Read it and weep, Irish style

When it all goes wrong, Irish version

http://www.irishtimes.com/newspaper/finance/2010/0114/1224262292412.html

INTERVIEW: THE PROPERTY developer Bernard McNamara has said he is “broke” and has debts in the region of €1.5 billion.

Asked if he could lose his luxurious home on Dublin’s Ailesbury Road, he said this was “probable”.

In an extensive interview with RTÉ radio’s Drivetime programme, Mr McNamara said he was involved in a number of businesses but they were not “interlinked” as had been reported by some media, and that the building company founded by his father, Michael McNamara Co, was a viable company with approximately 270 direct employees and a number of projects on the go.

He said he had looked for time in discussions with the Davy investors who had a judgment for €62.5 million registered against him yesterday, and had discussed a possible settlement of between €5 million and €10 million.

He said he could not pay the debt. He had given some consideration to seeking court protection, “the Liam Carroll route”, but had decided not to.

Mr McNamara was asked about the Irish Glass Bottle site in Ringsend, Dublin. He was part of a consortium that bought the site for €412 million in 2006, and it is now being valued at €50 million.

He said he had used valuers at the time. “How come they were all so wrong?”

He said he apologised to anyone who’d been hurt by the fact he had “waded too deep” into the property market and that he would do all he could to repay his debts. “Everything I’ve had since I was a young fella” was being put on the line, he said. “I’m not running anywhere. I’ll stand here and face whatever music there is.”

wrong end of stick?

She's got a point but the wrong one. There is a reason why big deals are reported, and why 'private' deals are not. It doesn't read like she knows. And journalists shouldn't "learn what ordinary people think are big deals", they should know and inform. If newspapers are not creating the environment in which knowledgeable journalists inform their readers about the issues they should care about, what are they doing?

Financial journalists must learn what ordinary people think are big deals

Mega-sensations are not as important as reporting what's happening to pensions

Ruth Sunderland

The Observer, Sunday 10 January 2010.

The credit crunch raises some profound questions about the nature of financial journalism; the types of story we write and how we write them. Over the past 30 years, there has been an expansion of financial coverage mirroring the liberalisation of markets. The credit crunch has itself created some unlikely new media stars: the BBC's business editor, Robert Peston, has gained a cult following for his dark-haired good looks and drawling delivery as much as for his scoops on Northern Rock.

Too much of the reporting, though, has been caught up with the drama of the mega-bid, the mega-bonus, or the mega-bust. Too little attention has been paid to the broader picture.

Business journalism in its current form was born in the 1980s when Margaret Thatcher embarked on her projects to open up the City through the Big Bang. She conducted parallel missions to expand home ownership by breaking up the old building society cartel, to widen pension provision and to democratise share ownership by selling off nationalised industries. Her over-arching belief in freeing individuals from the "dead hand" of the state spawned countless personal finance and property supplements.

Plenty of financial journalism tapped either into aspiration – how the readers, too, could become wealthy – or resentment, as the first fat cat pay packages, such as Cedric Brown's at British Gas, emerged in the 1990s. In tandem with the burgeoning business media, the City PR industry grew massively in the 1980s and 1990s, while older reporting beats such as industrial correspondent declined in importance along with the trades unions.

The dotcom boom of the early Noughties was a fresh seam of excitement for financial hacks. Some lost their critical faculties as they watched young entrepreneurs – including some of their own former colleagues – make millions. Reporters and editors were fixated by the big deals, preferably involving big personalities, such as Sir Philip Green's unsuccessful attempt to take over Marks & Spencer. Deals were and are typically reported in terms of high drama; issues such as likely job losses, the effect on regional economies and the long-term strategic interests of the UK generally took a back seat.

Large swathes of the financial universe were under-reported. Blue-chip companies quoted on the stock market received a big share of attention, partly because they are obliged to reveal information about their profits and trading on a regular basis. As private equity took over household names such as Alliance Boots and the AA, it became apparent that disclosure in that area urgently needed to improve. The state of company pension funds, on which millions of people rely for a retirement income, was and is insufficiently scrutinised – again, partly because of a lack of timely information. Although companies do report information in their annual accounts, actuarial valuations are only carried out once every three years. This gap is worrying, especially in the case of companies such as British Airways, which has essentially become a big pension fund with a little airline on the side.

