Hope for Britain after Brexit

Those who predict economic Armageddon ignore the reality. The status quo wasn’t working – now there’s an opportunity for change writes Larry Elliott in The Guardian

‘The mass exodus of banks and other financial institutions from the City of London, predicted since June 2016, has not materialised.’ View over the Thames to the City. Photograph: Niklas Halle’n/AFP/Getty Images

So this is it. Forty-eight years after Britain joined what was then the European Economic Community, the fasten seatbelt signs are switched on and the cabin lights have been dimmed. It is time for departure.

Many in the UK, especially on the left, are in despair that this moment has arrived. For them, this can never be the journey to somewhere better: instead it is the equivalent of the last helicopter leaving the roof of the US embassy in Saigon in 1975.

The lefties who voted for Brexit see it differently. For them (us, actually, because I am one of them), the vote to leave was historically progressive. It marked the rejection of a status quo that was only delivering for the better off by those who demanded their voice was heard. Far from being a reactionary spasm, Brexit was democracy in action. 

Now the UK has a choice. It can continue to mourn or it can take advantage of the opportunities that Brexit has provided. For a number of reasons, it makes sense to adopt the latter course.

For a start, it is clear that the UK has deep, structural economic problems despite – and in some cases because of – almost half a century of EU membership. Since 1973, the manufacturing base has shrivelled, the trade balance has been in permanent deficit, and the north-south divide has widened. Free movement of labour has helped entrench Britain’s reputation as a low-investment, low-productivity economy. Brexit means that those farmers who want their fruit harvested will now have to do things that the left ought to want: pay higher wages or invest in new machinery.

The part of the economy that has done best out of EU membership has been the bit that needed least help: the City of London. Each country in the EU has tended to specialise: the Germans do the high-quality manufactured goods; France does the food and drink; the UK does the money. Yet the mass exodus of banks and other financial institutions that has been predicted since June 2016 has not materialised, because London is a global as well as a European financial centre. The City will continue to thrive.

If there are problems with the UK economy, it is equally obvious there are big problems with the EU as well: slow growth, high levels of unemployment, a rapidly ageing population. The single currency – which Britain fortunately never joined – has failed to deliver the promised benefits. Instead of convergence between member states there has been divergence; instead of closing the gap in living standards with the US, the eurozone nations have fallen further behind.

In their heads, those predicting Armageddon for the UK imagine the EU to still be Germany’s miracle economy – the Wirtschaftswunder – of the 1960s. The reality is somewhat different. It is Italy, where living standards are no higher than they were when the single currency was introduced two decades ago. It is Greece, forced to accept ideologically motivated austerity in return for financial support. The four freedoms of the single market – no barriers to the movement of goods, services, people and capital – are actually the four pillars of neoliberalism.

The Covid-19 crisis has demonstrated the importance of nation states and the limitations of the EU. Britain’s economic response to the pandemic was speedy and coordinated: the Bank of England cut interest rates and boosted the money supply while the Treasury pumped billions into the NHS and the furlough scheme. It has taken months and months of wrangling for the eurozone to come up with the same sort of joined-up approach.

Earlier in the year, there was criticism of the government when it decided to opt out of the EU vaccine procurement programme, but this now looks to have been a smart move. Brussels has been slow to place orders for drugs that are effective, in part because it has bowed to internal political pressure to spread the budget around member states – and its regulator has been slower to give approval for treatments. Big does not always mean better.

Leaving the EU means UK governments no longer have anywhere to hide. They have economic levers they can pull – procurement, tax, ownership, regulation, investment in infrastructure, subsidies for new industries, trade policy – and they will come under pressure to use them.

Many on the remainer left accept the EU has its faults, but they fear that Brexit will be the start of something worse: slash and burn deregulation that will make Britain a nastier place to live.

This, though, assumes that Britain will have rightwing governments in perpetuity. It used to be the left who welcomed change and the right that wanted things to remain the same. The inability to envisage what a progressive government could do with Brexit represents a political role reversal and a colossal loss of nerve.

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Britain out of the EU: a treasure island for rentiers

There’s no sign that ministers will use the twin shocks of the pandemic and Brexit to fix a broken system that is failing too many people opine the editors of The Guardian

‘Culturally, Brexit plays the same sort of role as the right to buy, insulating poorer leave voters from the idea that they will suffer from the resulting policies.’ Photograph: Christopher Furlong/Getty Images
 

When the UK entered the coronavirus age in March, state resources and collective commitment were mobilised on a scale not seen since the second world war. Decades ago, Britain had revealed itself, thanks in part to being able to marshal the industrial might of the empire, to be a formidable world power. Its economy was energised with breakthroughs in radar, atomic power and medicine.

Although the story of the pandemic has not yet ended, there appears to be no such transformation in sight under Boris Johnson. Rather depressingly, familiar trends of greed, incompetence and cronyism are reasserting themselves. This is bad news for an economy where there has been a collapse of socially useful innovation. Britain’s lack of hi-tech manufacturing capabilities, notably in medical diagnostic testing, was cruelly exposed by the pandemic.

This country has become more of a procurer than a producer of technology. But it is a remarkably inefficient one – despite an extraordinarily high percentage of lawyers and accountants in the working population. Connections seem to matter more than inventions. How else to explain why, in the desperate scramble to procure personal protective equipment, ventilators and coronavirus tests, billions of pounds of contracts have gone to companies either run by friends or supporters – even neighbours – of Conservative politicians, or with no prior expertise.

History is not short of examples where political insiders were successful in extracting virtually all the surplus that the economy created. Such influential interests moulded politics to enlarge their share of the pie. Greed was limited only by the need to let the producers survive. The shock of war, revolution, famine or plague provides an opportunity to fix a broken society. But if, post-pandemic, UK politicians care less about reform than the retention of power, they will fail to restrain the grasping enrichment that undermines democracy itself.

Windfall profits

Perhaps the most penetrating X-ray of this phenomenon today is by Brett Christophers in his book Rentier Capitalism. The academic makes the case that Britain has become a treasure island for those seeking excess profits from state-sanctioned control of natural resources, property, financial assets and intellectual property. Rent, paid by renters to rentiers, is tied to the ownership or control of such assets, made scarce under conditions of limited or no competition.

Mr Christophers says that the first sign of this new order was when Britain struck black gold in the North Sea. He writes that MPs on the public accounts committee noted with incredulity in 1972 that “the first huge areas of the sea were leased to the companies as generously as though Britain were a gullible Sheikhdom”. After that, public assets were sold off cheaply. The private sector ended up controlling lightly regulated monopolies in gas, water and electric supply, and public transport and telecoms. Customers lost out, overpaying for poor service. In a rentier’s paradise, windfall profits abound. Brazenly occupying the lowest moral ground was essential, as the housebuilder Persimmon proved by earning supersized state-backed help-to-buy profits long enough to hand out a £75m bonus to its boss.

