Financial Times Europe - 10.10.2019

8 ★ FINANCIAL TIMES Thursday10 October 2019

For once, the US has got

its foreign policy right

I read with pleasure the report

(FT.com, October 8) that the US is to

restrict visas or Chinese governmentf

officials linked to the detention of

Uighurs in China.

Raising awareness and condemning

human rights abuses is the first step,

but implementing tangible initiatives

that will pressure China into

reconsidering its treatment of ethnic

minorities is the necessary step.

There is the understandable notion

that the US’s ulterior motive is to obtain

a better trade deal with China. While

there is truth to such an accusation, the

point is that the result is a positive one,

regardless of the underlying reason.

In a time where the US is continually

criticised for its foreign policy, we must

applaud it on this occasion.

Rajiv Radhakrishnan

Pinner, Middx, UK

A flat racing jockey is our

top investment manager!

As gloom and despondency fills the

financial pages, along with never-

ending consumer moans about low

interest rate/returns, excessive asset

management charges, and concern

about irresponsible gambling, a certain

investment statistic caught my eye this

week: that flat jockey Tom Marquand

provides an investment return of

£83.45 per £1 stake “invested” on

every one of his rides so far this flat

race season!

Nicky Samengo-Turner

Gloucester, UK

Human factors have

wider applications

I feel Andrew Hill may have missed an

opportunity in his column “The human

factors that no company should

ignore” (October 7). The human

factors profession not only focuses on

how humans interact with technology,

but more broadly is concerned with

how pressure influences human

behaviour and group interaction.

Having previously worked as a

derivatives trader, and now as a

performance psychologist, I have long

been struck by the investment

industry’s failure to embrace human

factors. Instead, post-financial crisis

they chose to employ small armies of

staff to “monitor” and control

colleagues’ conduct. The Swiss Cheese

model of human error suggests this

approach will have inevitable failures.

This is not even to mention its

underlying philosophy of distrust and

blame, with motivational implications

on staff.

Within the fund management

industry, attempts to improve risk-

management decisions have largely

been focused on data analytics. The

obsession with analysis misses a huge

opportunity, with a different approach

required. The airline and medical

industries consider human factors in

order to minimise risk. At some stage,

operational risk directors in the

investment industry need to consider

the impacts of stress on information

processing, group communication, and

consequently risk-management

decisions.

Paul Berry

Human Performance Science,

London SW15, UK

Yes, there is a third way

for the UK on Brexit

I am afraid that Robert Shrimsley over-

polarises the available political options

for the UK in “There is no third way —

it’s Brexit or Corbyn” (October 8).

The most likely prospect is that the

government will comply with theBenn

Act nd request an extension of time toa

negotiate. Then it is highly likely that

we will have an election. It will be open

to people to vote for Boris Johnson and

co and an extreme or no-deal Brexit; or

they can vote tactically for Labour, the

Scottish National party, the Liberal

Democrats etc depending where they

live. This would most likely produce a

hung parliament with a non-Tory

majority. Jeremy Corbyn would likely

be prime minister but with a strong

coalition agreement and real cabinet in

control. We would then get a softer

Brexit option (single market and

customs union) and a referendum.

People could vote for soft Brexit or

Remain. The coalition would probably

end soon after with another election.

This is I believe a better option.

Clare Short

London SW4, UK

Any trade deal will have

to get through Congress

Martin Wolf (“Brexit is a journey

without end”, October 9) omits

mention of the impact of a hard Brexit

on the chances of a trade deal with the

US. Assuming President Donald Trump

avoids impeachment and wins

re-election, his powers on trade are

asymmetric. While he can impose

tariffs and sign trade deals, they

become law only once passed through a

Congress that has huge support for the

Republic of Ireland. The havoc that is

wreaked upon the UK could last a very,

very long time.

