Financial Times Europe - 21.03.2020 - 22.03.2020

6 ★ FT Weekend 21 March/22 March 2020

Few self-styled social

democrats read Marx

As a student, I was a member of the

Student League of Industrial

Democracy, which became Students for

Democratic Society. n the socialistO

spectrum it was rightwing and anti-

communist. Emphasis was on co-

operatives and co-operation, but

hardly any grounding in socialism,

Marxist or revisionist. That came in the

1960s as resistance to the long war in

Vietnam. Ed Luce cut a fine slice of the

“progressive billionaires” in Marin

County; armchair progressives until

reality touches the purse (FT

Magazine, March 14). They will vote

for Biden because they dislike Trump.

Few self-styled social democrats have

read Marx. Like Bernie Sanders,

Alexandria Ocasio-Cortezcalls for

comprehensive medical assurance, free

public university education and the

Green Deal. But for Seattle councillor

Kshama Sawant, Mr Luce marches out

the same old suspects, like Robert

Reich. He could have called upon

Richard D Wolff who talks up

democratic socialism,although alas

not in the mainstream media.

Jakob Wasi

New York, NY, US

Lammy never went

to public school

A correction for the public record in

response to the letter of Anthony

Ojolola (Letters, FT Weekend,March

14 ). He describes David Lammy as a

“public school-educated Harvard Law

graduate”. In fact, The King’s School

Peterborough which Mr Lammy

attended was not a public school — it

was a state comprehensive, being then

the only cathedral school which had

remained in the state system.

Beryl Dennis

Peterborough, Cambs, UK

Late-1960s London was

no egalitarian utopia

In deploring wealth, at least of the

conspicuous kind, David Redshaw cites

the UK in 1967 as a healthy example of

a time and place without too much of it

(“ Veblen intended to satirise the rich”,

Letters, FT Weekend, March 14). As for

implied cause and effect, I would

question whether that year in Britain

was the harbinger of a specially happy

subsequent decade or so. I can recall

quite a few Rolls-Royce and Bentley

cars on the road in the London area

around 1967 — though I am quite

prepared to believe there could have

been proportionately more of them in

terrible places with intolerably low tax

rates like the Isle of Man.

Andy Thompson

Worcester Park, Surrey, UK

Veblen’s targets belonged

to an earlier era

David Redshaw is surely wrong

(Letters, March 14) in claiming that

Thorstein Veblen devised the term

“conspicuous consumption” to satirise

“the ludicrous and ostentatious dress

and lifestyles of the über-rich in the

1920s”.The Theory of the Leisure Class,

the book in which he coined the term,

was published in 1899.

Oliver Corlett

Oakland, CA, US

Unlikely interwar visitors

to the Hotel du Cap

I would call into question the likelihood

that James Baldwin (born 1924) or

even Ella FitzGerald (born 1917)

visited the Hotel du Cap during “those

heady years between the wars” (Life &

Arts, FT Weekend, March 14).

William H Janeway

Cambridge, Cambs, UK

A world without

modern tech

Every weekend enjoy sifting andI

contrasting the concerns of your

magazine contributors. Last weekend

was a bumper crop: Hattie Garlick’s

subtly anguished reflections on

curating her online life; Tim Hayward’s

reverent piece on the “grace” of being

well fed; and the weird glamour of the

reopening of a thousand-star-hotel on

the French Riviera, just when a crafty

virus is holding global travel to ransom.

But what impressed me most was

learning that Kaffe Fassett, the

exuberant colourist, engages with the

world without driving, working a

computer or owning a mobile phone

(How to Spend it, March 14). How

refreshing. I’m off to do a spot of

quilting. Honestly.

