Opinion

John Lloyd

Reviving a European democracy

John Lloyd
Jun 3, 2013 17:52 UTC

The rich are always with us, and we’ll have more of them soon. A report last week from Boston Consulting Group shows that the global millionaire population is some 13.8 million. That is twice the size of Switzerland, which is, incidentally, where many of them have parked much of their wealth. More will accrue, and more individuals will pass the million-dollar mark. Global private wealth will, says Boston Consulting, grow by almost 5 percent per year over the next five years, reaching $171.2 trillion.

This is what we, who like precision in such matters, call “a lot.” The millionaire population in the UK – the fourth-largest in the world – stands at over half a million households. This is so many that when I reminded a wealthy friend of mine, who was complaining about a personal setback, that she was a millionaire, she snapped, “Isn’t everybody?” Tactless as the response seemed, the rich hobnob with the rich. After a while it becomes the prevailing wisdom.

Within rising global wealth, BCG sees a sign that Western economies are edging upward at last. Indeed, the United States seems to be set for appreciably faster growth. But Europe is stuck in recession; If there is growth, it’s anemic and is happening outside the euro zone.

Some 6 million young people are unable to find work in the European Union. This is fewer than the more alarmist figures of a quarter or more of youth unemployment, but it is a vast army nonetheless ‑ one governments hope will not do what armies do, which is stop marching and start fighting.

These doleful figures have plagued Europe for several years. But most of us assume – or are assured – that things will get better, since they have in postwar years, until now. Stephen D. King, the group chief economist of the banking giant HSBC, wrote the recently published When the Money Runs Out: The End of Western Affluence (Yale University Press), in which he says:

A taxation conundrum

John Lloyd
May 28, 2013 18:23 UTC

For the giants of Silicon Valley, the fall from freedom’s children to social pariah has been something of a Shakespearean reversal of fortunes. Google, Apple and Facebook might be Lear, Othello and Macbeth in the suddenness and completeness of their fall from a grace that was bequeathed to them by the generations that found their technologies liberating, empowering and even beautiful.

These companies are nothing like the robber barons that were rebuked by the U.S. government a century ago. They are not locking out workers or running sweatshops. On the contrary: They’re hiring people. Led by Facebook founder Mark Zuckerberg’s advocacy group FWD.us, they are agitating for immigration laws to be loosened so they can hire clever Chinese, Indian and other citizens and pay them lots of money. Those lucky enough to get into their now-sprawling campuses gain access to a kind of gold-plated welfare state where choices of delicious food, health centers and dental clinics are theirs for the using.

The companies say transparency and freedom of speech are at the heart of all they do. Transparency is a Google “Core Value”; Facebook has signed up to the Global Network Initiative, dedicated to advancing freedom of expression to help “shed a spotlight on government practices that restrict expression and seek over-broad requests for user data.”

The European Union’s unending quandary

John Lloyd
May 21, 2013 15:45 UTC

The pace of European disintegration continues to quicken. Recession deepens in the 17-member euro zone; it is now the longest downturn since the currency was launched in 2000. In Italy, a new left-right government, launched on an anti-austerity program, finds the neighborhood more austere than it had hoped. In France, Maurice Levy, boss of the advertising giant Publicis, did a survey showing that northern Europeans – Poles, Germans, Brits – were moderately optimistic while southerners – Spaniards, Italians, Greeks and the French – were deeply pessimistic. France dipped into recession earlier this month, for the third time in four years. The union is pulling apart.

Nothing brings relief. In the Netherlands, a TV show persuaded the country’s deputy finance minister, Frans Weekers, to watch clips of Bulgarians boasting about how they had defrauded his country’s government of welfare benefits. Bulgarians and Romanians, the poorest members of the European Union, will be able to move to any state in the EU next year. What had been presented to the poor as a new freedom is now an imposition for the rich.

Those who have been most enthusiastic for the union now proclaim that it is in grave danger. In an interview earlier this month the financier and philanthropist George Soros said European leaders, in trying to find exit routes from the crisis, have “generated political dynamics that are leading toward the EU’s disintegration.”

Scrambling for the immigrant elite

John Lloyd
May 14, 2013 19:32 UTC

A new era has arrived in immigration. Many countries – the United States, the UK, France, Germany, the Netherlands – have for decades taken in poor immigrants with the express intention that they would do work that native citizens had become reluctant to do. The labor was either too hard, too cheap or too dangerous for the locals.

