Financial Times Europe - 21.02.2020

8 ★ FINANCIAL TIMES Friday21 February 2020

Kinnock wanted to bring

Labour members with him

Miranda Green, in “Labour’s new

leader must be free to reinvent the

party” (February 18), rightly highlights

the tricky path wannabe leaders must

tread between reassuring party

members and keeping their options

open. Neil Kinnock trod that path

carefully. He perceived a party uneasy

about quick changes in direction,

particularly when he had another

challenge to confront early on in his

tenure: factionalism.

Kinnock, ever since refusing to vote

for Tony Benn in an earlier deputy

leadership contest, was no stranger to

rancorous party meetings. He took to

quoting the historian Eric Hobsbawm,

warning of the “illusion” that

organisation could replace politics. He

wanted to bring what he believed was a

majority of Labour members with him

on a journey to a more “electable”

position. That meant gradual policy

change alongside a return to Labour’s

fabled “broad church” — altogether less

divisive, though some on the Labour

left have always considered it to be

code for isolating them.

Whether Labour’s next leader can

“compress” Kinnock’s near decade of

reform into something shorter, as Ms

Green suggests, will depend on their

perception of just how divided their

party is.

Dr Karl Pike

Queen Mary, University of London, UK

Bezos must now aim for

zero-emission cargo ships

Jeff Bezos’s announcement of a $10bn

fund to combat climate change is a

welcome addition to other significant

corporate commitments. These include

recently announced multibillion-dollar

plans to finance climate solutions by

Goldman Sachs nda lackRockB.

But Mr Bezos can also fund solutions

within Amazon’s operations.

Amazon elivers more than 10bnd

items annually. The company’s

“Climate Pledge” last September

included purchase of 100,000 electric

delivery vans geared to reduce

emissions. However, most stuff arrives

by ship before getting delivered by van.

ome 90 per cent of goods areS

transported by cargo ship. These huge

vessels release greenhouse gas volumes

on a par with the world’s largest

countries. These overlooked emissions

must be taken into account by

companies tackling climate change.

The Paris agreement will fail unless

cargo ships reduce emissions

immediately and move shortly to zero

emissions. Solutions already exist for

zero-emission ships fuelled by

hydrogen, ammonia, renewable

electricity and wind power. But demand

is needed to spur investment. Mr Bezos

must leverage Amazon’s considerable

demand to require that goods arrive on

zero-emission ships by 2030.

Amazon has pledged to decarbonise

on afaster time horizon han the Parist

agreement, and promised billions to

fund climate activists. But without

zero-emission ships soon, we are all

sunk.

Sue Libenson

Consultant, maritime, climate and natural

resource policy,

Haines, AK, US

Situation is more dire than

IPCC projections suggest

Martin Wolf (“Last chance for the

climate transition”, February 19) has it

just about right when he says that over

the past few decades CO2 emissions per

unit of real output have been falling at

around 2 per cent per year. That means

that energy use per unit output has

been decreasing at roughly the same

rate, or in economists’ jargon energy

productivity (output per unit of energy

and thus CO2 emissions) has been

increasing at 2 per cent. It is no

coincidence that labour productivity

grows at roughly the same rate.

The implication is that there is a

strong historical link between growth

rates of energy productivity and labour

productivity dating back for two

centuries, as Mr Wolf observes. Rising

energy productivity is tightly linked to

growth of per capita income. Nowadays

the relationship is likely to be

especially strong for middle-income

countries which have little choice but

to adopt technologies pioneered in the

upper-income echelon.

Currently available technologies may

be able to achieve decarbonisation but

they run a severe risk of cutting

economic growth per capita, the main

policy goal of middle-income

economies. The situation is more dire

than is made out in Intergovernmental

Panel on Climate Change projections,

which are visibly ahistorical over the

period since the second world war.

Truly, a “historic global effort” is

required.

Prof Emeritus Lance Taylor

Washington, ME, US

The Financial Times persists in

referring to “environmentalists” — so

why not to “anti-environmentalists”?

Surely humans who operate without

regard to their natural environment

most need a (warning) label?

