8 ★ FINANCIAL TIMES Thursday22 August 2019The richer you are,
the bigger the subsidy
Karen Petrou’s op-ed “Low interest
rates are the scourge of the poor and
vulnerable” (August 20) tells only half
the inequality story. The more
important half is that those who can
get the most credit (ie those who
already have the most physical or
human capital) get the most benefit
from interest rates that were, until
recently, below the yield on capital. So
the richer you are, the bigger the
subsidy on investment — no wonder
asset prices have been driven sky high.
At some point, the process will come
to an end when asset yields have been
driven so low it’s not worth investing
even at these low interest rates. Every
so often, the threat of a major
disturbance (for example President
Donald Trump’s trade war) provokes a
flight into bonds.
In short, central banks are inflating
the same sort of bubble they did pre-- It seems they never learn.
Prof Emeritus Laurence Copeland
Kenilworth, Warwicks, UK
Why not offer poor better
rates on smaller deposits?
The poor, even cumulatively, save so
relatively little, what would it hurt to
offer higher interest rates for the first
$10,000 saved?I recollect when jumbo
CD rates were offered for high deposits.
Why not offer some micro CD rates: a
higher interest rate for a lower amount
of savings, with an obvious limit —
perhaps 5 per cent on the first $10,000,
4 per cent on the second $10,000, 3 per
cent on the final $5,000. Add a
probably lower income tax rate to
these earnings, and it might be enough
to make a difference to some lower-
income savers; they might also benefit
from experiencing the advantage of
some financial planning.
Elizabeth Nolan
Coronado, CA, USBoris has surely adopted
the 17th Lancers’ motto
Sean Magee (Letters, August 21) draws
our attention to the tendency of our
political leaders to misquote text from
inappropriate sources. However, what
he does not point out is that the
regiment destroyed in the Charge of
the Light Brigade, the 17th Lancers
(known curiously enough as the Duke
of Cambridge’s Own), adopted the
motto “Death or Glory”.
History seems to be repeating itself.
John Kiddell
Madrid, SpainLet us vote on the realities
of Brexit, not the promises
In answer to Jon Moynihan’s letter
(August 20) on “national disunity”:
first, the 2016 referendum was held
over three years ago. Since the second
world war there have been three
general elections within less than two
years and three more within less than
four years. What constitutional
principle gives a referendum greater
validity than a general election?
Second, what was offered to the
electorate in that referendum is vastly
different from the reality which has
emerged since then. The electorate
should be given the opportunity to vote
on the reality, not the promises.
Chris Peer
Haywards Heath, W Sussex, UKRuptures appear when
the governed lose faith
I wholeheartedly agree with Tony
Barber that “democracies must be
fixed from time to time to work well”
(“Democracy needs retooling to
thrive”, August 20). As a local
politician of some 30 years I am only
too aware of the fragility and limitation
of “democracy” manifest in the poor
electoral turnouts.
There has always been an
undercurrent of scepticism about the
value of voting and the lack of
representation. However, many
commentators in underscoring the
provenance of democracy still refer to
Ancient Greece and its primitive form.
This is a misnomer because democracy
as we understand it today only
emanates from the Enlightenment. In
essence modern democracy is based on
a contractual arrangement, what Jean-Jacques Rousseau termed the “social
contract”, between the governed and
the governing.
Ruptures appear in this contract
when the governed lose faith in those
that govern them. In the UK this loss of
faith has been accelerated in recent
times with the Iraq war, the MPs’
expenses scandal, the media phone-
hacking scandal and, dare I say it,
Brexit. The EU referendum posited
an alternative form of direct
democracy which continues to
challenge the Westminster
representative model.
Structural tinkering with concurrent
citizens’ assemblies and so on may
form part of the solution, but what is
being ignored is the Westminster
electoral system itself. Until we
introduce a system of proportional
representation of whatever shape or
hue there will always be a “democratic
deficit” in this country that populist
parties will exploit.