There are huge questions for financial writers to address in these chastened times, including how an average person, with limited assets and financial knowledge, can be expected to navigate through the hazards of a liberalised financial system. Beyond the credit crunch there is the threat of the pensions crisis and how – or even whether – tomorrow's old people will ever be able to retire.

There are also important questions about companies' responsibility towards communities and the planet, as opposed to just serving the narrow interests of their shareholders. Issues such as dealing with the deficits have become highly politicised and will be a huge factor in the general election; more than ever, well-informed and lucid financial journalism is necessary for democracy to function properly.

This comes as the old media model is under threat from the internet. Money is tight at conventional media groups, with little cash to spare for investigations and reporters under pressure to produce instant news coverage to feed websites, and even less time to stand back and analyse.

But the picture is not all gloom; the internet has opened up access to customers and employees and could democratise financial journalism, lessening the influence of the PR machine. But whatever form it takes, the need for top-quality, independent financial journalism has never been greater.

http://www.guardian.co.uk/business/2010/jan/10/financial-journalism-big-bang-mega-deals

Murdoch

Journalism and Freedom

Government assistance is a greater threat to the press than any new technology.

We are at a time when many news enterprises are shutting down or scaling back. No doubt you will hear some tell you that journalism is in dire shape, and the triumph of digital is to blame.

My message is just the opposite. The future of journalism is more promising than ever—limited only by editors and producers unwilling to fight for their readers and viewers, or government using its heavy hand either to overregulate or subsidize us.

From the beginning, newspapers have prospered for one reason: the trust that comes from representing their readers' interests and giving them the news that's important to them. That means covering the communities where they live, exposing government or business corruption, and standing up to the rich and powerful.

Technology now allows us to do this on a much greater scale. That means we have the means to reach billions of people who until now have had no honest or independent sources of the information they need to rise in society, hold their governments accountable, and pursue their needs and dreams.

Does this mean we are all going to succeed? Of course not. Some newspapers and news organizations will not adapt to the digital realities of our day—and they will fail. We should not blame technology for these failures. The future of journalism belongs to the bold, and the companies that prosper will be those that find new and better ways to meet the needs of their viewers, listeners, and readers.

First, media companies need to give people the news they want. I can't tell you how many papers I have visited where they have a wall of journalism prizes—and a rapidly declining circulation. This tells me the editors are producing news for themselves—instead of news that is relevant to their customers. A news organization's most important asset is the trust it has with its readers, a bond that reflects the readers' confidence that editors are looking out for their needs and interests.

At News Corp., we have been working for two years on a project that would use a portion of our broadcast spectrum to bring our TV offerings—and maybe even our newspaper content—to mobile devices. Today's news consumers do not want to be chained to a box in their homes or offices to get their favorite news and entertainment—and our plan includes the needs of the next wave of TV viewing by going mobile.

The same is true with newspapers. More and more, our readers are using different technologies to access our papers during different parts of the day. For example, they might read some of their Wall Street Journal on their BlackBerries while commuting into the office, read it on the computer when they arrive, and read it on a larger and clearer e-reader wherever they may be.

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Corbis

My second point follows from my first: Quality content is not free. In the future, good journalism will depend on the ability of a news organization to attract customers by providing news and information they are willing to pay for.

The old business model based mainly on advertising is dead. Let's face it: A business model that relies primarily on online advertising cannot sustain newspapers over the long term. The reason is simple arithmetic. Though online advertising is increasing, that increase is only a fraction of what is being lost with print advertising.

That's not going to change, even in a boom. The reason is that the old model was founded on quasimonopolies such as classified advertising, which has been decimated by new and cheaper competitors such as Craigslist, Monster.com, and so on.

