David Nicholls: The half hour that changed my life

Recently I became confused about my age. For some reason I came to believe that I was 46 years old, instead of 45. The error was pointed out to me, and once I’d got over the embarrassment of forgetting my own age (not the kind of mistake I’d make at 19 or 27 or even 36), I had a brief moment of elation. In some way, hadn’t I gained an extra year, a whole 12 months of time that I’d mislaid? What could I do with my precious 46th year? Take up the violin, train for a marathon, learn carpentry or juggling or Spanish?

What I really wanted to do was read.

I’ve been a compulsive reader for as long as I can remember. For the best part of my childhood I visited the local library three or four times a week, hunching in the stacks on a foam rubber stool and devouring children’s fiction, classics, salacious thrillers, horror and sci-fi, books about cinema and origami and natural history, to the point where my parents encouraged me to read a little less. I loved television and movies, too, but the solitary act of reading was always my greatest pleasure. Books were an obsession – an education, an escape and inspiration.

So why, as an adult, was I reading so little, less than even 10 years ago? Of course the multiple distractions of modern life, the increasing demands of work and a new family all played a part, along with the bleeps and trills of technology, the constant tap on the shoulder that comes from texts, emails, mobile phones, because God forbid that I should call someone back or reply to an email a whole hour later.

If reading is simply the act of consuming text, then in fact I was probably reading more than ever, but for the most part it was nonsense, jabber and jargon. Like most people who work in front of a screen, I’d developed a terrible internet tick, cycling endlessly around the same websites, reading the same urgent “breaking news” 10 times a day, peering pointlessly at film premiere reports, gossip and Twitter feuds, movie trailers, updating iTunes and Adobe Acrobat for the 25th time, habits that devoured hours of my day, the hours that presumably I once gave to reading books. 

I was still buying books, far more than I could ever possibly read, but buying them is not the same as reading them, or loving them. All they did was furnish the room. The piles got higher, the irritation and guilt and regret increased. Reading was like sunbathing – something that I only did for two weeks in August.

About a year ago I decided to do something about all this. Along with the usual vows about exercise and fresh vegetables, caffeine and alcohol, I resolved to set my alarm one half-hour earlier, to sit up straight and read again. Unusually for a resolution, I’m pleased to say that I have stuck to that routine, and now those first 30 minutes of solitary reading are all too often the best part of my day.

I’ve read missing classics and new authors. I’ve finally devoured those writers who’ve been repeatedly recommended to me – Patrick Leigh Fermor, Alice Munro, Elizabeth Taylor, Marilynne Robinson – and, yes, they are wonderful. I’ve managed to reread some of Cheever’s brilliant short stories, and rediscovered writers who’ve unaccountably fallen off the literary map, like the great US writer John Williams or the neglected H E Bates. It’s not just fiction, either – there’s the brilliant journalism of John Jeremiah Sullivan, contrasting histories of cinema by David Thomson and Mark Cousins. Robert Macfarlane’s fascinating mix of geology, mythology and natural history. The unread pile still teeters precariously, but at least I’ve made a start.

Of course, there have been lapses along the way. I’ve slipped back into sleep more than once during The Portrait of a Lady, and there have been one or two hangover-induced lie-ins. Getting up earlier means going to sleep earlier, which isn’t always much fun. And I’ve yet to conquer my shaming addiction to electronics. I still find it absurdly difficult to concentrate on a novel if there’s a phone or computer to hand; I have taken to locking them outside the room like noisy pets. Thirty minutes is also a fairly puny amount of time. I’ve tried to turn off the TV and extend the hours into the evening, but reading a book – even a great book – after 9pm has the same effect on me as a chloroformed handkerchief. Mornings remain the best time, especially in spring or summer when the house is quiet, reading as the sun comes up.

“Just half an hour a day can change your life.” It’s the sort of dubious claim you find in the back of a magazine, and I’m aware of a zealot’s shrillness in all of this. I know that for every reader who has lost the habit or can’t find the time, there are people who’ve never enjoyed reading and question the value of literature, either as entertainment or education, or believe that a love of books, and of fiction in particular, is sentimental or frivolous. Given an extra half-hour a day, I know that some people would much prefer to be jogging or bantering on social networks or simply sleeping some more. “No one reaches the end of their life and wishes they’d spent more time on Twitter” is a claim I’ve heard before, but perhaps that won’t always be the case.

