Friday, 30 October 2009

Climate change Thursday #13

OK, it's Friday. But who's splitting hairs?

Let me introduce you to Viscount Christopher Monckton. He's convinced that the Copenhagen Treaty is a result of communists spilling out and taking over the world from Greenpeace to the US to everything else. It really is worth watching. I got as much joy out of it as I used to from watching David Icke in action.



Imagine my surprise when I heard that he's been interviewed on Glenn Beck's radio show:



I enjoy Glenn Beck also. Really. Who needs Jon Stewart when you have Glenn Beck for entertainment?

Monday, 26 October 2009

Taking on City excess

Will Hutton pitched into the discussion about whether we should look at fundamental structural change within the banking industry. Last week, I signaled agreement with Mervyn King's suggestion that we should split commercial banking from investment banking. Hutton is clear about the scale of the challenge:
"But reforming big finance ranks alongside climate change and the Middle East conflict as one of the great policy challenges of our time."
However, he doesn't follow King's desire to see banks split down the middle. He accepts Lord Adair Turner's line that such a split would be impractical and undesirable; better instead to manage capital requirements and, perhaps, think about some form of transactions tax if that was insufficient to curb riskier behaviour. Hutton does go much further than Lord Turner in suggesting:
"Britain should now break up its banks that are too big to fail as the US once trust-busted Standard Oil in 1911 when it got far too large – the King solution. The impact on British finance and the powerful financial oligarchs would be irreversible and unforgettable. We could create more than a dozen banks where we now have four – NatWest, Bank of Scotland, and the Halifax should be given their independence again – and new banks created to specialise in infrastructure and innovation financing, where there is a gaping hole. There could be a genuinely competitive banking market, fighting to increase lending in all parts of the country and driving a sustained recovery. No single bank could pose a systemic risk because none would be large enough."
So how does Hutton's trust-busting proposal stack up?

There are three questions for me: does it actually reduce systemic risk, does it eliminate moral hazard, would there be banks that were still be 'too big to fail'?

On the first of these, the proposal fails. The risk inherent in the system (sorry to get all Monty Python on you) is what is risky. Sounds tautological? Well, let me throw another tautology your way. The systemic risk is the system.

Having scattered tautology all around, let me hit you with an oxymoron (stick with this, serious point coming.) John Cassidy sees the financial meltdown in terms of 'rational irrationality.' What he means is that while the medium term consequences of decisions are irrational, short-term decisions are entirely rational. So, for example, a Wall Street CEO who invests in a risky class of financial products knows that he (almost all are 'he') may be jeopardising his firm's future, and knows that if other CEOs are making the same calls then the entire system may be jeopardised. However, he can't but make the investment or his company's stock will forgo growth, his reputation will suffer and he will lose his job.

Over to Cassidy:
"The same logic [rational irrationality] applies to the decisions made by Wall Street C.E.O.s like Citigroup’s Charles Prince and Merrill Lynch’s Stanley O’Neal. They’ve been roundly denounced for leading their companies into the mortgage business, where they suffered heavy losses. In the midst of a credit bubble, though, somebody running a big financial institution seldom has the option of sitting it out. What boosts a firm’s stock price, and the boss’s standing, is a rapid expansion in revenues and market share. Privately, he may harbor reservations about a particular business line, such as subprime securitization. But, once his peers have entered the field, and are making money, his firm has little choice except to join them. C.E.O.s certainly don’t have much personal incentive to exercise caution. Most of them receive compensation packages loaded with stock options, which reward them for delivering extraordinary growth rather than for maintaining product quality and protecting their firm’s reputation."
Herein lies the problem with the Hutton proposal. The dynamic of 'rational irrationality', far from reducing the risk within the system, could actually increase it. Many banks chasing scarce capital will compete with each other to make ever greater returns. That in itself will increase risk taking. Ah, but aren't these investors wise to risk? No. That's the problem. The whole thing is opaque and riddled asymmetries of information. Goodness, people within firms don't know what is going on let alone investors on the outside.

So the Hutton proposal wouldn't reduce systemic risk and may indeed increase it.

Now, the moral hazard question. While none of these smaller banks would be theoretically too 'big to fail', they would certainly be 'too politically damaging to allow to fail.' Northern Rock was not a big High Street bank but it was inconceivable that it could have been allowed to fail; indeed, it had to be nationalised. This was partly due to the fact that confidence in the system would be shot (remember, the hour by hour monitoring of ATMs.....) but also the political fallout would have been devastating.

So while none of the new 'mini-banks' would be 'too big to fail' as long as their failure didn't undermine trust in the entire system, the reality would be different. What's more, contagion spreads quicker in financial markets than myxomatosis in a rabbit warren. What this would mean in practice is that any executive would still be in a position where they knew they had a taxpayer guarantee. Moral hazard would still apply. Moral hazard and 'too big to fail' are, in reality, two sides of the same coin.

On the basis that I don't see that Hutton proposal- and he has some other ideas for the creation of banks to support infrastructure and innovation which are excellent- reduces systemic risk, eliminates moral hazard, or really solves the 'too big to fail' issue I'm sticking with Mervyn King.

