How can the City recover its political capital?

The good news? The financial sector is no longer enemy number one. Its place has been taken by our fumbling politicians. The bad news? The City has not regained its political capital.

Post the financial crisis the City, meaning financial and professional services in the UK, lost the trust of the nation. A perfectly understandable and justifiable result, but one that must change because of the harm that is being done to our economy when the City has no advocates beyond its own members.

As the country grapples with Brexit, assembly lines of MPs appear on television defending the UK’s manufacturing base. Not one talks about the need to defend the City, despite it being responsible for over 13.5% of tax revenues – that’s a lot of hospitals, infrastructure and schools. It is also responsible for around 2.3m jobs – jobs that aren’t just in the Square Mile, or London and the South East, but also in Liverpool, Glasgow and Bournemouth.

A lot of work is going on to regain the trust of the population, but it doesn’t make the headlines. UK Finance and The City UK are coordinating their members (banks and other professional services companies) with politicians to deal with the issues that generally fill the inboxes of MPs, most notably fraud and the finances of small and medium-sized enterprises (SMEs).

The £4mTake 5 campaign against criminal money transfers, an initiative between financial services companies and the Home Office, has raised awareness of smooth-talking criminals asking for PINs and passwords. Meanwhile, a new ombudsman scheme, plus a complaints review and redress policy, will be in place by September this year to deal with dispute resolutions between the banks and SMEs. Less than a year ago, 22 banks were forced to publish the results of their customer service ratings on their branch walls.

Yet none of this represents a positive campaign to clarify the City’s national role and international role. Those who see press reports on mega-bonused bankers or financiers in court for rigging Libor need to see other images which are just as real. Kevin, the bank worker in Bournemouth, where financial services is the biggest employer.  Sue, the elderly lady in Somerset who relies on her pension. Lucas, the toddler whose parents have bought him a Junior ISA. And the hundreds of sports grounds and start- ups, coffee shops and corner stores, that rely on finance to survive and prosper.

The City’s human face should be shown in granular detail. It is never more in evidence than on September 24, City Giving Day, an annual event where businesses raise money for charitable causes. It began with tea and cakes in Guildhall Yard, the centre of City government, in 2015. Last year, 313 companies participated, from Bank of China’s renown market stalls selling home-made Chinese specialties to Tour de City, a team effort on static bikes where enthusiasm and buckets of sweat abound. Insurance brokers and lawyers in City Giving Day red t-shirts race around the streets on a treasure hunt. The initiative was so successful that it was taken up by Birmingham and is set to spread to other cities later this year.

The City’s creative energy and its ability to implement change should be celebrated. This isn’t only in Green Finance, or Fintech, where we are the world’s leader, or Social Impact investing.  A few years ago, Barclays posted a 5-minute video on its intranet in which an employee detailed their mental health struggles. The reaction in the bank was so positive in encouraging conversations around mental health and broadening the mental health offering that This is Me, as it was called, was taken up by the Lord Mayor’s Appeal and publicised. By the end of 2018 the initiative had reached over a million employees in over 500 organisations and was launched in the North West and Scotland.

What should also be showcased, not least at a time of national division, is the City’s nearly 2,000 years of history, from its Roman beginnings to its famed coffee houses, the precursors to markets like Lloyd’s of London, and the huge contribution immigrants like Sir Sigmund Warburg made to its success. The Lord Mayor’s Show dates back to the 16th century. It is still the longest and most grand annual civic parade. Yet it is barely marketed in London or the regions, let alone abroad. This is surely a wasted opportunity. 

Over the last two years the City has lost an estimated 75,000 jobs and a trillion in assets as companies seek to guarantee seamless access to the European Single Market by moving parts of their operations abroad. But it is still a European jewel. supplying half the debt and equity to EU business and over a trillion a year in direct lending. And its position as a global jewel -with difficult-to-replicate regulation, rule of law and a wide pool of talent – must be defended.

Whatever happens in the next few days in politics, the uncertainty is likely to continue over weeks and months. It is time for the City to stop hiding its lights under a bushel. With humility and humanity, and an acknowledgement of its wrongs, the City should use storytelling to regain its rightful place in the national narrative.

This article was published in the Daily Telegraph on Tuesday 30th April 2019.

The City’s New Face

Marrying public and private ethics

Does it matter what the chattering classes are talking about? From the 1970s, column inches and speeches were dominated by Chicago economist Milton Friedman and the principle that companies should focus on shareholder returns and forget about suppliers, customers and community – they would benefit tangentially. This was famously encapsulated by legendary American CEO Al Dunlap´s 1990s outburst: “The most ridiculous term heard in boardrooms today is stakeholders. How much did they pay for their stake?”

Shareholder primacy and the Washington Consensus on economic growth had their time in the sun. Today, a couple of years after the election of Donald Trump and the Brexit referendum, we see an avalanche of books with titles like “Democracy and Prosperity – the Reinvention of Capitalism in a Turbulent Century” and articles in the mainstream press headlined “Populists have a point, the system has to change.”

At the end of last month Christine Lagarde, Managing Director of the IMF, quoted Aristotle on the need for a personal sense of purpose to be linked to a social purpose. Speaking in the heart of the City at the annual World Traders’ Tacitus lecture she called for the financial sector to develop “broader social responsibility.”

She noted that Fintech is producing cheaper and more accessible products to drive an inclusion revolution; that a higher share of women on boards is correlated to more financial stability and sustainable growth; that the younger generations prefer to invest in financial instruments with social impact.

Today, achieving social cohesion in our societies is key. The widening of the net of financial and societal gains of the last forty years is essential to underpin democracy and sensible government.

How should the corporate and financial sector react? Here are four suggestions for companies already on this journey, and for those who are being left behind.

1. Add a dollop of emotion to any policy changes. Making the world a better place is no longer the monopoly of charitable bodies and starry-eyed university students. Company actions need to be marketed emotionally as well as financially, not least because so many experts have been found wanting and ‘facts’ are under attack from the echo
   chamber of news.
   

2. The audience is both internal and external. Millennials and Generation Z – those who are working for your company, those you want to be working for your company. Politicians – who after the financial crisis dare not mention the financial sector as a source of growth or responsible capitalism. Investors – often cited as a barrier to change, because of their short time horizons. They are altering as well, ranging from Black Rock Chief Executive Larry Fink’s 2018 letter to CEOs calling on them to make positive contributions to society, to a family office that handed nearly a billion dollars to a Swiss private bank with the proviso that the bank itself must have a sustainable culture or the money would be withdrawn.

3. Be ahead of the curve by making clear that the costs involved in becoming sustainable are investments in growth opportunities. And that change cannot be immediate. Unilever is a much-cited and much-deserved, case in point. The consumer goods company proudly notes that on average it pays 27% corporate tax worldwide. It is very open about its shortcomings. For example, they overcame the innate contradiction in producing Vaseline, an extract of crude oil, by setting up a health initiative to send the crucial product plus health kits to disaster zones.
   

4. Diversity & Inclusion may sound like politically correct balderdash. Not true. Inclusion means creating an atmosphere where all can thrive and be themselves. This includes Black, Asian and minority ethnic (BAME), older workers and the white middle-aged men who form the backbone of the City and are wondering where they belong in this new world. Don’t leave them out.
   

5. Measure the impact of changes in diverse ways, such as lowering company risk, increasing well-being (an OECD-approved policy), helping achieve the UN’s Sustainable Development Goals and boosting employee loyalty. Stakeholders will all have a specific measure that engages them more than others.

To reach middle age and find yourself and your peers veering leftwards politically is a shock, not least because of that well-known phrase about a young person who isn’t a socialist hasn’t got a heart; an old person who is a socialist hasn’t got a head. But this isn’t socialism. It doesn’t mean voting for Jeremy Corbyn in the UK or Bernie Sanders in the US. It doesn’t mean throwing profits and return on equity out the window.

It does mean marrying private and public ethics. The divide in the moral codes between home and business is over. In the words of Christine Lagarde, the financial industry can be economically rewarding and ethically right.

Six Triggers for the Next Financial Crisis

Banks are much safer now than before the financial crisis. Or are they? Certainly, if focusing simply on increased capital and liquidity requirements, and closer regulatory supervision. Yet close questioning of bankers, and regulators past and present, throws up six possible triggers for a crisis.

1. CYBER-SECURITY. Imagine this scenario. A cyber-attack closes down a bank for a week; panicked depositors unable to access their funds form queues on the streets; the regulator is forced to close the bank permanently in a bid to avoid contagion; the strategy fails as queues form at other banks on (fake) news of their vulnerabilities. A former member of the Basel Committee on Banking Supervision believes this could be the most likely spark to trigger the next financial crisis. Another scenario is a cyber-security attack into any part of the wholesale infrastructure, say the estimated $542 trillion derivatives market, which would cause widespread panic as the global system shut down.
   
   In the words of an investment banker with knowledge of the subject: “Of course banks spend lots but as their IT departments are full of contractors and senior management is clueless, the spend is wasted. Their systems are weak, they don’t talk to each other, and are very vulnerable.  It’s impossible to trace where an issue has happened and to fix it.”
   
   Only big banks will be able to afford the enormous amounts needed for proper cyber-security. “Banks need military grade cyber,” asserts the former regulator. New ratings will emerge for a financial institution’s cyber safety. Those with anything less than triple AAA could find themselves frozen out of the wholesale markets. The inevitable consequence is consolidation: small banks will be gobbled up.

1. TOO BIG TO FAIL. An ongoing theme in this column, on which I have been proved wrong. So far. Writing about The Precariousness of JP Morgan Chase in 2014 and suggesting readers should sell, was an abysmal stock recommendation. Yet further consolidation of the financial system in countries from Spain to the US – an outcome of the financial crisis and of the ensuing regulation – has concentrated the risk. The taxpayer will more likely have to bail out the giants, notwithstanding the tough regime for Global Systemically Important Banks (G-SIBs).

1. RISK CONCENTRATION. Risk is also more concentrated now due to “significantly greater harmonisation on, for instance, the risk weighting of assets, the prudential rulebook and accounting standards…it means if something goes wrong, it goes wrong for everybody!” notes the Non-Executive Director of a bank. She points out that in 2008 it was the diversity of standards which helped reduce the problem in some countries. France, for instance, did not apply mark to market accounting, and Canada applied heftier capital standards.
   
   In the 2018 harmonisation recipe, lending to the real economy for investment has generally fallen, while another mortgage bubble in residential property has been created.  There has been a sharp drop in the diversification of business models. Excessive to overvalued property could yet again be the catalyst. Even more so if interest rates increase, unplanned for and unaffordable for many owners. We have raised a generation who think that interest rates of 2% are customary, notes a Dutch former regulator.
   
   Geographic shrinkage is another element in risk concentration and the lack of diversification. Regulatory bias has promoted more domestic exposure: banks like Citigroup of the US, or Unicredito of Italy, sold many of their foreign businesses post-crisis.

1. GEOPOLITICAL JEOPARDY. Italy is a likely suspect. The country could blow up on the back of its bankrupt banks and the unstable government’s argument with Brussels, amid recent evidence that Italian households are no longer willing fools ready to finance government spending by buying its bonds. If Italy goes, so would the euro.
   
   There is also the more obvious imbroglio of Brexit and its unforeseen consequences, however much the Bank of England provides public reassurance on this front. Or China’s debt burden…The list is long.
   