But to allow the zealot his voice again, think of what you might be missing by not finding the time to read. Allowing for a steady pace of a page a minute, you could easily take in a short story by Chekhov or Raymond Carver or Richard Yates every morning of next week.

An Alice Munro might take two days, but it will be worth it. The Great Gatsby could be read in four mornings or, if that’s too obvious, there is always Tender is the Night, a much better book I think. Other novellas – there’s The Good Soldier or The End of the Affair or Franny and Zooey or Goodbye, Columbus. Or something more recent – Denis Johnson’s Train Dreams, a small masterpiece and the best book I read last year. Or something lighter; have you ever read Ian Fleming? Casino Royale ’s a terrifically invigorating book to read before breakfast. Or why not start something more ambitious: Anna Karenina or Bleak House or Les Misèrables might last you into March, but Great Expectations or Persuasion or Madame Bovary will take half that time.

And then there are the Man Booker nominations, and the fine new work that’s coming out of independent presses, and the book of that film you saw, and travel writing before you go away, and poetry and, come to think of it, isn’t now the perfect time to read a really good biography of Napoleon?

How algorithms secretly shape the way we behave

Algorithms, the key ingredients of all significant computer programs, have probably influenced your Christmas shopping and may one day determine how you vote

• 
• • John Naughton
  • The Observer, Sunday 16 December 2012

Program or be programmed? Schoolchildren learn to code. Photograph: Alamy

 

Keynes's observation (in his General Theory) that "practical men who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist" needs updating. Replace "economist" with "algorithm". And delete "defunct", because the algorithms that now shape much of our behaviour are anything but defunct. They have probably already influenced your Christmas shopping, for example. They have certainly determined how your pension fund is doing, and whether your application for a mortgage has been successful. And one day they may effectively determine how you vote.

On the face of it, algorithms – "step-by-step procedures for calculations" – seem unlikely candidates for the role of tyrant. Their power comes from the fact that they are the key ingredients of all significant computer programs and the logic embedded in them determines what those programs do. In that sense algorithms are the secret sauce of a computerised world.

And they are secret. Every so often, the veil is lifted when there's a scandal. Last August, for example, a "rogue algorithm" in the computers of a New York stockbroking firm, Knight Capital, embarked on 45 minutes of automated trading that eventually lost its owners $440m before it was stopped.

But, mostly, algorithms do their work quietly in the background. I've just logged on to Amazon to check out a new book on the subject – Automate This: How Algorithms Came to Rule Our World by Christopher Steiner. At the foot of the page Amazon tells me that two other books are "frequently bought together" with Steiner's volume: Nate Silver's The Signal and the Noise and Nassim Nicholas Taleb's Antifragile. This conjunction of interests is the product of an algorithm: no human effort was involved in deciding that someone who is interested in Steiner's book might also be interested in the writings of Silver and Taleb.

But book recommendations are relatively small beer – though I suspect they will have influenced a lot of online shopping at this time of year, as people desperately seek ideas for presents. The most powerful algorithm in the world is PageRank – the one that Google uses to determine the rankings of results from web searches – for the simple reason that, if your site doesn't appear in the first page of results, then effectively it doesn't exist. Not surprisingly, there is a perpetual arms race (euphemistically called search engine optimisation) between Google and people attempting to game PageRank. Periodically, Google tweaks the algorithm and unleashes a wave of nasty surprises across the web as people find that their hitherto modestly successful online niche businesses have suddenly – and unaccountably – disappeared.

PageRank thus gives Google awesome power. And, ever since Lord Acton's time, we know what power does to people – and institutions. So the power of PageRank poses serious regulatory issues for governments. On the one hand, the algorithm is a closely guarded commercial secret – for obvious reasons: if it weren't, then the search engine optimisers would have a field day and all search results would be suspect. On the other hand, because it's secret, we can't be sure that Google isn't skewing results to favour its own commercial interests, as some people allege.

Besides, there's more to power than commercial clout. Many years ago, the sociologist Steven Lukes pointed out that power comes in three varieties: the ability to stop people doing what they want to do; the ability to compel them to do things that they don't want to do: and the ability to shape the way they think. This last is the power that mass media have, which is why the Leveson inquiry was so important.