Donald Amstad

Singapore

Nazi reference is a new

low, fancy quote or not

It is a measure of how far Martin Wolf

himself has fallen to be — absurdly —

comparing Boris Johnson to Joseph

Goebbels (“Brexit is a journey without

end”, October 9). Invoking Nazi

comparisons — even if framed with a

fancy quote — is usually a sign of

intellectual fatigue. Or, overzealous

student debate.

If I weren’t on a corporate

subscription, I would be asking for a

refund!

Roderick Wallace

Beckenham, Kent, UK

Climate change and a

simplistic comparison

Although Desmond Tutu makes

several insightful points in “The threat

of climate change is the apartheid of

our times” (October 4), it seems

somewhat simplistic to compare

climate change with a horribly unjust

remnant of European colonialism.

Instead, climate change is imposing a

plague-like burden through its toxic

effects on the global environment.

While it is critical to promote

renewable energy generation, the

current CO2 levels will continue to

raise global temperatures in the

foreseeable future. In addition,

absorption of CO2 by oceans is leading

to greater acidification that in turn will

increase melting of polar ice and

temperatures.

Bishop Tutu might use his influence

for promoting greater compassion

towards “climate migrants” from low-

lying countries, and help the United

Nations frame realistic sustainable

development goals that underscore the

need for reductions in population

growth and in wasteful agricultural and

economic practices.

Prof Alok Bhargava

School of Public Policy,

University of Maryland, US

There are two types of people in this

world, or so the old joke goes. The

people who think there are two types

of people, and the rest of us. But as

political polarisation grips the UK, the

opportunity to laugh about such crude

dividing lines has been rare.

Even discussion of how and why we

polarised has become “fractious”,

according to Bobby Duffy, director of

the policy institute at King’s College

London and co-author of arecent

report, Divided Britain. His research

has revealed a much more complex

picture than just of two tribes at war.

Yes, emotional attachment to

backing Leave or Remain in the 2016

Brexit referendum has fostered

mutual hostility. But add to the mix

an accelerated erosion of inherited

loyalty to the two main political

parties and the new landscape starts

to look like a tangle of volatile voting

patterns overlaid with the Brexit war’s

new political identities.

“There is no clear way to map it,”

Professor Duffy tells me. He and his

colleagues warn of political gridlock

and social conflict. But their report

holds out some hope. It points out that

the divisions exposed since the Brexit

vote mask a convergence of views

among British voters on other

priorities, such as healthcare and

tackling poverty. Even on gender

roles, same-sex relationships and

racial prejudice — hot-button issues in

the culture war raging on the other

side of the Atlantic — there is

surprising agreement among Brits

whatever their Brexit standpoint.

Gloria de Piero, a Labour MP in a

Leave-votingEast Midlands seat, took

a tentative step towards finding

common ground last month. From an

email inbox pepperedwith angry

messages, she chose around a dozen of

her most vehement correspondents

for and against Brexit, and brought

them together for an hour of

discussion. “I was really nervous,” she

admits. But from a “respectful” start

even this group, still so wedded to

their 2016 positions, managed a

compromise — the Remainers said the

referendum should be honoured and

the Leavers wanted a withdrawal deal.

These ad hoc attempts at dialogue

can backfire. “If you show some

people what they disagree with, they

stick to [their own view] even more

strongly,” warns Alison Goldsworthy,

who foundedThe Depolarization

Project t Stanford University, anda

investigates how to tackle entrenched

divisions. A recent study published in

the Annual Review of Political Science

sifts the evidence on what works. For

example, when committed US

Democrats and Republicans see that

their stereotype of opponents is

unrepresentative, they feel less

hostility (known as “partisan animus”

in the jargon).

Some of these experiments are

intriguing, and raise hopes that even

attitudes to intractable conflicts can

be softened. Inone study, voters in

Israel were given both Israeli and

Palestinian financial assets to trade for

a period of weeks before the 2015

election. The experience pushed them

towards voting for parties that

support the peace process — what’s

more, this change in political outlook

proved more than just a blip. The

researchers quote the 18th-century

French philosopher Montesquieu:

“Commerce is a cure for the most

destructive prejudices.”