Anne Greer

Worcester, Worcestershire, UK

Letters

SATURDAY21 MARCH 2020

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Correction

c photograph accompanying an articleA

on the redevelopment of London’s King’s

Cross district in House & Home on March

14 was of a strip club in King’s Cross, Syd-

ney, not London as the caption mplied.i

In times of crisis, the country wants to
rally behind its government. Whatever
reservations some people have about
Boris Johnson, they recognise the
exceptional nature of the coronavirus
emergency and understand that there
will be mistakes in addressing it.
A government, however, must also
accept when errors have been made.
The prime minister’s early crisis
response was slow and the initial strat-
egy, of allowing controlled spread of the
virus in the hope of buildingherd
immunity n the population, rejectedi
by other European nations, was flawed.
Mr Johnson is now moving rapidly
along the curve. His announcement
lateyesterday of the nationwide clo-
sure of pubs, restaurants and leisure
facilities was the right decision, if over-
due. Strengthened social distancing
measures are vital to try to ensure the
NHS is not overwhelmed. The prime
minister must think hard about
whether shop closures, except food
stores and pharmacies, should follow.
Chancellor Rishi Sunak is also rising
to the challenge. His£350bn support
package o the economyt this week put
meat on his “whatever it takes” prom-
ise to support business and the econ-
omy. The pledge yesterday that all
companies — including non-profit
enterprises — can claim grants of 80
per cent of salaries for furloughed
workers, up to £2,500 a month, is a
bold and substantial one.
Yet the government was sluggish ini-
tially in setting up co-ordinating struc-
tures. Mr Johnson took too long to chair
his first crisis committee and bring in
other ministers alongside his advisers.
The UK was slow to recognise that it
was in a global race for medical equip-
ment. It needs more and it is lagging
behind on testing capacity.
Rightly, the herd immunity strategy
has been abandoned as it became clear
it would lead to a swamped NHS and

thousands more deaths. Critics wonder

why Mr Johnson was not more ques-

tioning of theoriginal plan. The public

has been impressed by the chief medi-

cal and scientific advisers but Mr John-

son is the prime minister.

The change of strategy left far less

time to plan the other steps known to

be necessary, but which he hoped to

delay. This sense of playing catch-up

explains why measures such as school

closures are throwing up predictable

questions, yet ministers lack answers.

Less pardonable is the delay in getting

protective equipment to medical staff.

Citizens have three primary con-

cerns: that their livelihoods are safe-

guarded; that the NHS will cope; and

that there will beenough food o eat.t

Mr Sunak’s package helps address the

first, but more is needed on the others.

In tone and instinct the government

is doing better, but there is a gap

between promise and delivery. Mr

Johnson’s instincts are towards sunny

rhetoric. This has its place, but the pub-

lic may respond better to a serious rec-

ognition of problems and clear plans.

On food supplies, entreaties to peo-

ple to “be reasonable” are not enough

to counter empty shelves. Measures to

waive competition rules to allow col-

laboration are welcome. But both the

food andhealth equipment ssues cryi

out for the appointment of a logistics

supremo. Michael Gove appears to be

the government’s main fixer, but there

is a case for bringing in an expert from

business or the military. This govern-

ment lacks experience. It should not be

afraid to bring it in, recalling former

ministers if they can help.

The government needs support and

some latitude. It is learning its lessons

in the teeth of a crisis that would test

history’s greatest statesmen. In the first

weeks it has too often seemed behind

the curve. It is upping its game, but

catch-up time is over.

New social distancing and worker support measures are substantial

Large parts of the western world are
this weekend in lockdown. Thestate of
California— a bigger economy than the
UK — yesterday became the latest to
enforce sweeping social distancing
measures aimed at reducing the spread
of coronavirus. It joins cities such as
New York, and much of Europe, where
movement and business is now
restricted in the name of public health.
Alongside the virus suppression
measures that spread with extraordi-
nary speed this week, the global eco-
nomic policymaking apparatus has
shuddered into overdrive. This began
on Sunday when the Federal Reserve
cut interest rates to zero, relaunched
quantitative easing and extended swap
lines to foreign central banks.
The European Central Bank and the
Bank of England followed on Thursday,
with hundreds of billions in asset pur-
chases. The Fed also extended swap
lines to even more US allies, helping to
ease a funding squeeze as investors
dumped even safe-haven investments
such as government bonds andgold ni
a scramble to get hold of dollars.
The co-ordinated action is showing
signs of having ameliorated the purely
financial aspects of the crisis.Global
stocks nd the price of oil rose yester-a
day, while the US dollar’s rapid climb
went into reverse — though Wall Street
struggled to hold on to its early gains. A
lot has been achieved this week, but
more is still needed — especially in
terms of support to the real economy.
After the falls in markets, the dam-
age to livelihoods is just beginning. Job-
less claims for the US rose last week by
the fourth biggest percentage on
record. Goldman Sachs estimates this
week’s figures will rise by 2.25m: the
highest ever.
Policymakers must now turn atten-
tion to making the recession as shallow
as possible and the eventual recovery
robust. This does not mean boosting