Ian Wingfield
London SE15, UKFT needs to revisit its
definition of ‘good shape’
In your report “Consumers splash the
cash despite gloom on economy”
(August 20) it is stated that “household
finances are in better shape than they
have been for many years”.
However, a previous FT report —
“Growth fears damp stockbuilding
boost” ( June 29) — states that in the
first three months of 2019 “households
spent £6bn more than they earned, up
from £3.4bn in the previous quarter.
The figure marks an unprecedented
tenth consecutive quarter of household
net borrowing.”
Perhaps the FT needs to think again
about the meaning of the phrase
“better shape”!
Martin Hewes
Hewes & Associates,
Haslemere, Surrey, UK... but is rightly sceptical
of business call for change
Your editorial “Business must act on a
new corporate purpose” (August 20) is
sceptical of the US Business
Roundtable’s call for a change in the
philosophy of shareholder primacy.
Rightly, in my opinion: in fact it’s
sometimes hard to believe that the
boards and senior management of
multinational corporations put their
personal interests behind those of their
shareholders. Ask those who owned
bank shares in 2008.
Charles Taylor
London SW1, UKFaced with Donald Trump’s insistence
on buying Greenland, the sane world
has only one possible response: unity.
We must put aside our differences,
come together as partners — and
make a counter-offer.
Consider the situation. The US
president wants to buy Greenland,
and he wants to buy it badly. My
fellow Europeans, we have a wealthy
sucker on our hands. Let’s squeeze
him for all he’s worth. Publicly, as a
matter of principle, we stand in
solidarity with the Danish prime
minister. It is offensive to even think
about selling territories with sizeable
human populations. But it would be
unwise to fall out with the world’s only
superpower over a frozen wilderness.
So privately let’s begin negotiations.
Mr Trump, we are happy to discuss
selling Greenland. We only have one
condition: we want some of America
in return. Don’t worry — not thereal
America. You can keep Wyoming,
Alabama and all the places where six-
week old foetuses have the right to
buy assault rifles.
But Mr Trump, you have described
parts of Baltimore as “a disgusting, rat
and rodent infested mess”. Let us take
it off your hands. We named
Maryland, we’ll fix it. You have also
said Puerto Rico is “a mess” where
“nothing works”. We agree. It’s debt-
ridden, poorly-governed, yet still
pleasant to visit. We think there may
be real synergies with Italy.
These are the low-hanging fruit. But
to quote Mr Trump's ownThe Art of
the Deal, “if you’re going to be thinkinganyway, you might as well think big”.
Let us think big. What has Oregon
ever done for you, Mr President? Or
more to the point, California?
Assuming negotiations are swift —
and depending on regulatory
clearance — the land swap could be
completed by the middle of next year.
Mr Trump, your path to an electoral
college majority has never looked
easier! As for Greenlanders, they like
hunting and fishing and their biggest
city is called Nuuk; they definitely
sound like Trump voters.
In 2021, in the New America, there
will be no more tough votes in the
Senate, and no more Nancy Pelosi in
the House. The Republican majority
will be so clear that you could even
afford to take the profits on Alaska.
Make America 46 States Again!
Mr Trump, this land swap will be
good for the US economy. You want to
increase exports — now everything
you sell to California will count. No,
there won't be delays and borders
checks; it will all just work itself out.
Incredible, you say? That is what we
thought, but you trust our mutual
friend Boris Johnson, don’t you?
Caution — we expect the White
House may push back at this point,
worrying that, under the Danes, the
former US states will become havens
for immigrants. At this point, we will
simply ask whether Mr Trump follows
the Danish election results.
He may also wonder whether he
really wants to swap prime parts of
the west coast for a frozen island 1,
miles from Manhattan. We will againrefer him toThe Art of the Deal.
“Perhaps the most misunderstood
concept in all of real estate is that the
key to success is location, location,
location,” Mr Trump’s ghostwriter
wrote. “First of all, you don’t
necessarily need the best location.
What you need is the best deal.”
