American Abroad

Christmas Toys for the Technologically Impaired

Ever a disgruntled techno-phobe, I have been slowly coerced into the digital age, and have been aided along the way by my dedicated (and perhaps equally disgruntled) partner, a comp sci grad. The newest edition to Amy’s-Simple-Introduction-to-the-Modern-World has been my Christmas presents consisting of one Olympus digital recorder, one TP7 Telephone Pickup, and the icing on the cake: an iPod Touch.

As you can imagine, my reaction was one of abundant enthusiasm mixed with stone-age grunting and mild confusion over the turn-effect of the iTunes application. Yes, it is a wonder I have made it this far. But an Amy apologist (and there are many) might be inclined to point out that technology and its association with video games, sound systems, the demand to find the largest and most powerful television known to man-is largely contrary to the anti-consumer ethos promulgated by myself. The dangers of over-commodification and consequent social alienation through hyper-consumerism has led me to shy away from ever buying anything seemingly too unnecessary to fulfill my life in any practical manner.

This, and sheer laziness, have resulted in the creature you see before you: a stupefied young woman ferociously shaking an Ipod touch, while staring blankly at the time/date selection on a recorder only to find hours later that the side button, when pressed hard, does in fact lead to a menu.
Indeed, the lesson I’ve learned in the past 6 months is glaringly obvious to anyone not burdened by a stubborn refusal to adapt: technology is a tool, nothing more or less. It has the potential to greatly improve peoples lives, enhance our understanding of the world, or lead us toward a state of obesity and blindness resulting from hours in front of an Xbox with a constant stash of essential adrenaline-pumping fuel in the form of Hula-Hoops and Curly-Whirly’s.

Of course the class barrier does play a key role in access to these benefits, but in the near future at least, I hope to overcome my middle-class guilt by using my new gifts for the benefit of journalism. And I’m happy to listen to the Doors on my new iPod touch while doing so…

Interest rates, Unemployment and Resignation: An Exclusive with the Bank of England’s David Blanchflower

Once deemed ‘bonkers’ by colleagues for his repeated call to cut the Bank of England’s base rate, David Blanchflower is now hailed as the ‘Cassandra’ of the Monetary Policy Committee. Yet acting as the Bank seer is not without its woes, and could explain Blanchflower’s decision to resign when his term ends in May. He admits that, in hindsight, the job wasn’t what he’d bargained for.

“Central banking was meant to be kind of absent. Our job was to stay off the front pages, and unfortunately we’ve had a world financial crisis. It’s not been boring, and it certainly wasn’t very part-time, but not quite what I expected or hoped for.”

The British born economist resides in the US where he lectures at Dartmouth University. Every month he flies across the Atlantic to vote during Bank meetings, and often his presence is requested in Europe, as his press officer Gary Hunt explained in the trek up to Blanchflower’s office. “Danny” (as he’s referred to by everyone but his mum) had just returned from Germany, where he holds two research fellowships at the Universities of Bonn and Munich. While most people might prefer a more relaxed schedule, the self-proclaimed ‘workaholic’ says he’s just about adjusted.

“Suppose there’s an island called Atlantis in the middle of the Atlantic, that’s approximately where my body clock is. You never really get used to it, but a routine helps.”

In fact the jetlag was probably worth it. US residency enabled Blanchflower to see firsthand how the financial shock tore through the US economy, urging him to vote for lowered interest rates in the UK before inflationary fear was replaced by recessionary reality. 

“A lot of the things that happened in the US about 9 months earlier were actually occurring here, so it looked to me like there were a lot of similarities between the US and UK, ” he said.

The Bank of England cut interest rates by 1.5 per cent in November, and a further 1 per cent in December. The base rate is now at an all-time historic low of 2 per cent, and is expected to face further cuts as recession kicks in. Blanchflower has insisted that the Bank is now doing what needs to be done, but the outlook seems grim as sterling drops below the euro and banks fail to pass on cuts to SME’s and would-be mortgage buyers.

The head of City University’s Economics department Saqib Jafarey says: “Cutting rates drastically might have been a bad sign for the markets because it was a very big reversal in policy. It could have led to what is happening now, the declining value of the pound.”

Economists afraid of deflation have referred to the case of Japan in the 1990s when a cut to zero led to severe economic stagnation.

“We’ve tried to learn the lesson from Japan, and I think part of the lesson is you have to recapitalize the banks,” says Blanchflower earnestly. “You have to take toxic assets away from them, allow bad banks to fail, and then act very early to get rates down. But we’re quite a long way off from zero.”

According to the leading labour economist a more pressing problem is the short to medium-term crisis of unemployment, which he’s predicted will hit 3 million by 2010.

“I think these numbers are going to rise quickly, how high they’re going to go will depend on what we do, what the government does, what other governments do, and what happens to world demand. But obviously unemployment is going to rise.”