   During the 2008 Beijing Olympics, at the height of the US financial instability, Russian officials made a top-level approach to the Chinese and suggested that together they might sell big chunks of their US Treasury holdings. The Chinese declined. The answer might be more nuanced today, amid heightened political tensions.

1. JUDICIARY RANDOMNESS. A term first heard at a meeting of the G-30, this refers to multimillion fines which fall on banks after scandals such as mortgage abuse in Spain and product mis-selling in the UK. Danske Bank’s recent €200bn money laundering disgrace forced the newly nominated Chairman to speedily reassure the markets that the bank was not facing “an existential crisis” – and that is even before the US Department of Justice’s criminal investigation has reached a conclusion and consequent fine.

1. REGULATORY MICRO-MANAGEMENT. The financial crisis put paid to the idea of principles-based regulation. However, the sharp pendulum swing to prescriptive rules-based regulation isn’t working either. To state the obvious, regulators are not bankers.
   
   “The jerks presume to tell us how to do our business, in extreme detail…you come to Treating Customers Fairly (TCF) – the man from the government has this 100% wrong, “complains an executive board member of a British bank. As he points out, “we are now obliged to treat disparate people the same – [despite the fact that] nature was not fair in how it handed out its gifts.”
   
   Form-filling and ever-larger compliance departments are the curse of the post-crisis world. “We have to write a ton of repetitive stuff for the regulator year after year which nobody can read, understand or apply usefully,” notes the banker. The real issue with “this stupid charade” is the resulting risk blindness – either complacency that every risk is covered or an inability to see the forest fire because measuring every inch of the trees is the new normal.

There are other possible catalysts to a financial crisis: from the pile up of debt; to shadow banking; to climate change; to the unimaginable. Two overarching factors could make the next crisis even worse than the last one.  The public’s trust in the financial system, high before the crash, is being continuously eroded from its low base with a repetitive litany of scandals, greed and technical incompetence – examples abound such as Goldman Sachs’s reported Malaysian corruption and TSB’s IT chaos.

Meanwhile, the international cooperation visible in the financial crisis, and ably described in former US Treasury Secretary Hank Paulson’s book On the Brink, is entirely absent. The idea that the Trump government would coordinate action to save the world is risible.

On this cheery note, Robinson Hambro wishes its readers very Happy Holidays

The fear moving markets

Heinz Bude & Pascal Lamy

Investors are anxious. Many markets are down by anything from 8%- 10% this month. As central banks withdraw from quantitative easing, institutions are pulling money out of financial markets, resulting in a vicious downward spiral.

But anxiety isn’t just in the markets, where investors have been on tenterhooks waiting for a Black Swan event to turn the bull into a bear (how ironic that instead it is mainly the much-heralded end of excess liquidity instead). Anxiety is widespread in our developed societies. Fear is the defining emotion of the last few years, and it is relevant on a personal and political front, and ultimately on the market front.

Personal Fear

There has been, and continues to be, so much fundamental change that not only are the much-talked about left-behind afraid, so are the middle classes. In fact, tell me who you are and I will tell you, gentle reader, what you (and I) fear.

Heinz Bude, a leading sociologist in Germany, sums up the change by writing that “our mode of social integration is shifting from the promise of advancement to the threat of exclusion…Anxiety springs from the knowledge that everything is open but nothing is meaningless. Our entire lives seem to be on the line at every single moment.” A drunken rant on Twitter and 280 characters mark the end of a decades-old successful career. A student accuses a respected teacher of sexual abuse, and the veracity of the story is irrelevant: the pedagogue’s vocation lies in tatters.

The fear among the low earners, who Professor Bude calls the new service proletariat, is well-documented. Be it the mishandling of Universal Credit in the UK to the Amazon warehouse packer’s zero hour contracts, a descent into total poverty and social exclusion is a stumble away.

They are not the only ones living with apprehension. The professor writes about ‘Silicon Valley capitalism’, which leaves us no breathing space as it transforms everyday life into productive, symbolic, social or economic capital. “Most people feel this optimization pressure not only in their job but also in their family life, free time – in their lives as a whole, actually,” he points out in Society of Fear, first published in German in 2014.

How many steps does your FitBit say you took today? In fact, haven’t you run a couple of marathons on different continents? You retired as a full partner in your respected law firm, but the concept of achievement can no longer be centred solely on a career. Have you since not helped raise a sunken school from the ashes of failure into a top performing one, or sailed across the Atlantic in record time? Are your children – who you are very close to – not entrepreneurs or Heads of Fundraising at some worthy charity?

For the younger generations, millenials and Generation Z, smaller pensions, larger debts, lower wages and less secure jobs are the dreaded norm. Mental health problems are rising among the young, all the way down the age scale to schoolchildren, with suicide the biggest cause of death for 24 to 30 year olds.

Political Fear

On the political side, fear of immigration and its effects on cultural identity, allied to the spectre or reality of job loss, is the one of the major issues. This helps explain the emergence of Donald Trump in the US, Brexit in the UK, Viktor Orban in Hungary. It also helps explain the rise of a votable far right party in Germany, the AfD, which stands at 13% in the polls.

“German stability is over, “ says a top German Parliamentarian involved in foreign policy. “Germany is joining the European normality: the emergence of a far right, weakening of the centre and fragmentation. Centre parties used to garner 90% of the vote. Now it is only 53%.”

Whatever the criticisms of Germany’s leadership in Europe, on balance it has been a force for good. Angela Merkel’s decision to step down as party leader now and as Chancellor in 2021 is piece-meal and too late in the day, for Germany is paralysed by Italian-style coalitions which will likely have a dire effect on Europe and and international diplomacy.

Similarly, US global leadership has been much criticised, but a weakened country lead by a policy-free, media manipulator is a fearsome beast – not least because he has test-driven the new model of politician for other would-be autocrats.

On a global basis, “the level of tension is unprecedented and it stems from one place, Washington,” says Pascal Lamy, former Director General of the World Trade Organisation. Speaking at the London School of Economics, he mentioned two possibilities. Either President Trump, with his damaging attacks on allies and opponents, is intent on getting rid of globalisation and the rules based global system, or he is looking to transform it for the benefit of the US.

In either case, the definining geopolitical issue of our age is China, and not only in its rivalry with the US. Will China moderate its exceptionalism to fit in with a global system, or will it strike out on its own more, asked Lamy rhetorically. He fears that the power of its social credit system, an Orwellian mass surveillance rating of every citizen’s behaviour, makes the latter more likely. In fact, from the beginning of the year China has forced all foreign companies operating in the country to have a social credit code. Those who contravene it – as retailer Muji did in labelling Taiwan a country – have major fines imposed.

Meanwhile, dire threats of climate change, mass migration, terrorism, chemical and biological warfare or a nuclear holocaust come at a time when transnational cooperation is weakened, as is the credibility of institutions like the judiciary and the legislature, while the word “expert” has morphed from encomium to insult.

Market Fear

It is relatively easy to name the factors that affect markets. It is infinitely more difficult to get the timing right. Geopolitical risk has been increasing since Donald Trump’s investiture, but this was more than offset by excess liquidity and the promise of his tax cuts and infrastructure spending. Now US GDP growth is starting to slow. It rose 3.5% in the third quarter of 2018 from 4.2% for the prior quarter.

BlackRock, the behemoth of asset managers, announced mid-month that inflows to its funds fell to a two-year low in the last quarter. Investor anxiety about missing out on a rising market is giving way to fear of being caught overexposed to risky assets. How this pans out for markets – especially with extensive ETF investment – is beyond the knowledge of this columnist, but the widespread fear in our societies could all too easily turn to panic.

Innovation in the City

Mental Health Instruments

“Saying you had a mental health issue was career suicide in the bad old days,” says Jonathan Bond, Director of HR and Learning at Pinsent Masons. The international law firm now has a video called This is Me on its intranet where one of its high-profile partners talks about his mental health problems. “Junior people are blown away by this!” says Mr Bond.

On World Mental Health Day (October 10) it is worth celebrating how much has changed. From the confessions of Alistair Campbell to Lloyds CEO Antonio Horta-Osorio, and the support of Princes Harry and William – the former having admitted on television struggling on the back of his mother’s death – mental health is becoming a subject of open discussion. In the UK, the cost of mental illness is estimated at £25bn a year and one in four of the population will be affected at some point in their lives. Suicide is the biggest killer of men under 45, while self-harm amongst the young is ever increasing.

The City may seem the most unlikely place for a major initiative on mental health. Yet the myriad high-achievers who populate its office towers, making it a fertile breeding ground for mental illness and suicide, also mean that its creative and organisational powers are a powerful tool for change. A few years ago Barclays’s employees came up with a 5 minute video This is Me aimed at removing the stigma associated with mental health. The bank put it on its intranet and it became the most watched video, encouraging conversations around mental health and helping broaden the mental health offering.

The Lord Mayor’s Appeal, whose Advisory Board I chair, heard about it and using its convening power – who, after all, would say no to a glossy invitation from the Lord Mayor? – sent out invitations to companies inviting them to hear about This is Me. Expecting 10 or so responses, we had about 75 for the first event and spent the next year running roundtables on implementing it. A year later, 142 companies now run the programme, including the Bank of England and BNY Mellon, with 95% of them saying This is Me has a positive impact on reducing the stigma of mental health. Another 516 firms are registered to learn about how to do it, not least when there is internal resistance, and it is set to roll out in the West Midlands, Scotland and the Northeast this October.

In the videos, a wide range of employees from managing directors to personal assistants to analysts, talk about their normality and their mental health issues. Facing the camera without any props, they state their position in the company, their passion for a football team or sailing, their children, and at some point in the spoken catalogue of their full lives, they mention they battled with depression/battle with anxiety attacks/battle with self-harm.

“At BNY Mellon we employ employees for their minds. We emphasise its okay not to be okay all the time,” says John Jack, Chief Financial Officer. Being encouraged to bring your whole self to work means opening up about mental health issues in a supportive atmosphere. Commitment and loyalty from employees, a scarce resource these days, is a welcome outcome.

This is, quite simply a revolution: from a taboo to a subject that is being actively addressed by an ever-larger number of companies. However, we still have far to go. The day will come when seeing a distressed colleague and asking what’s wrong will be as normal as commenting on someone’s sprained ankle as they hobble into work.

Language soft skills key to AI future

How, and why to fight the decline in language learning

The aim of turning Britain into a “twenty-first century exporting superpower” is so laudable that it even brings together Remainers and Brexiters. But it was ironic that Liam Fox’s speech setting out the aim of boosting Britain’s exports to 35% of GDP from 30% was delivered in the two week period where A level and GSCE results highlight a continuous drop in interest in studying foreign languages.

The government, including its International Trade Secretary, seems to lack the joined-up thinking on the extra skills needed to increase exports – not that the increased support from embassies and government departments are unwelcome.

Language skills are being called for by business as much today as they will be in years to come. A CBI/Pearson employer survey showed increasing, unsatisfied demand for languages: over 50% of businesses rated French as useful for their business, over 35% Mandarin, with others wanting everything from Russian to Japanese. Almost 40% of employers were dissatisfied with graduates’ international cultural awareness, compared to 30% the year before.

According to a June British Council report, the prospect of Brexit has exacerbated the problem, ranging from hostile or indifferent parental attitudes, to problems recruiting EU teachers of foreign languages who are unsure about their reception. The bureaucratic form-filling attached to student exchanges does not help.