The banks, which took this country to the brink of collapse a decade ago, are at the heart of a rentier state. France, Germany, Japan, the US all have banking sectors smaller than the UK. While banks earning rents have flourished, the households paying them – either directly as financial consumers, or indirectly as taxpayers of a debtor state or customers of debtor firms – have floundered.

The anger that such spivvery engenders is diffused politically by making voters complicit in the theft. The sell-off of council homes, says Mr Christophers, was a privatisation that gave many of those perhaps most inclined to kick against Thatcherism a personal stake in the project. Culturally, Brexit plays the same sort of role as the right to buy, insulating poorer leave voters from the idea that they will suffer from the resulting policies.

The prime minister understands that Covid can change Britain, but lacks modernising policies. He extols the virtues of free competition – both for itself and because such freedom, he reasons, will somehow liberate the spirit fluttering within a pre-Brexit Britain caged by coronavirus. He is no doubt betting that the disruption of leaving the EU will be lost in the roar of an economy taking off as an inoculated population returns to offices and shops.

Weakened regulations

The gap between rich and poor in the UK is at least as high today, academics calculate, as it was just before the start of the second world war. This is largely because the British state that once mediated the struggle between labour and capital has been taken over by rentiers. Weakening regulations, reducing the importance of fiscal policy and shredding social protections has corroded liberal democracy in which an increasingly influential wealthy few have been enjoying a free run. Ultimately, rentiers want to increase what the economist Michał Kalecki called the “degree of monopoly” in an economy. This allows them to limit the ability of workers, consumers and regulators to influence the markup of selling prices over costs and to defend the share of wages in output.

The EU says its labour, environment and customer protections are a floor, not a ceiling, and that they can’t be traded away for frictionless market access. If we had stayed in the club, our ability to concentrate profits for monopolists would have been stymied in future trade deals negotiated by Brussels and open to MEPs’ scrutiny. Outside the EU, Mr Johnson can barter away such regulations – without parliamentary oversight – and scrap safeguards in new technology for higher monopoly profits. Karl Marx wrote in The Eighteenth Brumaire of Louis Bonaparte in 1852 that “the Tories in England long fancied that they were in raptures about royalty, the church and the beauties of the ancient constitution, until a time of trial tore from them the confession that they were only in raptures about rent”. His assessment of early 19th-century Tories applies with unerring accuracy to today’s Conservatives.

Mr Christophers’ insight is that the Tories under Mr Johnson are a party of – and for – rentiers, much more than the interests of productive capital. This explains why, after 2016, the Tory party embraced Brexit and shrugged off productive capital’s concerns about leaving the EU. It will be to the great detriment of this country if the pandemic permitted Mr Johnson to combine present-day fears with a yearning for hopeful change to persuade the average person to vote against their interests in the future. But history often repeats itself first as tragedy, then as farce.

Throughout history Britain’s ruling class has created crisis after crisis – just like now

Boris Johnson’s run of bad decisions on Brexit and Covid have their roots in a saga of elite entitlement and superficiality writes John Harris in The Guardian

‘Then came the Brexit trade deal, and a familiar idea returned, that under the shambling exterior, the prime minister is some kind of swashbuckling genius.’ Photograph: Pippa Fowles/No10 Downing Street


When the novelist John le Carré died earlier this month, among the passages quoted by journalists was a short excerpt from The Secret Pilgrim, published in 1990. In the book, the words are spoken by Le Carré’s fondly loved character George Smiley. “The privately educated Englishman – and Englishwoman, if you will allow me – is the greatest dissembler on Earth,” he says. “Was, is now and ever shall be for as long as our disgraceful school system remains intact. Nobody will charm you so glibly, disguise his feelings from you better, cover his tracks more skilfully or find it harder to confess to you that he’s been a damned fool.”

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The words are a cutting summary of the far-off era of upper class treachery and cold war subterfuge, but also fit the less romantic time of Brexit, the pandemic and a Conservative party whose leadership by two public schoolboys has so pushed us into disaster. Therein lies a huge part of the national tragedy that, amid stranded lorries, a shamefully high death toll and some of the greatest peacetime blunders this country has ever made, has recently seemed to be reaching some kind of awful climax. Of late, some of the best writing about the mess we are in has focused on Boris Johnson’s character flaws, which are undoubtedly a big part of the tale. But what has been rather less examined is the fact that his shortcomings blur into a much longer story about our longstanding ruling class, and its habit of creating crisis after crisis.

The year 2021 will mark the 80th anniversary of George Orwell’s inspirational essay, The Lion and the Unicorn, his warmly patriotic text about the English national character, and his belief that this country’s efforts in the early stages of the second world war were being compromised by the fact that he was still resident in “the most class-ridden country under the sun”. Here, too, there are plenty of characterisations of the English elite that seem as pertinent now as they were then. “Probably the battle of Waterloo was won on the playing fields of Eton, but the opening battles of all subsequent wars have been lost there,” wrote Orwell, and as an Etonian himself he surely knew what he was talking about.

Of the ruling-class politicians who had overseen Britain’s domestic travails during the 1920s and 30s while pursuing the disastrous foreign policies that culminated in appeasement, he said this: “What is to be expected of them is not treachery, or physical cowardice, but stupidity, unconscious sabotage, an infallible instinct for doing the wrong thing. They are not wicked, or not altogether wicked; they are merely unteachable.” Back when Conservatives at least partly understood such criticism and successively embraced first postwar consensus politics, then the populist meritocracy most spectacularly embodied by Margaret Thatcher, they were harder to malign as chancers and stuffed shirts. But in the buildup to Christmas, as I watched Johnson deny the nightmare of a no-deal Brexit, row back on his stupid promise of a normal Christmas and then yet again offer the prospect of a return to normality (this time, he seemed to suggest, by Easter), Orwell’s words once again made perfect sense.

Since the election as party leader of David Cameron back in 2005, even if the Conservatives have stuck with a post-Thatcher view of the world, many of the inner circles of Tory politics have reverted to a way of doing things more rooted on the grouse moors of old than in the modern world. Johnson’s arrival at the top revived a familiar mixture of entitlement, superficiality and lives that most people would think impossibly opulent. We all know what those things have led to – a seemingly endless run of terrible decisions, from the calling of the 2016 referendum to the chain of stupidities that has defined Britain’s experience of Covid-19.

Just to be clear: the downsides of a certain kind of privileged leadership have flared up on all sides of politics, from the messianic arrogance that led Tony Blair into the Iraq disaster, to Nick Clegg’s virtual destruction of the Liberal Democrats. But in the main, this is a Tory story. If your Christmas presents included the horrifically readable memoir, Diary of an MP’s Wife by Sasha Swire (whose husband, Hugo, was a minister under Cameron and part of his social circle), you will have a sense of what all this looks like up close. Johnson’s biographer, Sonia Purnell, described Swire’s book as a portrait of people who are “unserious, entitled, snobbish, incestuous and curiously childish” – obsessed with the subtle distinctions of taste and status that separate the middle from the upper class, and drawn to politics and power not out of any sense of mission or duty, but a dull belief that such things are what people like them do. Under Johnson, the same culture of entitlement and mutual back-scratching has hardened into the so-called “chumocracy”. Oligarchy is rarely an efficient or sensible way to govern, but that doesn’t seem to have got in the way.