Similarly for investment products —

sustainable investment should be

standard, and any products

contributing to the demise of the

planet labelled as such. Investors could

then select a “brown fund” or “high

carbon fund” for their pension with

little doubt over the impact.

Jessica J Cassey

London W10, UK

Barclays’ transformation

ought to be acknowledged

Your newspaper’scoverage f Barclays’o

recent results had a whiff of tabloid

journalism. Of course the regulators’

investigations into prior disclosure of

the chief executive’s association with

the sex offender Jeffrey Epstein

merited comment, and it was no

surprise to see Philip Augar (February

15) link his episode to the theme of hist

recent book about the bank that “likes

to live a little”. Nevertheless, the

transformation of the bank under Jes

Staley, so that in 2019 it ranked fifth in

the US (and your readers will be able to

name five US bulge bracket banks),

could have been acknowledged along

with the fact that this ranking is now

an impossibility for any European or

Asian bank.

If the FT is over Brexit now that the

UK has left the EU, Barclays’

achievement could even have been

posited as encouraging for the UK’s

prospects.

Nigel Rowe

Richmond, Surrey, UK

It is almost worthy of Monty Python.

As the Brexit negotiations move into

the hard-edged territory of thrashing

out the details of Britain’s future

relationship with the EU, it looks as

though it will all come down to the

question offish versus finance. If UK-

based banks want to keepdoing

business as usual with the EU then

European fishing boats will need to

keep their access to British waters.

Judged simply by the numbers, it

seems an absurd trade-off. One is a

marginal area of economic activity

that has been fading for decades, the

other is an international powerhouse

that generates masses of jobs. The

value of the financial services industry

is estimated to be169 times reaterg

than that of the fishing sector, which

accounts for a fraction of 1 per cent of

gross domestic product. Fishing

employs less than 10,000 people;

finance hundreds of thousands. As

one analyst waspishly noted,Harrods

department store generates more

value for the UK economy than the

“fishing and aquaculture” sectors.

Yet, while it may be an economic

tiddler, there has always been more to

Britain’s fishing industry than mere

numbers on some bureaucrat’s

spreadsheet. For an island state, fish

and fishing are a question of identity

— a defining feature of the Brexit

debate. The idea of foreign vessels

dipping into “our” waters triggers

deep-seated feelings about territory.

Fish and territorial rights have been

a steady feature of Britain’s modern-

day relationship with the rest of the

continent. The UK joined the

European Economic Community in

1973 against the backdrop of the

Second Cod War, a maritime set-to of

trawlers and frigates between Britain

and Iceland.

Once in, ows over fish became partr

of the staple fare of the Eurosceptic

prospectus. The annual setting of

quotas under theCommon Fisheries

Policy ecame ab rallying point for

those aggrieved by a system they felt

gave unfair advantage to foreign fleets.

It was a tension that was brought

home to me over a decade ago when,

in the wake of one particularly tough

quota settlement, I was packed off to

north-east Scotland to Fraserburgh

and Peterhead to report on how it had

all gone down in Europe’s biggest

fishing ports. It’s safe to say that

feelings towards Brussels were as cold

as the North Sea waters.

Yet any anger directed at the

bureaucrats was somewhat tempered

by the benefits delivered by — irony of

ironies — the EU’s policy of freedom of

movement. Among those I metwere

youngLatvianswho had filled

vacancies forgutting and filleting fish

in chilly processing factories. Local

people toldof the lucrative business of

renting out cramped quarters to

gangmasters and their imported

workers. (The issue is still with us: this

week, fishing industry leaders warned

of the possible impact of proposed

post-Brexit rules for migrant labour.)

Elemental, physical and rooted in

territory and community, this all

seems a world away from the

boundless, technology-charged world

of international finance with which

fishing has now been lumped.

And yet, perhaps the links between

finance and food are not so far-

fetched. Below the gauchenew

skyscraperslooming over the City

today are the earthy, or watery, roots

of Europe’s biggest financial centre.

Road names such as Old Fish Street

Hill, whichslinks between the

Financial Times offices and aWren

church, recall a time when other lines

of business drove the area. Billingsgate

fish market may have scuttled off

from its nearby home to a new venue

further east, butits meaty sibling

Smithfield s (for now) still doingi

business in trading animal products.