Now the rich countries don’t want poor people. Many of the production-line jobs they came to do have been automated – or the industries they came to work in, as the cotton mills of Lancashire in the UK, have mostly closed. The Immigration Bill now before the U.S. Congress and Senate is crafted to legalize the estimated 11 million illegal immigrants and to “attract… the world’s brightest and best-educated people.” As automation takes over more unskilled work and as the demand for labor emphasizes skills that higher education usually teaches, the needs of the United States and other developed countries change.

The heated debates over immigration and its consequences power the rise of the populist parties in Europe and push centrist governments towards tougher curbs. But the debates may soon seem beside the point: The traditional emigrant states are beginning to want their best minds back. The hunt for clever people is globalized: Universities, companies, even government bureaucracies seek them here and seek them there. The needs of the developed world and the greater needs of the developing world now conflict.

Russia’s reckoning

John Lloyd
May 7, 2013 18:05 UTC

Russia is now in a hard, even dangerous, place. A series of shocks are coming, and it is not well placed to weather them. It has, to be sure, little debt: Vladimir Putin’s administration is proud that the state has borrowed little and has built up a multibillion-ruble national reserve fund. Yet even that is ending, and the basics of the economy are weak. The former Marxists among Russia’s ruling class will know that the economic base determines the political and social superstructure. It is not looking good for them.

What’s worse, Russia isn’t a major player in the global economy. According to Eurostat figures, it has 2.4 percent of world gross domestic product, slightly under that of India; and 2.6 percent of world trade, slightly more than India has. It’s important, especially to Europe, in one significant economic aspect: It ships very large amounts of energy: 63 percent of European Union imports from Russia is oil, a further 9 percent is natural gas, with a further 3 per cent for coal. Icy Russia heats Europe. In return, Russia has, for the past decade, been enriched, as a once impoverished nation, which defaulted in 1998, surged to a lifestyle that supports a burgeoning middle class.

But oil and natural gas prices are falling now, and don’t look like they will rise again soon: “Over the coming few years,” writes Forbes commentator Bill Conerly, “look for oil prices to decline at least below $80 a barrel and quite possibly more” because of increased production. Gas prices are worse: The once-mighty Gazprom, which had dictated prices and terms to those it supplied, has been forced to discount and saw its profits fall last year by $6.5 billion, or 15 percent. The warnings, inside and out of the country, that it was dangerously dependent on fossil fuels for its newfound wealth and strength are coming home to roost. Russia may face recession.

The Italians have caste their lot

John Lloyd
Apr 30, 2013 21:24 UTC

Let’s begin with two glimpses of the workings of the Italian state.

First, it was announced last week that passengers would be required to mount a bus only at the door in the front, and pay the driver on entry. The present system, in which tickets are bought in cafes and other shops and stamped at machines on the bus after entry from any one of several doors, has resulted in such widespread evasion that it’s calculated that only a minority of riders buy tickets on publicly owned buses. In Naples, three out of 10 play by the rules. The wonder is that three bother to pay.

Second, the ruins of Pompeii, buried by lava from the volcano Vesuvius in 79 AD and thus preserved as a Roman town, is one of the world’s wonders. It is also among its worst-preserved wonders. The Italian authorities have taken such poor care of it that several buildings have collapsed, and much-needed European Union money has been withheld because of the bureaucratic chaos.

The Italian state is one of the most swollen in the democratic world. It has some 330,000 police officers in a dozen different agencies, more than any other country in the EU and twice the number in the UK, which is slightly bigger in population. The private sector in health, education and welfare is tiny. The administrations, at district, city, provincial, regional and national levels, have their own councils, bureaucracies and, in many cases, police forces.

The Tsarnaevs’ Chechen resistance

John Lloyd
Apr 23, 2013 16:01 UTC

Many men in Chechnya, the mountainous region in the Russian Caucasus that has been fought over for three centuries, define themselves as warriors. They see the title as both their birthright, and the source of their manly honor. Now, their example has gone global, like so much else.