Ms de Piero, for her part,

recommends modest experiments like

her roundtable to others who want to

bridge divides locally. If they are

doubtful of success, it’s not surprising.

Prof Duffy’s report quotes a study

showing Leavers and Remainers both

view each other as “closed-minded”.

They aren’t keen to see family

members “marry out” either.

But this MP, who isstanding down

at the next general election, found her

constituents were far more willing to

compromise than colleagues in the

House of Commons (parliament has

so far failed to agree a way out of the

Brexit impasse). “We’ve created the

polarisation,” she protests.

Ms Goldsworthy agrees that a

bipolar politics doesn’t reflect the

citizenry’s range of views, particularly

now that thetraditional party

allegiances are fracturing. But the

incentives for parties to whip up

partisan emotions as a general

election looks likely are far greater

than any niggling worries about the

consequences of stoking division.

As for the voters? She shrugs: “If it’s

what they’re offered, it’s where they’re

going to go.”

[email protected]

Bridging local

divides could

be a balm for

bipolar politics

Notebook

by Miranda Green

TheHouston Rockets’ general

manager’s tweet “fight for freedom,

stand with Hong Kong” last Friday

evening was a demonstration of a

freedom of speech that individuals in

free societies, their governments and —

yes — their employers should applaud

as well as strongly support. According

to the FT report this spontaneous tweet

wasblocked yb China and not viewed

by the Chinese mainland population.

The supposed outrage andsuspension

of partnerships ith the Houstonw

Rockets by the Chinese Basketball

Association,CCTV nda Tencent asw

another simple test of the Chinese

government’s belief that western ideals

will be quickly compromised for

short-term financial gain by American

companies and the American

government.

Both the western companies and the

US government failed this simple test

with their kowtow. The loss of NBA

basketball — and especially the

Houston Rockets playing — for Chinese

fans would be especially difficult for

the Chinese government to explain.

Sports fans across the world are

fiercely loyal to their sport and their

teams. For 500m Chinese basketball

fans to lose the NBA and one of their

favourite teams would be a loss of

freedom not easily remedied and a loss

long remembered. What about the

signed contracts and the possible

financial liability this would entail for

Chinese companies and the

government? Western leaders: Get

smart. Be strong. Don’t kowtow.

Michael Stoltz

Fort Worth, TX, US

China’s 500m basketball fans won’t forget

Letters

THURSDAY10 OCTOBER 2019

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Corrections: [email protected]

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Correction

cJacqueline Loh, deputy managing

director of the Monetary Authority of

Singapore and chair of the Markets

Committee, co-authored the Markets

Insight column with Philip Lowe on

October 8.

OPINION ON FT.COM

Anjana Ahuja

The British government’s belief in the ‘great

man’ theory is jeopardising scientific research

http://www.ft.com/opinion

‘What if he won’t let himself attend

his own removal?’

When the Hong Kong protest move-
ment broke out in June this year, it was
impressive because of both its size and
its dignity. At its height, some2m peo-
ple more than a quarter of the total (
population) took to the streets to dem-
onstrate against plans to allow extradi-
tion from Hong Kong to the Chinese
mainland. They were largely peaceful
and the police were initially restrained.
Several months on, the situation
has dramatically deteriorated. Recent
demonstrations have involved vand-
alism of shops and bank branches.
Running battles between protesters
and the police havebecome routine.
The police have resorted to live ammu-
nition on several occasions, although
there have been no fatalities yet.
Both the Hong Kong authorities and
the Chinese government in Beijing
have made serious mistakes. The initial
introduction of the extradition law was
a blunder. The move toban face masks
at demonstrations has left protesters
fearful of their vulnerability to tear gas,
identification and arrest.
But the protest movement should
also pause to reflect. Huge, non-violent
demonstrations attract world atten-
tion and sympathy. Violence and vigi-
lantism plays into Beijing’s hands,
alienating large elements of Hong Kong
society and allowing the Chinese gov-
ernment to portray the movement as
destructive and anarchistic.
Insofar as Beijing has a strategy, it
probably involves gradually reducing
the protest movement to aviolent and
militant corethat is easier both to
repress and to demonise. The Hong
Kong demonstrators should avoid that
trap. Some of the movement’s most
celebrated figures — such as Joshua
Wong, the youthful protest leader, and
Jimmy Lai, a newspaper publisher —
should now re-emphasise their com-
mitment to non-violence. Statements
of that nature need not compromise