Fishing has also provided inspiration

for high finance. One historian of

buccaneering venture capitalism

found the origins of that high-risk,

high-return business in thewhaling

industry. Cast the net more widely,

and you find that some of the most

sophisticated traded financial products

have their origins in foodstuffs, such as

the futures contracts for agricultural

producedeveloped in Chicago in the

19th century.

In Britain fish and finance are

ultimately two sides of thesame

Brexit coin. One the very expression

of the desire to take back control, the

other the seizing of borderless

opportunity. Which one wins out will

be a signal of the course Britain charts

for its post-EU future.

[email protected]

Fish and finance

have more in

common than

meets the eye

How do we finance a widening sphere

of “international public goods” linked

to globalisation? And how can we tax

the digital economy? Both problems

seem intractable. Perhaps a joint

solution is called for.

Globalisation continues, full steam

ahead. With that we need a growing

number of services and controls that

are best provided by transnational or

supernational bodies. But the funding

of such mechanisms remains an

unresolved problem. As a share of

gross national income, contributions to

the EU have not increased at all since

the introduction of the long-term

budgets in the late 1980s. Professor

Jeffrey Sachs describes it well in his

letter f February 19.o

Eighteenth-century Poland once

collapsed because of the “liberum veto”

— the rule that any nobleman could

block a parliamentary decision. The EU

is hamstrung by the same principle. As

long as funding decisions cannot be

taken by qualified majorities, foot-

draggers will call the tune.

Another quarrel revolves around

digital services. Should taxing rights

belong to the “source states” where

innovations are made, or to the

“market states” where the customers

live? There are valid arguments to go

either way and no agreement in sight —

in spite of Solomonic splits proposed by

the OECD.

Granting even prudently

circumscribed fiscal competence to

international organisations goes

against deeply entrenched principles of

national sovereignty, but with that

sovereignty partly undermined by

modern technology, this idea is

nevertheless worth exploring. Where

value creation takes place in the digital

economy will remain a moot issue,

whatever agreements are made. So

why not consign part of this fiscal space

to meeting urgent common needs

defying all national boundaries? With

the climate threats and many other

major challenges facing us, such needs

are getting ever more pressing.

Prof Daniel Tarschys

Swedish Institute for European Policy

Studies,

Stockholm, Sweden

Could tech taxes pay for global public goods?

Letters

FRIDAY21 FEBRUARY 2020

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OPINION ON FT.COM

Martin Sandbu’s Free Lunch

The EU could agree its budget on time — it

must not be held back by zero-sum wrangles

http://www.ft.com/free-lunch

‘The annoying thing is I was

pardoned by Donald Trump’

What the UN describes as the worst
humanitarian catastrophe of Syria’s
nine-year-old civil war is unfolding in
Idlib. The north-western province is
the last redoubt f the rebellion againsto
Bashar al-Assad’s regime, which has
launched a vicious offensive to recap-
ture it, backed by Russian warplanes
andIranian-suppliedfighters.
Roughly 1m people, a third of Idlib’s
population — half of whom have been
displaced several times already — are
fleeing from a campaign of terror that
deliberatelytargetscivilians.
Turkey, which has 12 military
“observation posts” in Idlib as part of a
“de-escalation” accord with Russia in
2018, and haslost troops o regimet
shelling in recent weeks, is poised to go
on the offensive against the Assads.
That will not only set Ankara on acolli-
sion course ith Moscow but aggravatew
the already appalling conditions Idlib’s
peopleareenduring.
Syria’s pitiless conflict has killed half
a million people. It has displaced half
the prewar population of 22m, about
6m of them abroad. This new wave of
refugees, pressed up against the Turk-
ish frontier to the west and crammed
into two north-west Syrian enclaves
Turkey seized in 2016 and 2018, is set
tobecomethebiggestofthewar.
Thatrisks reviving urope’s 2015-16E
“migrant” crisis that turbocharged
populist xenophobia. Russia is well
aware of this, using it as leverage to
frighten the EU into reconciling with
Assad rule and stumping up funds to
resurrect Syria from the rubble. Tur-
key is already host to 3.6m Syrian refu-
gees, and part-subsidised by the EU to
keep them. It periodically threatens to
reopen routes north into Europe for
fleeingSyrians—unlessitwinssupport
for the buffer zone it is building across
northernSyriaagainsttheKurds.
Idlib distils every intractable ele-
ment that deterred the US and Europe

from backing an initially broad-based

rebellion against tyranny, before it was

hijackedbyjihadiextremists.