But, in a way, algorithms also have that power. Take, for example, the one that drives Google News. This was recently subjected to an illuminating analysis by Nick Diakopoulos from the Nieman Journalism Lab. Google claims that its selection of noteworthy news stories is "generated entirely by computer algorithms without human editors. No humans were harmed or even used in the creation of this page."

The implication is that the selection process is somehow more "objective" than a human-mediated one. Diakopoulos takes this cosy assumption apart by examining the way the algorithm works. There's nothing sinister about it, but it highlights the importance of understanding how software works. The choice that faces citizens in a networked world is thus: program or be programmed.

Martin Sorrell's peculiar vision of corporate social responsibility

Ben Chu

Wednesday, 2 January 2013

Outlook Sir Martin Sorrell has expressed himself on the great corporation tax debate. What firms need to understand, the advertising magnate said today, is the imperative of corporate social responsibility.

"Doing good is good business," he told the likes of corporate black sheep such as Starbucks and Amazon, which have faced obloquy in recent months for paying less than their fair share of profit taxes in the UK. I'm afraid this is richer than the Christmas pudding that your grandmother oversoaked in alcohol. For Sir Martin's record on tax hardly resembles a model of virtuous corporate citizenship.

For several decades the British state has had a system whereby a UK-based multinational is required to pay corporation tax on its worldwide profits. In 2007 the Labour government proposed to move to a system where firms would only pay tax on their UK profits, a so-called territorial regime. This was good news for the multinationals, implying a smaller tax bill. But they didn't trust Labour to deliver.

So they upped sticks in a kind of pre-emptive protest. Pharmaceutical giant Shire shifted its headquarters to the Irish Republic. So did United Business Media. The exhibitions and magazines group Informa scurried off to Switzerland. The office accommodation provider Regus went to Luxembourg. And, making the biggest song and dance of all was Sir Martin, who shuffled his WPP advertising empire to the Emerald Isle.

Faced with this exodus the Labour Chancellor, Alistair Darling, redoubled his efforts to establish a territorial tax regime. And Sir Martin made it his business to seal the deal. He extracted a guarantee from Mr Darling's successor, George Osborne, that the new territorial regime would definitely come into force. And, in return, Sir Martin announced last year that WPP would be returning its HQ to London. The territorial corporation tax regime came into full force this week. And WPP is, as Sir Martin promised, on its way back.

The trouble is the new territorial tax regime looks even more open to corporate tax avoidance. Under the old system HMRC could, in theory, go after tax on profits anywhere in the world. It seldom did this effectively. But now, with its territorial remit in place, it is even less likely to do so. And there is still more room for clever accountants to register profits overseas by registering intellectual property rights in tax havens.

This compounds the advantage of multinationals in relation to smaller, domestic firms. We have long known that income tax tends to be for the little people. It increasingly looks like corporation tax is only for the little companies.

The only solution is harmonised international governmental agreement to prevent multinationals playing off national governments against each other on profit tax rates.

As for Sir Martin, he might like to consider whether quitting the country and promising to return only when a law you dislike is changed can be considered "doing good".

Why do UK rail fares keep rising?

With train companies, Network Rail and the Government involved, the answer is far from simple

Fed up: protesters against a rise in rail fares in King’s Cross Station Photo: AFP/Getty Images

By Christian Wolmar

7:47PM GMT 02 Jan 2013

 

Here we go again. It’s a new year but an old story. Commuters are up in arms about rises in rail fares and they’re looking for someone to blame.

Aside from the fact that central London was half empty yesterday and finding a seat on a train would have been no problem for most, they have a good point. This is the 10th successive year of above-inflation fare rises, and there is no sign of any change in policy coming until the next general election at least, and probably well beyond that.

But finding the right target for passenger anger is made difficult by the fact that transparency is not a feature of the rail industry and railway economics remains a dark art. The train companies, the Government, previous governments, and even Network Rail (responsible for the track and infrastructure) are all in the frame for blame. And actually, all of them deserve at least a bit of buckshot, if not a high-velocity bullet.

The railways may have been privatised in the mid-Nineties, but in reality they are a mix of private and state interests, with most of the purse – and other – strings still being pulled by the Government. Forget the notion of a raw capitalistic enterprise with energetic entrepreneurs seeking innovative ways to fleece the public: the train operating companies are pretend capitalists who have very little room for manoeuvre and invest very little. They complain that they make only a 3 per cent profit – or around £250 million annually – yet that is a misleading figure, based not on investment, as with a conventional company, but on turnover.