Jack Ma, one of China’s, and the world’s, most successful entrepreneurs, highlighted yet another reason to learn languages. The founder of Ali Baba, whose e-commerce and tech company’s market capitalisation stands at $468bn, says, “Computers are always smarter than you. AI will kill a lot of jobs. People need to develop soft skills (my italics) to compete.”

Among those soft skills, language skills are paramount. They open the mind to empathy, to new experiences, to continuous learning, to humour, teamwork and cultural awareness – elements that together distinguish humans from robots.

Arguments against learning languages don’t stack up. Everyone speaks English? Not true. Never underestimate how important it is to speak your counterpart’s language, even if their English is impeccable. A light conversation in Mandarin, say, acknowledges the importance you give to their culture and will make a deal happen faster.

Plus, we are a travelling nation, with 72.8 million visits overseas by UK residents last year, an increase of 3% on the year before. A smattering of Spanish as you travel amidst the Mayan ruins of Guatemala will allow you to engage with a local about his young son’s football career and his dreams of one day playing for Chelsea.

Other mono-linguists argue that wearable translating devices are a reality and getting better by the day. Why go through years of hassle to learn a language when technology does it for you in an instant? Machines are useful, but they cannot reproduce the subtleties of language, the personal connection, and the delight of making mistakes – a classic “je suis plein” to mean “I am full” after a meal when in fact it means “I am pregnant (like a cow or a goat).”

Lastly, there is the myth that if you are not gifted for languages you shouldn’t bother. Nonsense. Unless the Dutch nation has a genetic quirk that allows them all to learn a couple of languages by 16 years old, or the Germans have a peculiar affinity for English, we are all capable of picking up enough of a foreign language to communicate.

Three things need to change.

The government and business need to put the same emphasis on languages as they do on STEM. (In fact, many STEM graduates in this country speak another language because they were educated abroad, where learning a language is deemed as important as engineering). A public campaign, including social media, needs to bring home the importance of the subject in the development of children’s soft skills and their job prospects.

Learning a language should start much earlier, at nursery, when the effort involved is minimal. The (absurd) emphasis on being able to write a grammatically exact sentence should be dropped for a (sensible) emphasis on listening and speaking. The fact that the “oral” part of a language GCSE involves writing an essay and then reciting it parrot-like has nothing to do with oral skills and everything to do with memorisation.

Tech should be used to make learning fun. Take Duolingo, a free platform with 200 million users across the world. It can teach you, say, Spanish in a “casual” way for 5 minutes a day or in an “insane” way at 20 minutes a day. Or thisislanguage.com, which uses unscripted videos by young native speakers, giving a touch of authenticity and allowing the student to visualise a real person with whom they can identify and imagine communicating. All apps use games and humour.

When top law firm Freshfields merged with German firm Bruckhaus in 2000 the British lawyers found their German counterparts spoke excellent, literal English. There was, however, a bit of an issue with idioms. This reportedly led to a memo explaining that when an English lawyer says, “What an interesting idea,” they mean “What a load of codswallop!” It also explained the intricacies of cricket analogies.

Learning languages makes sense at all ages. For those of us getting on a bit, studies show that learning a new language can slow down the onset of dementia by three to six years. Worth a try? Russian, here I come!

A version of this article was published in The Daily Telegraph on 26th August 2018

Fine Minds for Fine Wines

Solutions to consumer company travails

At a recent weekend in Champagne, surrounded by vines and the combined intellect of 60 thinkers from the wine industry and tech/City/energy, we discussed the embattled future of Fine Wine. The conclusions of the Fine Minds for Fine Wines (FM4FW) think tank apply to many consumer companies, not least because between 2011-2016 large consumer brands lost 3 percentage points of market share to smaller brands, according to Boston Consulting Group, as smaller, more agile competitors use innovative marketing to engage customers.

The Fine Wine industry is facing clear challenges given its abysmal demographic statistics. The middle aged and the old are drinking fine wines. The younger generations can’t be bothered with the perceived pomposity of it all, preferring cocktails and prosecco, and they aren’t turning into their parents as they age – at least in their drinking habits. In the UK, over 40% of regular wine drinkers are over 55 years old, according to Wine Intelligence, with comparable statistics in other developed countries.

Meanwhile, the frequency of consumption is declining. In Germany, 16% of the population drank wine regularly in 2007. Only 5% do so in 2018, amid evidence of the harm wine does to health, and concerns about alcoholism. Fine wines could lose their social license to operate, warns energy guru Francis Gugen, just like traditional energy is losing it and tobacco has lost it. None of them is helped by climate change, which increases costs and creates problems with existing soil. Labouring under the weight of endless regulation – I hear the sigh of empathy from my financial services readers – and political upheavals add to the burden. Top Californian vineyards have shortages of harvesting labour because of Trump’s hostility to Mexico and the legalisation of marijuana, a crop that is easier to pick and pays better.

That’s the bad news. The good news? We drank some superb champagne and wines, like a 1996 Lenoble and the Moët & Chandon Grand Vintage 2008. There was even an attempt at a Chinese Fine Wine from the foothills of the Himalayas. Needs more work, was the conclusion. On a more serious note, a crisis is always an opportunity and FM4FW’s Chair Nicole Rolet* and Executive Director Pauline Vicard ensured we came up with game changing action plans.

The definition of luxury is being upended. In a world of terrorism and economic uncertainty, drinking a couple of bottles of a superb claret with a delicious picnic in a field with friends and family resonates with younger and older generations. Stuffiness is definitely out. “White tablecloths and great restaurants…people don’t give a hoot about all that, “says Paul Grieco, the award-winning maverick founder of Terroir, a US-based chain of upmarket wine bars where customers sit on stools, the waiters wear shorts, and the wine list is mouth-watering.

Champagne is associated with grandparents and parents. For it to become hip, celebrities and social media influencers must be brought on board. Adaptability is key: Moët created the Ice Imperial, which has more sugar in it, to turn it into a “cocktail” to be had on ice. So is creating excitement: Super Tuscan vineyard Orneillaia has a contemporary artist create a limited-edition label for one out of every six bottles in a case. We are all children at heart.

But the younger generations don’t just want hip, they want reassurance about the sustainability of the product, its environmental and social footprint. This is a great advantage for family owned houses with stories to tell. Take Anne and Antoine Lenoble, the brother and sister who run the family champagne company. At harvest time last year, champagne houses complained about not finding enough pickers. AR Lenoble had no such problem. “We believe in paying them properly; they are part of the family. Some of them have been coming over from Poland for many years,” says Anne.

Or Bodegas Torres. Patriarch Miguel Torres’s epiphany on climate change was in 2007 when he watched Al Gore’s film An Inconvenient Truth, leading to immediate changes. The head of the multinational, with vineyards in Chile and California as well as Spain, notes that in their main cellar they are already producing 5% of their electricity needs by means of photovoltaic panels and biomass. They are exploring the use of algae to capture CO2 generated from the fermentation process and, years ago, bought fields on higher ground to combat excessive heat.

Communicating the Fine Wine story without a Krug or a Ruinart budget – both champagne brands owned by deep-pocketed LVMH – will become easier with developments in smart labels, a recommendation from our think tank. As technology evolves, imagine pointing your phone at a wine label in a shop and having a Virtual Reality Anne Lenoble telling you the story of her Polish harvesters. Or, in the more mundane short term, a script comes up telling you about their certification as a “High Value Environmental” brand and giving you the traceability of all ingredients.

Technological advances are helping with production as well –   satellites, sensors, robots and drones – yet ironically the “human” has even more value. Creating a direct link between the consumer and the producer, a disruption of a mainly wholesale market, is the Holy Grail. Jordan wineries in Sonoma County, California, carefully segments its customers and creates unique experiences for them. Developments in Artificial Intelligence will take this further, while crowd funding can be a simple way of drawing in consumers and creating the personal link between the wine maker and the consumer – the money raised is secondary.

The younger generation’s emphasis on developing skills led to calls during the FM4FW sessions for accredited apprenticeships; its emphasis on collaboration to the idea of heritage brand rejuvenation clinics with both seniors and millennials/Generation Z contributing; for mentoring platforms for wine makers and for global Fine Wine standards in sustainability.

The future of luxury is offering what money can’t buy: an experience and an emotional connection. Like Proust when he bit into his eponymous madeleine in A la Recherche du Temps Perdu, a sip of that ’96 Lenoble will bring back to me sunny days in Champagne brainstorming the future of Fine Wine

*Nicole Rolet, along with her husband Xavier Rolet KBE, created Fine Wine Chêne Bleu in just over a decade. At a recent dinner honouring the former CEO of the London Stock Exchange, Sir Martin Sorrell, the former head of WPP, paid homage. “I have only two words: Chêne Bleu,” he said.

N.B.  I declare an interest as an Ambassador for Chêne Bleu, serving them at Robinson Hambro dinners.

The Western Alliance, European integration & Brexit

A deathly trio

The Western Alliance is in its death throes; European reform & integration is finished; Brexit is bust. Following attendance at some superb seminars and conferences in the last months, ranging from the Club of Three in Paris to the Global Female Leaders Summit in Berlin, these are the conclusions I have come to. Read on.

1.The Western Alliance is in its death throes; resurrection unlikely

There have been disagreements and upheavals in the US/European relationship before, ranging from the Iraq War in President Bush’s era to President Reagan’s Strategic Defense Initiative, known as Star Wars. But these were very specific and took place within a rules-based international order that was set up post World War II and built on in the next decades – from Bretton Woods to the World Trade Organisation (WTO) – with the leadership of the US.

The “fragmenting West” is no longer being lead by the US, in the words of a former UK spy baron. President Obama began the disengagement of the US from Europe with his “pivot to Asia” policy based on the rise of China and the increasing economic importance of Asia. He added to it with the abdication of US power, a pragmatic decision given the waning appetite of the American public for foreign adventures.

Donald Trump’s crass crashing out of the G-7 summit in Canada, calling Canadian Prime Minister Trudeau “weak and dishonest,” stands in stark contrast to the love-in with North Korea’s Supreme Leader Kim Jong-un whose downtrodden people “love him…you see the fervor.”

But don’t be duped into thinking the jaw-droppingly ludicrous tweets and bizarre policies such as starting a trade war with longstanding allies are temporary aberrations. These mask a long-standing US isolationism that goes back to the founding of the country by immigrants determined to leave behind the troubles of the lands of their birth. Trump’s very determined supporters, around 35% of the electorate, fight against foreign invasions of Chinese goods and foreign workers.

Trump’s undermining of the office of the President, of the outward-facing US institutions like the State Department, and of global bodies like the WTO, is irreversible. Even if the Democrats win the upcoming elections to Congress and the presidential election in 2020 – unlikely at this moment – the most that could be done would be a moderating of those policies. That would not be enough to save the system.

China is the winner, epitomised by the smooth running of the Shanghai Cooperation Organisation’s (SCO) summit mid-June with its concluding statement criticising trade protectionism and reaffirming support for the Iran nuclear deal. The SCO includes China, Russia, India, Pakistan and Central Asian countries, equal to half the world’s population.

How ironic that China’s emergence as the responsible, statesman-like world power has been fast-tracked by the US’s toddler-like behaviour.