legitimate demands for an investig-

ation into episodes of police brutality,

as well as broader reforms.

International businesses with ties to

Hong Kong also have some important

calls to make. The Chinese government

and consumers have already put huge

pressure on companies — such as

Cathay Pacific irlines and now Amer-a

ica’sNational Basketball Association—

that are accused of showing sympathy

to the protest movement.

There is no need for businesses to

take sides in a highly charged political

dispute. But they can and should assert

support for certain important princi-

ples, including free speech and non-

violence. On a practical level, busi-

nesses considering long-term commit-

ments to Hong Kong now must take

into account the risk that Chinamight

deploy troops on the streets.

For their part, the Chinese authori-

ties should not abandon dialogue in

favour of estruction and demonis-d

ation. That approach would condemn

the city to months more of civic unrest,

with all the economic and reputational

damage that entails. Even more seri-

ously, it would risk permanently alien-

ating much of Hong Kong’s rising gen-

eration and feeding the drift towards a

new cold war with the US. Turning

Hong Kong into a repressed and sullen

outpost would be a disaster. It would

also pose a long-term threat to the

stability of China. Unlike Tibet or Xin-

jiang, wealthy well-connected Hong

Kong will not be easily squashed.

Instead of doubling down, the

authorities should establish a commis-

sion into the future of Hong Kong to

openly debate the protesters’ wishlist,

including demands for elections by

universal suffrage. It is highly unlikely

that the Chinese Communist party

would take steps of this nature, but the

alternative path is very dangerous —

for Hong Kong, and China as a whole.

Dialogue with protesters is the only way to resolve the crisis

Repression is not the

answer in Hong Kong

International tax rules need to change.
Current principles dating from the
1920s that tie tax to physical presence
are no longer appropriate for a world in
which California-based Google can sell
ads in Bulgaria through a Dublin-regis-
tered subsidiary, or a Dutch branch of
the Seattle-founded coffee chain Star-
bucks pays royalties to a British subsid-
iary for use of its roasting recipe. Public
resentment has risen over companies
that enjoy the benefits of society but do
not pay a fair share in tax.
Proposals from the OECD, a forum
for research and debate among mostly
rich countries, provide a promising
basis for a new model. They would give
governments a “tax right” over the
profits of consumer-facing businesses
depending on the share of sales within
their territory.
All of the big countries involved have
something to lose. Not just US digital
companies such as Apple and Amazon,
but potentially any multinational busi-
ness that depends on intangible invest-
ment such as branding or patents could
be affected.
German carmakers and French lux-
ury brands alike could face a tax bill on
profits made from their sales in the US.
In Britain, where intangible invest-
ment is now the largest form of capital
expenditure by companies, life sci-
ences companies such as GlaxoSmith-
Kline might face higher taxes outside
their home market. This is one reason
why US president Donald Trump, who
made a stab at tackling corporate tax
avoidance through his own reforms,
has beenconstructive throughout.
Yet all these countries have some-
thing to gain as well. Small tax havens
includingIreland, Luxembourg, the
Netherlands and British overseas terri-
torieswould no longer be able to
undermine the global tax system in
tandem with multinationals. That
should help promote a level playing

field for small local businesses — and

reduce the incentive for companies to

profit more from clever accounting

than from real economic activity.