In the new business model, we will be charging consumers for the news we provide on our Internet sites. The critics say people won't pay. I believe they will, but only if we give them something of good and useful value. Our customers are smart enough to know that you don't get something for nothing.

That goes for some of our friends online too. And yet there are those who think they have a right to take our news content and use it for their own purposes without contributing a penny to its production. Some rewrite, at times without attribution, the news stories of expensive and distinguished journalists who invested days, weeks or even months in their stories—all under the tattered veil of "fair use."

OpinionJournal Related Stories:

Eric Schmidt: How Google Can Help Newspapers
Seth Lipsky: All the News That's Fit to Subsidize
Peter Kann: Quality Reporting Doesn't Come Cheap

These people are not investing in journalism. They are feeding off the hard-earned efforts and investments of others. And their almost wholesale misappropriation of our stories is not "fair use." To be impolite, it's theft.

Right now content creators bear all the costs, while aggregators enjoy many of the benefits. In the long term, this is untenable. We are open to different pay models. But the principle is clear: To paraphrase a famous economist, there's no such thing as a free news story, and we are going to ensure that we get a fair but modest price for the value we provide.

Finally, a few words about government. In the last two or three decades, we have seen the emergence of new platforms and opportunities that no one could have predicted—from social networking sites and iPhones and BlackBerries, to Internet sites for newspapers, radio and television. And we are only at the beginning.

The government has a role here. Unfortunately, too many of the mechanisms government uses to regulate the news and information business in this new century are based on 20th-century assumptions and business models. If we are really concerned about the survival of newspapers and other journalistic enterprises, the best thing government can do is to get rid of the arbitrary and contradictory regulations that actually prevent people from investing in these businesses.

One example of outdated thinking is the FCC's cross-ownership rule that prevents people from owning, say, a television station and a newspaper in the same market. Many of these rules were written when competition was limited because of the huge up-front costs. If you are a newspaper today, your competition is not necessarily the TV station in the same city. It can be a Web site on the other side of the world, or even an icon on someone's cell phone.

These developments mean increased competition, and that is good for consumers. But just as businesses are adapting to new realities, the government needs to adapt too. In this new and more globally competitive news world, restricting cross-ownership between television and newspapers makes as little sense as would banning newspapers from having Web sites.

In my view, the growing drumbeat for government assistance for newspapers is as alarming as overregulation. One idea gaining in popularity is providing taxpayer funds for journalists. Or giving newspapers "nonprofit" status—in exchange, of course, for papers giving up their right to endorse political candidates. The most damning problem with government "help" is what we saw with the bailout of the U.S. auto industry: Help props up those who are producing things that customers do not want.

The prospect of the U.S. government becoming directly involved in commercial journalism ought to be chilling for anyone who cares about freedom of speech. The Founding Fathers knew that the key to independence was to allow enterprises to prosper and serve as a counterweight to government power. It is precisely because newspapers make profits and do not depend on the government for their livelihood that they have the resources and wherewithal to hold the government accountable.

When the representatives of 13 former British colonies established a new order for the ages, they built it on a sturdy foundation: a free and informed citizenry. They understood that an informed citizenry requires news that is independent from government. That is one reason they put the First Amendment first.

Our modern world is faster moving and far more complex than theirs. But the basic truth remains: To make informed decisions, free men and women require honest and reliable news about events affecting their countries and their lives. Whether the newspaper of the future is delivered with electrons or dead trees is ultimately not that important. What is most important is that the news industry remains free, independent—and competitive.

Mr. Murdoch is chairman and CEO of News Corp. This is adapted from his Dec. 1 remarks before the Federal Trade Commission's workshop on journalism and the Internet.

http://online.wsj.com/article/SB10001424052748704107104574570191223415268.html

Squaring circles

Thought: how to square the circle of eliminating relative poverty and over-consumption?

New book to review

Anthony Gamble's The Spectre at the Feast sounds like it needs to be read.

