Archive for the 'Observer' Category

So what’s driving the deficit reduction mania?

[link] Sunday, January 25th, 2015

I’m not a conspiracy theorist, but…

Neither is Simon Wren-Lewis, the Oxford economist. But consider this interesting post on his blog:

I have searched hard to find a macroeconomic rationale for Osborne’s policy stance. A belief that QE is as effective as conventional monetary policy (there is no liquidity trap) comes close, but as I explained here it does not really fit with what Osborne has said (or not said). Osborne is certainly no market monetarist, as he has shown no interest in nominal GDP targeting. So there does not appear to be a coherent case for Osborne’s fiscal proposals that a macroeconomist could take seriously.

Second, the idea that the real motive is a small state is not the preserve of some small group of left wing conspiracy theorists. Here I quote Jeremy Warner, economics editor of the Telegraph (for non-UK readers, a newspaper firmly to the right): “In the end, you are either a big-state person, or a small-state person, and what big-state people hate about austerity is that its primary purpose is to shrink the size of government spending.” He also wrote: “The bottom line is that you can only really make serious inroads into the size of the state during an economic crisis. This may be pro-cyclical, but there is never any appetite for it in the good times; it can only be done in the bad.” I also think many of my non-UK readers will wonder why I am having to justify what is obvious in their countries.

Third, it must have become clear to many people now that reducing the deficit cannot be the overriding priority when there have been so many tax giveaways (50p rate, Help to Buy which creates large contingent liabilities, Cameron’s conference commitments, stamp duty changes that are far from fiscally neutral, pensioner bonds). Putting these down to ‘politics’, but counting spending cuts as ‘economics’, will not wash. (See Brad DeLong for the equivalent in the US). You cannot pretend that deficit reduction is driving government policy, when that driver only operates on the spending side of the accounts.

Economists in the media are beginning to realise this. It is really important that political commentators do so as well, so that those without an economics background get a clearer idea of the nature of the choices they will have to make in 100 days time.

Of course, it’s also conceivable that Osborne & Co don’t really know what they’re doing. It’s been known to happen with British governments.

And then, later this from Joseph Stiglitz:

For the past six years, the West has believed that monetary policy can save the day. The crisis led to huge budget deficits and rising debt, and the need for deleveraging, the thinking goes, means that fiscal policy must be shunted aside.

The problem is that low interest rates will not motivate firms to invest if there is no demand for their products. Nor will low rates inspire individuals to borrow to consume if they are anxious about their future (which they should be). What monetary policy can do is create asset-price bubbles. It might even prop up the price of government bonds in Europe, thereby forestalling a sovereign-debt crisis. But it is important to be clear: the likelihood that loose monetary policies will restore global prosperity is nil.

This brings us back to politics and policies. Demand is what the world needs most. The private sector – even with the generous support of monetary authorities – will not supply it. But fiscal policy can. We have an ample choice of public investments that would yield high returns – far higher than the real cost of capital – and that would strengthen the balance sheets of the countries undertaking them.

The big problem facing the world in 2015 is not economic. We know how to escape our current malaise. The problem is our stupid politics.

Bill Clinton was famous for his mantra “It’s the economy, stoopid”. The mantra we need now is “It’s the politics, stoopid”.

Facebook’s fantasy economics

[link] Sunday, January 25th, 2015

This morning’s Observer column.

Last week was Davos week, the time of year when 2,900 movers and shakers (only 17% of whom are women, incidentally) congregate in a small town in Switzerland to talk the talk. It also means that it’s the week in which Facebook issues its annual Bullshit Report, claiming that it is not only a Force for Good but also one of the world’s economic powerhouses. In 2012 the report claimed that Facebook – an outfit which then had a global workforce of about 3,000 – had indirectly helped create 232,000 jobs in Europe in 2011 and “enabled” more than $32bn in revenues.

Now, two years on, Facebook has more than 1.3 billion users, and its claims have become correspondingly more extravagant. This year’s Bullshit Report asserts that in the year ending October 2014 the company’s “global economic impact” amounted to $227bn – which is roughly equal to the gross domestic product of Portugal – and that Facebook accounted directly and indirectly for 4.5m jobs.

These numbers were plucked out of the air by Deloitte, the consulting company regularly employed by Facebook’s fantasy economics division. I use the word fantasy advisedly, having read the disclaimer at the head of Deloitte’s document…

Read on

Google: the next Microsoft?

[link] Sunday, January 18th, 2015

This morning’s Observer column:

Bill Gates once said that the only technology company that reminded him of Microsoft in its early days was… Google. Thanks to one of those delicious ironies in which capitalism excels, guess which company Google now reminds people of? Answer: Microsoft in its current dotage. Gates’s creation was once even more dominant in the industry than Google is now. It had three core products – the Windows operating system, Office and Windows Server – which were licences to print money. Microsoft had huge revenues that just rolled in every quarter, just as Google’s advertising revenues do today, and on the back of them built a huge 128,000 employee company. But, cushioned by its money-pump, it failed to innovate and, in particular, failed to address the decline of the desktop PC and the rise of mobile computing.