2. European reform & integration is finished

It collapsed a few years ago, when the refugee crisis led to the re-establishment of border controls and barbed wire. EU reform and integration had a death bed rally in 2017 through Emmanuel Macron’s enthusiasm – who can forget the French President’ triumphal post-electoral march to the EU’s anthem, Beethoven’s Ode to Joy? France is determined to lead Europe, noted EU Minister Nathalie Loiseau at the Club of Three’s opening dinner. However, without the support of Germany, the other major European power, France stands no chance of forging ahead.

“The totally stagnant” German coalition government is incapable of agreeing any action on domestic politics, let alone controversial reform and unification, noted a German foreign policy supremo. This week’s very public fight on the refugee issue between the major ruling parties, the CDU and Bavarian sister party CSU, underlines its inability to govern.

Meanwhile, Italy’s economic travails, its political revolution lead by an anti-EU, cobbled together coalition government, and its resentment at shouldering too much of the refugee burden, has put the nail in the coffin of European reform and integration.

The EU summit later this month will likely concentrate on refugees and budget negotiations.

3. Brexit is bust

Brexit was meant to be a focus of the summit, but the British government’s position paper has been officially postponed to July.

The UK is reliving the trench warfare of the First World War. Except that the battles are within the government and parties of the UK itself: Tory against Tory, Labour against Labour, back and forth in an endless cycle of destruction, breeding cynicism and despair. The EU is an incidental protagonist, popping onto the field of battle, only to be shouted at and then ignored while the real war continues.

Behind closed doors, civil servants say Brexit “cannot be done,” reports a former foreign policy civil servant of his erstwhile colleagues. They despair of a divided government and an insurmountable task. This can’t be blamed on their unwillingness. It is simply an impossibility given the intricate web that ties the UK and the EU together.

Foreign Secretary Boris Johnson says the Treasury department is the “heart of Remain.” Not surprising, given that their priority is the economic health of the United Kingdom.

The EU has given the UK a deadline of four and a half months from now for Brexit negotiations to be complete and thus for all parties to have enough time to sign a deal. This will not happen. What is most likely is an endless transition via a postponement clause which is applied annually, resulting in the continuous erosion of investment and slower growth.

This Groundhog Day scenario could end with another referendum, say three to five years down the line. By then a younger contingent, who are more pro-European than their elders, will be voting, while lessons about the importance of the vote will have come home to roost. The negative economic effects of the UK’s attempt to extricate itself will be more apparent.

Given the end of European reform and integration, the EU will have morphed into a body bearing many similarities to the former Common Market, albeit with the Euro – a sellable proposition to many, if not all, Brexiteers. Meanwhile, America’s absence from Europe will make the UK’s military alliance with Continental Europe, which is in a very healthy state, even more important. The UK will vote to remain in a European Union whose emphasis is on economic and military ties.

Fantasy land? We are already living in one.

Diversity and Inclusion

Church warnings: How to win the battle for talent

The Catholic Church in Guatemala is on a downward spiral. The magnificent Easter processions that fill the streets of its towns with penitents in purple robes and enthusiastic spectators disguises its decline from a monopoly position to under 50% of the population. The Church’s fall from grace holds at least three lessons – and three warnings – for companies a world away that are struggling with diversifying their workforce.

Leaders: Pope John Paul II was instrumental in the fall of Communism in Eastern Europe. The charismatic Pole was also key to the collapse of the Catholic Church in Guatemala. His ultra-conservative brand of Catholicism reversed most of the advances made at the liberalising Vatican II Council and, more importantly for Central and South America, led to ostracism, if not ex-communication, for large numbers of priests who subscribed to Liberation Theology. These local priests worked for the poor and against abusive right-wing governments. The bishops and cardinals, meanwhile, had no qualms in bedding down with the army-supported authorities.

A CEO delivering rising profitability may be looked on as favourably as Pope John Paul II was in Europe, but without a commitment to Diversity & Inclusion policies those profits won’t be sustainable, given the battle for talented labour. Head hunters Korn Ferry report that London will be facing a shortage of more than half a million workers in financial and professional services by 2030. The tone from the leader of a firm and their interest in delivering more diversity are instrumental in attracting and retaining the best workers. And the more diverse the workforce the better the firm’s chances of survival in our fast-changing world.

Communication: On my recent visit to Guatemala, I watched the wizened, ancient priest celebrate Easter Mass in Antigua town’s main church. The audience of indigenous Indians and mestizos (60% and 35% of the population, respectively), listened to a sermon from the lips of this very white Italian – most probably a good man – who looked as though he had one foot in the grave. He, and his sermon, were uninspiring.

Compare that with the dynamic communication of the Pentecostals. They have radio channels dedicated to national music like salsa and merengue, laced with religious lyrics. They, and other arriviste movements from after the 1870s (the Catholic Church has been around from the 1530s) own TV channels with indigenous, brown-skinned Guatemalans preaching lively, relevant sermons. They are adept users of social media.

From job ads to websites, how you communicate and where you send out your message matters. A company that writes about its Diversity & Inclusion policies only on the recruitment page is missing a trick. The power of certain words is nowhere more evident than in those words that will attract men only, and those that will attract both women and men. “Aggressive” and “competitive” are a red light to women. The words that Schroders has on its website are a green light to all: “Find out about our people and how we value, nurture and celebrate them.”

In the last year, the FTSE-100 asset management firm has seen female applicants increase from 20% to 30% through a transformed communication strategy, CEO Peter Harrison told a May breakfast meeting of the Lord Mayor’s Appeal Power of Diversity programme.

Agile competitors: Evangelicals, Mormons and similar groups have made huge inroads into the Guatemalan population by targeting local leaders – a teacher, the owner of a local store, the midwife – and helping them become the preachers of the new religious message. Every convert morphs into a recruitment agent. The religious movements help local populations with projects to do with the export of tilapia fish or macadamia nuts – taking care of both spiritual and material needs.

The City, my professional home, is facing recruitment competition from companies like the infinitely-more-fashionable Netflix to all sorts of start-ups, while the headwinds of Brexit drive foreign workers away.

The firms that will thrive are those that take care of the spiritual and material needs of their workforce. For instance, ambitious millennial men expect to spend more time with their children than their fathers did with them. At Virgin Money 60% of Dads are taking shared parental leave of 11 weeks, infinitely more than in most firms, and sending out a clear message that time out for a baby does not mean a career on hold.

All managers use a pay and bonus tool that allows them to see in real time the impact of their pay and bonus decisions on the gender pay gap, noted Emily Cox, Director of Public Affairs at the financial services group, another speaker at the Lord Mayor’s Appeal breakfast.

Governments are important too. Some of the Evangelical churches have been supported in their Guatemalan adventures by the US government, which sees them as an arm of US foreign policy.

The UK government, mainly via the Treasury, took the lead in pushing the Women in Finance charter, to which 205 firms have signed up. Why? By attracting and retaining more women in the financial and business services sector, it expects to improve the UK’s sorry productivity numbers.

In adaptation lies survival. The Catholic Church, instead, went to sleep on its Guatemalan throne. Many City firms are transforming themselves. Those who don’t, risk following the Church’s sorry fate.

*Clydesdale Bank announced a bid for Virgin Money as this column was published. Let’s hope the merged entity applies the successful Virgin Money Diversity & Inclusion strategy.

The twin fragilities of India & Turkey

A look behind the facades

India is as fashionable now for investors as Turkey once was. A stable, business-friendly government, projected 7.4% growth this year and a fast-expanding middle class look like a rising soufflé.

That optimism is visible in the Indian stock market’s 33% gain in 2017, with another 15%-18% forecast by brokers for 2018. In the India versus China comparisons, a staple in the investing world, the former currently has the upper hand as China’s growth slows down, while President Xi establishes a dictatorial control that contrasts with India’s apparently vibrant democracy.

Yet beware the easy narrative.

Instead, India shares similarities with troubled Turkey. They are countries that mirror the developed world’s problems of rising inequality and polarised societies; where jobs that have not yet been created are already disappearing under the axe of automation and digital processes; where (imperfect) democratic traditions that allowed for a relatively peaceful expression of anger are undermined and where, ultimately, the graffiti of political upheaval could spoil the pretty picture of economic growth.

THE TURKISH STORY

When I interviewed Turkish Prime Minister Recep Tayyip Erdogan in 2007 he denied that he planned to turn secular Turkey into an Islamic state. Eleven years later the hijab is much more prevalent and having a hijab-wearing wife is the surest way to receive a lucrative government contract or a job in the government, notes Soner Cagaptay, Director of the Turkish Research Program at the Washington Institute for Near East Policy.

Many parents face little choice but to send their children to the proliferating religious schools, while mosque-building rivals all other infrastructure work. The military, who were the guardians of secular Turkey and, oddly enough, its democracy, are emasculated. A 2016 law to restructure the country’s high courts has made the judiciary dependent on government. Meanwhile, the independent media is silenced via court orders, prison and murders. A weakened, divided opposition has failed to make inroads into the dissatisfaction felt by 50% of the electorate who do not vote for the ruling AKP.

“The AKP is on steroids. There is no accountability, “says Cagaptay.

THE INDIAN STORY

In India the IMF gives a thumbs-up to reforms such as flexible inflation targeting and the implementation of a goods and services tax. The Washington-headquartered organisation affirmed growth forecasts of 7.4% this year and 7.18% in 2018, making India the world’s fastest growing economy.

But other statistics highlight different truths. Non-performing loans in the banking sector are over 10% of total assets and are due to rise to 12% later this year, according to India’s central bank – a jaw-dropping figure which could yet be an underestimate, according to some private sector bankers.

Meanwhile, over 30% of the country’s population between the ages of 15 and 29 are NEETs (Not in education, employment or training). Women’s participation in the labour force at around 25% is the lowest among emerging markets.

The BJP’s electoral promise when it came to power in 2014 was the creation of 10m jobs a year. Twelve million Indians reach employable age each year. Prime Minister Narendra Modi insinuated in a tv interview that offering pakodas (snacks) on the street could count as a job. The lack of security and the lack of enough income to survive – the case for many of the sellers – lead to a firm rebuttal by P. Chidambaram, leader of the ailing Congress opposition party, who scoffed, “By that logic, even begging is a job.”

On the political front, the BJP appears to be heading back to its roots as an anti-Muslim, Hindu nationalist group. It is worth remembering that the violence against Muslims in Gujarat in 2002 happened under the rule of Narendra Modi, who was Chief Minister of the state. He is now Prime Minister.

The ruling party has been encouraging violent groups like Gau Rakshaks, whose reported duty is to protect the cows sacred to Hinduism, say commentators. Additionally, they have been undermining the Supreme Court and other constitutional safeguards.

“This state will confront, not accommodate, its neighbours; this state will not tolerate cultural heterogeneity but seek to replace it with a single homogenised culture that Modi mistakenly believes to be Hindutva. Muslims, and other minorities, will be tolerated in this entity so long as they know their place,” wrote respected author Prem Shankar Jha.

THE RISKS TO BOTH

There is little doubt about who stands to win the 2019 Parliamentary and Presidential elections in Turkey – fraud and ballot stuffing guarantee the result – while Prime Minister Modi’s oratorical skills and the sorry state of the opposition are likely to lead to triumph for his party in the same year.

But by personalising power, undermining democratic institutions and turning religion into a bulwark of the state, both rulers have deepened the polarisation in their countries: about half of their electorate will never be won over. There is a brittle fragility to the new Turkey and the new India.