Just before Christmas, dismay about the Johnson government and its apparent distance from reality seemed to be reaching a peak. But then came the Brexit trade deal, and a familiar idea returned – not least in the rightwing press – that under the shambling exterior, the prime minister is some kind of swashbuckling genius. This is an archetype that depends on the glib charm cited by Le Carré, and draws on a deep well of deference. The reality is surely that a reckless project driven by the alumni of private schools (Johnson, Dominic Cummings, Nigel Farage, Jacob Rees-Mogg et al) has resulted in probably the only trade deal in history that puts up barriers to commerce rather than removing them, and will be rushed through parliament with a sickening disdain for any scrutiny. Combined with the economic effects of the pandemic, the result will be damage and uncertainty that is only just starting: all the talk about Brexit now being finished is further proof of the ditch we have been led into.

The disasters, then, will continue to mount up, but will they result in any change? If history teaches us anything, it is that this country’s mixture of cap-doffing and unassailable privilege tends to keep even the most rotten hierarchies in place, and the saga grinds on. This is the essence of the very British mess that we seem unable to escape.

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How UK-EU trade deal will change relations between Britain and Brussels

Sam Fleming and Jim Brunsden in The FT

The future relationship deal struck between the UK and the EU (24 Dec 2020) will bring far-reaching changes, as both sides are forced to adapt to the end of Britain’s 30-year membership of the European single market

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The trade agreement between London and Brussels will offer UK and EU companies preferential access to each other’s markets, compared with basic World Trade Organization rules — ensuring imported goods will be free of tariffs and quotas. 

But economic relations between the UK and the EU from January 1, when the deal is due to take effect, will be on more restricted terms than they are now.  

“Everyone needs to get prepared for a situation next year that will be very different to today,” said an EU official. 

A trade agreement along the lines of the one negotiated between the two sides will leave Britain facing a 4 per cent loss of potential gross domestic product over 15 years compared with EU membership, according to the UK’s Office for Budget Responsibility. Failure to secure an agreement would have led to lost potential GDP of almost 6 per cent, the fiscal watchdog estimated. 

Below are some of the benefits conferred by the UK-EU future relationship deal, which also includes security co-operation — and the important areas in which Britain’s links with the bloc will fall short of existing arrangements. 

1. Trade in goods  

The EU and UK’s starting point for the future relationship talks was that they should lead to a deal with no tariffs on trade in goods between the two sides. They also wanted no quantitative restrictions on the volume of goods that could be sold free of tariffs.  

That was negotiated, meaning the deal will go beyond what the EU has done with any other advanced economy outside the European single market.  

But the agreement is still a very different state of affairs to membership of the EU single market and customs union. 

Once implemented, from January 1, a hard customs and regulatory border will exist between the EU and UK, and goods will face checks and controls that can be smoothed at the margins only by co-operation. 

The deal will include facilitations such as co-operation on trusted trader schemes, but none of these erase border checks. 

“The agreement provides for continued and sustainable air, road, rail and maritime connectivity, though market access falls below what the single market offers,” said the European Commission.

2. Fair business competition 

The EU’s offer on tariff-free trade was contingent on the UK agreeing to uphold a “level playing field” on fair business competition in areas such as environmental standards. 

Brussels was also keen to ensure the UK does not have unfettered scope to disburse state aid to prized industries, giving them a competitive advantage.  

The agreement includes common binding principles on state aid, enforceable in both sides’ courts, which would be able to recover illegal subsidies. 

It also includes a painstakingly negotiated “rebalancing mechanism” to deal with a situation where the sides’ regulations in areas such as labour rights diverge over time. 

The mechanism, which would be subject to independent arbitration, would allow the disadvantaged side to impose tariffs to restore fair competition. 

But, crucially for the UK, it will not be required to follow EU rules directly or be subject to the jurisdiction of the European Court of Justice. 

Being outside the European single market has other regulatory consequences for Britain. For example, UK businesses will no longer be able to assume that product authorisations from British watchdogs will allow their goods to be placed on the European market.  

3. Fish 

The deal creates a five-and-a-half-year transition period during which EU fishermen will have guaranteed access to UK waters. 

EU quotas in British waters will decline in the transition by 25 per cent compared with current levels, and this will have the knock-on effect of boosting how much UK fishermen can secure. EU boats currently catch about €650m of fish in British waters each year. 

Once the transition period is over, EU boats’ access to UK waters will in principle depend on annual negotiations between both sides. Those talks will also determine the overall quantities of different species that can be caught. 

Should EU boats’ access to British waters ever be revoked by the UK, the bloc will have the right to take compensatory measures. These include retaliatory closing of EU waters to UK boats, and the imposition of tariffs on British fish. 

The deal also links the UK’s access to the EU energy market to access to British fishing waters. 

The UK warded off EU demands for a cross-retaliation power to hit other parts of the British economy should a dispute over fish escalate. 

Still, the deal does provide a last-resort “safeguard” option that would allow either side to take emergency measures to protect coastal communities, subject to dispute-settlement arrangements in the agreement. 

The deal enshrines the principle that Britain is now outside the EU’s common fisheries policy: an independent coastal state with sovereignty over its waters. 

4. Financial services 

The City of London will exit the EU’s single market for financial services at the end of the Brexit transition period on December 31. 

Both sides have said that the new market access arrangements for UK and EU financial services companies should be based on unilateral decisions by Britain and the bloc, rather than be provided for in the trade agreement. 

These so-called equivalence decisions involve each side evaluating whether the other’s financial services regulations are as tough as its own. 

Banks and traders have acknowledged that the proposed system is more piecemeal than existing arrangements, and less stable. The EU did not announce any fresh equivalence decisions on UK access to the bloc’s markets alongside the trade agreement on Thursday, resulting in uncertainty in key areas including share trading and derivatives. 

The two sides plan to put in place a regulatory dialogue on financial services based on a separate memorandum of understanding. 

5. Migration 

Current British and EU expatriates have their rights safeguarded by the UK’s 2019 withdrawal agreement with the bloc, but big changes to migration arrangements take effect from January 1. 

Britons will no longer have the benefit of European freedom of movement: the right to go to any EU member state and seek to work and live there on the same basis as the country’s own citizens.  

Instead, Britons will rely on a visa-waiver programme to travel to the EU for short stays, and on member states’ national rules for the right to work.  

Ending free movement for EU nationals in the UK was identified by the British government as one of the benefits of Brexit, allowing the country to devise a new immigration system.  

6. Security 

The EU and UK have been at pains to emphasise the importance of continuing co-operation in the fight against terrorism and organised crime, although talks in this area were complicated by Britain’s determination to escape the ECJ’s jurisdiction. 