Poor countries would be some of the

biggest winners from reform. Many

companies sell in the developing world,

yet pay local companies for distribu-

tion and do not locate headquarters

there. Authorities would be able to

raise revenue for public services from

these multinational corporations as

now-rich countries could when they

had similar incomes. The IMF esti-

mates non-OECD countries lose about

1.3 per cent of national income a year in

tax revenue as companies shift profits

into low tax jurisdictions.

The big fight, however, is still to

come. The details of the proposals and

the extent of the taxing right are yet to

be filled out. Principles have been artic-

ulated, but putting them into a consen-

sus framework will take some time.

The OECD is encouraging the G

group of bigeconomies to come to a

deal by the end of January next year.

Unilateral UK and French measures

to impose sales taxes on Big Tech cre-

ated political momentum within the G

leading economies which, in turn, gave

political cover for the OECD. This

momentum should be kept up but with

a promise to rescind unilateral steps

once a common framework is in place.

If this succeeds, the OECD, built out

of the organisation responsible for dis-

tributing Marshall Plan aid, will have

delivered a victory for multilateralism.

Thanks in part to the cavalier attitude

of the current US president, postwar

international organisations are facing

one of the biggest challenges since their

inception.

The tax plan could yet provide a

salutary example of how international

co-operation can tackle the challenges

of globalisation — far better than a

retreat into nationalism.

Big countries have something to lose; poorer states would be winners

OECD lays a foundation

for fairer taxing rights

The ‘dinosaurs’ were right

to point out QE’s negatives

Your editorial “The euro’s guardians

face a roar of the dinosaurs” (October

7) dismissed concerns raised by six

prominent former central bankers over

the European Central Bank’s renewed

stimulus as a “partisan attack”,

favouring savers, and as a roar of the

dinosaurs, alluding to former

Bundesbank president Helmut

Schlesinger’s age of 95 years. Well, I am

only half his senior, and have

advocated the need to consider the

position of borrowers (not savers) in a

series of research articles and a book.

And in my view, the Financial Times

has published a very bad editorial.

There can be no reasonable doubt

that the ECB’s policy over the past

decade has been predominantly fiscal

in nature. From a pure monetary

policy standpoint, its stance would

simply be out of proportion. More

concretely: the ECB has followed a

bailout policy for states and banks ever

since the beginning of the global

financial crisis in 2008.

Such a policy does have its

theoretical foundations. I have co-

writtenan article he FT’s editorialt

board would love: in “Systemic Crisis

and Growth”, we argue that occasional

bailouts of the borrowers in times of

crisis are necessary and support

investment, healthy risk-taking and

growth.

According to the FT, Mr Schlesinger,

Otmar Issing and the others ignore

these benefits of ECB policies. But here

is the point: even if this is fully taken in

to consideration, it is democratically

elected governments, not central

bankers, who should decide on the

extent of the bailouts. Initially, the

central bank can take the role of a

lender of last resort, but 10 years after

the crisis this is no longer appropriate.

The FT’s international comparison is

also flawed: consider for instance the

US. It has managed the process of

“tapering” successfully. Also the

Federal Reserve, before starting

quantitative easing, asked Congress for

permission. It never had a full

allotment policy to banks and never

bailed out individual states. Japan

would be a better analogy, but not a

good example either, as it experienced

decades of stagnation. It had

dramatically wasteful Keynesian

spending programmes and ran up the

government debt to more than 200 per

cent of gross domestic product.

The former central bankers are right

to point out the negative side-effect of

QE. Anyone knowing Mr Issing’s efforts

to create a truly European institution

free from partisan considerations

should be concerned about this

analysis and take the position of the

former central bankers more seriously

than the FT has in its editorial.

Frank Westermann

Osnabrück University, Germany

OCTOBER 10 2019 Section:Features Time: 9/10/2019- 18:56 User:alistair.hayes Page Name:LEADER USA, Part,Page,Edition:USA, 8, 1