Mr Trump, this is the best deal —
California and Oregon are about
260,000 square miles, Greenland is
836,000. It’s the most unequal
equation since you compared your
inauguration crowd with Barack
Obama’s. You’d be a fool not to sign.
As a fallback, we could accept a
Trump Organization-style licensing
arrangement. Mr Trump would yield
control of the underlying asset but
retain naming rights. California,
Oregon, Alaska, Maryland and Puerto
Rico would keep the American brand,
but their management and ownership
would pass overseas. Greenland,
meanwhile, would soon be as
American as gerrymandering and
falling life expectancy.
The more I think about the “Arctic
of the Deal”, the more I like it. The
European Central Bank would surely
finance the transaction; Deutsche
Bank and Barclays could finally crack
the US deal market. The whole thing
will probably spawn a sequel to the
musicalHamilton.
There is only one potential hitch:
one banker I consulted thought Mr
Trump might already have offered the
right of first refusal to Russia.[email protected]So you want to
buy Greenland,
Mr Trump?
Let’s talk terms
Notebook
by Henry Mance
While the push from shareholders to
address the remuneration discrepancy
between the sexes is laudable
(“Investors step up efforts to cut
gender pay gap”, August 20), a higher
approach must be taken. Education
must trump regulation.
Forcing companies — either via
proxy proposal or government
mandate — to report their gender pay
information will have only limited
returns. For real change to occur, the
governance community at large should
instead focus on teaching companies
why promoting women into the
executive ranks, and paying them at
that level, is their best bet.This education, moreover, must
begin at the top. Thankfully, last
month, the last all-male S&P 500 board
was no more as Texas-based Copart
appointed a woman director. In
addition, executive leadership teams
are more receptive to adopting
innovative programmes that benefit
their companies than to adhering to
regulation by fiat.
Executive recruiters like me can do a
better job, too. We are already bound
by pay equity laws in nine US states, as
well as many other cities. In fact, the
state of Maine will enact its pay equity
law next month, and Kansas City,
Missouri, will follow in October. Thegoal here is to provide candidates with
a compensation package that other
employees with similar experience,
education and responsibilities are
earning. Yet still, until we drive home
the many lessons that point to better
top and bottom lines when women are
at parity, we will be fighting an uphill
battle.
As Winston Churchill said: “If you
have an important point to make, don’t
try to be subtle or clever. Use a pile
driver.”
Christopher Sheeron
Chief Executive,
Grayson & Company,
Washington, DC, USDrive the point home on the gender pay gap
Letters
THURSDAY 22 AUGUST 2019Email:[email protected]
Include daytime telephone number and full address
Corrections:[email protected]
If you are not satisfied with the FT’s response to your complaint, you can appeal
to the FT Editorial Complaints Commissioner: [email protected]OPINION ON FT.COM
Boris Johnson is one step closer to no-deal
FT’s Sebastian Payne sees both sides
unyielding with 73 days before the splitHong Kong protest puts onus on Beijing
FT’s James Kynge says the march of 1.7m
people is a show of defiance
http://www.ft.com/video‘At least England’s still for sale’The power blackout that hit the UKthis
month was the worst inmore than a
decade.About 1m homes were left
without power, passengers were
stranded on crippled trains, an Ipswich
hospital and Newcastle airport lost
power. Tuesday’s report from the
National Gridblaming the outage on
two generators suddenly tripping out
after a lightning strike leaves many
questions unanswered. Ofgem, the
energy regulator, is right to investigate
whether any companies involved
breached operating licences. But the
incident raises loud alarms about the
resilience of Britain’s energy system.
National Grid says the Hornsea off-
shore wind farm off Yorkshire and the
Little Barford gas-fired plant in Bed-
fordshire both went offline seconds
after lightning struck a high-voltage
transmission line near Bedford on
August 9. With some other small-scale
suppliers also cutting out, some 1.
gigawatts of generation was lost — far
more than the 1GW of reserve power
the grid was holding, as required by
regulators. When the frequency on the
grid, which reflects the stability of the
system, dropped below allowable lev-
els, 5 per cent of supplies were auto-
matically cut to low-voltage distribu-
tion networks to help restore balance
and prevent a worse blackout.