But ahead of the deal being finalised, EU chief negotiator Michel Barnier confirmed the sides had found ways to maintain “close co-operation” on crucial matters including the work of the bloc’s crime-fighting agencies Europol and Eurojust, and the sharing of criminals’ DNA data. 

Brussels said the deal “builds new operational capabilities, taking account of the fact that the UK, as a non-EU member . . . will not have the same facilities as before”.  

The deal establishes that security co-operation can be suspended if the UK breaks away from the European Convention on Human Rights. 

Covid prompts a new approach to economic growth

 An FT Editorial 

The coronavirus pandemic means that 2020 will go down in history as the year with one of the deepest plunges in national income on record. In the UK, which has one of the longest continuous logs of economic output, gross domestic product looks likely to have fallen around a tenth this year, making for the biggest recession in three centuries. Yet even these figures, however eye-watering, do not capture the true collapse in wellbeing, which must be the ultimate goal of economic policy. 

In theory, gross domestic product adds up everything that a country produces in one year. The fall in national income during 2020 is easy to explain: interruptions to normal economic activity have meant that far less has been produced. In this regard the drop in gross domestic product will capture some of the missed outings and trips to the cinema, the cancelled holidays and all the meals and drinks with friends that had to be postponed.  

There is, however, plenty that the figures miss. To aggregate the value of very different activities that take place in an economy statisticians use market prices — allowing them to compare the production of both apples and oranges on a common scale. But the absence of these prices for much of healthcare and education in many countries — statisticians merely impute their production from how much the government spends on them — means the disruptions to schools and delays in administering non-coronavirus medical care is missed. Spending on healthcare might have risen but on a net basis societies got far less for their money. 

On the other hand, public parks and other green spaces have become much more important but their contribution to the economy will not be registered as part of GDP. Unpaid labour too, those who tried to teach their children at home, sewed personal protective equipment or baked banana bread, will not appear in the story of the year told by national income figures. Nor will the drop in air pollution or the volunteers who took care of neighbours. 

Even an accurate counting of the drop in production this year would still miss the psychological damage done by prolonged isolation and loneliness; the “hidden pandemic” of mental health problems. That suggests the solution would not be to expand the definition of gross domestic product to include the production it misses but to consider focusing on wellbeing directly.  

All the same, the experience of this year — when governments shut down their economies in order to protect public health — has shown that economic growth has not been prioritised above all else. Already, a wider definition of wellbeing than a pure economic one is implicitly being used to inform policy. Daily count cases and death rates have played a much bigger role in policymaking than quarterly growth figures. Suggestions that health measures represent a trade-off with economic fortunes have also been overplayed. The best way of protecting jobs this year has been keeping the virus under control: New Zealand, which managed to remain virtually virus-free thanks to an early and strict lockdown, is reaping the economic rewards. 

This will remain true when the pandemic has passed. A healthy and well-educated workforce is one of the most important prerequisites to growth and secure, well-paid, high quality jobs are among the best foundations to protect mental wellbeing. Unemployment and poor-quality work can easily destroy people’s sense of self-worth while a robust private sector is essential to provide the tax revenues for health and education. The goal should be to create the kind of society where economic growth and wellbeing go hand in hand.

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The Jan Vertonghen case shows concussion is all part of the sporting capitalism system

The defender, like many others, played through headaches and dizziness because his career depended on it writes Jonathan Liew in The Guardian

Tottenham’s Jan Vertonghen sustained a concussion in the 2019 Champions League semi-final against Ajax and for most of the following season had dizziness and headaches. Photograph: Matthew Childs/Action Images via Reuters


It was around the end of last year that people began to notice Jan Vertonghen was looking decidedly off the pace at Tottenham. He was slow off the mark, slow to the ball, slow to react. Occasionally entire passages of play seemed to pass him by. And so, naturally, as an underperforming player in a popular ball game, it felt only right that he should be subjected to the same pitch of ridicule and abuse as anyone else in his position.

I went back through social media during some of his poorer games last season and pulled out a few of the more representative comments from Spurs fans and others. “Legs gone.” “Sad, but hasn’t got a clue what day it is.” “Get this clown out of my club.” “Finished.” “Past it.” “Utter disgrace.” “Sell.” “Dead wood.” “Stealing a living.” “Happy if I never see him in the shirt again.”




Jan Vertonghen reveals head blow led to nine months of dizziness and headaches


Well, now we know what was really going on. Last week Vertonghen revealed that for most of last season he was enduring the after-effects of a concussion sustained against Ajax the previous April. “I suffered a lot from dizziness and headaches,” said Vertonghen, now at Benfica. “It affected me for eight or nine months. I still had a year left on my contract, and thought I had to play because I had to showcase myself to other clubs.”

On Monday a working group led by the Premier League and featuring the Football Association, the EFL, Professional Footballers’ Association and Women’s Super League sat down to discuss whether there should be restrictions on heading the ball in adult football. It follows a 2019 study by the University of Glasgow that found professional footballers were three times more likely to die of neurodegenerative diseases than the rest of the population.

Meanwhile, the former England hooker Steve Thompson is one of a number of former players launching legal action against World Rugby, the Rugby Football Union and Welsh Rugby Union for an alleged failure to protect them from repeated head traumas.

Thompson is 42 and has been diagnosed with dementia. He no longer remembers winning the World Cup in 2003. “Was it a massive love of my life?” he said of rugby union in an interview with this newspaper two weeks ago. “No, not really. But it was a job.”

A question to consider as you scroll through all this: what does it make you feel? Sadness? Or sadness with a “but”? But: Vertonghen and Thompson knew what they were doing. But: they were handsomely paid for their trouble. But: you can’t ban heading in football, that’s just ridiculous.

But: any of us could get a traumatic brain injury simply by walking down the street and into the path of a falling piano. Life is risky. Sport is dangerous.
Perhaps this is a moment to consider what we owe the people risking their safety for our entertainment

There is a broad school of thought here that at its core, the debate over head injuries in elite sport – one that can easily be extended to other areas of player welfare – is simply a matter of personal choice. If athletes are prepared to embark on a career in professional sport, then as long as they do so fully apprised of the risks and in possession of the latest medical science, who are we to impede them?

Occasionally you will even see this idea expressed in terms of liberation, self-actualisation, even gratification: the notion that danger is not only part of the basic thrill of sport, but also the very point. That the essence of sport is bound up in sacrifice. That on some level we are all animalistically addicted to testing ourselves, pushing ourselves, breaking ourselves. Or at the very least, watching with a beer while others do.


Steve Thompson: 'I can't remember winning the World Cup'


If we can no longer pay teenagers ridiculous money to give themselves brain damage for our gratification, then frankly are we even still free as a species? And ultimately, this is a question that cuts to the very core of what sport means, and who it serves. After all, choices are not made in a vacuum: they are influenced, impelled, incentivised.