Nearly 20 years ago, with Pilar Bonet of the Spanish daily El País, I persuaded two Chechens to drive us out of Grozny, Chechnya’s capital, to some high ground, so that we might catch a glimpse of the Russian army advancing on the city. It was the beginning of the first Chechen war, in 1994. Russian President Yeltsin had tired of the defiance of the self- appointed Chechen leader Dzhokar Dudayev, who had declared Checnya’s independence – one of Russia’s Caucasus republics. He sent in the army.

Our drivers, a father and son, sped their rattling Lada out of the city and headed west, in the direction of the advancing Russians. As we drove, the older of the two men reached under the seat and, grinning, produced a Kalashnikov submachine gun and a pistol. He announced the intention to strike a blow for freedom against the Russians. Not wanting to join them in a bloody ditch, we asked to be let out, to the evident scorn of the son. The older man, with a hint of apology, said you must understand: “Lyubim oruzhie”  – “we love guns.”

The nuance behind the iron

John Lloyd
Apr 16, 2013 14:38 UTC

There’s no time more apt for murmuring the ending of Brutus’s speech in Julius Caesar than the week of Margaret Thatcher’s funeral: “The evil men do lives after them/the good is oft interred with their bones.” No time better, either, to add that the “evil” that, in this case one woman, did is little examined by her detractors, who prefer to stick to a diabolical version of her 12-year rule.

Margaret Thatcher (narrowly) won the 1979 election because the Labour government of the 1970s, under Prime Ministers Harold Wilson and James Callaghan, had unsuccessfully tried to make a contract with the trade unions. In such a contract, pay would have been calibrated to productivity, and increases would be low in order to bring down high rates of inflation and to keep up investment in the socialized education, health and welfare institutions that disproportionately benefited the lower classes. It was the kind of social deal that the Germans and the Scandinavians had and still – in part – have: one that produces economies that, not by chance, have escaped the worst of the economic buffeting of the past five years.

But the attempt failed. The turn of 1978-79 was called the “Winter of Discontent” – another Shakespearean tag, this time from Richard III. Power failed; transport was constantly disrupted; hospitals and ambulance services closed. Most memorably, some gravediggers in Liverpool struck, and bodies piled up in a factory. All that Labour had held out as its usefulness to the nation – the ability to bring organized workers into a lasting, productive and stable agreement – was shattered. The party lost, but so did working men and women.

North Korea’s known unknowns

John Lloyd
Apr 8, 2013 18:06 UTC

As Donald Rumsfeld used to say, there are known unknowns. Two of them are confronting the world today, and both stem from the Korean peninsula. 

One: What will North Korean leader Kim Jong-un do now? He’s ordered missiles to be ramped up, fired a gun on TV, watched missiles shoot down dummy planes and told his military they were cleared for an attack on South Korea and the United States. He said “a sea of fire” would engulf his enemies if they dared to provoke him. Earlier this week, South Korea’s Unification Minister, Ryoo Kihi-Jae, said “there are signs” that a fourth nuclear test is being prepared at the Punggye-ri test site. What is the next move? 

The other quandary: What will the newly installed Chinese President Xi Jinping, whose state has protected North Korea for decades, do now?

Beppe Grillo’s anti-disappointment party

John Lloyd
Apr 3, 2013 17:37 UTC

Jim O’Neill, head of Goldman Sachs Asset Management, thinks Beppe Grillo and his Five Star Movement is a greater threat to Europe and the euro than the trials of little Cyprus. That’s because Grillo received more than a quarter of the votes in February’s election in Italy and has since gridlocked the political system by refusing any dealings with the established parties. A government can’t be formed.

O’Neill warned that if growth does not come soon to the euro zone’s third-largest economy, stalled for longer than any other in Europe, even more people will start to support Grillo’s movement and its call for a referendum on membership of the euro zone. What, he asked, does Grillo think? His response: “Does anyone really know?”

I do, Jim.

Grillo and his collaborator, the slightly mystic Gianroberto Casaleggio, believe that the Web is the new form of democracy, infinitely superior to the representative parliamentary kind in which, they say, leaders frame the politics and politics fail the people. The Five Star Movement, said Casaleggio in a recent book, believes the word leader “is a word from the past, a dirty word that leads you astray. Leader of what? It means that you attribute intelligence and the power of decision making to others, so you aren’t even a slave, you’re an object.”

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