National Grid says two generators
tripping off the system at once is excep-
tional and safeguards worked largely as
they should. It remains unclear, how-
ever, how a routine lightning strike
knocked two providers offline. Also
unanswered is why some priority con-
sumers such as an airport that should
have been protected were hit by the
supply cut. Unforeseen vulnerabilities
were also exposed. While electricity to
the rail network was not cut, 60 Govia
Thameslink trains “reacted unexpect-
edly” to the frequency disturbance; 30
needed engineers to restart them.Lessons need to be learnt from the
incident in the light of an ever more
sophisticated economy and demands
to shift to renewable energy sources —
and provide more power to charge elec-
tric vehicles — to help reduce carbon
emissions. As Dieter Helm, an econo-
mist who carried out a 2017 review of
energy costs, has noted, an increasing
reliance on high-tech data and commu-
nications systems makes the economy
more vulnerable to even short inter-
ruptions. Ensuring priority consumers
such as critical infrastructure are prop-
erly protected is vital.
The shift away from coal and gas as
baseload suppliers towards multiple
smaller and more intermittent renewa-
ble sources also makes the task of man-
aging the power system more complex.
National Grid says the fact a wind gen-
erator was involved in this month’s
incident has no significance. But some
analysts say wind farms provide less
“inertia”, or resistance to frequency
drops on the grid, than traditional gen-
erators, making frequency more vul-
nerable to sudden supply drops.
The regulator should examine
whether reserve power requirements
— obliging the grid to hold back-up
power equivalent to the biggest genera-
tor on the system that day — are suffi-
cient. National Grid says increasing
this would carry a cost. But that should
be weighed against the potential costs
to the economy of damage to, and fail-
ures of, critical infrastructure.
Bolstering network resilience will
require government, regulators and
power companies to work together.
The collapse of two nuclear power sta-
tion projects within the past nine
months makes adoption of a new
energy strategy even more pressing. A
white paper has been delayed but
should be given high priority by the
new government. The country could
pay a high price if it is not.High-tech economy is more vulnerable even to short-term power cuts
Blackout raises alarms
on UK energy resilience
Italy’s far-right and anti-establishment
coalition government hascollapsed
after 14 months of chaos and contra-
diction. Few in Italy or elsewhere in
Europe will mourn the passing of such
a dysfunctional administration. But its
demise, opportunistically triggered by
Matteo Salvini, the leader of the anti-
immigrant and Eurosceptic League,
thrusts the country into a fresh politi-
cal crisis at a time of deep social and
economic problems. Seldom has Italy’s
political drama seemed so detached
from reality.
It is now up to President Sergio
Mattarella to find a way out of the
crisis. He wants to move quickly. Italy
can ill-afford lengthy deliberations and
a game of political egos. Rome has to
submit a fiscal outline for 2020 to the
EU by mid-October and enact a full
budget by the end of the year. The
economy is stagnating and could tip
into a recession if the political uncer-
tainty persists and automatic tax rises
come into effect in January. But snap
elections would probably install a
hard-right government intent on a
bust-up with Brussels over tax cuts.
Of the various options for Mr Matta-
rella to consider, the worst would be to
resuscitate the tie-up between the
League and the anti-establishment
Five Star. Mr Salvini hashintedthat he
is open to a new start. But it is hard to
see how the yawning policy differences
between the two parties could be
bridged or how the far-right leader
could be stopped from jumping ship at
the next opportunity.
A better way out would be a coalition
of Five Star and the centre-left Demo-
cratic party. It was unthinkable only a
month ago — one reason why Mr Sal-
vini felt he could pull the plug on the
government. If there is a lot of bad
blood between Five Star and the Demo-
crats both have an interest in forestall-
ing early elections, where they couldsustain heavy losses. Thanks to Mr
Salvini’s timing, they can claim to be
acting in the nation’s interest given the
urgency of passing a budget this
autumn and avoiding a confrontation
with the EU.