Vertonghen played on because he felt his livelihood was on the line. Thompson played on because it was his job to do so. No scientific paper or well‑intentioned press release will ever override the profit motive. And so to focus on personal autonomy is to ignore the extent to which athletes, like all labour, are co-opted into an economy that they did not choose and over which they have little to no influence.

This is, of course, how sporting capitalism works: I get entertained, you get paid, and everything else is window dressing. Sporting capitalism simply buys off your fatigue, your mental health issues, your insecurities, your quality of life, your memory loss, your pain. If you tear a ligament, then it’s financially counterproductive for your club to make you play.

But a concussion? Well, we didn’t see anything, and obviously you can’t, so … how about we keep this one to ourselves? Partly this is a critique of a system that essentially regards the athlete as industrial plant: a part, a tool, a resource from which to extract performance value. But partly, too, this is a process in which we all participate. And for those of us who take pleasure from sport, perhaps this is a moment to consider what we owe the people risking their safety for our entertainment. To remember that welfare does not begin and end with a wage.

To bear in mind, above all, that within every superhuman athlete there is a human who bends and breaks like everyone else.

A Level Macroeconomics 3 - AQA - Economic Development

For evaluation please read:

1. Are poor countries poor because of their poor people? Economic History in Small Doses 5

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A Level Macroeconomics 2 - AQA - International Economics

For evaluation please read:

1. Do rich countries undermine democracies in developing countries? Economic History in Small Doses 3

2. Does the WTO help a poor nation become rich? Economic History in Small Doses 4

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Time spent in the pub is a wise investment

Sarah O'Connor in The FT

When I joined the Financial Times as a trainee in 2007, I spent a lot of time learning about credit default swaps and a similar amount of time in the pub. The CDS knowledge proved useful in the ensuing financial crisis, but 13 years later, I am glad of the hours spent in the pub too. 

It was how I got to know my colleagues, who taught me the FT’s folklore, its funny anecdotes and its subtle power dynamics. I just thought I was having fun, but an economist would have said I was building “social capital”, defined by the UK’s statistical office as “the extent and nature of our connections with others and the collective attitudes and behaviours between people that support a well-functioning, close-knit society”. 

Social capital is a fuzzy concept and hard to measure. But Covid-19 has made us think about who has it, who doesn’t, how we build it and how we lose it. 

I was near the end of my maternity leave when the pandemic started, so it has now been almost 18 months since I last worked in the office. I’m grateful every day for my store of social capital, which has helped me to stay connected, though I do get a twinge of anxiety with every new byline I don’t recognise. 

It has been much tougher for people starting out this year. If it is hard to maintain relationships via video calls, it is harder still to build them from scratch. I spoke recently to some senior accountants about their new crop of trainees. They were learning their trade, but there was no opportunity for general chit-chat before and after virtual meetings, and the trainees seemed to find it harder to ask “daft questions” in video calls than when “sitting round a table with a packet of biscuits”. 

Next year, employers will have to think creatively about how to help new employees “catch up” on forming social capital, especially in a world of “hybrid” work where people stay at home for several days a week. 

Inadequate social capital is a problem for organisations as well as individuals. Research suggests that social capital boosts efficiency by reducing transaction and monitoring costs. In other words, “society wastes resources when people distrust and are dishonest with each other”, according to Dimitri Zenghelis, leader of the Wealth Economy project at Cambridge university, which explores social and natural capital.  

I am often struck by the inefficiencies of distrustful workplaces. Companies using screenshot and mouse-tracking software can end up in a cat-and-mouse game with resentful workers using tech workarounds of their own. Employers who doubt the honesty and motivation of their staff compel line managers to hold “return to work” meetings with employees after every sickness absence, even of only a day. Factories and warehouses often have long queues at shift changes as staff go through scanners to prove they are not stealing. Covid-19 might push some employers further in this direction, particularly if they decide to use more offshore workers with whom they have no prior relationship. 

On the other hand, this year’s forced experiment with homeworking has made some employers realise their staff can be trusted to work productively without oversight. The key will be to hold on to that trust, and the efficiencies it brings, rather than slip back into old habits of micromanagement. 

Social capital matters for economies, too. For his book Extreme Economies, economist Richard Davies travelled to nine unusual places, from a refugee camp in Jordan to an Indonesian town destroyed by the 2004 tsunami. He was struck by how societies with higher social capital were more resilient when disaster struck. In Glasgow, by contrast, he argued that the replacement of tenement homes with tower blocks had dismantled the social capital of the people who lived there, making it harder for them to cope with economic decline. 

For both individuals and economies, social capital is an important buffer against unexpected hardships. Yet in the UK, where the Office for National Statistics has been trying to track various indicators of social capital over time, the trend has not been good. We exchanged favours or stopped to talk with our neighbours less often in 2017/18 than we did in 2011/12. Our sense of belonging to our neighbourhoods also fell. Parents became less likely to regularly give help to, and receive help from, their adult children. 

The pandemic has strained our ability to maintain the bonds between us, but it has also reminded us just how important they are. Any plan to “build back better” when the crisis ends should include plenty of time in the pub.

Modi is reaching out. AMU has a chance to take Muslims away from path of confrontation

Despite its characteristic boast, Aligarh could not chart a path for modernity and progress of Indian Muslims after Independence. PM Modi's centenary address is an opportunity opines NAJMUL HODA in The Print

 

Prime Minister Narendra Modi is going to address the centenary celebrations of the Aligarh Muslim University on 22 December. The event is online. If it wasn’t for Covid, he would likely be on campus. This is the first time since 1964 that a prime minister of India is going to address AMU. Fifty-six years is a long time, and except for Jawaharlal Nehru and Lal Bahadur Shastri, no other prime minister thought of visiting the university, even though Aligarh is only 120 km from the national capital, and AMU is a fully funded central university whose Visitor is the President of India.

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The proposed address by PM Modi is a well-thought gesture full of symbolism. As he often emphasises, Modi is the prime minister of 130 crore Indians, which includes about 20 crore Muslims. He belongs to an ideological stream whose understanding of history is much different from how Muslims would look at India’s past and their role in it. Therefore, their idea of the present and the vision for the future remain equally contested. 

Past without a closure

The Aligarh Muslim University has been a part of that contentious history, and must face up to its history in the spirit of truth and reconciliation. Sir Syed Ahmad Khan, the founder of Muhammadan Anglo-Oriental (MAO) College, the institution which became AMU in 1920, is alleged to have propounded the two-nation theory. It’s another matter that if his successors had not totally buried his social and political ideas, alongside his religious thought, there was much in his speeches and writings to place him among the founders of composite nationalism.

It was the Muhammadan Educational Conference, the vehicle of the Aligarh Movement, which doubled up as the founding session of the Muslim League at Dhaka in 1906. MAO College hosted the League till 1912 before its headquarters were shifted to Lucknow. The politics of Muslim separatism was institutionalised in Aligarh, which, by the 1940s, had become, in Jinnah’s words, “the arsenal of Muslim India”. Later, poet Jaun Elia would quip that Pakistan was a prank played by the juveniles of Aligarh (“Pakistan — ye sab Aligarh ke laundoń ki shararat thi”).