Only by having a commercial banking sector that is very boring, very regulated, and transparent can we shield the UK taxpayer from shouldering the burden of loss while others reap the grotesque rewards. I do not think the system is transparent enough for capital requirements to resolve the issue. The only way is to de-risk commercial banking. I do not think any of Lord Turner's objections are really convincing. There is no reason why the more sophisticated services like hedging could not be offered by regulated commercial banks. They could simply become agents for such services.

Where I absolutely 100% do agree with Will Hutton is that this is one of the big questions of our time. It is one that I fear we are ducking exposing the UK- given the the ratio of the banking sector to our GDP- to perhaps greater risk than any other European economy.

Post script: George Osborne has delivered a speech on these issues today. It contains lots of 'this should happen, that should happen' without much this is how it will happen. Intriguingly, he reiterates his proposal to hand banking regulation to the Bank of England. Yet he doesn't state whether he agrees with Mervyn King's proposal to break up the banks. Well, to support one measure is to support the other so what is it? Vince Cable is explicit in his support.

The rest of the speech is the normal mix of deregulation, rhetoric about red tape (as if the issue facing the British economy was supply side and not demand side!) and his usual stuff about Britain facing a 'debt crisis':
"It is the soaring national debt that sits like a vulture poised to swoop on a sustainable British recovery."
Unfortunately, shoot that bird too early and you shoot down recovery which is what will happen, of course. To his credit, George Osborne is completely honest about his intentions. If we vote for it, then we will only have ourselves to blame.

Thursday, 22 October 2009

Climate change Thursday #12

Climate change erupted onto the political stage this week with ferocious sparring between the two main parties on renewable energy.

The Conservatives were severely hindered by comments made by their business spokesperson, Kenneth Clarke, that:
"My view is that those few wild and open spaces that we have left in Britain should not be used for wind turbines."
He was quickly put in his place by Greg Clark, the shadow energy and climate change secretary. The Conservatives are keen to portray themselves as being just as committed to renewable energy as Labour. Indeed, their idea that communities that permit new wind turbines can keep the Business Rates from them for six years is positive. But it will not be enough simply to pursue clever 'nudge-esque' tinkering.

Greg Clark's clarification of the Conservative position came after Ed Miliband, never slow to take a new media campaigning opportunity, had dashed off a letter to David Cameron signed by 3000+ (including myself) to seek clarification of the Tory position and insist that they acknowledge the importance of on-shore wind generation.

The problem with the Tories' position, it would seem, is that they are very deeply divided so, despite good intentions, will not be able to use the full muscle of government to create market conditions that lever in major investment so that the UK meets its renewable energy commitments (15% of electricity generated to be renewable by 2020.) David Cameron's anti-government rhetoric in his conference speech suggests that ideologically they are quite simply in the wrong place to make a big difference. Can the UK afford to lose four to five years of the next ten in pursuing a laggardly approach to climate change?

The reality is that Greg Clark's rhetoric and micro-incentives are fine but Kenneth Clarke's attitude is closer to the Tory mainstream.

A report by SERA (note to self: must remember to join), shows that Tory Councils:

- Only approve 40% of applications for wind turbines.
- Have only approved wind capacity of 44.7MW of electricity from wind power.

It's all very well imploring us to 'Vote Blue, Go Green' but the reality is very different to that it would seem.

Wednesday, 21 October 2009

Time to split up the banks?

To split or not the split? Mervyn King yesterday waded into the debate about whether deposit banking should be split away from investment banking. The Chairman of the Treasury Select Committee has followed King into the discussion. If capital requirements are so great, it may well happen anyway.

But is there any logic to such a move?

The first question has to be: did the fusion of the two forms of banking contribute to the financial crisis in the first place?

Well, it's far from incontrovertible. Glass-Steagall, the 1933 act legally separating the two functions, was repealed in 1999. As a fascinating piece in the New Yorker about the role of Chairman of the National Economic Council's, Larry Summers, in the crisis, makes clear, there are those who hotly dispute the repeal of the act as a cause.

As Ryan Lizza points out in the piece:
"Others note that the pure investment banks, like Lehman Brothers, have been the greatest source of instability, while the banks with combined commercial and investment arms have fared the best."
However, Robert Reich and Joseph Stiglitz are both clear that the issue wasn't necessarily about institutional arrangements, it was about the cultural impact of such arrangements. The casino approach won out over the safety first approach. There is little doubt that high-risk investment meant that traditional banks were up to their necks in it, even if it was Lehman Brothers, AIG, Bear Sterns, and Merrill Lynch who were swallowed by the waves. In the UK, that meant that our High Street banks were in severe jeopardy.

It's a difficult case to prove, but there is little doubt that the major banks on which savers and investors depended had become severely incautious. We can simply speculate on whether that was due to structural issues. Stiglitz and Reich argue that it was due to the consequences of such arrangements. Others, such as Robert Shiller, argue that there was a dynamic that led to ever greater risk taking. Both are right. Would having Glass-Steagall in place have prevented the financial crisis? No, I don't think the evidence is there to support that but it was probably a contributing factor. However, that does not mean that we should not consider re-introducing it.

Mervyn King's concerns are that these super-institutions: (i) are very difficult to police and regulate; (ii) when they go wrong, pose systemic risk. I agree with him.

