8 ★ † FINANCIAL TIMES Tuesday10 March 2020
Prices should rise as
demand increases
With all due respect to the Competition
and Markets Authority, increasing
prices in response to increasing
demand is not ripping off consumers
(“ Regulator warns vendors against rip-
offs”, March 6). Rather, it is exactly
how the market should function. When
there is surging demand and
constrained supply, prices should rise
to discourage hoarding and encourage
production.
The CMA’s edicts cannot make the
economic problem disappear. Retailers
unable to raise prices will try to stop
hoarders from emptying the shelves by
restricting the number of items each
customer can buy. But these policies
can be easily circumvented. The result
is goods going to shoppers who happen
to be there when new stock is
delivered, have “inside information”
about new stock, have the time to
make multiple trips to the shops, or
have friends and family members that
can buy for them. Hardly any fairer
than allocating goods by price. Nor will
price controls stop “profiteering”:
black marketers will inevitably set up
shop and make a killing on arbitrage.
Qinhao Zhu
Christ Church Oxford, UKFace masks are a courtesy,
and protect other people
You repeat the advice given by the
National Health Service and other
information sources by stating that
“wearing a face mask is pointless”
(“ Beware fake news, do not panic buy
and prepare for possible self-isolation”,
March 7). This may well be true for
self-protection, but anyone who has
lived in crowded cities in Japan, Korea
or other Asian countries will know that
the point of the face mask is the
protection of others, not of oneself.
In these countries, people tend to
wear a face mask at the slight sign of a
cold, simply as a courtesy to others to
make sure they do not catch it. Given
the Covid-19 incubation period of up to
two weeks with no visible signs of
infection, and many mild cases of
infection that are hard to differentiate
from a common cold, I would have
thought the best advice for the country
would be for everybody to wear face
masks in public places until things are
under control, in addition to regular
hygiene advice such as washing hands.
Jem Eskenazi
London N3, UKI have seen the advice that there islittle
point n wearing a face mask as there isi
no evidence that they offerprotection
against coronavirus. But surely there is
some value in them if they prevent you
from touching your face?
Adrian Widdowson
Leeds, UKAssad’s strategy is to stop
refugees wanting to return
Your editorial “Europe cannot ignore
the Syrian migrant crisis” (March 7)
was an excellent reminder of a basic
fact that “Fortress Europe is an
illusion”. However, the only way the
crisis can be resolved is by addressing
the root of the problem.
More than half the population have
been uprooted, in the main by a long
scorched earth campaign by Bashar
al-Assad, backed by Russia and Iran,
consistent with the tone set by his
militias in response to the 2011
peaceful uprising: “Assad or we burn
the country”. Most people, if they even
noticed, ignored the bombing of
hospitals, schools, bakeries and even
bread queues, not to mention the
starvation sieges — one of the grimmest
hallmarks of the Syrian conflict. Now
like Banquo’s Ghost this betrayal of our
so-called values and commitment to
human rights has come back to haunt
us as Turkey unlocked the gates that
the EU paid him to keep shut instead of
addressing the cause of the crisis in
Syria.
We must confront the fact that
President Assad does not want the
more than 5m refugees to return and
his whole strategy of repression and
crimes against humanity with Russia
and Iran has been based on dissuading
them. The clearest evidence was
provided by General Jamil al-Hassan,
the head of Syria’s Air Force
Intelligence, at a meeting of 33 senior
officers on July 27 2018 when he was
reported as saying: “A Syria with 10m
trustworthy people obedient to the
leadership is better than a Syria with
30m vandals.” He also emphasised he
had lists with 3m names of people
deserving punishment — a concept in
Syria that means death lists, especially
when such remarks are attributed to
Gen Hassan, who manages regime
detention facilities, in which thousands
have been executed or died from
torture, starvation and otherinhumane conditions since the 2011
peaceful uprising.