The train companies will receive a proportion of the extra fare income that yesterday’s rises generate, thanks to an opaque process that began last summer. Once the fare rises (which are based on July’s inflation figures) are known, the Department for Transport (DFT) and train companies begin negotiations over how the spoils should be divided. This is because rising fares will deter some passengers from travelling, and under the franchise agreements the DFT has to compensate the private companies for this loss.

However, given the recent inept performance of the DFT over the West Coast franchise, it would not be reckless to suggest that perhaps the train companies get rather more of this extra dosh than they need to cover any passengers lost as a result of the rises. The projections and the sums of money that follow are, of course, “commercially confidential”, and therefore not released to the great unwashed British public.

There is a real irony here. The legislation to regulate season tickets and off-peak fares was designed, at the outset of privatisation, to protect passengers from greedy private companies exploiting their monopoly position. Originally, the rises for “regulated” fares were set at the RPI measure of inflation minus 1 per cent, as a way of encouraging rail travel. In fact, since 2003 – when the formula was changed by the Labour government to RPI plus 1 per cent – the legislation that supposedly protects consumers has been used against them.

However, the situation with unregulated fares – which represent about half the income of the train companies – is completely different. Train operators are free to set all other fares, which include the very expensive peak fares on intercity and other routes, first class and advanced, and all of the increase will go to them.

For their part, the train operators argue that the extra revenue from unregulated fares is needed in order to meet the financial arrangements that come with the franchise deals – most of the train companies pay an annual premium to the Department for Transport. They say these unregulated fares are set commercially because operators face competition from airlines or the roads. But many people making occasional journeys at peak times have no option but to travel then, and are therefore heavily penalised for their lack of flexibility.

A spokesman for the train operators justifies the situation by saying: “Train companies have to meet tough financial commitments agreed with the Government when franchise agreements are signed.” It is also the case that since 2007 there has been a cross-party policy of increasing the share of the cost of the railways paid by rail users, which is now around two thirds, compared with less than 50 per cent six years ago. Yet this does not negate the fact that the train operators decide the level of unregulated fares and many have gone up far more than regulated fares. A peak return from London to Manchester in standard class, for example, is now a stunning £308.

Provided the DFT gets its sums vaguely right, the Government therefore will receive a substantial proportion of the money from increased fares. Ministers’ explanation for the rises is that this money will be used for investment in the railways – but the relationship between investment and fare rises is a distant one.

In fact, the amount of investment going into the railway for extra capacity such as improved track and better signalling is determined by a complex process of negotiation involving Network Rail, the Office of Rail Regulation and the Department for Transport. Ministers set out an investment programme in five‑year periods – the current one runs out in March 2014 – and allocate funds accordingly, and then the Office of Rail Regulation assesses whether enough money is available to carry out the plans. Network Rail then undertakes the work, primarily through contractors.

New trains are provided through a different, and similarly tenuous, relationship. The Government will determine that there is a need for new trains and build this into franchise contracts. The trains are then leased, with the operators paying for them out of their income from the fare box and any subsidy they receive from the DFT. However, the level of fare rises is not linked to the acquisition of new rolling stock. As one angry rail traveller tweeted yesterday: “Why should I pay more to travel in Lincolnshire when the services and rolling stock are so bad?”

Overall, then, there is very little relationship between yesterday’s fare rises and future investment plans. Indeed, for the past two years, the Government, in the face of public pressure, has backed down from proposed fare increases of RPI plus 3 per cent to the current RPI plus 1 per cent, which has resulted in a reduced income of around £250 million annually – enough to kick-start an investment programme of, say, £2.5 billion. Yet there has been no suggestion from ministers that this cut in fares income will reduce the amount available for investing in the railways.

The position of Network Rail – a state-owned company in all but name – adds to the confusion. It spends around £6 billion a year on maintaining the railways but has been sharply criticised for excessive costs. A report in the spring of 2010 by Sir Roy McNulty, the former chairman of Short Brothers, the airline manufacturer, identified wasted spending amounting to 30 per cent.

