night had been taken over by the politics of communalism and the debate over the proprietorship of the disputed land. 

But till Lord Rama ‘manifested’ Himself inside the Babri Masjid, all moves had sought to construct the temple at Ramachabutara, an elevated platform outside the inner courtyard of the mosque. Only after the idols were placed inside did the demand for converting the Muslim place of worship into a temple enter the legal arena. And yet the development of that night did not attract much attention in the media when it actually took place. No major newspaper or journal of the time gave it the kind of serious coverage it deserved even though the import of the development was not at all lost on Congress leaders like Jawaharlal Nehru, Sardar Vallabhbhai Patel, Govind Ballabh Pant and Akshay Brahmachary as well as Hindu Mahasabha president N.B. Khare, its vice-president V.G. Deshpande and its all India general secretary and president of the party’s UP unit Mahant Digvijai Nath.

The only journal that covered the events in detail was a local Hindi weekly in Ayodhya called Virakta. Its editor, Ramgopal Pandey ‘Sharad’, was a known Mahasabhaite. The kind of material that Virakta published had a pronounced Hindu communal bias, and it was hardly expected to carry objective reportage on the developments. If anything, this journal was the first to promote the theory of ‘divine exercise’ – though in bits and pieces – to explain the appearance of the idol of Lord Rama inside the mosque.

Later, Ramgopal Pandey ‘Sharad’ wrote a booklet in Hindi – Shree Ramjanmabhoomi Ka Rakta Ranjit Itihaas (The Blood-soaked History of the Birth Place of Lord Rama). In Ayodhya, this has remained the most popular and perhaps only available material on the subject ever since. Like Virakta, this booklet, too, explains the developments of that night in terms of divine intervention rather than as a communal tactic conceived and executed by the Mahasabha in collaboration with local communalists. is is what the booklet says:


Twenty-third December 1949 was a glorious day for India. On that day, after a long gap of about four hundred years, the birth place of Lord Rama was redeemed. e way developments happened [on the night before], it can be said that Lord Rama himself redeemed his place of birth.

While this theory was being used by communalists to explain the mystery of those dark hours, no serious attempt was made to explore the events of that night objectively, neither by the government nor by any institutions or individual researchers. Debunking the theory of ‘divine exercise’ is one thing (and there is no dearth of works in this regard), but unravelling the truth that was sought to be covered is something else.

Surely, part of the reason why the facts could not come out as and when they occurred – as happened in case of Mahatma Gandhi’s assassination – had greatly to do with the power politics of the time. After the assassination of Gandhi in 1948 until the death of Sardar Vallabhbhai Patel in 1950, the Congress party was beset with an intense intra-party power struggle. Though it had witnessed factional fights earlier as well, there had always been an element of restraint under the influence of Mahatma Gandhi and the idealism of the freedom struggle. But as soon as these restraints disappeared, the fight between the two power blocs in the Congress – Hindu conservatives led by Patel and secularists led by Nehru – came out in the open.

The United Provinces, in particular, emerged as one of the main battlegrounds for these power blocs in the Congress, merely months after Gandhi’s assassination. Govind Ballabh Pant, the chief minister of the province (called prime minister before adoption of the Constitution on 26 January 1950), was a staunch loyalist of Patel. His desperation to remove all those who appeared to be potential challengers to his authority in the state Congress led him to align with Hindu revivalists in Ayodhya – a move that, apart from paying him dividends, greatly emboldened Mahasabhaites and set the ground for the eventual appearance of the idols at the Babri Masjid.

With the Hindu conservative faction of the Congress, in a bid to neutralize Nehru, openly trying to outsource political strength from communal elements outside the party, and the latter endeavouring to arrest this political drift and salvage its own position, there was hardly much time, or determination, to probe the misdeeds of the Mahasabhaites. This was even more so in the United Provinces where the government appeared to be more interested in protecting the Hindu communalists than bringing them to book.

By the time this battle was won by Nehru in late 1950, the incidents of the night of 22 December 1949 had got lost in legal thickets, and the mood of the nation had changed, with the secular fabric seemingly no longer threatened by Hindu revivalists. As the focus shifted following the promulgation of the Constitution of India on 26 January 1950, almost all the players of the Hindu Mahasabha’s Ayodhya strategy either lost their relevance or, in cases where some of them managed to remain in currency, their ability to break the secular equilibrium got severely restricted and their link with the night became part of this missing link of modern India’s history.