David Marquand's review in the New Statesman is interesting also. One of his conclusions:

"The left has no hope of winning the battle of ideas if it has nothing better to offer than a spruced-up Keynesianism. To win, it will have to jump out of the Keynesian box in which it has been trapped for too long, admit that there was substance to the neoliberal critique of the postwar Keynesian order, and think new thoughts in new ways."

Things will change

Because governments cannot afford to bail out their banks again this is not a short-lived crash. Things will not be the same again - we cannot afford the same risks to re-emerge.

Some of this stuff can be found here.

Nick Davies book review

Can modern-day journalism accurately describe the world in which we live?

Nick Davies revelation-filled book Flat Earth News is a disturbing tale of an essential industry in decline. However, demand remains for high-quality information and journalism – the challenge is to make providing it worthwhile.

The newspaper business is in crisis. Years of declining sales and advertising revenues have led to a sharp drop in standards and an industry flailing for new readers.

Within the industry, Rupert Murdoch’s recent decision to force readers to pay for the best content has triggered intense debate. Murdoch and allies blame freeloaders on the internet for the industry’s difficulties, complaining about the “theft” of news content by websites, as well as provision of free news by state-backed BBC Online.

But not everyone agrees with Murdoch. Nick Davies’ recent book, Flat Earth News, suggests the news industry’s problems lie closer to home.

Davies commissioned research that showed only a small proportion of articles in ‘quality’ British newspapers contained original material, or had their key facts effectively checked (1). The remainder – comprising more than three-quarters of the total reviewed – Davies dubs ‘churnalism’: regurgitated press releases and stories from news agencies or other news sources, reprinted with little or no editing.

“This profession has become damaged to the point where most of the time, most of its members are no longer able to do their job,” Davies writes. (2)

The emergence of the evening freesheet means Londoners are familiar with such empty journalism. These newspapers are compendiums of news briefs and pseudo news about celebrities tacked together by twenty-somethings hoping to get a proper job.

Without investment, even proper journalists are forced to fill space with whatever material they can find. Davies’ researchers found that journalists today are filling three times the space they were in 1985. Squeezing the time to check stories “shoves a blade into the heart of the practice of journalism,” he laments (3)

“Starved of time, desperate for material, a system which should be protecting itself with rigorous checks instead starts to suck in anything which looks like a story,” he says. (4).

Davies tracks the journey of one press release, thinly disguised as a news item, sent out by an insurance company. It ends up on the pages of numerous local and national newspapers, duped into reprinting the insurer’s advertising. (5)

“This is the heart of modern journalism, the rapid repackaging of largely unchecked second-hand material, much of it designed to service the political or commercial interests of those who provide it,” he writes. (6)

Davies’ account echoes that of David Simon, the former U.S. newspaperman better known today as the writer of hyper-real television series The Wire. In testimony to the U.S. Congress earlier this year, Simon said high-end journalism is dying in America, helped along by the internet-based reader’s preference for free news.

But Simon said the industry’s decline began more than a decade ago, before the emergence of the internet, when big corporations moved in.

“We know now, because bankruptcy has opened the books, that the Baltimore Sun was eliminating its afternoon edition and trimming nearly a hundred reporters and editors in an era when the paper was achieving 37 percent profits,” Simon said. (7)

On this side of the Atlantic, Davies blames the ‘grocers’ – big industrial combines – rather than Wall Street. The takeover of local newspapers by large operations such as Johnston Press and Trinity Mirror ultimately led to the closure of hundreds of newspapers, and the loss of thousands of journalist jobs.

“Even though this was a disaster for local and national journalism, even though masses of readers reacted by giving up local papers, the grocers were happy,” Davies writes, noting how cutting costs helped drive up owners’ profits. (8)

National newspapers are included in the story of decline Davies describes, and the latter part of his book details the seedy goings-on and steady erosion of these institutions. Davies, a freelance investigative journalist for The Guardian, makes a number of attacks on senior newspaper journalists and executives, fulfilling an earlier promise to break the unwritten industry rule not to dish the dirt.