Network Rail is therefore being required to cut costs; McNulty reckoned it could save £1.8 billion by 2019. Justine Greening, who was Transport Secretary until the autumn reshuffle, argued that if these reductions were made then fares could, in future, be held steady, but few industry insiders believe that such big cuts could be made without compromising performance or safety.

So the real blame for the fare rises must lie with us, the passengers, and our appetite for rail travel. Ever since the early Nineties, passenger numbers have kept on rising steadily. Remarkably, even the long-term trend of passenger numbers falling during recessions has been reversed, as numbers have continued rising except for 2009-10, and even then the fall was very small.

The one way to ensure that fare rises are lower in the future is for more people to shun the railways and use the alternatives – or simply not travel. While numbers keep rising, even in times of recession, why should either the train companies or their political masters change the policy?

Christian Wolmar is a writer and broadcaster specialising in transport.

USA - Congress's manufactured non-solution to its manufactured fiscal cliff crisis

This fiscal cliff deal doesn't stop tax hikes, doesn't reduce the deficit, doesn't avoid spending cuts … and it's not even a deal

• 
• • Heidi Moore
  • guardian.co.uk, Tuesday 1 January 2013 15.38 GMT

The Capitol as the US went over the 'fiscal cliff' in Washington, DC. Photograph: Jim Lo Scalzo/EPA

It is a habit of the United States Congress never to congratulate itself until it has utterly failed to accomplish what it set out to do. Needless to say, the Congress is particularly delighted with its work in leaping over the fiscal cliff last night.

Of course, it will never be put that way. Amid the usual Washington smoke and mirrors, lawmakers will talk about the benefits of the deal: it will cut taxes; it has come in time to avoid the real fiscal cliff; it will reduce the US budget deficit; it will represent a bipartisan agreement to fix America's debt problems.

It does precisely none of those things.

The much-praised deal is as thoughtless and hasty as you would expect from anything cobbled together at the last minute. Lawmakers should regard it not with self-congratulatory glee, but with suitable shame at their failure to think through major issues that impact the American economy. As the humorist Andy Borowitz concisely put it on Twitter this morning:

Andy Borowitz

• ✔

@BorowitzReport

Praising Congress for the fiscal cliff deal is like giving an arsonist an award for putting out his own fire.

1 Jan 13

• Reply
• Retweet
• Favorite

Taken point by point, the deal looks even less worthy of praise.

Tax cuts – and hikes

While the Senate agreement was designed to protect the middle class by allowing the Bush era tax cuts to rise for people making $450,000 and above, don't believe anyone who tells you that it's a tax cut. In fact, all Americans are going to be paying higher taxes through their paychecks, starting today 1 January, because Congress has allowed the payroll tax cut to lapse. President Obama cut the payroll tax to 4.2% from 6.2% in 2010; now, those taxes are going back up.

The cost is noticeable. It will amount to $1,000 a year out of the pocket of Americans making $50,000pa. That could be a mortgage payment, or nearly a year's cellphone bills, or a vacation.
In addition, the middle-class Bush era tax cuts will be extended for only five more years, so expect more dithering in 2018 about the value of the middle class to the US economy. Luckily, that will only be a year for midterm elections that affect Congress, not another presidential election.

Spending cuts: sequester postponed

Nor does the deal avoid the uncertainty and economic disaster avoided with the fiscal cliff. In fact, it creates an even bigger cliff – really, a fiscal mountain – in March. The Senate refused to come to an agreement on the actual "cliff" part of the fiscal cliff: sweeping government spending cuts that were designed in 2011 to be so stupidly punitive that they would never be passed. Instead of sitting down and thoughtfully coming up with a new set of spending cuts, the Senate has pushed the issue off for two months. That deadline coincides with the moment that the US will hit its debt limit.

The result: the new fiscal cliff will have even higher stakes, as the US could spend the next two months wrestling with even greater potential economic disaster, and a more dire impact on the markets. Now, it's not just some spending cuts that are on the table; it's the full faith and credit of the US government. That was already proven in 2011 to be an ill-judged candidate for congressional toying, but the addiction of the drama and adrenaline appears to be too much to resist for those in Congress.

The deficit and debt: revenues reduced

As for the deficit, that will actually grow under this deal, partly because the tax cuts now don't apply to many of the rich. When the president aimed for $250,000 in income and above for tax hikes, that encompassed about 2% of American taxpayers. But the new $450,000 threshold covers less than 1% of Americans. That means less money to cut the deficit, and more coming in spending cuts – very likely, to important government programs.