A separation of the casino parts of the banking system from the boring bits would make things far more transparent and would place a division between the two conflicting cultures that define each. There would still be risk and the investments that High Street banks were making on our behalf would have to be monitored carefully for contagious risk as would the risks taken by insurance and pension companies. This would be far easier if there was a separation.

The argument is not just historical, it's about the future as well. As a nation that plays host to a disproportionately large financial sector, we have an interest in de-risking our exposure as depositors or, far more probably, as tax-payers.

As things stand, we have the most appalling moral hazard within our financial system. Bankers thought that they would be bailed out prior to the financial crisis. Now they know that they would be. They only way to reverse that is to ensure that no bank is 'too big to fail' and the legal separation of investment and High Street banking is part of that.

Post script: There was an intriguing debate between Will Hutton and Heather McGregor in The Observer on Sunday. My beef and Yorkshire pudding ended up on the carpet when I read this pearl from Heather McGregor:
"Lord Turner and I may agree on bonuses, but we disagree about the social relevance of investment banks. Would I miss Goldman Sachs if it didn't exist? At every level – not only does it provide a valuable service to companies whose continued financial health my business depends on, but even at the most basic level they help the country – the tax their UK bankers pay on their bonuses will help fund our budget deficit."
And why, pray, do we have a Budget deficit of £175billion or so if it was not for the reckless actions of those who you want to reward handsomely to pay down the very same deficit?!?

Her piece improves as it goes on. I made friends with her again towards the end of the piece when she argues:
"We need to return to an age when investment banking and mainstream banking are separated, as they were in the US under the Glass-Steagall Act"
Unfortunately, the gravy stain is still on the carpet just as the gravy train has already left the station.

Post script 2: Though he doesn't argue that banks should be broken up, Martin Woolf takes on the moral hazard and 'too big to fail' arguments in his column today. Worth reading.

Where we are going wrong on race

Race is the most difficult subject to write about; there is just too much emotion flying around. When writing Barack Obama: the movement for change, the sections on race (and there is a whole chapter on it) were the ones I agonised over the most. Following a sparky meeting I had in Lewisham Library last week, I have revisited the discussion in the context of the UK in my column on LabourList.

The piece looks at particular issues concerning race and alienation. Just to be clear about my overall position:

- As a nation we have made huge strides in eliminating overt racism but in a sense that is the easy bit. If someone describes a black tennis player as a 'froggy golliwog guy' then that is clearly unacceptable and it wasn't four decades ago.
- Like the United States, there is a burgeoning ethnic minority middle class and minorities proliferate our media, culture, and sport. That is progress.
- However, just as in the United States, there is a large proportion of minorities who have been left behind- and that is distinct from immigration. In a sense, this is tied in with wider socio-economic change and the growth of inequality. Thirty years ago the ship of opportunity left the port and those who were left behind were disproportionately minorities.
- That is why when you listen to alienated white, working class communities and the same alienated voices in minority communities you often hear similar voices. Class is a major part of this (see the piece for some observations.)
- However, there are alienating experiences that are significantly down to race. The 'stop and search' resentment, job discrimination, etc. There are other types of discrimination too- social class, sexuality, gender- but this does not invalidate the claim that there is a great deal of hidden racial discrimination in the UK.
- Finally, we do not have an honest public discussion about these issues. What do we teach at our schools? Why would we need a Black History Month if history properly reflected the diversity of the British people? Why does so much discrimination persist? Why do our public institutions- particularly the criminal justice system- operate in a way that alienates and condemns so many minority groups?

I'm afraid all these issues are not answered adequately by the retort 'the white/ working class have it bad too.' We must seek a more equal, more mobile, less discriminatory society. We must talk more openly about these issues (in a way that the BNP does not.) We have an enormous distance to travel. If we start to talk about these issues in a more open way then many people who are suspicious of each other might find themselves with rather more in common than they think.

Anyway, I discuss my reasons for objecting to the BNP appearing on Question Time in the piece. Mainly, it is because they are a party that seeks to deny human rights to millions so beyond what is the legal requisite, their voice should not be amplified or legitimised. That is what the appearance on Question Time and the precedent it sets will achieve, whatever happens on Thursday night.

Friday, 16 October 2009

How good a negotiator are you?

Guest post by Stephen Adshead

One evening a blue monster, who lived on the west side of a mountain, called through a hole, “Can you see how beautiful it is? Day is departing.”

“Day departing? Called back his neighbour to the east, a red monster. “You mean night arriving, you twit”

“Don’t call me a twit, you dumbo, or I’ll get angry“ fumed the blue monster, and he felt so annoyed that he could hardly sleep.

Owners of small children might recognise the hand of David McKee, creator of Mr Benn, and the author of Two Monsters. Arguing as these monsters do can be commonplace in a range of scenarios, not least parties in litigation. The language may be more or less colourful and, if lawyers are involved, phrases like ‘with all due respect’ and ‘your claim is speculative, misconceived and meretricious’ are perhaps more likely than ‘smelly custard tart face’.

But, as in the case of the blue and red monster, arguing in these scenarios is partly the result of a failure to see the other’s point of view, east versus west. Continuing the argument in a monstrously aggressive manner will also impede opportunities for successful resolution.

