Diversity and its downside

December 15, 2014

In a Newsnight interview, the Economist Paul Collier sketched out his concerns over diversity and its political implicationsThe Human Development Context: Paul Collier

The BBC Newsnight interview [by Kirsty Wark, Dec 11th 2014] was partly framed by the increased importance being attached to the question of immigration control in the build-up to the General Election next May.

The distinguished economist Sir Paul Collier was introduced as a ‘liberal leaning’ figure who nevertheless had ‘expressed concerns about immigration’ in his work, including his analysis to be found in his recent book Exodus

Unsurprisingly, Sir Paul gently evaded attempts to simplify his ideas into an ‘immigration good or bad’ discussion. He suggested that the economic consequences of immigration were less significant than might be believed from the current narrative. His own concerns were that the consequences could result in a deterioration of socially cohesive factors of generosity, trust, and willingness to collaborate.

Loss of generosity
Loss of trust
Loss of collaboration

Wark suggested that her interviewee had been reported as relying too much on anecdote rather than evidence. Collier pointed out that the use of anecdote in his work was to illustrate the technical evidence, not replace it.

I found the interview a serious contribution to a debate on immigration that has increasingly demonstrated a preference for the glibness of absolute beliefs and evocative anecdotes. The issue is not so much whether immigration is good or bad, but how leadership and citizenship deals tolerance, trust and a willingness to seek collaborative over confrontational actions.


One report on immigration, six different news stories

November 7, 2014

This week saw the publication of research on the economic impact of immigration to the UK. The breaking media reports made me think of six authors in search of a headline

The research was conducted by the Centre for Research and Analysis of Migration (CReAM) at University College London (UCL) and published by the Royal Economic Society in the Economic Journal.

In its own summary of the work, UCL headlined it as

Positive economic impact of UK immigration from the European Union: new evidence , adding that the report showed that European immigrants to the UK have paid more in taxes than they received in benefits, helping to relieve the fiscal burden on UK-born workers and contributing to the financing of public services.

A political football match starts

The report signaled the kick off at a political football match as national and international media joined the game. The headlines show how a complex report can be reported selectively.

Sky News

The Sky headline selects the main point indicated in the UCL article, that EU migrants pay in more than they take out of the economy

The Guardian

The Guardian touches on the political point that the UK ‘gains £20 billion’ from EU migrants

The BBC

The BBC suggests that New EU migrants add £5bn to UK

Business Week

Business Week notes that EU migrants ‘ add billions to UK public finances

The Telegraph and Daily Mail

The Telegraph and Daily Mail have taken a different approach.

The Telegraph notes that ‘Immigration from outside Europe cost £120 billion’; The Mail that Non-EU migrants are costing £120 billion.

Making sense of the headlines

You have to look at the report to decide which headlines summarize what the authors believe to be the key finding of their report, and which headlines are, shall we say, more selective.


Did Hyman Minsky anticipate creative capitalism?

March 25, 2014

Bill Gates has called for a more creative form of Capitalism. The work of Hyman Minsky is being reappraised as relevant after the 2008 financial crisis

Minsky’s ideas were taken up by Paul Krugman, and later by other influential figures such as Janet Yellen, now head of the US Federal Reserve bank. They offer an explanation for the irrationalities of economic boom and bust, though inherent instabilities rather than temporary distortions. As such it relates to the Animal Spirits of John Maynard Keynes.

What is creative capitalism

Some posts ago I asked what is the nature of creative capitalism. The question arose after Bill Gates called for it, without exactly joining up the dots. My best shot was a suggestion that thinkers about capitalism were rewriting the map to deal with the uncertainties of the global economic climate. Under such uncertainties, creativity in thought and action becomes important. Mr Gates suggested that Capitalism needs to refocus its energy on social issues including the environment. Minsky suggests how this might come about.

Minsky’s destabilization hypothesis

An interesting article on the BBC website [March 2014] and a subsequent Radio Four broadcast outline why Minsky’s ideas might be relevant.

It seems that the relatively unknown Minsky has attracted attention recently for his theory of inherent instabilities of financial markets. Stock Market bubbles are inevitable as turbulent flow of water from a high pressure hose or water boiling in a saucepan on a hob through induction heating.

Minsky’s three stages

Minsky describes three stages within the process. The hedge is the stage in which the innate caution of professional investors dominates. The hedge offers possibilities for more risky gains, and the famous animal spirits kick in. In Wall Street jargon, the animal spirits move from those of cautious bears to those of Raging Bulls.

The ghost of Ponzi

Conventional wisdom is that bears and bulls eventually damp down irrational blips in the market. Minsky argues that after the speculative stage comes a fraudulent stage he termed the Ponzi stage. This honours or maybe I should say dishonours the schemes of Charles Ponzi, [1882-1949] the infamous modern inventor of a huge pyramid-selling scam.

To be continued

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Low Status High Security: lessons from the Snowden case

August 19, 2013

By John Keane

The Snowden case has drawn attention to a characteristic of espionage in an electronic age in which high security information is accessible to security-cleared contractors of relatively low status

The phenomenon of electronic espionage by low-status contractors is becoming increasingly discussed after several high-profile leaking stories, which for shorthand sre being labelled as wikileaks. The BBC noted recently that the conditions are well-known, but little has been done to address the problem. The article points to the need to grant contractors high security status. They cite the large consulting firm Booz Allen as having remarkably high numbers for staff cleared for accessing Government information. Of its 25,000 staff, nearly half have security clearance to top secret class information. These are the ranks from which Edward Snowden emerged.