A deal far from done

And lastly, the bipartisan nature of the deal is something that is unlikely to last after the House meets to talk about it this New Year's Day. Whatever joy the Senate has with its 89-8 landslide agreement achieved at the ungodly hour of 2.07am, news channels featured an endless stream of Republican lawmakers in the House of Representatives talking about their unlikeliness to vote for the deal. One of them compared his plan to vote against the deal to dying in honor on a battlefield.

The deal is not a complete disaster, although most of what it does well is completely and obviously necessary. The best thing that it does is extend unemployment benefits for millions of Americans – at least, for another year – and revoke an ill-judged $900m automatic pay hike for members of Congress. It also extends tax breaks for research and development and interest on student loans: this is important as student loan debt now exceeds credit card debt in the United States.

So, after a day, and week, and year filled with manufactured drama, the US Senate not only failed its only goal – reducing the US deficit – but also built a mountain range out of the molehill of budget talks. But tell that to lawmakers patting themselves on the back.

"For the first time in years, we will have a major issue settled with a bipartisan vote," Senator Dianne Feinstein crowed. Vice-President Biden, asked what was his selling point to Senate Democrats, modestly declared, "Me." He expanded later on how he did it – not with reasoned arguments about the duty of the Congress and the American economy, but with this folksy negotiation tactic: "I said, 'this is Joe Biden and I'm your buddy.'" Harry Reid graded his fellow failing congressional students on a curve: "It's disappointing that we didn't get the grand bargain … but we tried."

Well, at least they tried, right? Except that won't be good enough for the millions of Americans who have their pensions invested in the stock market and the bond market. We already know that the markets don't care a fig about tax policy; but when it comes to the debt limit, they react disastrously.
Columbia Professor Emanuel Derman depended on a classic quote when he tweeted his reaction to the Senate's last-minute deal for the fiscal cliff:

Joseph Weisenthal @TheStalwart

1 Jan 13

RT @mikememoli: Dem caucus well into its second hour now as @VP sells #fiscalcliff deal

Emanuel Derman @EmanuelDerman

@TheStalwart @mikememoli @VP This is all theater. Tale told by idiot, full of sound and fury, signifying nothing.#fiscalcliff

1 Jan 13

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The worst part, Derman might have added, is that we are only, after all this, at the first act.

Saudi Arabia's riches conceal a growing problem of poverty

In a country with vast oil wealth and lavish royalty, an estimated quarter of Saudis live below the poverty line

• Kevin Sullivan for the Washington Post
• Guardian Weekly, Tuesday 1 January 2013 11.09 GMT

The children of Souad Al-Shamir watch television in their living room in Riyadh, Saudi Arabia. Photograph: Linda Davidson/Washington Post

 

A few kilometres from the blinged-out shopping malls of Saudi Arabia's capital, Souad al-Shamir lives in a concrete house on a trash-strewn alley. She has no job, no money, five children under 14 and an unemployed husband who is laid up with chronic heart problems.

"We are at the bottom," she said, sobbing hard behind a black veil that left only her eyes visible. "My kids are crying and I can't provide for them."

Millions of Saudis struggle on the fringes of one of the world's most powerful economies, where jobs and welfare programmes have failed to keep pace with a population that has soared from 6 million in 1970 to 28 million today.

Under King Abdullah, the Saudi government has spent billions to help the growing numbers of poor, estimated to be as much as a quarter of the native Saudi population. But critics complain that those programmes are inadequate, and that some royals seem more concerned with the country's image than with helping the needy. In 2011, for example, three Saudi video bloggers were jailed for two weeks after they made an online film about poverty in Saudi Arabia.

"The state hides the poor very well," said Rosie Bsheer, a Saudi scholar who has written extensively on development and poverty. "The elite don't see the suffering of the poor. People are hungry."

The Saudi government discloses little official data about its poorest citizens. But press reports and private estimates suggest that between 2 million and 4 million of the country's native Saudis live on less than about $530 a month – about $17 a day – considered the poverty line in Saudi Arabia.

The kingdom has a two-tier economy made up of about 16 million Saudis, with most of the rest foreign workers. The poverty rate among Saudis continues to rise as youth unemployment skyrockets. More than two-thirds of Saudis are under 30, and nearly three-quarters of all unemployed Saudis are in their 20s, according to government statistics.