President Erdogan could continue in power until 2034. In fact, he cannot afford to be out of power. He and his family would be prosecuted for well-documented corruption, among other charges. While reinforcing his authoritarian nationalism, Erdogan’s pursuit of an anti-Western foreign policy has made him no friends and added to the number of Turkey’s enemies. “Coupled with these external threats, the country’s crisis could catapult Turkey into a dangerous civil war,” warns Cagaptay.

India and Turkey are moving too quickly along unsustainable paths. Investors watch out.

With thanks to Turkish expert Soner Cagaptay, whose masterful book The New Sultan is a must-read for those seeking to understand today’s Turkey.

With thanks to Mukulika Banerjee, Director of the South Asia Centre at the London School of Economics

Why brand loyalty matters even more

The blurring of personal & business life

Rumour has it that pregnancies have been postponed and Grannies have been kept alive by artificial means, all to ensure the family is not forced to cancel its customary holiday weeks at the Lorünser in the Alberg. The traditional hotel in the Austrian Alps has created brand loyalty which, unlike the snow, doesn’t melt between seasons.

That allegiance is what companies must attempt to create now to attract and retain talent, amid boundary blurring and changes in investment criteria.

The war for talent in financial and professional services firms is exacerbated by the appeal of Tech, both start-ups and established ones, which market their coolness and their social aspirations. * Meanwhile, the demarcation lines between personal life and business life are blurring on the back of the digital revolution and flexible working. It is no longer acceptable to use the phrase, “Well, that’s business!” when referring to a morally dubious choice.

And investment decisions by millennials, who stand to inherit substantial amounts from their baby boomer parents, are strongly linked to their values. Almost 80% of millennials described themselves as impact investors seeking both financial and social impact returns, according to a study by Toniic, a global investing forum. The sample covered six continents.

In fact, even youth who do not yet have the funds to invest, affect valuations. Witness their current campaign against the ultra-powerful National Rifle Association (NRA) in the US, which has led top investors to explore excluding gun companies from some indices and ask questions about their business models.

What must all companies do: be ahead of the curve. Firstly, the tone does come from the top and, surprisingly for an era of mistrust, trust in the voices of CEOs has increased between 2017 and 2018, according to the Edelman Trust Barometer. The CEOs most important task is to build trust, and they are expected to “take the lead on change rather than waiting for the government to impose it,” according to the report.

The CEO role is a great opportunity, which needs to be allied to specific measures. Get the younger generations of staff involved in policy changes, which will give them a sense of stakeholder ownership, rather like the Lorünser “belongs” just as much to my son as it does to me and my mother, and many, many years ago to my grandfather.

The Austrian hotel, like many of its kind, is a family business, a corporate version of the family. There is a reason the traditional family unit is one of the most successful creations ever. Its inbuilt diversity and inclusion – the toddler and the teenager force you to look at the world differently – is a given in a family business but needs nurturing in the corporate world.

How do you report on matters like the CEO’s increased focus on profit sustainability and a substantial growth in employee engagement and loyalty? A classic set of accounts does not reflect this. Nor does an Environmental, Social and Governance (ESG) report. Instead, integrated reporting is the way forward.

One of the pioneers in Total Contribution reporting is The Crown Estate, a fascinating business which owns real estate assets like most of St James’s in central London, as well as managing the seabed around the UK. The method consists of measuring the impact of six pillars: physical resources, natural resources, financial resources, people, network and know-how, in order to see how the business is creating value for all stakeholders.

The downside of not incorporating ever more responsible business practices is an increase in company risk – not least to the share price. Look at BlackRock CEO Larry Fink’s widely-cited February letter: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers and the communities in which they operate.”

$6.3 trillion BlackRock itself is deficient in what it what it preaches – 32 governance and stewardship specialists to be doubled in number by 2020 is proportionately smaller than many of its rivals with smaller funds under management – but what matters is that they are reflecting the zeitgeist. And let’s not ignore the undertone of menace from one of the world’s largest investors.

Realistically, companies won’t manage to create the Lorünser experience. But the voyage there will bring them as close as it can, benefitting all stakeholders.

*Note that Big Tech are now known by the acronym FANG (Facebook, Amazon, Netflix, Google), a clear indication that their tax juggling, privacy-gouging practices are starting to affect their brands. In fact, the 2018 Edelman Trust Barometer showed trust in platforms decreased in 21 out of 28 countries compared to 2017.

No more heroes anymore

Peter Sutherland, Margrethe Vestager et al

Already four decades ago the cry went up, “No more heroes, anymore.” Sung by punk rock band The Stranglers, it rings true for our era. But that is too facile a judgment.

Peter Sutherland, who died last week, was assuredly an exception. A larger than life Irishman whose deep faith was nurtured by the Jesuits, they instilled in him the belief that “you’re on earth for a purpose: to maximise your own abilities,” as he told me a few years ago.

With that ethos, he initiated the Erasmus Scheme when he was European Commissioner for Education, which has so far sponsored over 3 million EU students studying abroad; he bulldozed through the agreement to form the World Trade Organisation (WTO) when he was Director-General of its precursor, the General Agreement on Tariffs and Trade (GATT); latterly, he served as the United Nations Special Representative of the Secretary-General for International Migration.

Despite his stellar career, he constantly questioned how he got to where he was, “genuinely, with humility, because I know the humble failings that I have…which I am not going to identify! I have had the luck of Old Nick.”

Sutherland believed in the market economy and globalisation, which another hero, this one still alive, is doing her best to support. EU Commissioner for Competition, Margrethe Vestager is a former leader of the Danish Social Liberal Party and the inspiration for the Prime Minister character in globally broadcast Danish series Borgen. She was her country’s Minister for Economic Affairs and the Interior and took on the sacred cow of unemployment benefits, cutting them drastically.

In her current role, Vestager is facing up to the oligopolistic power and derisory tax payments of Facebook, Amazon, Apple and Google, while tackling other abuses by large corporates like Russia’s Gazprom.

A front runner to succeed EU President Jean-Claude Juncker when his term expires next year, her candidacy is helped by belonging to a small country. She is very aware that it is only through taming the extremes of the market economy that we can we hope to reconfigure – and thus protect – a system that has brought hundreds of millions out of poverty. Ideologically neutral, happy to attack either welfare excess or corporate excess, Vestager would add a hefty dose of heroic pragmatism to the role of EU President.

Not all heroes have the larger than life personalities of Sutherland or Vestager. With some, only time will tell if their bravery was visionary or misguided. Was Angela Merkel the Chancellor who presided over Europe’s most successful economy; successfully tackled the euro crisis; and cleverly incorporated 1 million refugees into Germany to compensate for its low birth rate?

Or, the opposite, a nationalist who parasitically allowed Germany’s economy to thrive on the back of the travails of Southern European nations; opened the borders to 1 million refugees who will never assimilate, thus sowing the seeds of Central and Eastern Europe’s disillusionment and subsequent departure from the EU? Only history will tell.

There are also heroes who labour on thankless tasks, aware that the result will be ignominy for them. As the British prepared to leave India in 1947, the decision to partition it threw up the most complex task imaginable: deciding on the boundary lines dividing the Punjab and Bengal provinces with their mishmash of Hindu and Muslim populations. Eighty-eight million people, their homes and hovels, their rice paddies and pastures, all 175,000 square miles to be divided between Pakistan and India, with the leaders-to-be of those countries unable to agree. As Larry Collins and Dominique Lapierre recount in their masterful book Freedom at Midnight, brilliant British barrister Sir Cyril Radcliffe took on the responsibility, knowing that no matter what he did, there would be terrible bloodshed and slaughter when his report was published and his name would be mud. It came to pass.

This column is dedicated to those fallible human beings who labour for a better world. Acknowledged or unacknowledged in their time, I leave the last words to German philosopher Schopenhauer.

‘Once, when I was collecting specimens under an oak tree, I found, among the other plants and weeds, and of the same size as they, a plant of a dark colour with contracted leaves and a straight, rigid stalk. When I made to touch it, it said in a firm voice: “Let me alone, I am no weed for your herbarium, like these others to whom nature has given a bare year of life. My life is measured in centuries: I am a little oak tree.”

Thus does he whose influence is to be felt across the centuries stand, as a child, a youth, often still as a man, indeed as a living creature as such, apparently like the rest and as insignificant as they. But just give him time and, with time, those who know how to recognise him. He will not die like the rest.’

From Schopenhauer Essays and Aphorisms, published by Penguin.

Ode to London

A look at exile and taxes

“You cannot tax me out of London,” says a retired top banker who has made a considerable amount of money in his lifetime. HMRC, the UK’s tax collecting body, will be glad to hear that. Not least because an extreme-left government and a wealth tax are looking more probable than they were a few years ago.

As the growth estimates for the British economy are downgraded amid Brexit uncertainty, tax-exile Portugal, where foreigners with assets pay minimal tax, might be an attractive option for some, or even other cities on the European continent. Rather more attractive than locations like built-up Gibraltar or small, floating islands of minimal culture and maximum sun.

But oh, the wrench of leaving London! The city with its blend of multiracial, multi-world events and people, with its magnificent mix of high and low culture, with antiquity and modernity oozing from its pores…

No more could I attend the Dog Party at George armed with a Paddington Bear-like Norfolk Terrier. In the heart of Mayfair on an autumn evening, bejewelled owners appear with their pooches big and small to raise funds for the Dog’s Trust. Elegant waiters in white vests and long aprons offer trays of canine treats, paying no heed to the bottom-smelling that is going on around their ankles. Owners take advantage of the free dog training class, where their pets will behave impeccably – behaviour never to be repeated outside the doors of the private club.

Lisbon, can you offer that?!

A wealth tax is relatively easy to implement. It would affect many professionals who would not consider themselves “wealthy”. Over half a million homes in the UK are worth over £1m, with the majority of those concentrated in London and the South East. In France last year, an annual wealth tax of 0.5% was payable on those with a total net wealth between €800,000 and €1.3 million, rising to 1.5% with wealth over €10m.

In exile, no more could I attend public lectures at the London School of Economics and hear Nobel Prize winners cum Heads of State like Juan Manuel Santos, an LSE-graduate, talk about the state of the world and submit to questioning from eager students.

Geneva, can you offer that?!

Also at the London School of Economics, Dr Cristobal Young of Stanford University last month presented his findings from the first large scale study of tax exile. He looked at 45 million US tax returns along with the Forbes rich list. His conclusion was that, despite conventional wisdom, the actual migration of the rich when taxes are high is limited. Ed Miliband, the former leader of the Labour Party was present for the discussion and this will no doubt be fed into party policy.

No more could I go to a little church on Walton Street to see Mark Rylance, the foremost Shakespearean performer of his generation, supervising a three-hour workshop with actors from disadvantaged, ethnic minority backgrounds who belong to theatre group Intermission, which also works in prisons and in schools. They stage plays like Verona Road, an interpretation of Shakespeare’s Romeo and Juliet, using street language mixed with Shakespeare’s immortal lines. The audience reaction is rarely other than a standing ovation. All for £16.

Luxembourg, can you offer that?!