The blue monster ultimately batters his point home, coupling his ‘point’ with name-calling and, when that is not sufficiently persuasive, rocks. These rocks tend to miss the red monster but hit the mountain. When we, and monsters, engage in difficult conversations there is a tendency to repeat our points, assuming that the other person didn’t understand initially, rather than taking the time to understand the other person’s narrative and the underlying reason for the conflict. How could the monsters here have persuaded the other as to his story, without the need for gravel?

In the seminal (but unfortunately titled) book ‘Getting to Yes’, Ury and Fisher of Harvard Law School advocated interest-based, as opposed to positional, negotiation, a strategy that has become known as the ‘Harvard (or Win-Win) Method’. This method of negotiation focuses on developing mutually beneficial agreements based on the interests of the disputants and has been applied to a variety of situations, including negotiating with a second hand car dealer, the current healthcare debate in America, and negotiations with terrorists.

It has even been applied to the most resistant participants to any form of negotiation – children. The literature on interest-based negotiation continues to grow and the students of the programme on negotiation at the Harvard Law School include not just lawyers, but also psychologists, economists and anthropologists. I won’t attempt to summarise their output, but if it piques your interest I recommend the interview with retired NYPD hostage negotiator, Dr Hugh McGowan, on http://www.negotiationtip.com/ to gain an insight into how this negotiation strategy can work and ideas from him such as ‘if you listen to them, they will listen to you’.

The competitive amongst you (which I suspect will include all of the lawyers) can test your negotiation skills online. Click the link below to try and sell some nature prints at the best price to moustachioed cartoon character Bill Gimel. http://www.sfhgroup.com/ca/training/online-training/test-your-skills.php. Tip – There is another person that you need to persuade.

Had the monsters been blessed with a Harvard law degree, the internet or opposable thumbs, they might not have ultimately destroyed the mountain, thereby realising, as they watched together both the arrival of the night and the departure of the day, that neither monster merited rock-assisted vitriol. As it was, they walked to the middle of the mess and remarked ‘that was rather fun, pity about the mountain’.

Thursday, 15 October 2009

The speech I'd like Gordon Brown to give...

I've rounded up where I see things are after the conference season over on LabourList. Basically, little change in the public mind but a strategic victory for the Labour party- they have the Tories where they want them and where they have ended up in each of the last two elections. However, the context is different this time given the fiscal position. Nonetheless, there is all to play for.

I've had a bash at the speech I'd like to hear Gordon Brown deliver. It's not perfect, but in terms of tone it is radically different: more open, engaged and conversational. It concludes:

"We believe we face adversity down by coming together - as the British always have. We believe that we should all be equal not because it sounds good. We believe it because it means that people will be more free, our communities will be safer, and we will achieve more individually. Acting together, we will unleash our national creativity which has given us pride, time and time again.

“So let’s have a great national debate about who we are and the type of nation we want to be. I invite the Leader of the Opposition and the Leader of the Liberal Democrats to travel with me to our major cities to debate our national future. Let’s lift our politics from the mire to the sky. Let’s make this election a proud advert for our democracy.”


Anyway, we'll see where things go from here.....

NB: The image is an initial @alexsmith1982 attempt at a Shepard Fairey.

Climate change Thursday #11

In a sense, of the three areas targeted by the Committee on Climate Change (CCC), energy, residential, and transport, it is the latter that is politically most contentious. The Government starting moving in the direction of some road pricing, for example, a few years ago but then had to perform an about turn.

If the conversion to electric powered cars is to happen more rapidly and we are to limit use of petrol powered vehicles in the meantime then some road pricing will have to be considered. It could incentivise the move to electric also. Revenues from any road pricing could be used to build the infrastructure of charging points etc. for electric vehicles and could be used to subsidise the purchase of new electric vehicles.

The CCC refused to take this discussion off the table. To quote:
"There is good economic rationale to introduce road pricing and thereby reduce congestion. Evidence in this report suggests that road pricing would result in a significant emissions reduction (e.g. around 6 MtCO2 in 2020) if there were no offsetting reductions in other aspects of transport pricing (i.e. fuel duty, VED.)"
There is an equity issue. There are many people on lower incomes or whom are performing essential tasks who may find themselves hit hard by any introduction of road pricing. This particularly becomes the case if the journeys are unavoidable. Perhaps there is a simple way of deadening the impact (and there must be an impact if there is to be a disincentive) for people in such a position. The reality may be that it is only longer distance journeys, i.e. those over 30 miles or so, that would attract some sort of price.

What cannot happen is that we just bury equity issues when we consider new ways of incentivising lower carbon emitting behaviour. For example, just as we provide opportunity for shared ownership social housing for healthcare workers, we may wish to provide additional grants for the purchase of new electric cars so they could avoid road charges altogether (electric cars would not attract any charges.)

This is a controversial area but one that can not be ducked if the UK is to hit the most ambitious carbon reduction targets possible. There is an environmental necessity for the UK to be a world leader, a moral necessity (we kicked all this off after all...), but also potentially a huge economic gain as we become a world leader in the science of climate change, research, manufacturing, services etc; if we get this right, the UK would become a net exporter of environmental goods and services. Let's not leave this one to Germany, the US, China, and Japan.