In just seven decades as a nation, Saudi Arabia has grown from an impoverished backwater of desert nomads to an economic powerhouse with an oil industry that brought in $300bn last year.

Forbes magazine estimates King Abdullah's personal fortune at $18bn, making him the world's third-richest royal, behind the rulers of Thailand and Brunei. He has spent government funds freely on high-profile projects, most recently a nearly $70bn plan to build four "economic cities", where government literature says "up to 5 million residents will live, work and play".

The king last year also announced plans to spend $37bn on housing, wage increases, unemployment benefits and other programmes, which was widely seen as an effort to placate middle-class Saudis and head off any Arab Spring-style discontent. Abdullah and many of the royals are also famous for their extensive charitable giving.

For many years, image-conscious Saudi officials denied the existence of poverty. It was a taboo subject avoided by state-run media until 2002, when Abdullah, then the crown prince, visited a Riyadh slum. News coverage was the first time many Saudis saw poverty in their country.

Prince Sultan bin Salman, a son of Crown Prince Salman, said in an interview that the government has acknowledged the existence of poverty and is working to "meet its obligations to its own people".
Prince Sultan said the Saudi government was "three to five years" away from dramatically reducing poverty through economic development, micro-lending, job training and creation of new jobs for the poor.

The Saudi government spends several billion dollars each year to provide free education and health care to all citizens, as well as a variety of social welfare programmes – even free burials. The government also provides pensions, monthly benefits and payments for food and utility bills to the poor, elderly, disabled, orphans and workers who are injured on the job.

Much of the welfare spending comes from the Islamic system of zakat, a religious requirement that individuals and corporations donate to charity 2.5% of their wealth; the money is paid to the government and distributed to the needy.

"Living in Saudi Arabia is like living in a charitable foundation; it is part and parcel of the way we're made up," Prince Sultan said. "If you are not charitable, you are not a Muslim."

Despite those efforts, poverty and anger over corruption continue to grow. Vast sums of money end up in the pockets of the royal family through a web of nepotism, corruption and cozy government contracts, according to Saudi and US analysts.Bsheer said some Saudi royals enrich themselves through corrupt schemes, such as confiscating land from often-poor private owners, then selling it to the government at exorbitant prices.

At the other end of the spectrum, many of the poorest Saudis are in families headed by women such as Shamir, who are either widowed, divorced or have a husband who cannot work. Under Islamic law, men are required to financially support women and their children. So women who find themselves without a man's income struggle, especially because the kingdom's strict religious and cultural constraints make it hard for women to find jobs.

The situation for many families, including Shamir's, is worse because they are "stateless" and not officially recognised as Saudi citizens, even though they were born in the country.

The UN estimates that there are 70,000 stateless people in Saudi Arabia, most of them descended from nomadic tribes whose traditional territory included parts of several countries. Their legal limbo makes it harder for them to receive government benefits.

Shamir, 35, lives in the shadow of a huge cement factory. The houses and streets are covered in a haze of smoke and dust. Her concrete house is down a narrow alley, where graffiti covers the cracked walls and litter piles up in the street. Her landlord is threatening to kick her out, and a local shop owner has cut off her credit for food and gas for her stove. She lives mainly on charity from wealthy Saudis who show up with food and clothes.

One recent morning, her children ran to the door to help unload food being dropped off by a middle-class Riyadh couple in an SUV. Shamir said donations help her pay for the electricity to run an air conditioner, but she does not have enough to buy school supplies for her children.

While middle-class Saudi youths have all the latest gadgets, Shamir's 14-year-old daughter, Norah, has never sent an email or seen Facebook. Her husband has a second wife who has another 10 children. Most of them are unemployed.

Shamir said her husband earned about $500 a month as a security guard until his health forced him to quit five years ago. She said she has tried in vain to find work as a seamstress or a cleaner.
"I've been patient all these years," Shamir said. "I hope that God will reward me with a better life for my children."