That this practical joke, by its sheer thoughtless adventurism, turned out to be a monumental tragedy, which sundered the country into two and the Muslim community into three, is yet to be confronted by Aligarh. The inability to confront its past, and the ruse of feigning amnesia in this regard, has also led to the collateral forgetting of nationalist and progressive streams, which though not dominant, were nonetheless quite robust strands. 

That this could happen despite the fact that AMU is endowed with a Centre of Advanced Study in History is even more surprising. History has to be written no matter what be one’s methodology, analytical tools, philosophical inclination and ideological orientation. Developing an Akbar-Aurangzeb centric school of history may be a noble endeavour, and nobler may be the zeal to argue how secular were the Muslim rulers — Aurangzeb being the most secular of them all — but expatiating on secular nationalism of people like Zakir Hussain and Mohammad Habib, in the face of frenzied communalism, would be much better if one didn’t fight shy of calling the mainstream Muslim communalism on the campus by its name.

This could not happen because post-Partition, Aligarh was reassured and rehabilitated, but not reformed. It reflects the high-mindedness of independent India’s leadership, how they protected and preserved AMU even as most of its faculty and students deserted it for the greener pasture of their conquest, Pakistan. An un-critiqued and un-reformed Aligarh would continue to inhabit the same narrative as earlier. Thus, despite its characteristic boast, Aligarh could not chart a path for modernity and progress of Indian Muslims and their integration and mainstreaming in the national life. The emotional chasm between the two communities kept widening despite the increasing commingling of people. And so, instead of giving intellectual leadership to the Muslim community, to which AMU considered itself traditionally entitled, and for which it is statutorily mandated by its founding Act, Aligarh chose the regressive path.

On such politically momentous issues as Shah Bano and Triple Talaq, despite having the material wherewithal to come up with its own progressive position, Aligarh’s intellectual sterility made it toe the line of the ulema and the reactionary Muslim Personal Law Board, the very people against whose thought the university was founded. It became complicit in the cultural regression and political alienation of the Muslim community, and could not intervene when a second separatist movement got underway in the name of identity. On the question of Babri Masjid, the Aligarh academia adopted the Leftist line of limited technical correctness, oblivious of the fact that the issue had far deeper implications for the Muslims than the Leftist arguments could see them through. 

A chance for reconciliation

Now that Prime Minister Modi, staunch in his own ideological position, is going to address AMU in a grand gesture of reaching out, its symbolism should not be lost on anyone. More so, as this moment comes not very long after the physical assaults and vicious propaganda against the university by Right-wing groups that swear allegiance to the Modi government. Stigmatising AMU over Jinnah’s portrait, which hung, among many others, in the student union’s building for he was an honorary member of it, was malicious, even as the arguments against removing it were too untenable to be sustained, too nuanced to be understood and too disingenuous to be given any credence.

Be that as it may, notwithstanding every imaginable criticism of AMU, the fact could not be ignored that this campus has the highest concentration of modern, educated Muslims anywhere in the world. So, even if it couldn’t realistically boast of being the intellectual vanguard of Indian Muslims, in sheer quantitative terms, and in view of its historical legacy, it has an unsurpassable symbolic value for the Muslim community.

Now that the prime minister is reaching out, should Aligarh, on behalf of the Muslims, not grasp the extended hand of friendship and reconciliation? It is for Aligarh to decide whether it would wean away Muslims from the path of confrontation, which, if not shunned, is bound to bring an unimaginable catastrophe, or to put them on the path of conciliation as Sir Syed did with the British.

An alumnus of AMU, Mukhtar Masood, mentions an anecdote in his book Awaz-e Dost, wherein some time after Independence, while addressing the governor of Uttar Pradesh, Sarojini Naidu, in the Union Hall, a student said, “Ya to hum aapke bade dushman hain ya chhote bhai hain (we are either your big enemy or little brother).” The reality is simpler than this. Muslims are neither. They are equal as Indians and citizens. Let this opportunity not be missed.

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UK and China: how the love affair faded

Patrick Wintour in The Guardian

In 2003, the Cabinet Office decided to allow the Chinese state-backed Huawei telecommunications network to start supplying BT for the first time. Nobody bothered to put a note on the security implications into the red box of the then business secretary, Patrica Hewitt. A minor discussion, solely on the competition implications, did take place.

The then head of MI6, Sir Richard Dearlove, used to daily cooperation with BT to secure wire taps, was shocked and concerned when he heard of the plan, but was told: “It is nothing to do with you. These are issues we can control.”

The path was set fair for the open trading relationship with China which reached its zenith with George Osborne and David Cameron in 2015. “No economy in the world is as open to Chinese investment as the UK,” Osborne boasted on a five-day visit to China in September of that year. In a speech to the Shanghai stock exchange, he vowed London would act as China’s bridge to European financial markets. “Whatever the headlines … we shouldn’t be running away from China,” he said. “Through the ups and downs, let’s stick together.”

David Cameron and George Osborne visit the Forbidden City in Beijing in 2015. Photograph: Andrew Parsons/Press Association

Osborne knew he was taking a risky bet and Britain, against vehement US objections, joined the Asian Infrastructure Investment Bank.

UK trade with China is worth approximately £7bn, making it Britain’s’s fourth-largest trading partner, the sixth-largest export market and the third-largest import market. By comparison, in 1999 China was the UK’s 26th largest export market and 15th largest source of imports.

But Britain is now veering away from China, despite Osborne’s pledge. It has moved from being China’s greatest advocate in Europe, a wide open door for Chinese investment, into one of its sternest critics. Overall, it represents as swift and complete a reversal in foreign policy as the UK’s shift from treating Russia as an ally in 1945 to cold war foe in 1946.

Yet how this course correction happened, the extent to which it was internally driven, or imposed on the UK by the Trump administration, and whether its limits has been finally set remains largely unresolved.

People walking past the Huawei logo during the Consumer Electronics Expo in Beijing. Photograph: Fred Dufour/AFP/Getty Images

In the last fortnight alone two major government bills have been published, one aimed primarily at screening out Chinese investment from 17 UK strategic industries, and another cutting Huawei out of the UK telecommunications network entirely from 2027. This reverses the decision taken, in defiance of the US, at the start of the year to give Huawei limited access.

A third bill, in front of the Lords, has been amended in an attempt to prevent any UK trade deals with China if its human rights record is found wanting.

The government’s integrated foreign and security policy review, due in the new year, will contain a British tilt to the Indo-Pacific, shorthand for greater political and military support for the forces of democracy in the South China Sea.

On the Tory benches, the intellectual commanding heights are now dominated by China critics, so much so, it is argued, that Sino-scepticism is the New Euro-scepticism. There is probably no more active group of parliamentarians than the Tory China Research Group, only set up in January. The group, established by Tom Tugendhat, the foreign affairs select committee chairman, and Neil O’Brien, now head of the Conservative policy board, were instrumental in March in mounting the rebellion of 40 MPs who pushed to have Huawei excluded.