Just returning to the infrastructure point for a moment, it was very pleasing to see that the Mayor of London has included consideration of on-road infrastructure needed to make electric vehicles work in the city in his new London Plan. One in five new parking spaces will need to have an electric power point. Not enough in my view but a good principle to embed in the planning system nonetheless.

***UPDATE***

Boris, I was nice but then you announce eye-popping public transport fare increases. Why? Because you are refusing to take the tough choices on the environment, bowing instead to the Chelsea tractor and big haulage brigade. As Simon Fletcher explains on LabourList:
"It is claimed - though we will have to see - that the higher fares will raise an extra £125million. Yet Boris Johnson’s own actions have cut millions from TfL’s budgets – £50m-£70million a year will go when the western extension is abolished; £50million a year has been lost through the cancellation of the £25 CO2 charge on gas guzzlers; millions are being wasted through the new Routemaster plan, the removal of bendy buses and the ending of the mutually beneficial agreement with Venezuela."
************

Finally, I'd encourage you to have a quick read of The great BBC global warming swindle piece I posted a few days ago. One to watch....

Monday, 12 October 2009

UK on a collison course with China?

I will report more fully on Thursday about the Committee on Climate Change's first report which was published today. I attended what as a fascinating launch addressed by Lords Turner and Stern.

The top-lines of the report are: we should not be fooled that we are hitting the underlying targets for carbon emissions by the fact that we are in recession. This reduces emissions but, more worrying, lowers the price of carbon so disincentivising low-carbon investment which will slow the transition to a low-carbon economy. To hit our targets, i.e. to meet the government's carbon budget, there needs to be a step-change in three main areas: energy, buildings, and transport.

Most intriguingly though, the discussion took an interesting turn when Tim Yeo MP, Chairman of the House of Commons Environmental Audit Committee (and who was very supportive of the report), questioned the panel about the UK exporting its emissions. Tantalisingly, Lord Turner indicated that investigating the consumption model of emissions (current policy is geared towards production of carbon rather than consumption) was beyond the legal remit of the Committee. However, it was absolutely clear that he would welcome that remit being widening so as to investigate the question further.

The problem with measuring production of carbon without considering consumption alongside that is that off-shore emissions are not taken into account, i.e. so the emissions embedded in the products and services we import and international transportation are not properly considered.

Lord Stern made it clear that as part of their evidence base feeding into the 12th five-year plan, the Chinese will be publishing the historical data of emissions of each country going back to the 19th century.

China seems to have an interest in provoking this discussion as they are a surplus nation exporting products that they manufacture and we consume. They could make an argument that the West, and the UK is majorly implicated here, is not consuming either its historical and current smoke.

However, as someone pointed out to me, it may not be in China's interests to push the issue too far. It may provoke a discussion about global imbalances and the rate of the Renminbi. Why would the resolution not be to appreciate the Chinese currency so that production was moved elsewhere?

China is likely to have many developing world allies with this argument but it could become explosive. At the very least, the UK will need to have its own assessment of the impact of its consumption patterns (net environmental impact.) So it is right that the Committee's legal remit should be expanded.

The Great BBC global warming swindle

So The Great Global Warming Swindle has come to the BBC. Of course, it is dressed up in the adornment of 'balanced reporting' that is so important to the BBC. But, nonetheless, it uses the type of arguments used in that infamous, wholly manipulated and, at times, fabricated Channel 4 documentary.

The culprit? Well, it is an article from the BBC's Paul Hudson which poses the provocative question, What happened to global warming?. It has all the hallmarks of the climate change denying press: the lone gunman, the conspiratorial scientific establishment, expert quotes relegated to the foot of the article (it must be balanced remember), an air of sensationalism, it's all very confusing (when it isn't in the slightest)and a bit of quasi-science sprinkled in. Only this isn't The Spectator (and for completeness, here is George Monbiot's response to the linked article.) It's the BBC.

And the worst thing? This is a very old debate about solar flares etc. The impact of the solar cycle on the earth's climate has long been appreciated. It's not new. It's not a devastating challenge to anthropogenic climate change.

Here is a screen clip from Peter Sinclair's effortless rebuttal of The Great Global Warming Swindle.

The blue line is temperature rises. The red line is solar activity. You will see how they march in step until the early 1970s. Then they diverge spectacularly. That does not imply that solar activity has no impact on earth's temperatures. It has an enormous impact. Climate change may be appearing to slow and that is because of diminished solar activity and is temporary. Nonetheless, eight of ten warmest years on record have been in the last decade or so. The BBC piece could easily have pointed this out but failed to. Poor.

For a real treat, here is Peter Sinclair's short video rebuttal of The Great Global Warming Swindle.



Oh, the assertion that the world hasn't warmed in the last decade is nonsense as well. Here is paper from Yale explaining what has actually happened. (As well as solar activity, there is El Nino and La Nina to consider also- who said this was simple?)

I will be at the launch of the Committee on Climate Change first report this morning. Tweets and a blog will follow.

Post script: And just in case the BBC thinks that the way it reports has no consequences, then read this blog post from Tory Bear. Careless talk costs lives and not just polar bears.....

Saturday, 10 October 2009

It's the fighters and believers....

I can't help but post this incredible video. It's the fighters and believers who change the world. We can succeed because we must.



If you have a blog, Facebook account or Twitter etc then I think this video deserves to be disseminated....