• This story appeared in Guardian Weekly, which incorporates material from the Washington Post

We avoided the apocalypse – but 2013 will be no picnic

The world hasn't ended, but global leaders will still have to work hard to manage economic trials and social tensions

• 
• • Ha-Joon Chang
  • The Guardian, Sunday 30 December 2012 19.00 GMT

‘The eurozone is entering a make or break year, with the social fabric of the periphery countries stretched to the limit.' Illustration: Andrzej Krauze

 

 

The world did not end this year, as some people thought it would following a Mayan prophecy (well, at least one interpretation of it), but it seems pretty certain that next year is going to be tougher than this one.

We are entering 2013 as the Republican hardliners in the United States Congress does its utmost to weaken the federal government, using an anachronistic law on federal debt ceiling. Until the Republicans started abusing it recently, the law had been defunct in all but name. Since its enactment in 1917, the ceiling has been raised nearly a hundred times, as a ceiling set in nominal monetary terms becomes quickly obsolete in an ever-growing economy with inflation. Had the US stuck to the original ceiling of $11.5bn, its federal debt today would have been equivalent not even to 0.1% of GDP (about $15tn) – the current debt, which is supposed to hit the $16.3tn ceiling today, is about 110% of GDP.

A compromise will be struck in due course (as it was in 2011), but the debt ceiling will keep coming back to haunt the country because it is the best weapon with which the extremists in the Republican party can advance their anti-state ideology. This ideology has such a hold on American politics because it taps into the anxiety of the majority of the white population. Being squeezed from the top by greedy corporate elite and from the bottom by new immigrants, they seek solace in an ideology that harks back to the lost golden age of (idealised) 18th-century America, made up of self-defending (with guns), free-contracting (white) individuals who are independent of the central government. Unless mainstream American politicians can offer these people an alternative vision, backed up by more secure jobs and a better welfare system, they will keep voting for the extremists.

Meanwhile, on the other side of the Atlantic, the eurozone is entering a make or break year, with the social fabric of the periphery countries stretched to the limit. With its GDP 20% lower than in 2008, with 25% unemployment rate and with the wages of most of those still in work down by 40% to 50%, it is a real touch and go whether the current Greek government can survive another round of austerity. Spain and Portugal are not yet where Greece is, but they are hurtling down that way. And even the infinitely patient Irish are beginning to vent their anger against the inequities of the austerity programme that has hit the poorest the hardest. Should any of these countries socially explode, the consequences could be dire, whether they technically stayed in the eurozone or not.

As for the UK, 2013 may become the year when it sets a dubious world record of having an unprecedented "triple-dip recession". Even if that is avoided, with high unemployment, real wages that are at best stagnant and swingeing welfare cuts, many people will struggle to make ends meet. In a letter to the Observer yesterday, the leaders of the city councils of Newcastle, Liverpool and Sheffield, have even warned of a "break-up of civil society", should the austerity programme continue.

European leaders need to work out new economic programmes with a more equitable sharing of the burden of adjustment, both within and between countries. Paradoxically, they can look towards Iceland, the canary that first died in the mine of toxic debt, for a lesson. The country has been recovering rather well, considering the scale of the banking crisis, while making spending cuts in a way that impose the least burden on the poorest: between 2008 and 2010, income of the poorest 10% fell by 9% while that of the richest 10% fell by 38%.

Things look brighter in the Asian countries, with their economies growing much faster and with even Japan ready to make a dash for growth through more relaxed monetary and fiscal policies. However, they – especially the two giants of China and India – have their own shares of social tension to manage.

Growth is slowing down in China. It is estimated to have grown by 7.5% in 2012, well below the usual rate of 9% to 10%. Some forecast that its growth rate will pick up again to above 8% in 2013, but others believe it will fall below 7%. Given the country's heavy reliance on exports to the US and the European Union, the more pessimistic scenario seems likely, as things don't look very good in those economies. With slower economic growth it will become more difficult to manage the social tension that has been bubbling up thanks to runaway inequality and high levels of corruption.

Management of social tension will be an even bigger challenge for India. Its economic growth has significantly slowed down since 2010, and few predict a major reversal of the trend in 2013. Add to this economic difficulty deepening economic, religious and cultural divisions, and you have a heady mixture, as we see in the social unrest following the recent gang rape and death of a young medical student.

If the political leaders of the major economies do not manage these social tensions well, 2013 could be a year in which the world takes a turn for the worse. It is a huge challenge, as it is like trying to fix a car while driving it. However, without fixing the malfunctioning car, we will not get out of the woods, however much extra fuel, like quantitative easing, we pour into the car.