No more could I drink mediocre, warm wine at The Amorist’s party in a small gallery, where an 80-year old lady in fishnet tights and excessive makeup lambasted a speaker for not mentioning love in his discourse on sex. The Amorist magazine “has been created for readers who want to lose themselves between the sheets of a publication that’s as romantic about sex as it is discursive, philosophical, truthful, wayward, wry, flirtatious, occasionally baffled and downright engrossed.”

Frankfurt, can you offer that?!

And, the cheapest entertainment of all would be no more: walking along the streets of London, forever being distracted by looking at the vast range of London faces and wishing I was a sculptor.

In the immortal words of man of letters Samuel Johnson, “Why, Sir, you find no man, at all intellectual, who is willing to leave London. No, Sir, when a man is tired of London, he is tired of life; for there is in London all that life can afford.”

They are as relevant in 2017 as in 1777.

Big Tech under pressure

The four winds of change

Silicon Valley is shaken. Don’t be distracted by the confidence with which Big Tech representatives have been testifying to Congress about Russian influence in the US electoral process. Nor by the latest top tech results. It is indisputable that the “gorillas” beat earnings expectations last week, leading shares of companies like Amazon, Twitter and Alphabet up sharply, that the S&P 500 Technology Index has gained more than 30% this year, and that Mark Zuckerberg may end up as US President in 2024.

But the breeze of change is turning into a proper wind and it will do more than just ruffle the feathers of Big Tech.

Big Tech believes its own story, best exemplified by the Google founders’ mantra “Don’t be evil.” But it goes further than that in a quasi-religious faith that its products make consumers’ lives better at no cost, that it creates wealth for the many who invest in its equity, and that when founders cash out they spend it on philanthropy to solve the world’s major problems.

There is another story. That they abuse their dominant positions and use their monstrous cash piles to buy up any competitors, thus denying choice to consumers. That their disruption of sectors like retail leads to ever increasing job losses, which their investments in and worship of Artificial Intelligence will only make worse. That their platforms are useful mechanisms for evil doers to up-end our political process. That they are gathering so much information on each of us that George Orwell’s Big Brother in his novel 1984 looks like a rank amateur. That their belief that, in Leona Helmsley’s immortal words, “Only the little people pay taxes” is insidiously undermining society: the most valuable companies of the 21st century pay piddling taxes which are not enough to maintain infrastructure, police, city administration and a host of other crucial societal services.

There is a reason why the Universal Basic Income theory is popular in Silicon Valley. Give a hand out to the disadvantaged members of society and you can wash your hands of them. In fact, put on a pair of VR (Virtual Reality) glasses and you won’t have to see the obese, the left-behinds, the technologically incompetent.

You may think, gentle reader, that the last line is a touch harsh. But remember that your average denizen of Silicon Valley spends time principally with like-minded folk (they recruit in their own image). They share tremendous intelligence and, most likely, a touch to a strong dose of autism. Out of these ingredients can come mind-blowing, revolutionary products or gobsmacking, disconnected howlers. To advertise their latest VR, Mark Zuckerberg’s avatar teleported to Puerto Rico to see the hurricane devastation. With real life wrecked homes in flood waters as a backdrop, he blithely says: “One of the things that is really magical about virtual reality is that you can get the feeling that you’re really in a place.”

One can only hope that the Facebook CEO and other founders will use AI to insert some emotional intelligence into themselves, for their world class public relation advisors are either not up to the job or, more likely, being ignored.

Here are four indicators of how the tide is turning.

1. Shareholders – Despite Big Tech giving equity holders returns of unparalleled juiciness, they are stirring, and discovering they have clout. Note the ousting of UBER’s CEO Travis Kalantick by shareholders on the back of various scandals including a culture that condoned sexual harassment.

Meanwhile, Zuckerberg’s plan to reclassify some shares to retain control of the listed company, resulting in an estimated loss of $10bn for public shareholders due to stock depreciation, was stopped in its tracks by a lawsuit lead by a Swedish national pension fund and others with shares in the company. As tax, regulation and a government backlash chip away at Big Tech’s returns, their vulnerability to shareholder activism will rise.

2. Tax – The tech companies are losing the battle because they have abused the system, indebted governments in the developed world need funds, and there is a limit to how far taxes can be raised on hard-pressed voters.

Big Tech have not just broken the spirit of the law, they have smashed it, and thus the PR battle is lost. Headlines in the media attest to this. The British arm of e-Bay paid £1.6million in corporation tax last year despite revenues of over a billion, an outcome that is grossly unfair when their lack of profitability is nothing but a sleight of hand to do with IP and other tax jurisdictions.

The European Commission has been a leader in tackling the issue. Amazon has been ordered to pay about €250m for back taxes in Luxembourg after benefiting from illegal state aid, while Ireland is being forced to collect €13bn in taxes owed by Apple. The EC is considering a tax on turnover or a levy on online ads or another form of tax and expects to table a proposal by next spring. Although it would be more effective if the US and other nations agreed on a method under the umbrella of the OECD, it is doubtful this will happen any time soon.

But that doesn’t mean there is no action in the US, where the tax reform package touted by the government would see tech giants repatriate a portion of their funds currently stashed overseas. Apple, for instance, holds 94% or $231bn of its cash overseas. And this summer Donald Trump attacked Amazon in a tweet: “Amazon is doing great damage to tax paying retailers.” I would expect to see more action on this front from the US government.

3. Regulation – There is movement on both sides of the Atlantic. Recently, a bipartisan group in Congress proposed the Honest Ads Act, which would make online political advertising subject to the same rules of disclosure as those on television, print and radio. As more revelations of Russia’s involvement in the 2016 U.S. election come to light through Big Tech’s testimony to Congress, the political urge for change increases.

Meanwhile, a former head of GCHQ, the UK surveillance agency, suggested tech companies might have to be regulated. Robert Hannigan said they had been naïve about fake news and their interference in the democratic process. At the end of June Germany passed the Network Enforcement Law which imposes steep fines (€5m to €50m) on platform companies if they don’t remove hate and other detrimental speech within 24 hours.

Anti-trust law or other regulation will probably be used at some point on Facebook and Google due to their oligopolistic dominance of the digital ad market. They control 60% of it between them and, of even more concern, around 85% of all new digital advertising revenue. Competitors barely make a dent before they are gobbled up.

4. Political backlash – Governments are expending huge effort to tackle economic inequality, one of the biggest issues of our time – once they and the media understand Big Tech’s contribution to it, there is bound to be legislation.

A bit of background: in a pioneering study, Professor Beverly Skeggs at the London School of Economics used software to track the trackers, mainly Facebook, and analyse the use of data. Bids for the data of High Net Worth individuals and their network – that means you, dear reader – are made 50 billion times a day. With the January implementation of PSD2, a European directive that aims to increase consumer financial choice, Facebook and other tech giants will have access to even more of our financial data.

The bigger scandal lies in who else is being targeted. Professor Skeggs points out that the poor and the vulnerable are sold to advertisers – they are peddled debt, predatory lending, scams like Trump university. With more than eight million adults in the UK living with problem debt, US consumer debt levels at record highs and interest rates set to rise, those struggling will face even more adversity. Governments will need to respond. Big Tech would make a convenient – and justified – target.

German Justice Minister Heiko Maas summarised Big Tech’s attitude to the intrusion of the real world in a speech a few months ago:

“Experience has shown that, without political pressure, the large platform operators will not fulfill their obligations…”

A number of factors are coming together. As knowledge of the modus operandi of Big Tech becomes more widespread, politicians and the media will feed off each other. The headlines and the political wins will result in fines and laws which should make Big Tech more accountable.

Shareholders will also be more active, not least because of the changes to the tech business model. More staff to monitor posts, more staff to lobby politicians and more staff to communicate with the outside world…this sounds not entirely unlike the journey banks undertook post the financial crisis. But banks realised their culture needed to change as well. Big Tech is just starting to realise this. The EQ of Silicon Valley has yet to match its IQ.

Russia is the only existential threat

An interview with US Commanding General Hodges

Despite the heightened threat from North Korea, the Alliance mustn’t lose sight of the fact that Russia is the only existential threat to Europe and the US, declares the Commanding General in charge of US troops in Europe.

Interviewed as Russia and its ally Belarus hold the Zapad-2017 war games, following similar ones in 2009 and 2013 which served as distractions and preparation for the invasions of Georgia, Crimea and Eastern Ukraine, Lieutenant General Ben Hodges says: “There are multiple threats all around us, of course, which is part of why our NATO alliance is so important. Of course Russia, and its behaviour over the last three years, is the only nation that really possesses the ability, the capability, to destroy a European country or the United States with its nuclear weapons. In terms of an existential threat: that’s Russia.”

He adds,” Now it’s not likely, but that’s a part of it.”

Zapad, which is Russian for “West”, is causing heightened anxiety in the North American Treaty Organisation (NATO) for many reasons. They are the largest war games in years – although the Russians insist troop numbers are under the 13,000 beyond which foreign observers have the right to participate, NATO members like Estonia estimate the numbers at around 100,000. Meanwhile, the state of Russian-NATO relations is at a low, communications between the two camps to avoid misunderstandings have declined considerably and rumours are rife that the Russians are considering leaving behind troops in Belarus or annexing it outright on the back of disagreements with its ruler Alexander Lukashenka.

At a 2016 summer summit in Warsaw, NATO upped the military stakes on the back of Russia’s actions. It feared that its troops were too far back from a potential war front. Moving from what it called an assurance to a deterrence strategy, European and US troops are now closer to the border in the Baltic states and Poland. For instance, there are 800 British troops in Estonia, Canadians in Latvia and Germans in Lithuania, part of NATO’s forward presence, although “the foot is tapping on the brake to avoid anything provocative as no one wants a war with Russia,” says Hodges.

NATO armies, including the US, have been under financial pressure for a number of years. The top US army commander in Europe is philosophical about the resulting trade-offs, no doubt helped by having experienced many different twists and turns in policy over a 37-year career. Reports that the ever-diminishing British army may end up with only 65,000 troops don’t faze him: “I would say the British army has the same challenge that the American army has: not enough resources to do everything that it’s asked to do.”

He sings the praises of the British army leaders for making the most of their funds, while pointing out possible parallels with the US: “We reduced the size of the US army to pay for modernisation and readiness and now we’re having to grow the army back up and increase the size to meet all the requirements, so the price will be paid somewhere else.” In fact, in his trademark southern drawl, he points out that the UK is launching two magnificent aircraft carriers but “I don’t know if they have enough sailors to man both aircraft carriers.”

Hodges, whose family home was spared the destructive ire of Hurricane Irma, is more concerned with the many impediments to moving troops and equipment around NATO countries. These range from bridges too weak to take the weight of Challenger tanks to bureaucratic processes appropriate to peacetime only. Already in 2015 he called for the military equivalent of a Schengen zone – in essence the ability to move forces freely through all European nations without the current red tape restrictions -a move seconded this year by Dutch Defense Minister Jeanine Hennis-Plasschaert. Yet no advances appear to have been made on this front.

“If we had only three days to send a formation to Poland, it has to be be done under peace time conditions and we will be way too late to the party,” he warns.

Treading carefully to avoid any criticism of President Donald Trump, whose public berating of NATO country heads of government at his first NATO summit in May made the Alliance look weak and in disarray, Hodges makes the point that prior US Presidents also complained about burden sharing. In a rather more positive tone than his President, who lambasted 23 of the member nations for not paying what they should for their defence, the General notes that the 2014 commitment to spend 2% of GDP was to be reached a decade later in 2024 and yet “almost every nation in the Alliance has moved either towards that two percent, has achieved it, or at least has stopped that decline. That’s very important because that demonstrates commitment towards collective security.”