Blanchflower is all too familiar with the subject of unemployment as the author of the groundbreaking book The Wage Curve, which tracks the relationship between unemployment and low wage levels. He’s also done extensive research into the economics of happiness and the implications of unemployment on well-being. Known for his controversial belief that happiness is quantifiable, Blanchflower calculated the unhappiness caused by unemployment to be equivalent to $60,000 in 2004.

Unfortunately for people facing recession-fuelled redundancy, he’s also found that unemployment was more devastating to individual happiness than inflation. A one per cent increase in unemployment affects happiness twice as much as a one per cent increase in inflation, as people are directly faced with “income loss and loss of face,” he explains.

If there is an upside to all this, at least for economists there is a cornucopia of research opportunities, which will certainly hold appeal for Blanchflower when he resigns. As he mentioned thoughtfully, “this is quite a nasty shock, so there’s a good set of tools to work with…”

Financial crisis stimulates land grab for food

Governments and corporations have set in motion a worldwide competition to buy off farmland abroad, according to a new report released by the non-profit organization GRAIN.

Countries that rely heavily on imports such as Saudi Arabia, the UAE, India, Korea, Libya and Egypt are seeking to remedy the food crisis at home by buying farmland in places like Uganda, Burma, Brazil, Cambodia, Sudan, and Pakistan.

Food corporations and private investors have also joined in the land grab as they seek new means to make a profit in the wake of the collapsed derivatives market and shrinking available resources.

“The single best recession hedge of the next 10 or 15 years is an investment in farmland,” said Reza Vishkai from Insight Investment, one of the largest asset managers in the UK.

Yet buying up land for outsourced food production is rife with contradiction, as many of these countries are facing their own desperate food shortage. In Sudan the World Food Programme is attempting to feed 5.6 million refugees, while in Cambodia half a million people are starving.

In the Philippines the population cuts back on meals, while delegations from Saudi Arabia, UAE, and Bahrain haggle over the price of farmland.

According to the agricultural attaché for the Middle East, Gil Herico, “the Philippines may be facing a rice shortage, but it can boost the UAE’s stock of certain other food products, such as bananas, pineapples, corn, vegetables, and other farm and poultry items.”

Despite the danger of local communities losing land needed for domestic food supply, governments of these countries view the move as a way to secure much needed foreign investment.

The World Bank and European Bank for Reconstruction and Development (EBRD) are among the proponents of this program, advising governments to weaken their land ownership policies to create incentives for foreign investors.

The World Bank’s US$1.2 billion aid package for the food crisis in Africa highlights this plan, encouraging governments to give foreign investors greater access to buying land.

“The trick here is not just to harvest crops, but to harvest money,” said the founder of Black Earth Farming, which has recently bought up land in the black earth region of Russia.

Yet the GRAIN report warns against the likelihood of social conflict arising from outsourced food production, which will hinder agrarian reform and indigenous rights.

Small-scale farmers are also likely to suffer as foreign conglomerates push out local business.

Isabel Kwok explains how Triodos survived the financial crisis

As the financial crisis wreaked havoc on banks the world over, the head of personal banking at Triodos wasn’t worried.

The leading ethical bank across Europe experienced 8% growth during the first half of 2008.

“October was our best month,” declared Isabel Kwok confidently from across the table at Triodos’s Bristol branch.

The Triodos ethos of social and environmental responsibility is a world apart from typical commercial banks, but according to Ms. Kwok it is this difference that saved Triodos from financial ruin.

“We have a very simple model where we take in deposits and loan them out to ethical businesses, and we don’t get mixed up with derivatives and abstract investments” she explained. “In the past people thought our model was quite old fashion, but now they are hailing it as the solution to what’s happening.”

The Bristol Fairtrade Coordinator Jenny Foster, both a personal and business customer, said: “my money is safer at Triodos because I know what it is being invested in.”

Ms. Kwok joined Triodos in May 2008 after working as an assistant development manager at Rathbone Greenbank since 2003. She moved into ethical banking when she became disillusioned with her first job working at a share-scheme firm that serviced chemical and pharmaceutical companies.

“I wanted to stay in finance because I realized it could make a real difference, but I wanted to go down the ethical route” she said.

When asked about competitors such as the Cooperative bank, Ms. Kwok alleged that Triodos was a step ahead in ethical standards.

She said: “The cooperative bank actively promises to screen out unethical businesses, but we go a step further and actively support ethical businesses.”

Russell Brady from the Cooperative bank denied this, saying: “It is nonsense to suggest it’s just about who we don’t support. The Co-op has increased its microfinance portfolio and recently invested £400 million on renewable energy.”

Ms. Kwok insists that transparency is what set Triodos apart from other banks, and it’s clear that she has taken this to heart when managing her personal banking team.

Her assistant Karen Piatt was recruited by Ms. Kwok in August. She said: “Isabel and I work very closely. I’ve had bad experiences in the past with managers who don’t communicate and it’s great to have someone who’s very open.”