current spending; consumption will

inevitably fall with populations in lock-

down. Stimulus should instead encour-

age productive capacity to remain, so

that when social distancing comes to an

end businesses can resume work and

employees return to their jobs.

European governments have already

launched programmes including tax

holidays and loan guarantees to keep

companies in business. On Monday,

France said it would guarantee loans to

businesses worth about 12 per cent of

national income. The UK made guaran-

tees worth 15 per cent. The US Senate

introduced legislation yesterday that

would unlock more than $1tn in total,

including $208bn of loan guarantees.

Cheap credit can help some busi-

nesses survive but others will not be

viable with theadditional debt at any

cost. Governments now need to pro-

vide help so companies can keep their

workers on the books ready for when

the virus passes. France and Germany

have relaunched the kind of subsidised

short-term working arrangements that

helped during the financial crisis. In

one of the most substantial packages so

far, the UK government yesterday

pledged to pay 80 per cent of the wages

of workers who are furloughed rather

than fired, up to a certain limit.

Direct payments, funded by govern-

ment borrowing or in extremis central

banks, are also now called for — and in

size. Other countries can learn from

the US, where Congress is debating just

how much to send to low- and middle-

income workers. Methods need to be

found to offer payments in other devel-

oped countries.

As with antivirus efforts, time is of

the essence. The faster governments

put in place measures to combat reces-

sion, the better. Welfare states were

created to provide insurance for tem-

porary sickness and unemployment.

Now it is time to show what they can do.

The next stage of crisis firefighting is to safeguard companies and jobs

Johnson is coming to

grips with the virus

Global policymaking

has cranked into gear

It is never easy to admit that you are

wrong; especially when you have

previously earned fame (and billions

of dollars) by calling the future right.

However, Ray Dalio, founder of the

world’s largest hedge fund,

Bridgewater Associates, has done just

that. After it emerged that his flagship

fund was down about 20 per cent

since the start of the year, Mr Dalio

admitted that he had been caught flat-

footed by the recent coronavirus-

driven market swings — in sharp

contrast to the 2008 financial crisis,

when he and his team predicted

events with such prescience that they

profited handsomely.

“We’re disappointed because we

should have made money rather than

lost money in this move, the way we

did in 2008,” he told the FT. It seems

that the systems Bridgewater

developed to analyse the flows of

finance and economic activities did

not offer any guidance when looking

at a rare event such as the current

pandemic. “We didn’t know how to

navigate the virus and chose not to

because we didn’t think we had an

edge in trading it,” Mr Dalio added.

“So, we stayed in our positions and, in

retrospect, we should have cut all

risk.”

Now, many readers may feel baffled

by this, given that the whole point of

investing with hedge funds is that they

are supposed to beat the markets at

times of stress. However, I think that

scorn is the wrong response here.

Never mind the fact that Bridgewater

is far from the only fund to suffer big

losses and that Mr Dalio has admitted

to his mistakes (which is a more

honest approach than most of his

rivals). What is interesting to ponder

is what this episode reveals about the

nature of forecasting — and our

modern attitudes towards time.

As anthropologists often point out,

the way we think about time is a

defining feature of the post-

enlightenment world. During much of

human history, the future was viewed

as a vague and terrifyingly

unknowable blur.

In modern, post-enlightenment

western cultures, however, a linear

vision of time emerged that presumes

the past can be extrapolated into the

future with a sense of progression. In

the 20th century, this gave birth to the

risk management and finance

professions, as Peter Bernstein wrote

two decades ago in his brilliant book

Against the Gods.