Despite Google’s self-image of an ultra-agile, young company, in fact it’s become a 55,000-employee monster, which is what is leading some people to see parallels with Microsoft…

Read on.

Why the world’s poor shouldn’t be conned into thinking that Facebook is the Net

[link] Sunday, January 11th, 2015

This morning’s Observer column:

Some years ago, I had a conversation with a senior minister in which he revealed that he thought the web was the internet. While I was still reeling from the shock of finding a powerful figure labouring under such a staggering misconception, I ran into Sir Tim Berners-Lee at a Royal Society symposium. Over coffee, I told him about my conversation with the minister. “It’s actually much worse than that,” he said, ruefully. “Hundreds of millions of people now think that Facebook is the internet.”

He’s right – except that now the tally of the clueless is now probably closer to a billion. (Facebook has more than 1.3 billion users, some of whom presumably know the difference between an app and the network.)

Does this matter? Answer: yes, profoundly, and here’s why…

Read on

Could Facebook be a factor in the next election?

[link] Sunday, January 4th, 2015

This morning’s Observer column:

There are two things about 2015 of which one can be reasonably certain: there will be a general election in May and it’s unlikely to produce an overall majority for either of the two big parties. In those circumstances, small, localised events might have big implications: a Ukip candidate shoots his mouth off about, er, non-white people; a Labour candidate turns out to have an embarrassing past; a Tory garagiste cannot differentiate between sexual harassment and bum pinching. The kind of stuff, in other words, that could affect the outcome in a finely balanced constituency.

Which brings us to social media and the question of whether the 2015 general election could be the first one in which the outcome is affected by what goes on there. Could Facebook, for example, be a factor in determining the outcome of some local constituency battles?

Far-fetched? Maybe. But the question is worth asking because in the 2010 US congressional elections, Facebook conducted an interesting experiment in social engineering, which made some of us sit up…

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The concierge economy

[link] Sunday, December 28th, 2014

My Observer essay on the implications of Uber:

In a way, the name of the company – Uber – gives the game away. It has connotations of elevation, superiority, authority – as in Nietzsche’s coinage, Übermensch, to describe the higher state to which men might aspire. Although it’s only been around since 2009, Uber, the smartphone-enabled minicab company, is probably the only startup of recent times to have achieved the same level of name recognition as the established internet giants.

This is partly because Uber is arguably the most aggressive tech startup in recent history and partly because it has attracted a lot of bad press. But mainly it’s because a colossal pile of American venture capital is riding on it. Its most recent investment round valued the company at about $40bn, which is why every MBA graduate in California is currently clutching a PowerPoint presentation arguing that his/her daft idea is “Uber for X” – where X is any industry you care to mention.

What lies behind the frenzy is a conviction that Uber is the Next Big Thing, fuelled by the belief that it is the embodiment of what Silicon Valley values most, namely “disruptive innovation” – as in disruption of established, old-economy ways of doing things…

Read on

LATER

Om Malik has a very thoughtful essay which starts with a meditation on a conversation he had with an Uber driver, and then moves into a meditation on the apps economy.

Keith [Malik's Uber driver], who aspires to be in the fashion business was pretty ruthless in his assessment of the company and brought up many questions that have coursed through my mind. He appreciates the financial flexibility Uber has provided him — his luxury car rental business wasn’t enough and he has benefitted from this augmented income. He isn’t the first one who felt that Uber look some pressure off their back — the other day I met a $12-an-hour bouncer at a Tenderloin music venue who is happy dealing with traffic rather than drunks and strung out addicts. “It was worth $19 billion three months ago and now it is worth $41 billion,” says Keith, “isn’t that something. And yet they don’t care about their contractors.”

Still, like many others Keith is befuddled by Uber’s treatment of its contractors. Many of the rule changes seem arbitrary and he too is confused by the tone-deafness of the company. He laments the recent directive (later modified) by Uber to classify all cars before 2010 as a UberX and thus relegated them to lower money making tier. When I point out that as a customer if I am paying premium prices, why shouldn’t I get a premium experience. Today, you end up riding in “black cars” who are a pale imitation of their real self. Shouldn’t the car upgrades result in better cars and through process of elimination bring fewer, but better drivers on the road? Like most drivers, Keith agrees, but points out that logic and reality of being a contract driver are two different things.

It is very hard for people to understand that it isn’t easy to upgrade your car, especially when you are trying to make a living driving an Uber in an intensely competitive marketplace where there are more cars on the road and the pie is getting sliced into thinner and thinner slices. Still, Keith said that he was planning to upgrade, though he didn’t care much for Uber’s financial plans or deals with car companies — he is going to get a Mercedes as part of the upgrade. During our conversation, Keith points out that Uber is good for helping him and others make money in the near term, but the current model doesn’t allow much optimism for the future, thanks to too many cars, too many rules and demand which isn’t rising as fast as the cars.