A few weeks ago the Tories did their own historical video on 'progressive conservatism.' It was laughable. I can't even be bothered searching for it again.

'Against the Odds' reminded me of this incredible speech to the Labour party a few years back which I had the absolute pleasure to watch. "There are good men and women all over the world. Those good men and women are to be found in the Labour party of Great Britain."

It wasn't the Conservative party conference that he attended...

Post script: Note to 'Against the Odds' film-maker. Very few people are roused by Manchester United winning the Champions League (quite the opposite)....Liverpool really coming back against the odds in 2005 is genuinely rousing...

Thursday, 8 October 2009

Climate change Thursday #10

There was a frankly disturbing article in The Observer by Robin McKie last weekend on the increasing evidence of rapid ocean acidification.

This ocean ecosystem devastating process is another consequence of anthropogenic carbon dioxide intensification alongside climate change. In fact, climate change and ocean acidification interact with one another creating the type of feedback loop that is so unpredictable and unhelpful in terms of its environmental consequences. Cold water absorbs carbon dioxide at a faster rate than warm water.

This means that cold waters- such as the Arctic Ocean- acidify quicker (Co2 dissolves in water to produce Carbonic Acid) but as waters warm up they will leave more Co2 in the atmosphere hastening global warming. The oceans have absorbed half the Co2 we have produced since the industrial revolution. According to the research quoted in The Observer piece, they are now only absorbing 25 per cent of it- 6 million tonnes per day.

According to a report by the Royal Society published in 2005, the issue is not just the increasing acidification of the world's oceans- 100 per cent of the Arctic Ocean is forecast to be corrosively acidic by 2100. But it is the rapid nature of change also. To quote Ocean acidification due to increasing atmospheric carbon dioxide:
As CO2 continues to enter the atmosphere from human activity, a proportion will be taken up by the oceans. If CO2 emissions are not regulated, this could result in the pH decreasing by 0.5 units by the year 2100. This is beyond the range of current natural variability and probably to a level not experienced for at least hundreds of thousands of years and possibly much longer. Critically, the rate of change is also probably at least 100 times higher than the maximum rate during this time period. These changes are so rapid that they will significantly reduce the buffering capacity of the natural processes that have moderated changes in ocean chemistry over most of geological time.
Like global warming, the issue is not just volumes but the rapidity of change and the inability of ecosystems to adapt to rapid change.

What is the impact of this acidification? Well, whole ecosystems could collapse- organisms who rely on calcified shells, mussels etc, could be threatened as could fish that feed on them. Coral reefs could simply dissolve. For humans the economic cost could be considerable, the natural cost immense (e.g. coral reefs protect coastlines from erosion), and the whole thing is mightily unpredictable.

What's more, the ocean that has been shielding us from from much of the negative impact of increasing CO2 levels in the atmosphere will not be able to cope with the continued intensification. The Royal Society report details that photosynthesising plankton only increase their CO2 absorption by 10 per cent with each doubling of atmospheric CO2. Again, over to the Royal Society:
In almost all of the phytoplankton species examined to date, it has been found that doubling the present atmospheric CO2 concentration has only a small direct effect, 10% or less, on the rate of photosynthesis.
Finally, almost no mitigation technique (bunging limescale in the oceans for example) will work other than on a local scale. Only one thing will work: reducing the amount of anthropogenic CO2 in the atmosphere. There are no easy routes out of this one.

Which brings us nicely onto the EON's decision to postpone the construction of a new coal-fired power station at Kingsnorth. I am extremely agnostic about carbon capture and sequestration (CCS). Pragmatically, it may well be essential but it almost seems too good to be true and so probably is. Even if the UK does not adopt the technology, other nations will build coal-fired power stations and so globally technological progress may be necessary. The UK, with government leadership, has the opportunity to be at the forefront of that.

EON's decision is an economic one. The government's insistence that any new coal-fired power stations should be carbon capture and sequestration ready has altered the economics and certainty of any new investment. The company clearly wishes to pause for breath while it considers these issues more thoroughly.

From the UK's perspective, it would be possible to rapidly increase the deployment of renewable energy generation. Indeed, it is necessary to do so. However, the pragmatist in me suggests that globally CCS may be a necessary technology. So why not make the innovation here for export? It would be a major aspect of a UK comparative advantage in the provision of low and zero carbon energy generation.

Tuesday, 6 October 2009

Cameron dust and twigs

Well, it's been an incredible day for LabourList with the posting of an open letter from Stephen Fry and many others criticising the Tories' dalliance with Polish homophobe Michal Kaminski. Mr Fry tweeted the link to his 800,000 or so followers and since then Alex Smith, LabourList's Editor, has literally been holding the whole thing together straining every sinew in the process.

He found time to post my weekly column which dealt with the emerging picture of the Tories from their conference in Manchester: irresponsible and damaging to the national interest.

The 'dust and twigs' reference is in relation to a David Cameron as 'tea bag' analogy that someone outlined to me over the weekend:
As he explained, you don’t know what’s in a tea bag until you dip it in hot water and see what emerges. On the evidence of Sunday morning, Cameron’s tea bag is full of dust and twigs.

The dust just washes away leaving a foul taste behind. It’s the twigs, though, that are the real concern.