Across the Tory thinktanks that matter – Policy Exchange, the Legatum Institute, Henry Jackson Society, – hostility to the Chinese Communist party is unanimous.

China footage reveals hundreds of blindfolded and shackled prisoners. Photograph: youtube

Labour, committed to human rights, takes a similar view. It is a British human rights barrister, Rodney Dixon, who is leading the claim that China can be taken to the international criminal court over its treatment of Uighur Muslims. Hong Kong Watch is one of the most active pressure groups defending the steady stream of jailed activists. The UK has become a safe harbour for the exiles, and nearly 60,000 British National (Overseas) passports were handed out to Hong Kongers in September alone.

By contrast the business lobbies, especially finance capital that previously worked assiduously to secure deals with China, have fallen silent, or found themselves struggling for a hearing. British board members on Huawei such as Lord John Browne have resigned. Other former advocates for Huawei such as Alexander Downer, the former Australian high commissioner to London, have long converted, urging the UK to engage with the geopolitical threat posed by China, and “not just see the country as a place to sell Land Rovers and Jaguars”.

Huawei’s own warnings about the potential cost to the UK economy of delaying 5G are ignored.

It can be argued, as Keynes did, that when the facts change, it is advisable to change your mind. The destruction of Hong Kong’s freedoms, China’s secretive mishandling of the coronavirus outbreak, its wolf warrior diplomacy, the revelations about treatment of the Uighur people, the wholesale theft of intellectual property, and the bullying of one of the UK’s natural partners, Australia, has ended illusions about China. In July, the former head of M16 Sir John Sawers wrote that the last six months have “revealed more about China under President Xi Jinping than the previous six years”.

Rory Stewart, the former Foreign Office minister, says: “China has broken a lot of our beliefs about how we thought about things for 200 years. For 200 years there seemed to be a connection between economic growth and liberal democracy. Many, many people thought 20 years ago it was almost inevitable China would move in a liberal, democratic way. Today we are in a much more gloomy place.”

China’s entry into the WTO in December 2001 proved not to be the prelude to the country opening up, but instead a high-water mark.

But these views are now being wrapped into an ideological perception of China as an imperialist power intent on dominating the west technologically, politically and militarily, a view enshrined in a 70-page US state department policy paper entitled Elements of the China Challenge published this month. The paper argues the west utterly misconstrued China as a fledgling economic super power with no imperial ambitions, when in reality “it is determined fundamentally to revise the world order, placing the People’s Republic of China at the centre and serving Beijing’s authoritarian goals and hegemonic ambitions”.

Riot police detain a man as they clear protesters taking part in a rally against the national security law in Hong Kong in July. Photograph: Dale de la Rey/AFP/Getty Images

In a lecture given to Policy Exchange, Matthew Pottinger, Donald Trump’s chief adviser on China, drew a sinister portrait. “The party’s overseas propaganda has two consistent themes: ‘We own the future, so make your adjustments now.’ And: ‘We’re just like you, so try not to worry.’ Together, these assertions form the elaborate con at the heart of all Leninist movements.”

It is this kind of thinking deep in the Trump administration that led to the remorseless commercial and political pressure on the UK this summer to change its mind over Huawei.

There are distinctions between the America and British process of disillusionment, according to Sophie Gaston at the British Foreign Policy Group. The US came at the China issue via trade and the loss of manufacturing jobs while the UK came at it primarily through the lens of human rights and national security. But the two views have now blended into a melange of concern about human rights, the race for quantum supremacy and protection of the national infrastructure ranging from power stations to university freedom.

For Martin Jacques, the former British editor of Marxism Today and enthusiastic chronicler of China’s rise, the UK has been gripped by a form of paranoia – reds under the bed replaced by reds under the hard drive. “What’s happening is a very serious regression in the mentality in the UK toward China. It reminds me very much of the cold war. In fact, the thinking is cold war thinking: China is just the evil enemy that has to be rejected. The rightwing reduces China to the communist regime, the communist threat, and the whole Chinese history is lost in the process. So they have no understanding whatsoever of China really. They’ve just got this extraordinary backward view of China, which is just, frankly, plain ignorant. But it’s making the running.”

Another surprising figure despairing at the trend is Vince Cable. The Liberal Democrat was business secretary in the Osborne era and bemoans “the unholy alliance” of Trumpists, neocons, British Conservatives and Labour opposition who, he says, are blowing apart the government’s post-Brexit strategy to invest in China.

But Dearlove kicks back, arguing there is something sinister about China’s methods. He cites three Chinese maxims. “Kill with a borrowed sword – that is, get what you can. Loot a burning house – bear that in mind in terms of taking advantage of the current pandemic. The third one is hide a knife behind a smile.”

Xi Jinping waits to greet Theresa May in Beijing in 2018. Photograph: Bloomberg/Getty Images

China, he says, assembled an influence network in the UK. It “recruited a whole group of leading British business and political figures into that group who were designated cheerleaders for a burgeoning relationship with China. Huawei was an important part of that. The composition – the British membership of the Huawei board – was a very impressive lineup of people who were there to persuade us to drop our guard.”

Quite how far the UK, mired in recession, will go in specific policy terms to distance itself from China, and how China reacts, is in question. The China Research Group in its recent manifesto stops short of Trumpian decoupling of the west from China’s economy, but backs measures including sanctions on UK finance houses operating in Hong Kong that extend the reach of the Communist party, a ban on Chinese state-owned enterprises investing in UK critical infrastructure and a ban on UK firms exporting goods and services that are used to abuse human rights. Tariffs are mentioned only as a last resort.

Some of this is enough to make Lord Grimstone, the former head of Standard Chartered and now a trade minister, blanch. The new China-Britain Business Council chair, and head of public affairs at HSBC, Sir Sherard Cowper-Coles, has also been leading a discreet fightback, pointing out that after Brexit, Britain needs to insert itself into the Asian-Pacific growth area. China, after all, is the economy taking the world out of recession.

So far, the British elite have managed to keep the Liu Xiaoming, the Chinese ambassador, onside. Despite smarting from the Huawei 5G ban, he has not descended into the name-calling disfiguring Chinese relations with Australia. He has not, for instance, like his colleague in Canberra, sent a 14-point checklist of mistakes that the UK must correct.

Instead, he spoke last month to the third China-UK Economic Forum about the continued chances for synergy with UK business. Ahead of the forum, a survey showed continued Chinese enthusiasm to invest in the UK, despite a fall-back in investment due to coronavirus.

The Foreign Office is clearly nervous of being cast in a vanguard role, while Japan and Germany, for instance, allow Huawei into its 5G networks. The UK has not yet sanctioned anyone over Hong Kong, only provided safe haven. The Trump administration by contrast has sanctioned 14 Chinese officials specifically over Hong Kong, including the chief executive, Carrie Lamb.