By the turn of the century,

innovations such as computing and

the internet were turbocharging the

forecasting business to an

extraordinary degree, as Margaret

Heffernan notes in her excellent (and

very timely) new bookUncharted.

Ms Heffernan writes that while the

forecasting business has made its

“experts” very rich, it is also based on

a fallacy: the idea that the future can

be neatly extrapolated from the past.

Moreover, the apparent success of

some pundits in predicting events

(such as the 2008 crash) makes them

so overconfident that they get locked

into particularly rigid models. “The

harder economists try to identify

sure-fire methods of predicting

markets, the more such insight eludes

them,” she writes.

Is there a solution? Ms Heffernan’s

answer is to embrace uncertainty,

build resilience, use “narrative” (or

qualitative) analyses instead of rigid

models and to respect the wisdom of

diverse views to avoid tunnel vision.

There is another way to frame this

debate: to treat models (whether they

emerge from computer science or

economics) like a compass in a dark

wood at night. Navigation tools can

give you a sense of direction and

orientation; it would be ridiculous to

toss them out entirely. However, if you

rely exclusively on them, accidents

can occur. The trick, then, is to use

navigation aids but also to maintain

your peripheral vision.

Using the insights of cultural

anthropology is one way to do this,

since it provides a social context for

looking at our favoured tools (and

thus a way to see their shortcomings).

Others might argue that peripheral

vision simply stems from common

sense. Either way, now more than

ever, we need this broader perspective

— and humility — when we try to

assess what might happen next, not

just with the markets but with the

coronavirus outbreak too.

The problem

with predictions

in an age of

uncertainty

Notebook

by Gillian Tett

Ed Balls did not have much time for

Anne Case and Angus Deaton’s new

bookDeaths of Despair “(American

Carnage”, Life and Arts, FT Weekend,

March 14). But he’s attacking their

liberal (in the American sense) critique

of the detrimental impact of late

capitalism on the white working class

from the left. What’s this? Just as UK

Chancellor Rishi Sunak goes all JM

Keynes, Ed Luce tells us that, “Even

when [Bernie] Sanders is losing, he is

winning” (“The Future of Socialism in

America”, FT Magazine, March 14) and

Comrade Balls pops up all lefty! He also

finishes with an intriguing admission of

doubt: “I ended the book worried that

economics still doesn’t seem to have

answers to the economic and cultural

dislocation faced by so many working

people in the US and across Europe.”

Something really significant is going

on. The neoclassical conceptual model

that still holds sway in the economics

departments of our universities is

intellectually bankrupt, in denial about

the financial crisis that it said couldn’t

happen. The neoliberal policy

prescription to which there has been

no alternative for the last 40 years has

been tested to destruction... and

failed. Jeremy Corbyn and Mr Sanders

are not going to be our leaders — but

they are harbingers of change. They

have opened a space for discussion and

possible renaissance on the left, forcing

their disgust at what’s wrong with the

current economic orthodoxy on to the

mainstream agenda. What we are

waiting for is a new Keynes, someone

who will change the terms of the

debate altogether and offer a new

economic model as he, and then

Friedrich Hayek, both did in the 20th

century. But where is she?

There have been some interesting

candidates (many of them female —

Stephanie Kelton, Anne Pettifor,

Mariana Mazzucato, Kate Raworth)

but no one has ucceeded in changings

thegame. And even the bumptious Mr

Balls, for all that he seems to be riding

the wave to the left, says we don’t have

the answers. Buthe’d be fun to talk to.

Virus restrictions permitting, why

doesn’t the FT invite him to lunch and

put him on the spot on the Green New

Deal, the Sanders/Corbyn phenomenon,

modern monetary theory, doughnut

economics and other stuff? Who does

he think might be the new Keynes?

And could AOC be the new FDR?

Rod Wood

Nottingham, UK

Economic policy prescriptions have been tested to destruction

MARCH 21 2020 Section:Features Time: 3/202020/ - 19:00 User:alistair.hayes Page Name:LEADER USA, Part,Page,Edition:USA , 6, 1