Some of these later chapters are a little predictable – it is not a big surprise to hear that Daily Mail editor Paul Dacre can be quite nasty, or that Rupert Murdoch cares little for truth-finding investigative journalism – but broadly they do support the book’s tale. However, the wide use of hostile quotes from anonymous sources makes some sections read like point-scoring from disaffected hacks.

Fellow journalist Mary Riddell, once of The Observer, and briefly mentioned in the book, says Davies’ book overstates the reputations of newspapers in the 1970s and 1980s, and thinks there is life left in newspapers.

“Many of Davies's arguments are powerful and timely, if unduly pessimistic. British papers, for all their faults, have much left to commend them,” Riddell wrote. (9)

My own experiences suggest much of what Davies says is true.

When I worked for a financial news agency I often saw my stories reprinted, sometimes word-for-word, in local and national newspapers, many times with someone else’s name on it. Within our newsroom, this was so regular executives were rarely concerned. Only the most egregious examples were ever followed up.

Such low-level plagiarism may seem inconsequential but there are serious consequences when it takes place on big stories. In the run up to the war in Iraq, most newspapers wrongly reported that Iraq had weapons of mass destruction, largely because of their tendency to report claims from official sources as facts.

Arguably a bigger failure occurred in my area of expertise – capital markets – when journalists ignored risks building up in the financial system until it was too late. The sudden impact of the resultant credit crunch came close to pushing the developed world into bankruptcy.

Paul Mason, the energetic economic news reporter for BBC’s Newsnight says such failings were because of secret nature of the “shadow banking system … a huge, unannounced and unregulated banking network operating with almost no press coverage and little visibility in annual reports.” (10)

“Hardened bubble-watchers eyed the stock markets, searching for new scams, new hype. But we were looking in the wrong place,” Mason writes in his recent book on the credit crunch. (11)

However, Financial Times capital markets editor Gillian Tett is less willing to shift the blame for journalists’ failures onto bankers.

“By 2006, my team had become seriously alarmed by the trends and tried to point out the dangers. It was a lonely endeavour. Most mainstream newspapers all but ignored the credit world until the summer of 2007. So did politicians and non-bankers. Credit was considered too ‘boring’ or ‘technical’ to be of interest to amateurs. It was a classic case of social silence.” (12)

The Financial Times had such insights not just because of the skills of its reporters, but because it had continued to invest in specialist staff. These journalists, though left to feel like the country cousins of higher profile colleagues, continued to plug away at daily coverage of bonds, derivatives and other capital market products.

Most other newspapers relied upon one or two ‘City reporters’ – generalist news reporters lacking sector expertise and incentives to question the flood of finance deals flowing through the markets. As a result, newspaper reporters adopted the finance industry’s relaxed attitude towards debt.

“No one now doubts that the UK consumer has over-borrowed in recent years. As long as employment prospects are good and interest rates remain low, it will not be a problem,” wrote Mail on Sunday journalists at the beginning of 2006. (13)

Worryingly, little has changed even after the recent financial crisis. Editors might now be aware of the existence of credit but coverage remains largely uninformative. Instead of detailed articles tackling the complex issues around finance in a globalising world, newspapers prefer to scandalise their readership by demonising bankers. (14)

A major factor is to get ahead of rivals, and all are chasing the same story. Many editors measure their success by benchmarking their output against close rivals; the Telegraph watches the Times, Reuters keeps a close eye on Bloomberg, the BBC monitors Sky.

The key is to beat the rival, as this ‘win’ – even if it is only by fractions of a second – can then be repackaged by salesmen to help sell the product to clients or taken by managers seeking affirmation up the chain of command. In a news factory, good journalism is difficult to measure.

As Davies writes:

“It is no longer a matter of independent newspapers competing with each other to produce the best stories, but of mutually dependent newspapers working in tandem to produce more or less the same stories – stories which may or may not be ‘the best’. Or honest. Or accurate.” (15)

Some readers learn to avoid newspapers altogether. Many people now assume journalists are incapable of reporting an event accurately. Blogs have sprung up to expose the excesses of tabloid newspapers (16), while Ben Goldacre’s exposé of systematic newspaper mistruths about health and science issues is a startling read. (17)

Economics writer Nassim Nicolas Taleb says journalism “may be the greatest plague we face today – as the world becomes more and more complicated and our minds are trained for more and more simplification”. (18)

Facing up to this rising tide of disgust at journalism is a significant challenge for the industry. Squaring the circle of selling stories while also accurately describing the world is a difficult challenge. No newspaper would survive if they did not publish the stories they think readers want to read, or if they miss the big stories that periodically dominate national conversation.