Britain will also be cautious because it does not want to be left beached on the high tide of Trumpian anti-Chinese rhetoric only to find that tide went out with Joe Biden’s election. Biden is, at a minimum, likely to take a less aggressive unilateral sanctions-based approach to trade, and it is not yet clear if his planned alliance of democratic nations will be explicitly anti-Chinese.

If the Biden administration is interested in re-stabilising the US-China relationship, the UK is likely to want to be in the slipstream of this process, probably using the climate change agenda as the way back in.

After all, the advocates of pragmatic British engagement have not gone away, just gone quiet.

Lord Powell, a former chairman of the China-Britain Business Council and private secretary to Margaret Thatcher, put it succinctly in a lecture last year. He explained: “I have to admit when visiting China, as a I frequently do, I never get the sense that parliamentary democracy is anything like the highest priority for most people. At least at this stage in the country’s development, their priority is material progress, even if it comes at the price of freedom.”

He added: “I know pragmatism is a dirty word in any discussion of ethical values but when the other guy – in this case China – indisputably has the stronger hand, it is prudent not to provoke unwinnable fights.”

Are poor countries poor because of their poor people? Economic History in Small Doses 5

Girish Menon*

A bus driver in Mumbai gets paid around Rs.50 per hour whereas his equivalent in Cambridge gets paid £12 per hour. Using currency exchange rates, the Cambridge driver gets paid 24 times more than his Indian equivalent. Does that mean John the Cambridge driver is 24 times more productive than Om? If anything, Om would likely be a much more skilled driver than John because Om has to negotiate his way through bullock carts, rickshaws, bicycles and cows on the street.

The main reason why John is paid 24 times more than Om is because of protectionism. Some, British workers are protected from competition from workers in India, and soon from the EU, through immigration control.  (Technology has erased this protectionism in the relocation of many white collar jobs.) This form of protectionism goes unmentioned in the WTO (World Trade Organization) as countries raise their barriers to immigration of poor workers.

 Many people think that poor countries are poor because of their poor people. The rich people in poor countries typically blame their countries’ poverty on the ignorance, laziness and passivity of the poor. Arithmetically too, it is true that poor people pull down the national income average because of their large numbers.

 Little do the rich people in poor countries realize that their countries are poor not because of the poor but because of themselves. The primary reason why John is paid 24 times more than Om is because John works in a labour market with other people who are way more than 24 times more productive than their Indian counterparts. The top managers, scientists and engineers in the UK are hundreds of times more productive than their Indian equivalents, so the UK’s national productivity ends up being in the region of 24 times that of India.

In other words, poor people from poor countries are usually able to hold their own against counterparts in rich countries. It is the rich from the poor countries who cannot do that. It is their relative low productivity that makes their country poor. So, instead of blaming their own poor for dragging the country down, the rich of the poor countries should ask themselves why they cannot pull up the productivity and innovation in their own country,

Of course, the rich in rich countries need not get smug. They are beneficiaries of economies with better technology, better organized firms, better institutions and better physical infrastructure. Warren Buffet expressed it best:

 “I personally think that society is responsible for a very significant percentage of what I’ve earned. If you stick me down in the middle of Bangladesh or Peru or someplace, you’ll find out how much this talent is going to produce in the wrong kind of soil. I will be struggling thirty years later. I work in a system that happens to reward what I do well – disproportionately well.”

 

* Adapted from 23 Things they don’t tell you about Capitalism by Ha Joon Chang

Does the WTO help a poor nation become rich? Economic History in Small Doses 4

 Girish Menon*

Today, when we look at the world that we live in, we find that Huawei (a Chinese technology company) is being subjected to a systematic campaign of defamation and discrimination among the US led group of developed countries. And the WTO watches on helplessly. Yet, in its “WhatWe Stand For” page the WTO (The World Trade Organisation) states it’s first principle as:

Non-discrimination

A country should not discriminate between its trading partners and it should not discriminate between its own and foreign products, services or nationals.

The question this article attempts to explore is whether the WTO’s purpose is compatible with the desire of developing countries to join the ranks of the developed world.

 Let’s start with India and it’s Hindustan Motors (HM) company. Today HM’s cars are as ubiquitous as the dodo. Till the early 1990s it was so popular that it even enabled G D Birla to get a seat in heaven**. Ever since the Narasimha Rao government was forced to open up the Indian economy, after the economic crisis of the late1980s, HM has entered the books of Indian corporate history. The Indian government failed to protect HM because of the non-discrimination clause of the WTO and today there is no Indian car manufacturer visible on the horizon while her roads are choked with foreign brands.

The globalisation rhetoric dictates that countries stick to what they are already good at (theory of comparative advantage). Stated bluntly, this means that poor countries are supposed to continue with their current engagement in low-productivity activities. But their engagement in those activities is exactly what makes them poor. If they wish to leave poverty behind they have do the more difficult things that bring them higher incomes. And the WTO’s non-discrimination principle stops them from improving their earning capabilities.

 Today Toyota is the leading global brand in car manufacturing. It took Toyota more than 30 years of protection and subsidies to become competitive at the lower end of the car market. It was a good 60 years before it became one of the leading car makers in the world. It took nearly 100 years from the days of Henry VII for Britain to catch up with the Low Countries in woollen manufacturing. It took the US 130 years to develop its economy enough to feel confident about doing away with tariffs. Without such long time horizons, Japan might still be mainly exporting silk, Britain wool and the US cotton.

Unfortunately, poor countries are not allowed to adopt such time frames for developing their industries. The non-discrimination clause of the WTO demands that poor countries compete immediately with more advanced foreign producers, leading to the demise of their domestic firms before they can acquire new capabilities.

Like any other investment, investment in capability building is fraught with risk and does not guarantee success. Some countries make it and some don’t. And even the most successful countries will bungle things in certain areas.

However, economic development without investment in enhancing productive capabilities is a near impossibility.

 

* Adapted and simplified by the author from Ha Joon Chang's Bad Samaritans - The Guilty Secrets of Rich Nations & The Threat to Global Prosperity

 

** When GD Birla died his secretary tried to get him a seat in Vaikuntha. The Dwarapalaka (gatekeeper) asked the secretary to state the reason why GD should be let into heaven.

The secretary: ‘GD is one of the biggest industrialists in India’.

Dwarapalaka: ‘Usually that involves doing acts which are not acceptable here. This is Vaikuntha; not some unquestioning tax haven for moneybags! Please let me know what he has done in the name of God’

The secretary: ‘GD has established many Birla temples all over India’

Dwarapalaka: ‘Birla is worshipped in these temples. Not good enough!’

The secretary: ‘GD is the owner of Hindustan Motors’

Dwarapalaka: ‘I am confused. How is that a case for entering heaven?’

The secretary: ‘Because whenever someone gets into an Ambassador car he says “Oh God” and whenever someone reaches her destination she says “Thank God”.

Dwarapalaka: That has definitely advanced the cause of God. Please ask him to come in’

This anecdote was first narrated by the late Sharu Rangnekar. It has been modified by the author.