More than any Opposition in living memory, this Cameron Conservative party is hell bent on pursuing major policies that are extremely detrimental to the UK’s national interest
And while you are considering the national interest and these Conservatives, I would highly recommend taking a few moments to read Edward McMillan-Scott's analysis of David Cameron's new friends. It is fierce and absolutely on the money.

Monday, 5 October 2009

Being nice about Tories and other things.....

Just some snippets today. Firstly, a couple of bits I've sprayed around the web over the last few days.

There was my LabourList column on 'why democratic reformers almost always lose.' It deals with the angry reaction to the Prime Minister's announcement on electoral reform in his speech of last Tuesday:
"Pluralists and reformers disagree amongst themselves. It’s in the nature of the endeavour. If they are truly committed to seeing reform actually happen they do so in a respectful manner. They know that compromises may be necessary along the way.

If PR were to be the only viable way forward then if it was a system that improved on first past the post (i.e. AV+) in terms of democratic renewal then that would be acceptable. I hope that if AV proves to be the only viable alternative - which it seems to be - then pluralists and reformers of all types will accept that also.

It doesn’t seem that it will happen that way. And that is why, just as they almost always do, the majoritarians will win."
Next, I posted on the Progress website about the Conservative party's new online organisation tool. It is not so much the tool itself that I like- the technology is fairly straightforward and Labour has its own version-ish. But it's the openness of the Conservative approach that I like- a lot.

Anyone can use their tools and http://www.myconservatives.com/ was launched with a fanfare from their party leader who explained it as an aspect of the new politics. That is why I said that the Tories appear to 'get it' on technology. Party culture impacts the likelihood that new media is effective. The Conservative approach could make a difference over time (though not to the next election.)

Finally, I just want to draw attention to a couple of articles.

I've written on credit agencies in the past and there have been two recent pieces in the New Yorker that deal with the issue. Firstly, James Surowiecki explains how credit ratings agencies not only fostered the bubble but accelerated the panic in the crash. What's more, they did so because they have become an institutionalised part of the system as a result of SEC rules.

Secondly, John Cassidy describes the process of rational irrationality- i.e. individuals behaving in rationally risky ways- and the crunch. It was rational for the credit ratings agencies to upgrade junk securities because they would lose business if they did not. As Cassidy states:
"But in a market environment the individual pursuit of self-interest, however rational, can give way to collective disaster. The invisible hand becomes a fist."
Well put.

Oh, and Graeme Cooke's take on the Tories' welfare proposals is worth a read too. He is a former Special Advisor to James Purnell and now heads up the Open Left project at Demos.

Sunday, 4 October 2009

Inherit the Wind at the Old Vic

Inherit the Wind is a fictionalised account of the 1925 Scopes Trial in which a schoolteacher is prosecuted for teaching Darwin. It centres around a gladiatorial courtroom battle between acerbic lawyer, Henry Drummond, and lawyer-cum-politician-cum religious propagandist, Matthew Harrison Brady. Kevin Spacey portrays a wily and intellectually agile Drummond. David Troughton delivers a breathy and tense Brady.

The original play was first performed in the McCarthyite era. The themes reach across times. During the course of the trial Drummond makes clear that what he is seeking to establish is not what is 'right' but instead what is 'true.' As such he is positing progress against ignorance. At one point, he refers to general relativity. Brady has stood still whereas Drummond has moved on. They used to have so much in common but now they appear to have little as Drummond humiliates Brady- who in a highly unusual move is called as a witness though he is the prosecuting counsel- on the stand.

Comparisons with To Kill a Mocking Bird are inevitable (and I have written about TKAMB previously.) Where Atticus Finch is concerned about justice and that his kids grow up in a world where there is some sort of notion of right, Drummond is slightly differently focused. His concern is truth. In order for truth to out, people must have freedom to speak out no matter how wrong they may be. His concern is the battle of ideas and progress; laws must not get in the way of that.

Brady is based on William Jennings Bryan, Secretary of State under Woodrow Wilson, and populist lawyer and public lecturer. Bryan toured the nation lecturing against the works of Charles Darwin. He also became a vigourous prohibitionist which the play references. In his reactionary disposition and anti-intellectual fervour his descendants abound American politics. They line the streets to protest against healthcare reforms that are in their own interests; they smugly profess their deceitful certainties on rightist TV shows and talk radio; and they fail to engage with anything that may challenge these certainties.

Actually, I am being grossly unfair to Bryan. He comes across a man of populist integrity in a way that Beck, Hannity, Palin, Limbaugh, Coulter etc do not. They appear to be on the make- personally or politically. Bryan was driven, it seems, by some notion of betterment with a degree of personal emotional need. In the play, Brady travels with his mother. It turns out that he just needs some love. But no amount of love can fulfil such a hungry heart. And so it stops.

That ushers in the play's most powerful passage. Drummond's intellectual certainties begin to waver. The man of ideas can never remain still. He reveals an intellectual love for Brady's articulate ignorance. From a man with slightly grating, though admirable, intellectual confidence, doubts begin to set in, humbling him in the process. God or Darwin? The Bible or The Origin of Species? Both books rock the scales.