Davies does little to describe such difficulties, but this does not reduce the impact of his book. “The mass media now operate more like a global village idiot, deeply ignorant and easily led,” he writes (19).

Some newspapers appear to have abandoned all pretence at truth-telling, with the Daily Express now infamous for using its front page to promulgate weekly conspiracy theories about the death of Princess Diana. (20)

Such desperate attempts to retain readership have had little success. The Express has seen sales drop from close to a million a day at the start of the decade to less than 700,000 now, and the industry as a whole has experienced a drop of around 20 percent. (21)

Departing readers will probably never return to paying regularly for a newspaper, raising the spectre of continuing decline and atomisation of the newspaper industry.

This may be too bleak. The great hope for journalists is the internet, the same format that is killing the newspaper. While it might be too late to make internet readers pay for individual newspaper articles, but many industries have found ways to make digital pay. The music industry, for instance, spent a decade trying first to avoid the issue before belatedly tackling the internet on its own terms. A similar process seems likely for news journalism.

In that new world, churnalism is still likely to dominate mainstream news sources. Demand for generic news will stay, and low-cost advertising-backed news factories will produce this. However, in this ‘information age’, where knowledge is central to many businesses and industries, there is rising demand for quality information and journalism, and not just from trade reporters writing for industry.

It remains to be seen whether quality niche journalism – such as coverage of finance, sport or the media, to name just three – can be provided inhouse by big newspaper brands re-investing in specialist reporting, or will be fed by third-party providers into such portals.

Davies’s analysis of the state of the newspaper business may describe a low point for British journalism. His exposé of the structural constraints preventing journalists from describing the world around them should be a call to arms for those that believe this is important to our society.

The rapid collapse of the previous business model, alongside the rise of the internet, constitutes both a threat and an opportunity. By itself, volunteers on the internet cannot produce the kind of journalism we need. It is vital that today’s journalists learn new ways to profit from accurately describing the world they see.








1. p60, Nick Davies, Flat Earth News (London: Vintage, 2009).
2. Davies, p28
3. Davies, p64
4. Davies, p84
5. Davies, p49-51
6. Davies, p60
7. David Simon, testimony to Senate Committee on Commerce, Science and Transportation Subcommittee on Communications, Technology and the Internet hearing on the future of journalism, 6 May 2009. http://commerce.senate.gov/public/_files/DavidSimonTestimonyFutureofJournalism.pdf
8. Davies, p65
9. Mary Riddell, “Failures of the Fourth Estate”, The Observer, 3 February 2008
10. p80, Paul Mason, Meltdown: The End of the Age of Greed (London: Verso, 2009)
11. Mason, p74
12. p299, Gillian Tett, Fool’s Gold (London: Little, Brown, 2009)
13. Simon Watkins, Dan Atkinson, Jeff Prestridge, “We’ve Beaten the Bears”, Mail on Sunday, 1 January 2006
14. For example, Damian Reece, “We Will All Pay for Fred Goodwin’s Spend Spend Spend Years at RBS”, Daily Telegraph, 7 December 2009
15. Davies, p95
16. Such as http://enemiesofreason.blogspot.com/
17. Ben Goldacre, Bad Science (London: Fourth Estate, 2008)
18. p39, Nassim Nicholas Taleb, Fooled by Randomness (London: Penguin, 2007)
19. Davies, p45
20. http://www.mailwatch.co.uk/page/2/?s=diana
21. http://www.guardian.co.uk/media/abcs

Huhne on Fitch

Lib Dem person Chris Huhne used to work for Fitch. This puts him in a reasonable position to discuss what's to be done with rating agencies. Here's his article from The Times today.