“US economic ties with Europe are five times what they are with any other region in the world,” he points out.

The General, due to retire next year, is concerned about balancing the need for more cyber security to counteract Russian and other attacks, with the need for interoperability between the troops of different countries. “No doubt, it’s undisputed, that Russia is putting pressure on nations, individuals, or organisations through the use of cyber… The cyber domain is on the front of everybody’s minds,” he says.

Jens Stoltenberg, Secretary General of NATO, has said that a cyberattack against a member by another state could trigger a collective military response under Article V.

Hodges, whose career encompasses time spent fighting in Iraq and as Director of Operations in Kandahar, Afghanistan, is sanguine about another nation involved in cyberattacks against the Alliance: Turkey. This is despite an official German security report accusing the NATO member of interference in the German elections due later this month, as well as other policy moves by President Erdogan which are not in keeping with an ally.

“The fact is we are more effective as an alliance with Turkey than we would be without Turkey. It’s been a loyal member of the Alliance since it joined in 1952. It has a very good professional military. The geographic location, obviously, on the Black Sea, the Caucasus, the eastern Mediterranean. It’s essential for the alliance for so much that we have to do in that part of the world,” he says, adding some caveats: “It is a challenge. I think that Turkey knows that their future is with the West. They may buy weapons from Russia, they may depend on Russia for energy, as does half of Europe, but their real, true economic prosperity depends on the West, not Russia.”

Having been involved in NATO at various points in his career, he sounds relatively unconcerned, if not blasé, about internal divergences. “So, look, each member of NATO irritates other members; the United States irritates people; Germany irritates people; the UK irritates. That’s kind of the nature of a coalition.”

On the Korean front, he is very concerned, and sees China as key. “China has the most important role here. China does not want a war in Korea because they will inherit all the debris and the disaster that would fall out from it. But I also don’t think that China wants a unified Korea that would possibly become an American ally the way South Korea is. So, they’ve got to figure out their role,” he says.

Earlier this week, the UN Security Council, which includes China and Russia, voted unanimously to boost sanctions against North Korea. How well these are being respected is another matter.

Meanwhile, Hodges dismisses as misguided a headline-grabbing open letter signed by over 100 tech entrepreneurs such as Elon Musk calling for the United Nations to ban the development and use of killer robots like drones. Their precision significantly reduces civilian and military casualties, while any ban would mean that terrorists and enemies would use them: “So I don’t know what good, in terms of real effect, would come out of that.”

Interviewed after a breakfast briefing to the Worshipful Company of International Bankers, a City of London livery company, as part of reaching out to the public, the General is philosophical, and endearingly humble, about his stellar 37-year career. “I’ve made about every mistake you can make seriously and not get sacked,” he muses.” I’ve been forgiven for losing equipment, getting lost, failing a mission, those kinds of things.”

At a time when there has been a mass erosion of institutional legitimacy in the US and other NATO countries, the fact that the military can hold its head high is due in no small measure to men like General Ben Hodges.

Two fresh ideas on migration

Paddington Bear, the ultimate refugee, would never have made it past the recent terrorism and refugee-inspired checks. Some of my followers, holidaying in Europe, may even now be reading this while standing in endless airport queues.

Here is one reason for the checks: in the first half of 2017, the Italian Ministry of Interior registered 83,752 new migrant arrivals, which is the highest number recorded for this period since 2014, with thousands arriving every week in these peak summer months. It is no coincidence that the populist Five Star Movement is running neck to neck with the centre-left Democratic Party in polling for the 2018 general election.

The issue of migrants divides countries, allies, regional groupings, all at a time when a unified front is the only way to deal with it, as well as other related problems confronting mankind, such as climate change and Islamic terrorism.

Transformational factors are at play which will increase humanitarian disasters, leading to an explosion in the numbers of migrants and refugees over the coming decades, says Dr Randolph Kent, a former United Nation official whose roles included Humanitarian Coordinator in Somalia and Kosovo. He envisages migration flows that could be analogous to the flows of tribes in north-east Asia in the 12th century, numbering hundreds of millions.

“And, unlike the 14 million refugees that moved between Pakistan and India in 1947, the vast numbers that one can foresee in the future will also have access to sophisticated weapons,” he states in an article for the International Review of the Red Cross.

Our increasingly complex eco-systems guarantee this outcome through the weakening of the post-war global system, the inter-related threat of cybernetic attacks, the resurgence of sovereignty, population growth, demographic shifts, the wildfire effect of social networking, climate change and wars.

Given that large movements of people in search of family safety and/or a better life are going to be an increasing feature of our society, valiant attempts to categorise “economic migrants” separately from “refugees” fleeing war, with rights under international law, are useful only at the margin.

Migration per se is not a zero-sum game where one less migrant means one more job for a local – the local who may well be the product of a substandard education and a Western benefits system. For the many countries with declining working age populations, lower migration means crops left unpicked, engineering jobs left unfilled and a faster uptake of robots. Any complacency in the UK about a Mediterranean-based influx solely to the Continent ignores the evermore sophisticated smuggling networks.

Dealing with repercussions in the social order, integration and a host of other issues is a challenge for us and the next generations. Visionary ideas are needed. I came across two recently.

Former US Secretary of State John Kerry gave the 53rd annual lecture at think tank Ditchley Park in Oxfordshire last month. The house had been a weekend home to Prime Minister Winston Churchill during World War II. It was an appropriate venue for another committed internationalist to express his ideas.

Kerry called for a Marshall Plan for the 21st century by a doubling up of the developed world’s bet on the promise of globalisation – not only confined to the developing world, but to the West and wealthy OECD countries – in order to strike at the roots of the despair leading to populism and extremism.

He spoke of the “largest public-private partnership the world has ever seen” by having the West partner with China, busy with its “Belt and Road” policy of investing in the developing world to boost trade and stimulate economic growth across Asia. Kerry called for a global initiative that would release “some of the $12-13 trillion that today is sitting in net negative interest rate status around the world”. He believes this would strike at the roots of extremism and hopelessness by developing education and job opportunities around the world.

His vision encompassed developing clean energy, which has the potential to become the largest market the world has ever seen, and harnessing the power of technology which is already leaving too many people behind. Rather than reacting to change, the private sector and governments need to do more to shape the future through unified action. Rooting out corruption would be critical to delivering the programme.

German Chancellor Angela Merkel has also been looking at the Marshall Plan idea, consulting with private sector investors in Africa.

The second visionary idea comes from Tolu Olubunmi and the World Economic Forum, which already recognised her a couple of years ago as one of 15 women changing the world. She co-chairs Mobile Minds, an initiative focused on remote working as an alternative to migration. For talented individuals who do not necessarily want to leave home but cannot find jobs, remote and mobile work are a way forward.

For countries with declining populations, this is a way around the political backlash from local populations. Benefits for companies include increased access to talent, cost savings and reduced turnover, while societal benefits include global traffic mitigation and a decreased brain drain from the developing world to the developed world.

US-based Olubunmi does not underestimate the challenges of a widespread implementation of cross-border remote work – compliance issues, consistency of fair labour standards, a tangle of employment laws, among others. But as a Nigerian national and a trained chemical engineer who arrived in the US as an undocumented and unemployed migrant, her own story gives credence and lends determination to this globally transformational agenda.

Paddington Bear turned out to be the right sort of refugee, despite his inauspicious start. An immigration officer would have judged that the short, brown figure lacking in skills – as evidenced by the label round his neck that read “Please look after this bear” – would not be GDP-enhancing. Yet if one could measure added value by the laughter of children and adult alike, or marmalade sandwiches, the naughtiest bear in the world broke all the records.

Bring back Boris

An unlikely saviour

Much as one hates to welcome back a turncoat who sacrificed his Remain views on the altar of unparalleled ambition, bring back Boris!

The UK’s June 8th general election was Theresa May’s to lose and this she did. The catchphrase “strong and stable” turned out to be untrue, as U-turn followed U-turn with not even a glimpse of an apology. Being the recipient of years of austerity – however much it was needed following the financial crisis – was always going to make defending government positions on health and security a dreadful task. Labour leader Jeremy Corbyn, meanwhile, could scatter largesse for all and sundry like a bridesmaid’s petals. Cleaning up the mess was never going to be his problem.

At the time of writing, the Tory majority has collapsed with the loss of 13 seats, nine of them government ministers, while Labour has won 29. To reach the 326 seats needed to govern, the 318-seat Conservative Party is in talks with Northern Ireland’s 10-seat Democratic Unionist Party (DUP).

A weak minority government with a discredited leader will not last. Nor is it the right position from which to negotiate Brexit. A new Conservative Party leader is needed to fight a new election.

The country’s saviour, Foreign Minister Boris Johnson, is an unlikely figure. Yet the contrast with Prime Minister May is where his strength lies. Bumbling and dishevelled vs controlled and neatly clad. Eton-honed debating skills vs May’s ducking the party leader debate. An excess of everything on display – flesh, words and humanity, vs containment. Well-documented sexual transgressions vs a steady marriage of 37 years.

Boris could recover the London and youth votes that May lost. He also stands a better chance of keeping the Hard Brexiters in the party under control. Not necessarily due to his charm, although that helps, but because the party has just received a horrendous shock. The actual share of the vote is truly terrifying for them, with the Tories at 42% compared to Labour’s 40%. The complacency of May is giving way to a June panic. And the biggest unifier for any party is a credible opposition.

Helpful to Boris will be the perception that voters are tired of austerity. The government will borrow more to fund policies ranging from increased police numbers to the NHS health service. It will also have to raise taxes. What this will mean for interest rates and the pound is far from clear due to a host of external factors, such as the German general elections in September and the timing of the Brexit negotiations. But with Boris at the helm, a soft Brexit looks more likely.

As the UK continues its slide into international irrelevance on the international stage, it is time for the return of the Teddy Bear, this time to head the Conservative Party, head the next government, and arrest the decline.

A New Age for Old Age

The latest tech innovations

Dimmed lights are reflected on the heated sea water in the indoor pool, while New Age music wafts across the cavernous room. Aged bodies advance in slow motion from jet to jet, allowing each one to massage a different part of their arthritic bodies, while chatting desultorily with each other and with Nikkos, the Greek God of a lifeguard.

This vision of the future, courtesy of a thalassotherapy spa holiday near Athens, shocked me into a personal awareness of how the population of the world’s major economies is ageing, notably in Europe, Japan, China and the US. And what a wealth of opportunities and challenges arise out of it.

People over 60 are set to become the world’s fastest growing cohort. By 2050 there will be 2 billion of them. Their participation in the workforce will be crucial to make up for fewer working-age adults. For this to happen, more flexibility will be needed in the world of work, whose practices too often continue to be hidebound by tradition.

Adapting the tools of work is also vital. Sixteen-year old students at a recent workshop at ADA, the National College for Digital Skills in London, experimented with taping three of their fingers together and wearing dark glasses while trying to use a normal keyboard. The simulation of old age travails will undoubtedly lead to breakthroughs in workable technology.

In any case muscle weakening, for instance, will not be an irreversible effect of age. The Olympic-contest handshake between French President Emmanuel Macron and US President Donald Trump was won by the younger man. No surprise there. But bionic inserts, created using 3-D printing, are on the horizon.