Yesterday, Nicola Zingaretti, the
Democrats’ leader who had been
strongly opposed to a coalition with
Five Star, said he was open to talks sub-
ject to conditions, including: “loyal
membership” of the EU, economic
development based on environmental
sustainability, a new approach to
migrant inflows and avoiding an
increase in the tax burden. Turning
sensible principles like these into a
detailed coalition programme will be
tough; holding a coalition together will
be a struggle. It might last long enough
to steer through a new budget.
By pushing the League, Italy’s most
popular party, into opposition the risk
is that a Five Star-Democratic party
coalition plays into Mr Salvini’s hands.
He is already presenting it as a denial of
democracy even if it was his failed
gambit that brought it about.
Becoming prime minister would
force Mr Salvini to make choices and
assume responsibility for them, rather
than hiding behind his allies. But many
Italians, not to mention their EU part-
ners, look at the prospect of the first
government led by the far-right in
Europe since the second world war
with dread. Mr Salvini’s Eurosceptic,
anti-immigrant speech in the Senate
marking the downfall of his govern-
ment suggests he is not about to mod-
erate any time soon. His promise of a
€50bn package of tax cuts to stimulate
the economy in breach of EU fiscal
rules would put Italy on collision
course with Brussels and push up its
borrowing costs. Italy’s economy needs
a lift. It also needs a plan to raise its
growth potential. Mr Salvini can
deliver neither.A Five Star-Democratic tie-up could steer through a new budget
Italy needs an alternative
coalition to stop Salvini
CCS is critical to meeting
the net-zero challenge
Your Big Read “Coal’s survival plan”
(August 21) paints a narrow picture of
carbon capture and storage and its
potential and expected role in tackling
CO2 emissions from a variety of
sectors. It creates the risk of losing
sight of the immense decarbonisation
challenge ahead by downplaying the
criticality of CCS in a portfolio of
climate solutions.
CCS technology is versatile in its
application, commercially viable and
delivers the large-scale emissions
abatement required to meet global
climate goals. There are currently 19
large-scale CCS projects operating
around the world. Only two of these
projects are in coal power generation.
The rest of these large-scale facilities
capture industrial emissions from
natural gas processing units, chemical
production, ethanol and steel plants, as
well as fertiliser and hydrogen
production.
A plethora of science and climate
organisations recognise the need for
increased deployment of CCS as being
critical, including the International
Energy Agency and the IPCC, which in
its special Report on Global Warming
of 1.5 °C included CCS in three of its
pathways to get to net-zero emissions
by the middle of the century. Indeed,
the UK Committee on Climate Change
called CCS “a necessity, not an option”
in a reportreleased this year.
CCS is the only technology available
today to deeply decarbonise heavy
industry, including steel and cement.
This conclusion is backed by the
Energy Transitions Commission. CCS
can also enable carbon dioxide removal
to reduce the stock of emissions
already in the atmosphere and produce
clean hydrogen to supply heating,
transport and industrial processes.
The statement that CCS is expensive
is often put forward. In reality, the cost
of deploying the technology varies
across industries and will continue to
fall as new facilities come online. In
certain applications, including natural
gas processing and ethanol production,
the cost can be as low as $20 a tonne of
CO2 abated.
It is important to recognise that there
is no silver bullet to tackling emissions.
Delivering our ambitious, global
climate targets will only be achieved by
going beyond divisive rhetoric and by
putting forward a realistic pathway to
net-zero — one that embraces a
portfolio of solutions including
renewables, energy efficiency, nuclear
and CCS.
Guloren Turan
General Manager,
Global CCS Institute,
London NW1, UKObvious, if you
think about it
Apropos the letterfrom John Turner
(August 20): Ireland is so rich because
its “capital” is always “Dublin”.
Ajay Malik
Grand Saconnex, Switzerland
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