Warner on CRAs

A reasonable attempt at CRAs by Jeremy Warner.

http://www.telegraph.co.uk/finance/comment/jeremy-warner/6786069/Credit-rating-agencies-the-untouchable-kings-of-finance.html

Prepack for Ashwell

But the FT journalist is struggling with the concept.

Fooled by Randomness

Someone at the WSJ has read Fooled by Randomness!

Well done them.

PE back in business

Did really ever go away? Oh well - a journalist has to find a hook somewhere.

Two-and-a-half years ago, before the financial crisis struck, the private equity industry was fast becoming the bete noire of unions, politicians, the media and a plentiful number of company boards.

...

Then, almost overnight, the industry disappeared from view, the credit crunch making its highly leveraged deals impossible to fund. And as the banks began teetering on the edge of collapse, a new generation of villains replaced the private equity buccaneers.

But over the past week, there have been indications that the moribund private equity industry is again showing signs of life."

Wot no books?

Some time soon the market is going to peak, perhaps as early as this month, and then there is a terrible crash ahead. Which market? The next bubble, of course: Books about the financial crisis.

Floaters

The Telegraph awake to the raft of IPOs to come.

They name some names: "Hyperion Insurance Group and rival Cooper Gay expect to raise £450m when they float. Flybe, the regional airline, is considering a similar move, as is Promethean, which makes white boards. Gartmore, the fund manager, New Look, Pets at Home and Merlin Entertainment are all limbering up for a public debut."

"Their owners, often private equity funds, are desperate to sell and raise some cash (and hopefully profits) after two disastrously lean years while management want some fresh capital to invest."

When governments don't work for corporates

Here's an interesting story. Reuters trying hard to find an investor angle in the withdrawal of the missile shield from Eastern Europe.

"U.S. companies have arguably lost out to some European companies in joint ventures, and better diplomacy will likely improve the chances for investors in the strategic sectors of the Russian economy," said Carlo Gallo, senior Russia analyst at London-based consultancy Control Risks."

Hardly a unified corporate takeover of the U.S. state.

The collapse of the Left

The Monumental Collapse of the Left!

"Socialism and social liberalism may hunker down together in the broad-left church – though religion is just one of the things that liberals often fail to be liberal about. But they are contradictory bedfellows, and blending them has already proved difficult.Socialism needs collective commitment to, and respect for, the state, and a personal allegiance to the greater good, even if it is not necessarily in your own interests or even your family's."

"Liberality, like neo-liberality, is a rich man's game, though no one dares any more to point out that freedom from conformity is an expensive luxury, whether you are buying it in cash or in costly self-discipline. Repeated errors, if you don't have the money to buy yourself out of trouble, and sometimes even if you do, tend to wreak havoc. We have seen that in the collapse of the banks. Someone had to pick up the tab, when liberal banking was exposed as neglectful banking."

Management consultants

Management consultants as rationality factories:

"The savvier consultants and their clients understand that the basis of the business is not technological but anthropological – and that this is not always a bad thing. Among human beings, it turns out, the perception of expertise, however unfounded, can sometimes be used to good purpose. As the shamans who poison chickens and the soothsayers who read entrails have long demonstrated, sometimes it is more important to build a consensus around a good decision than to make the best possible decision; sometimes it is more useful to believe that a decision is sanctioned by a higher authority than to acknowledge that it rests on mere conjecture; and sometimes it is better to make a truly random choice than to continue to follow the predictable inclinations of one's established prejudices. Consultants, following in the footsteps of their pagan forebears, understand that they must adopt the holy mien of a priestly caste."


"The most important of the all-too-human functions of shaman-consultants is to sanctify and communicate opinion. Like ministers of information, consultants condense the message, smooth out the dissonances, unify the rhetoric, and then repeat and amplify it ad nauseam through the client's rank and file. The chief message to be communicated is that you will be expected to work much harder than you ever have before and your chances of losing your job are infinitely greater than you ever imagined."

http://www.independent.co.uk/news/business/analysis-and-features/masters-of-illusion-the-great-management-consultancy-swindle-1788556.html

The point of finance

Hard to disagree with much of this. Like the focus on uncertainty too!