This production at the Old Vic is stunning. The performances are powerful. The set- which begins at Main Street, Hillsboro, Tennessee- seems to go on as far as the eye can see. When two jurors join the audience we all become part of the drama. The on-stage appearance of a monkey is greeted with gasps of excitement.

The play is not as emotionally wrought or viscerally affecting as To Kill a Mocking Bird. The 'crime' at its centre is not as electrically charged as an alleged rape. Racial justice touches a nerve in a way that intellectual freedom doesn't seem to. We never quite get to emotionally engage with the accused, Bertram Cates. These are observations rather than criticisms. This play is a play for all times. Ignorance rears its head masked in many different guises throughout time. And Spacey v Troughton is just sublime.

Inherit the Wind is on until December 20th at the Old Vic.

Friday, 2 October 2009

IMF takes on big finance

Lord Turner put the cat amongst the pigeons in proposing what very much sounded like a version of a Tobin Tax on financial transactions a few weeks ago. His basic argument was that the way to curb bonuses was not to perfume the stench but rather to drain the swamp, i.e. reduce the profits of socially useless banks.

Amazingly, the IMF is now also on the case. They worry about the impracticalities of a Tobin Tax. However, Dominique Strauss-Kahn, the IMF managing director has tasked his deputy, John Lipsky with looking at the possibility of introducing some sort of insurance levy to build a fund to cope with the fiscal consequences of bank collapse.

While the fund would clearly be used to help developing countries service their debts in the event of a widespread loss of liquidity in the main, would it not be right that such a fund could be used to help others who shoulder a great deal of risk through the size of the international financial markets that locate on their shores? The UK and Ireland are obvious examples.

It will be interesting to see how this discussion develops and how the insurance approach will be less avoidable by financial institutions than the tax approach, also favoured by the French president, Nicolas Sarkozy.

There is still much to do to combat the risks of financial collapse that proposed reforms have not diminished significantly enough. I still fail to see why an EU wide separation of the risky parts of the financial system from the parts that look after our money is not being properly considered. As long as Paris, London, and Frankfurt were in on the act- as they would be if it was an EU directive- it should be doable. And don't even start me on credit ratings agencies.....

Blind justice- sue online

Guest post by Stephen Adshead

Lady Justice is often depicted – as she is on the lampposts outside the US Supreme Court – wearing a blindfold and carrying balanced scales; indicating that justice should be blind and meted out impartially, without fear or favour.

In his book ‘The End of Lawyers’, Richard Susskind drew attention to a recent US phenomenon that may deliver just that, electronically. The online courtroom.
“On January 18, 2009 at approximately 10:30pm I entered into Dirty Girl Laundromat on 2009 Wisk Avenue between Tide and All Streets, Bronx NY. As I walk to an available washing machine with my clothes in my arm I found myself slipping on the floor since it was wet.

"In the process of trying to keep my balance with my clothes in my hand, I eventually fell on my right side on my hip, butt and back. Due to the fall I was unable to get up and the ambulance was called and I was taken to the hospital. As a result of the fall I sustained a fracture hipbone, bruised butt and T-11 back injury.

"I was admitted into the hospital for two weeks and have not been able to return back to work. I am filing a jury lawsuit for permanent personal injuries and loss wages….”
This is an example of a case at www.i-courthouse.com, where justice moves swiftly and surely. Justice here is “more egalitarian, more democratic and, actually, rather enjoyable”, according to the website. And the court is “always in session”.

To find out whether the plaintiff is awarded damages for his bruised bottom you will need to volunteer to be a juror. Don’t despair - anyone can act as a juror on pending cases. Internet bandwidth appears to be the only restriction. You can also combine jury work with other internet-based activities, perhaps surfing, reading blogs, gambling, or even gainful employment. Who goes empty handed? Who gets damages? You, and your online peers, decide.

This is no sinecure position – you will be presented with plaintiff’s and defendant’s opening statements, evidence and closing arguments, and be given an opportunity to post questions to the plaintiff and defendant. You can review digital photos or videos and follow links to legal information. In short order, you, the jury, will deliver a verdict, one which according to the website is binding and enforceable.

If handing the keys to the judicature seems a touch radical, why not try online computer-assisted dispute resolution. At www.cybersettle.com its customers engage in an online double-blind bid, enabling them to settle disputes electronically and, therefore, instantly. Still unsure? Fortunately, this digital video makes it all clear. In the past 10 years, Cybersettle claims that it has handled over 200,000 transactions and has facilitated over $1.6 billion in settlements.

As a litigator-turned-risk manager-turned-blogger, I can see benefits to online courtrooms and computer-assisted settlement negotiations – speed and cost to name but two - even if I am hesitant to use them currently and on complex cases. The 2.0 versions may assuage my doubts that the jurors are 12 year old kids operating from basements and may include a paid/professional jurors option.

The internet has the power to deliver incredible variation and flexibility, e.g. 12 electricians to decide a dispute about negligent wiring or 12 bilingual English/Chinese speakers to decide a case resolving around promises made in both languages. Jurors could be rated in the same way that they are on ebay and, much like professional arbitrators, their impartiality will be evident from their appeal to all the parties to a dispute.

For the time being, I will simply volunteer to be a juror (no.11). Now, back to the case of The Dirty Laundromat...

Stephen Adshead is a litigator-turned-risk manager-turned-blogger.