There are some 20,000 jihadi fight-

ers linked to al-Qaeda in Idlib. But

there are also 3m civilians. They have

run out of places to run to, and their

children are freezing to death in sub-

zero temperatures. They face the

bombing of hospitals and schools, mar-

kets and bakeries — the war criminal’s

handbook the Assad regime and its

patrons have written in blood. Syrian

and Russian air forces have destroyed

more than 50 medical facilities in Idlib,

such that doctors have stopped provid-

ing the coordinates that were supposed

to protect them and have, in some

casesliterally,goneunderground.

Idlib, one of the first cities to rise up

againsttheAssads,hasbeenapivotofa

horrendous war that has saved the

worst for last. The regime and its spon-

sors always intended to make it the

final killing field in this catalogue of

horror. The strategic logic of the Idlib

offensive — to recapture two arterial

highways from Damascus to Aleppo

and from the coast to the east — pales

alongside the primeval urge to liqui-

date all opposition. It should be

remembered that when Russia came to

the Assads’ rescue in 2015, it did not go

afterIsisoral-Qaeda.Itrelentlesslytar-

getedmainstreamrebels.

Western response to the tragedy is

shameful. Russia has used its veto at

the UN Security Council to shield Syria

14 times in 2011-19, often backed by

China. But the US is an onlooker and

Europe nowhere to be seen. The west

has things that Russia (and Iran) want,

including relief from sanctions and

help to rebuild Syria. President

Vladimir Putin needs to be confronted

— with the evidence of Russia’s war

crimes — before Idlib turns into a

bloodbath and more millions of help-

lessSyriansarescatteredtothewinds.

The west must confront Putin with evidence of war crimes in Syria

A shameful response

to the tragedy in Idlib

Pete Buttigieg put it best. Summing up
the Democratic presidential race at
Wednesday’sdebate in Las Vegas, the
ex-mayor from Indiana said of Bernie
Sanders and Michael Bloomberg: “We
shouldn’t have to choose between one
candidate who wants to burn this party
down and one who wants to buy this
party.” Mr Sanders’ tilt at the nomina-
tion in 2016 makes him a known quan-
tity. Mr Bloomberg’s dramatic, high-
spending entry into the fray — with one
pollthisweekputtinghimsecondtoMr
Sanders — poses adilemma ot just forn
the Democrats, but potentially for US
democracy.
Mr Sanders, a self-styled socialist, is
too leftwing even for many in his own
party to support. Mr Bloomberg, by
contrast, has attributes that could
attract a broader base. One is compe-
tence.HeisaprofessionalwhoranNew
YorkCityasmayorforthreeterms,and
could run government. After the dys-
functionoftheTrumpera,Washington
— and America more broadly — badly
needs a return to more efficient and
predictablegovernment.
Mr Bloomberg is a pragmatic cen-
trist. He says he is driven, above all, by
his alarm over Mr Trump’s policies,
and what the US president is doing to
constitutional checks and balances. He
brings the best of American free enter-
prise and dynamism into the political
sphere. Were he to win the Democratic
mandate and then the White House, he
would be the first truly successful, self-
made businessman to become presi-
dentformanyyears.
This last point, however, is also his
biggest flaw as a candidate. With esti-
mated wealth of $62bn, the business
data magnate is a plutocrat who for
many Americans symbolises the coun-
try’s yawning social inequality, the
arrogance of the C-suite, and the
grubbynatureofbig-moneypolitics.
Heisvulnerabletothechargethathe

is trying to buy not just the Democratic

party, but the presidency. His $408m

advertisingspend njustfourmonthsisi

$65m more than his fellow billionaire,

Mr Trump, spent during his entire

2016 campaign. The funds Mr Bloomb-

erg has poured into buying up political

operatives, social media influencers

andsophisticateddataanalyticsdistort

thewholepricingofUSpolitics.