LATER STILL: this:

Dan Sperling, Founding Director of the Institute of Transportation Studies at UC Davis, says that while Uber “will continue to do battle with local and state authorities, it’s pretty clear that they’ve got a very good business model, they’ve got a lot of momentum, and they’ve got a very good product that people love. They’ll figure out a way around the challenges because it’s clear they provide a valuable service. And that’ll force regulators to reassess their rules, some of which were written up years ago and make absolutely no sense today.’’

As Sperling sees it, “while it’s true that taxis are way over-regulated, the answer is not to smother all the babies competing with them; the answer is to regulate the Ubers of the world better while you deregulate the taxi industry.’’

And what about that $40 billion price tag? Uber and its rivals “are entering a marketplace that has seen almost no innovation in many decades,’’ according to Sperling, who says adding courier and food-delivery services could make Uber even more of a behemoth. “There’s a lot of pent-up demand for real-time, on-demand-type services, so there’s huge upside potential here.’’

Coming to grips with where we are now

[link] Sunday, December 28th, 2014

This morning’s *Observer column:

Could we live without the net? Answer: on an individual level possibly, but on a societal level no – simply because so many of the services on which industrialised societies depend now rely on internet connectivity. In that sense, the network has become the nervous system of the planet. This is why it now makes no more sense to argue about whether the internet is good or bad than to debate whether oxygen or water are desirable. We’ve got it and we’re stuck with it.

Which means that we’re also stuck with its downsides…

Read on

How not to introduce an IT system

[link] Sunday, December 21st, 2014

This morning’s Observer column

When you walk into my GP’s surgery, the first thing you see is a screen on the receptionist’s counter. Displayed on it are the words (all in capitals) “TOUCH THE SCREEN TO ARRIVE FOR YOUR APPOINTMENT”. Being pedantic, the first time I saw it I pointed out to the receptionist that I had arrived for my appointment. She grimaced. I then asked if the medical implications of asking every patient to use the same touchscreen during, say, a flu epidemic had been considered. Another grimace. It was, she explained, “a new system”.

This system was provided by Epic Systems, a US corporation based in Wisconsin, which may explain why its software designers seem unfamiliar with the verb “to arrive”. It’s one of eight major vendors of healthcare information systems, all of which are based in the US, and it got its foot in the NHS door quite a long time ago. My doctor’s surgery has been using it for a while. At the beginning, the system’s user-interface was abysmal and dysfunctional. Now, several years on, it’s merely ugly. But at least it works…

Read on

LATER

One of my colleagues wrote, confirming my friend’s experience:

The only thing that marred our recent experience of Addenbrookes A&E (also with suspected broken foot/feet, there must be something in the water in Cambridge!), was the introduction of the new system:
there was a 20 minute wait to register once we had initially registered, because the details hadn’t come through, then the x-ray results had to be manually retrieved …and really very stressful for the staff who had to keep apologising and physically running between departments to get results.

Q: Who let this happen? A: We did.

[link] Sunday, December 14th, 2014

This morning’s Observer column.

The relevant extract from the [FISA] court transcript reads:

Justice Arnold: “Well, if this order is enforced, and it’s secret, how can you be hurt? The people don’t know that – that they’re being monitored in some way. How can you be harmed by it? I mean, what’s… what’s your… what’s the damage to your consumer?”

Ponder that for a moment. It’s extraordinarily revealing because it captures the essence of the mindset of the people who now rule our democracies. It’s a variant on the “if you have nothing to hide then you have nothing to fear” mantra. And it begs the question: who gave these people the right to think and act like this?

The long answer goes back a long way – to Thomas Hobbes, John Locke and maybe Rousseau. The short answer is that we did. We elected these holders of high office – the home and foreign secretaries who ostensibly control MI5, MI6 and GCHQ, the MPs who cluelessly voted through laws such as Ripa (Regulation of Investigatory Powers Act), Drip (Data Retention and Investigatory Powers) and will do likewise for whatever loose statutes will be proposed after the next terrorist/paedophilia/cyber crime panic arrives…

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Forget North Korea – the real rogue cyber operator is closer to home

[link] Sunday, December 7th, 2014

This morning’s Observer column.

The company [Symantec] goes on to speculate that developing Regin took “months, if not years” and concludes that “capabilities and the level of resources behind Regin indicate that it is one of the main cyberespionage tools used by a nation state”.

Ah, but which nation states? Step forward the UK and the US and their fraternal Sigint agencies GCHQ and NSA. A while back, Edward Snowden revealed that the agencies had mounted hacking attacks on Belgacom, a Belgian phone and internet services provider, and on EU computer systems, but he did not say what kind of software was used in the attacks. Now we know: it was Regin, malware that disguises itself as legitimate Microsoft software and steals data from infected systems, which makes it an invaluable tool for intelligence agencies that wish to penetrate foreigners’ computer networks.

Quite right too, you may say. After all, the reason we have GCHQ is to spy on nasty foreigners. The agency was, don’t forget, originally an offshoot of Bletchley Park, whose mission was to spy on the Germans. So perhaps the news that the Belgians, despite the best efforts of Monty Python, are our friends – or that the UK is a member of the EU – had not yet reached Cheltenham?

Read on