Skidelsky maintains that the financial crisis demonstrates a failure by economists to take seriously the problem of uncertainty. He believes that excessive complexity, especially a reliance on mathematics, has divorced economics from commonsense understanding. It encouraged a mistaken belief that markets regulate themselves and that all risk can be accurately priced. The wreckage of the Western financial system testifies to the unreality of these assumptions and the hubris of economists.

Against them, Skidelsky seeks to reintroduce Keynes and his emphasis on uncertainty. A market economy is inherently uncertain because it involves investment for the future as well as consumption now. The uncertainty of the future creates economic instability because our expectations affect the way we behave. Had economists paid more attention to uncertainty, then governments might have been better prepared for the financial crash.

...

Keynes: The Return of the Master is a masterly book. It is impossible to argue that finance has done its job. The essential principle of modern financial theory is that holding a diversified portfolio of assets eliminates market risk. In practice, securitisation — creating marketable securities out of loans and selling them to investors — created a contagion of bad debts that infected the real economy. Yet the foundations of modern theory still have more validity than Skidelsky allows.

The pursuit of wealth is not the overriding value in life, but, unlike a love of books or the value of friendship, it is measurable. Financial markets are the least bad means yet devised of coping with the uncertainty of future wealth. They involve giving up immediate consumption so that we can make provision for the future. Financial models try to estimate what future cash flows (interest payments and dividends) are worth now. They assign a lower value to cash flows in the far future because they are less certain. The calculations are always inexact, but this is not mumbo jumbo. Capital is a scarce resource. Modern financial markets have generally allocated it to companies that can make good use of it.

The true problem, which Keynes brilliantly foresaw, is that financial firms are herd-like in their attachment to fads. With heavy irony, Keynes defined a sound banker as “one who, when he is ruined, is ruined in a conventional and orthodox way, so that no one can really blame him”. That is the full story of today’s financial crisis, in which banks took on risks they did not understand and made acquisitions out of the purest self-aggrandisement.

Diary: August 27

Finally put my finger on my problem with much of the modern-day Left, and now have the title of my essay about Naomi Klein. The phrase is "The Vanishing Middle", or (maybe) the "The Excluded Middle".

I mean by this that Klein, following Chomsky, argues that being moderate is the same as (complicit with) the terrible events and beliefs they highlight.

Chomsky, for instance, likes to accuse liberals of this (like Kamm), and Klein gently segues her arguments about extremist right-wingers into general attacks on all those to the Right of her (most people).

Around extremists, taking a moderate line can be difficult unless you know how to stand up for yourself. To a Chomskyite, working in mainstream life is "selling out" but in fact Chomsky is making these attacks from the privilege of an Ivy League university. This pattern repeats again and again - political messages designed to alienate people from their communities by authors with privileged and comfortable positions within these same structures.

The Climate Campers, occupying some of Blackheath, are daily reminders of this. They espouse revolution under the cover of benign "political activism". They evade actual politics through false comparisons with some other world and hope of consensus politics.

Consensus politics, however, is false, and Michels' Iron Law of Oligarchy suggests leads to power residing in the hands of the strong and active, with little of no accountability. As someone noted elsewhere, have these people never read Animal Farm?

On Brockley Central, my comments highlighted the number of ways in which the Campers reminded me of a religious sect. Like nuns, they take themselves out of society to marry an ideal. Like monks, there are tasks to do obey, and an air of puritanism. Like early Christianity, there is a focus on becoming an exile from one's own community.

Back on the idea of the excluded middle, it was interesting to note that the first action by the Campers was to attack carbon trading. In other words, people trying to achieve the same ends, but through moderate measures. To me, this seems to highlight the extremism of these believers.

We have become a secular society, but this has not stopped people from having extreme beliefs. Shame these ideas had to infect first my friends and now my neighbourhood.