Mr Bloomberg also faces questions

over his record. On Wednesday he

came under attack over past allega-

tions of sexist comments and behav-

iour towards ex-employees and associ-

ates — and the use of non-disclosure

agreements. The heavy-handed stop-

and-frisk policies of his mayoral

administration may tarnish his appeal

among black voters. True, Mr Trump

has been accused of worse and Mr

Bloomberg’s past has already been

picked over in his mayoral campaigns.

But that makes concerns over the busi-

nessman-politician’s previous conduct

nolessimportant.

Mr Bloomberg’s fumbled responses

to predictable assaults from his rivals

inLasVegashighlightsafurtherfailing:

he is a poor retail politician. His plod-

dingdisplaydemonstratesoneperhaps

reassuring truth about democratic pol-

itics — that even hundreds of millions

ofdollarscannotbuyyouagooddebate

performance.

It is still early days. Mr Bloomberg

may yet emerge as the Democratic

nominee, because his campaign proves

unstoppable, or the party concludes he

is the only candidate with a credible

chanceofdefeatingMrTrump.Withan

unconventional campaign and the

deepest of pockets, he has upended the

Democratic race to the nomination.

His investment could pay off. But if he

continues to stumble, he may find that

a more productive strategy is to put his

immense resources behind a more

electablecandidate.

Billionaire ex-mayor is a competent centrist. He is also a plutocrat

The Bloomberg dilemma

for the US Democrats

Delisting may not be the

best option for companies

in DP World’s position

DP World’sannouncement f itso

delisting from Nasdaq Dubai may not

be surprising. Indeed, there are many

companies across the world that delist

from the stock markets, resulting in

what is referred to as the listing gap. In

a research paper, my co-author and I

found that a good number of

companies delist from London’s junior

market, mainly because the costs of

listing are higher than the benefits. We

document that these delisted

companies have not raised equity

capital during their listing life and they

tend to underperform significantly

before the delisting. Our results are

consistent with some companies that

delisted from the London Stock

Exchange main market, such as

Vedanta Resources inOctober 2018.

The case of DP World appears to

follow this trend: its stock price has

declined by about 50 per cent over the

past two years. The fact that the

company has only about 19.5 per cent

free float facilitates the delisting; in the

UK Alternative Investment Market,

companies can be taken private when

insiders own a 75 per cent stake. DP

World’s low free float is likely to have

exacerbated its underperformance.

The argument that its delisting will

mitigate its being “beholden to public

markets’ short-term view on capital

and shareholder returns” is debatable,

as it is not clear that with such low free

float, public shareholders have enough

power to monitor the company and to

push it to make it subject to short-

termism.

However, what is surprising is the

fact thatDP World is increasing its

already very high leverage to pay for

the acquisition of its shares from the

market. It is offering a 29 per cent

premium, and it is paying $2.72bn. At

the same time, its borrowing is

increasing by $8.1bn, worsening its

already high leverage. Its majority

owner Port and Free Zone World would

pay $5.15bn to its parent Dubai World

to help repay debt to bank lenders, but

it is not clear how these funds are going

to be treated. If the new funding is in

the form of debt, the transaction

becomes cosmetic as it is replacing one

debt with another.

In normal circumstances,

underperforming companies should

not engage in cash-depleting strategies

such as buying back shares or engaging

in takeovers — strategies that,

according torecent research, destroy

value. DP World could have adopted

some cash-generating strategies, such

as asset sales and/or raising equity

capital, after undertaking all the

required operating strategies. Thus,

staying in the stock market and

employing good strategies to buoy up

its price and raise additional equity

capital in the form of seasoned equity,

offering to pay back debt and

implementing its strategy without any

restrictions from its creditors, are

likely to help the company in its long-

term prospects.

Meziane Lasfer

Professor of Finance,

Cass Business School,

City, University of London, UK

London

Notebook

by Frederick

Studemann

FEBRUARY 21 2020 Section:Features Time: 20/2/2020- 18:43 User:alistair.hayes Page Name:LEADER USA, Part,Page,Edition:USA, 8, 1