Blurring science fiction and reality, Bristol-based Open Bionics creates 3D-printed robotic hands for amputees, mainly children. One child asked them for a pocket to store his iPhone on his bionic arm. In a few years, one can visualise an older person who has lost the use of their arms due to, say, Parkinson’s, asking for an app to be downloaded into their arm which would call their carers when they had a severe fall. (In fact, the latter already exists, albeit on an iPhone, not inserted into a body.)

Later that day at the spa, gently perspiring in a sticky seaweed wrap, I reflected that in 500 BC Greek physician Hippocrates came up with a revolutionary focus on preventing sickness instead of simply treating disease. The older people at the spa (and those of us who meander in the middle-age range) were doing just that. Monitoring our health is becoming normal through Fitbit and other wearable devices, while exciting apps are being developed that can tell when a depressive episode is about to happen or when a heartbeat is out of sync, as seen in the Flying Health incubator in Germany.

Robots will undoubtedly help with old age. Yet the warmth of human interaction is invaluable. Penelope, one of the personal trainers at the spa and the living image of a koure (temple maiden), led a keep-fit class in the pool and her smile, surely, encouraged us more than any robotic voice could have. In any case, the human/tech interface is emerging as the most productive piece of the puzzle in our new world. Take Vida, a start-up funded by Hambro Perks which aims to disrupt the carer market. The app lets customers book carefully vetted carers and includes capabilities like setting the tasks they are to accomplish. It sees itself as the Uber of carers.

Mental stimulation is essential both to quality of life and to being a productive member of society. Tech devices will help deal with, and possibly reverse the decline in our mental capacity as we age – but nothing can be as stimulating to our brains (and souls) as using our professional capabilities to help society. This can be seen through the work of United Nations Volunteers. Assignments can range from advising on dam building to editing a newspaper in Haiti or changing laws in Vietnam. There is also online volunteering in areas like proposal writing or social media management for an organisation in Cameroon. The UN is visionary is in not having any upper age limit for the skilled individuals it seeks, thus appealing to retired professionals, amongst others.

In fact, the Odyssean saga of Greek debt forgiveness/restructuring/bailout, which dominated the local papers during our stay, would assuredly benefit from the advice of old hands who dealt with the Latin America or Asian debt crises.

Touring the fascinating Acropolis Museum with my elegant 85-year old mother stuck in the customary wheelchair at groin height, I mused on the business opportunity in creating one that would allow the occupant to be at the proper viewing height for the exhibits. But an ageing population is not all about opportunities. It is just as much about facing up to the challenges and the biggest one is financing, not easy for politicians.

The difficulty of so doing became apparent as we landed in London to find that Prime Minister Theresa May had done a U-turn on a new policy to make pensioners pay more for their care. It needed more work, but the basic premise that more funds were needed was accurate. However, even on the funding side there are new ways of doing things, in this case using data to come up with risk-pooling initiatives via cloud communities, as mentioned in more detail in a FT piece.

To the young out there, embrace the older generation for their wisdom and experience; to the middle-aged and old, fear not advancing age but grasp it with the strength of a Hercules.

*Open Bionics and the Flying Health incubator both gave presentations at the fascinating annual Global Female Leaders Summit 2017 in Berlin. I am a member of the Advisory Board. The next one is April 23-25, 2018.

Escape from the bubble

Re-engineering capitalism

I live in Chelsea, studied at the LSE and live in a bubble. This sounds like a confession from a self-help group like Alcoholics Anonymous. So it is, dear reader of Karina’s Column, for you too are most likely to be among the much-talked about 1% of the global population that owns half the world’s wealth. In fact, chances are a decent number of you are part of the 0.1% *

We socialise and work primarily amongst ourselves, while our global outlook and preoccupation with the state of the world is matched with socially liberal and economically conservative politics. A minority of you voted for Brexit, but its triumph was a surprise; a minority of you voted for Donald Trump, but his triumph was a surprise; I hope none of my French readers vote for Marine Le Pen and that she will not triumph.

Yet I am not sure after reading Edouard Louis’s The End of Eddy, an autobiographical account of unemployment, brutality and family love in Northern France. Caught in a trap of alienation and hopelessness, Le Pen’s National Front canalises that anger and frustration.

Understanding the world we live in is crucial. LSE’s motto is ‘Rerum cognoscere causas’ or ‘to Know the Causes of Things,’ without which we cannot properly deal with the consequences and come up with solutions.

Here is one of the primary causes of the current crisis. Two thirds of households in developed economies saw no increase in their real incomes between 2005 and 2014, according to a McKinsey study. Even with the return of some jobs to their developed country base, slow growth and technology-induced disruptions look set to eliminate jobs for humans faster than new ones can be created. Improved education and training, the mantra of all governments for the last decade or two, have stumbled against the obstacle of implementation. That doesn’t mean we should not forge ahead – the boost to apprenticeships in the UK being a case in point – but may be of use only at the margin.

In 2011, McDonald’s launched a high-profile initiative to hire 50,000 new workers in a single day and received over a million applications, a ratio that made landing a McJob more of a statistical long shot than getting accepted at Harvard, as cited by Martin Ford in his must-read The Rise of the Robots.  These are the sort of low wage and no benefit jobs which have provided a kind of safety net of sorts for workers with a lack of skills. But San Francisco-based Momentum Machines’ first device makes gourmet burgers from scratch – how soon before the cost plummets and McDonald’s burgers are made and delivered by robots?

Meanwhile, the gig economy and zero hour contracts often represent a self-destructive capitalism that could take us all down with it. Putting to one side any moral considerations about a total lack of employer responsibility, on a purely economic level our societies only function on the back of large numbers of consumers who live with hope.

And yet, despair at the bleak present and future of work can be staved off. We are at a point in the developed world where we are getting to ‘know the causes’ past and present, and are beginning to visualise the future. Solutions like a Universal Basic Income (UBI) are being discussed. It does not really matter whether the idea of all citizens of a country receiving an unconditional amount of money allowing them to survive at a low level is viable, or not. What matters is that a re-engineering of capitalism is a constant topic of discussion. Innovative ideas are bubbling away.

Even much-maligned Etonians are working at solutions. The Hoberman Prize for Social Entrepreneurship in Technology was this year presented to three boys who developed a free app connecting employers and employees in the gig economy. Crucially, it also attempts to ensure workers’ rights are upheld.

I live in a bubble pricked by recent election results. Armed with optimism and the intellectual and financial resources of the 1% I believe we will be able rise to the challenge.

———————————————–

* The Credit Suisse Research Institute defines the top 1% as having assets of over $759,900, including property and stock market investments, but excluding debt. Only those I have met personally or been introduced to are signed up to my column. However, a few people at hedge funds have signed themselves up.

An oasis of stability amidst the populism

The Spanish exception

Political upheaval stalks the West. Holland went to the polls in March and the far-right party of Geert Wilders came in second place. Marine Le Pen looks likely to win the first round of the French presidential elections in April. The US voted for Trump and Britain voted for Brexit. Yet cast your eyes south to a country with 42% youth unemployment, two inconclusive elections, almost a year without an elected government, and discover an oasis of stability.

“Spain is different!” Napoleon was reported to have exclaimed after his troop’s first defeat on Spanish territory in 1808 following a remorseless string of successes elsewhere.

Spain now boasts the same conservative Prime Minister, Mariano Rajoy, and the same Economics Minister, Luis de Guindos, as in 2012 when the Partido Popular came to power.

Protest party Podemos has lost its puff, while the traditional opposition socialist party is leaderless and beset by infighting, forced to abstain from voting against a minority conservative government for fear of new elections at which it would likely lose more votes. At a time when the UK Conservative Party and the US Republican Party espouse policies their predecessors would not recognise, the Partido Popular administration stands by the labour law reforms from its last stint in government. There is even a whiff of hope around the Catalan question, as the government privately and publicly dialogues with local politicians.

Meanwhile, the UK’s loss of influence in the EU has moved Spain into a more central, influential position. At the mini-EU summit in Versailles earlier this month, Mariano Rajoy was very visible in the company of Germany’s Angela Merkel, the French President and the Italian Prime Minister.

The answer to why Spain has evaded a major upset is complex – and like recipes for paella, everyone has a different one. “We are too poor to indulge in a Brexit-like bit of populism,” states a Spanish diplomat friend. “Only a wealthy country like the UK can afford to do so.”

‘Poor’ is an exaggeration, but what is true is that the years of scarcity are not as far back in Spain’s collective memory as that of other European neighbours. Spain’s per capita nominal GDP is $28,115. The UK’s is $39,530. For the US this is $56,115.

Evidence of what populism means in practice is also cited as a reason. Podemos, with its pony-tailed, jeans-clad leader, reached the apogee of its support a couple of years ago. It then suffered the shock of actually making it into some local and city governments, proving to be incompetent and unable to fulfil any of its promises. The party’s connections with Venezuela came to light as did other revelations of corruption, all leading to disappointing results for them in the last general elections.

Additionally, the populace has not reacted to large scale immigration or terrorist attacks with xenophobia and anti-Muslim sentiment. Partly, easily integrated Latin Americans make up the vast majority of the 10% of the total population who are immigrants. Yet there are also an estimated one million Moroccans in Spain. It is a tolerant society.

Spain’s home ownership rates provide another clue, says a Spanish bank chairman. A substantial 78% of Spaniards own their own home, even after one of the deepest recessions in the EU. It is 22% lower for the UK, the US and France. And almost half of the population own their homes outright, without a mortgage, compared to 34% in the UK. Despite headline-grabbing statistics like 18% unemployment, the Spanish middle class has a larger stake in political stability.

In fact, the economy is progressing solidly, with 3.2% GDP growth last year and forecasts of up to 2.7% in 2017 on the back of a rebound in private consumption, exports, and investment, aided by past reforms, according to the IMF. Tourism has reached record highs as the list of sunny competitor countries that are also safe becomes ever smaller.

Although the Spanish phrase “mal de muchos, consuelo de tontos” (only a fool takes comfort from the misfortune of others) comes to mind, Madrid also hopes to take advantage of Brexit to poach some City jobs. It has put on an impressive turn of speed. The financial markets regulatory authority, the CNMV, guarantees foreign companies a fast-track pre-authorisation process in two weeks and authorisation in two months. The simple pre-authorisation form is on the website and, like all company documentation, can be submitted in English. An English-speaking coach is appointed to guide each firm through the process.

For expats, it doesn’t get much better than living in small city where you can easily drop off your children at any number of international schools before work, walk to the office, have a light lunch of fresh, grilled gambas in one of the many outdoor restaurants even in March, and from May enjoy a game of evening golf or savour the array of cultural activities in endless sunshine. For Spaniards only stay at home when they are ill. Seriously ill. Life-threateningly ill.

Madrileños, in the words of a foreign CEO “combine the rigour of the Germans with the creativity of the latins.” That is certainly a reason why Madrid is the 2nd region in the EU for technology created employment: 220,000 professionals working in high-tech industrial and services sectors.

In truth, calling a country with a minority government dependent on the abstention of its rivals an oasis of stability, may seem an exaggeration. But in our topsy turvy world, what matters is relative stability, not absolute stability. And whatever happens on the political front, I would always vouch for Spain’s welcome of foreigners – be they tourists, immigrants or displaced bankers.