Trump has a point about globalisation

Larry Elliott in The Guardian

The president’s belief that the nation state can cure economic ills is not without merit


  

‘The stupendous growth posted by China over the past four decades has been the result of doing the opposite of what the globalisation textbooks recommend.’ Photograph: AFP/Getty Images


Once every three years the International Monetary Fund and the World Bank hold their annual meetings out of town. Instead of schlepping over to Washington, the gathering of finance ministers and central bank governors is hosted by a member state. Ever since the 2000 meeting in Prague was besieged by anti-globalisation rioters, the away fixtures have tended to be held in places that are hard to get to or where the regime tends to take a dim view of protest: Singapore, Turkey, Peru.

This year’s meeting will take place in a couple of weeks on the Indonesian island of Bali, where the IMF and the World Bank can be reasonably confident that the meetings will not be disrupted. At least not from the outside. The real threat no longer comes from balaclava-wearing anarchists throwing Molotov cocktails but from within. Donald Trump is now the one throwing the petrol bombs and for multilateral organisations like the IMF and World Bank, that poses a much bigger threat.

The US president put it this way in his speech to the United Nations on Tuesday: “We reject the ideology of globalism and we embrace the doctrine of patriotism.” For decades, the message from the IMF has been that breaking down the barriers to trade, allowing capital to move unhindered across borders and constraining the ability of governments to regulate multinational corporations was the way to prosperity. Now the most powerful man on the planet is saying something different: that the only way to remedy the economic and social ills caused by globalisation is through the nation state. Trump’s speech was mocked by fellow world leaders, but the truth is that he’s not a lone voice.

The world’s other big economic superpower – China – has never given up on the nation state. Xi Jinping likes to use the language of globalisation to make a contrast with Trump’s protectionism, but the stupendous growth posted by China over the past four decades has been the result of doing the opposite of what the globalisation textbooks recommend. The measures traditionally frowned upon by the IMF – state-run industries, subsidies, capital controls – have been central to Beijing’s managed capitalism. China has certainly not closed itself off from the global economy but has engaged on its own terms. When the communist regime wanted to move people out of the fields and into factories it did so through the mechanism of an undervalued currency, which made Chinese exports highly competitive. When the party decided that it wanted to move into more sophisticated, higher-tech manufacturing, it insisted that foreign companies wishing to invest in China share their intellectual property.

This sort of approach isn’t new. It was the way most western countries operated in the decades after the second world war, when capital controls, managed immigration and a cautious approach to removing trade barriers were seen as necessary if governments were to meet public demands for full employment and rising living standards. The US and the EU now say that China is not playing fair because it has been prospering with an economic strategy that is supposed not to work. There is some irony in this.

The idea that the nation state would wither away was based on three separate arguments. The first was that the barriers to the global free movement of goods, services, people and money were economically inefficient and that removing them would lead to higher levels of growth. This has not been the case. Growth has been weaker and less evenly shared.

The second was that governments couldn’t resist globalisation even if they wanted to. This was broadly the view once adopted by Bill Clinton and Tony Blair, and now kept alive by Emmanuel Macron. The message to displaced workers was that the power of the market was – rather like a hurricane or a blizzard – an irresistible force of nature. This has always been a dubious argument because there is no such thing as a pure free market. Globalisation has been shaped by political decisions, which for the past four decades have favoured the interests of capital over labour.
Finally, it was argued that the trans-national nature of modern capitalism made the nation state obsolete. Put simply, if economics was increasingly global then politics had to go global, too. There is clearly something in this because financial markets impose constraints on individual governments and it would be preferable for there to be a form of global governance pushing for stability and prosperity for all. The problem is that to the extent such an institutional mechanism exists, it has been captured by the globalists. That is as true of the EU as it is of the IMF.

So while the nation state is far from perfect, it is where an alternative to the current failed model will inevitably begin. Increasingly, voters are looking to the one form of government where they do have a say to provide economic security. And if the mainstream parties are not prepared to offer what these voters want – a decently paid job, properly funded public services and controls on immigration – then they will look elsewhere for parties or movements that will. This has proved to be a particular problem for the parties of the centre left – the Democrats in the US, New Labour in Britain, the SDP in Germany – that signed up to the idea that globalisation was an unstoppable force.

Jeremy Corbyn certainly does not accept the idea that the state is obsolete as an economic actor. The plan is to build a different sort of economy from the bottom up – locally and nationally. That’s not going to be easy but beats the current, failed, top-down approach.