A leadership dilemma

Security analysts recognize that the management of vast information flows requires considerable back-up support. I think of it as a wormhole in the blogosphere through which data can slip. In principle, the dangers can be reduced by greater care in allocating access to highly sensitive data. In practice we have a leadership dilemma of the electronic age.

The author

This post is written by Dr John Keane of Urmston University in Northern England where he teaches and researches into leadership and the history of economics. The views expressed are those of the author.


There’s too much news out there

May 2, 2013

Overwhelmed with newsI’ve been distracted from my customary scan of news sources recently. Now that normal service is being resumed, I have noticed how many leadership stories that are reported every day

This week I would have liked to have followed-up on at least six stories:

The Bangladesh factory tragedy

Hundreds of workers died in a factory building collapse and subsequent fire. The over-simple treatment in the UK focuses on the poor pay and wage conditions of those in the Bangladeshi ‘sweat shops’. [Primark is said to be offering hardship aid to its supplier]. The globalising drive for cheap sources of supply is also being scrutinized. One dilemma to be addressed is the economic benefits of international trade as a country develops.

Krugman and Keynes

Paul Krugman continues to express the neo-Keynesian view that austerity programmes are inadequate for dealing with the exceptional social hardships of a severe recession. He believes the majority of economic commentators are missing the point. Ironically, Keynes was himself frustrated that conventional wisdom of the time seemed unable to appreciate his arguments. Krugman feels pretty much the same, offering this rebuttal of one counter argument. Economies, he says, are not like families. Income and spending are inter-dependent. If we all cut spending our incomes will fall too. He also rejects the idea that this is a leftist spending-spree mentality, but necessary a short-term measure for exceptional economic times.

Alfredo Saenz

Then there was the surprise retirement of Santander chief Alfredo Saenz who is expected to collect a goodbye present of around $100,000,000 rather than cop an investigation into his activities by the Supreme Court .

UKIP

Back in the UK, local elections this week [Thursday May 4th 2012] are seen as a measure of protest votes away from the traditional political parties. The anti-immigration and (even more anti – European Union) party UKIP is tipped to poll well under the leadership of its somewhat unconventional and ebullient Nigel Farage, who is also standing for Parliament in a by-election.

Larry David and his mother

An article by American humourist Larry David looked at how his mother would have reacted to his being arrested for terrorist offenses. It provoked a storm of protests. When told he had confessed she replied “well he probably didn’t want anyone else to suffer.” The article saves me from going any further with an idea I had for a blog which was going to be entitled “every mother is a potential terrorist”.

Reginald D Hunter

Anti-racist comedian Reginald D Hunter is in trouble for using racist language at a Football Association dinner. Or at least I thought it was humour with a political intent, in the tradition of Lenny Bruce.

Coping with overload

This ‘six for the price of one’ blog post is my attempt to cope with information overload. Hope you liked it. Normal service, as they say, may be resumed shortly…


Drugs, the silk road, and new money-laundering systems

April 16, 2013

BitcoinThe market in illegal drugs continues to keep a step ahead of efforts to control it. New technology is already being applied to complement or replace older practices of money laundering

In researching the rise of new technology banking, I came across the rapidly-growing Bit Coin system. It struck me as interesting to those engaged in nefarious operations such as drug trafficking. I was not surprised to learn that the idea had already occurred to others.

According to its own website

Bitcoin is a digital currency, a protocol, and a software that enables instant peer to peer transactions, worldwide payments, low or zero processing fees, and much more.
Bitcoin uses peer to peer technology to operate with no central authority; managing transactions and issuing Bitcoins are carried out collectively by the network. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment systems.

How does Bitcoin work?

The International Business Times offers a nice explanation of how bitcoin works

April 16-17th

Paul Krugman in the International Herald tribute writes of The fallacy of bitbugism. Further insights were provided in a BBC review.


How firing a leader may be explained in Keynesian terms

April 1, 2013

By John Keane

The firing of leaders should be clear evidence of rational decision processes. Sometimes it seems driven by irrational expectations

My example comes from the world of football in England, but it could easily be extended to other business situations.

As Easter approached [March 2013] Premier League battles for survival were heating up. Six clubs were considered most likely to supply the three who would be relegated, with serious loss in income. If a boost to performance could be achieved in the final ten games, financial disaster could be avoided. It is considerably harder for a club to fight its way back, as the relegation to the Championship has considerable consequences on recruitment of new players, sponsorship and match attendances.

On firing a leader

The decision to fire a manager seems to be one primarily taken by a powerful owner, who may or may not be influenced by others such as the manager, and (or so the fans would like to believe) the vocal protests of supporters.

One of the most powerful and wealthy owners, Roman Abramovitch of Chelsea, has a track record of removing managers in search of others he approves of more. At present his choice has already been told he is a stop gap to be replaced at the end of the season by the best manager money can buy. This is somewhat different as Chelsea is also able to buy good enough players to win trophies. They are currently European Champions, but the achievement was not enough to save the last manager from being fired.

The candidates for the chop

Managers facing relegation this year included those at Southampton, Wigan, Aston Villa, Reading, Queens Park Rangers and Sunderland. One of these (QPR) acted earlier in the season and appointed Harry Redknapp, one of the most experienced managers capable of helping ‘the great escape’. Reading, Southampton and Aston Villa pressed the trigger later. In these cases the replacement is not obviously a better manager by track record than the departing one. This is particularly the case for Sunderland, who replaced a manager of considerable prior achievements, with a controversial one with less experience.

These sorts of decisions illustrate the Keynesian view that financial decisions are driven by irrational forces and expectations. Or, as Keynesians like to say, the leaders are left trying to ‘push on a piece of string’ [to obtain supply-side wins] to achieve better results than might otherwise have been produced.