Syrian refugees are now only pawns
in a geopolitical struggle, but if we want
to solve the refugee crisis and give them
the chance to build a better life in their
own country we must press vigorously
for a political settlement in Syria based
on justice and accountability for crimes
against humanity, and even more
importantly respect for human rights,
freedom and democracy.
Ronan L Tynan
Director, “Syria — The Impossible
Revolution”,
Esperanza Productions,
Dublin 3, IrelandSavers will suffer from
Fed’s rate reduction
David Wilcox’s comment that the Fed’s
reduction in interest rates was “in a
situation where there’s really nothing
to be lost and there might be
something to be gained” was either
myopic or callous, or both (“Fed and
markets joust in ‘hall of mirrors’ ,”
March 5). Although investors and
corporations may cheer a 50-basis
point reduction in interest rates, the
reduction will inflict serious pain on
millions of people who are savers and
not investors. The average person will
see their income go down as interest
rates on bank certificates of deposit
and money market funds are reduced.
Pension plans that use fixed income to
balance assets against liabilities will
also find it difficult to meet their
obligations with the reduced income.
The consequence of the Fed’s action
is to force savers and other people who
cannot afford to take risks to take risks
they do not even understand in order
to replace the lost income. Contrary to
Mr Wilcox’s view, there is plenty to be
lost. The action can be viewed as a
mass transfer of wealth from workers
and persons of average income to
corporations and wealthy investors,
many of whom take risks with other
people’s money.
Daniel F Hinkel
Atlanta, GA, USJapan may have been in
a liquidity trap already
Cathal Rabbitte (Letters, March 6), in
criticising Fed governor Lael Brainard’s
proposal for yield curve manipulation,
rightly says that “Japan ended up in a
liquidity trap” when it adopted this. He
neglects to point out that Japan was in
deflation when it introduced this — it
may have been in a liquidity trap
already.
With inflation and inflationary
expectations both positive in the US, it
may not necessarily follow that this
will happen were yield curve
manipulation to be enacted today.
Paul Negrotti
Greenford, Middx, UKMacomb County, Michigan, home of
the so-called Reagan and Trump
Democrats, isn’t what it used to be.
That may make all the difference to
former vice-president oe BidenJ ’s
chance of beating Bernie Sanders, his
rival for the Democratic presidential
nomination in this turncoat county
outside Detroit — the kind of place
that puts US presidents in power.
Voters will face a clean choice
between the two candidates for the
first timetoday, when Michigan
(along with a handful of other states)
votes in its primary without a split
ticket of moderates to distract them.
The choice for Democrats is simple:
who has the best chance of beating
President Donald Trump in
November, Mr Biden or Mr Sanders?
In few places will that choice matter
more than in Macomb, a pothole-
pitted,working-class county hatt
single-handedly gave Mr Trump his
margin of victory in Michigan in 2016,
when he won the county by 48,
votes and the state by under 11,000.
Much could depend n howo
Macomb’s African-Americans vote,
and whether they turn out to do so.
The power of the African-American
vote in South Carolina lit a fire under
Mr Biden’s moribund campaign heada
of Super Tuesday. To win Macomb he
will be hopingthe same thing happens
there. Back in the days when Macomb
helped usher in the Reagan era in
1980 — when union Democrats flipped
parties for a populist, much as they
would later for Mr Trump — the
county had almost no African-American residents. Today’s Macomb
is estimated to be at least 12.2 per cent
African-American, up from only 2.
per cent as recently as 2000.
“The influx of African-American
voters into Macomb held down
Bernie’s vote” in the 2016 primary,
says Joe DiSano, a Macomb
Democratic campaign consultant. Mr
Sanders narrowly lost the county to
Hillary Clinton but narrowly won the
state that year. “It will likely
negatively impact him again this
year,” he says, predicting Mr Biden
will win county and state by double
digits. “[Mr Biden] is killing it among
voters 50 and up and African-
American voters. I’m starting to think
we may be witnessing a suburban
surge of people who just think they’ve
had enough of Trump, a national
moment of sanity,” he says.
So diversity probablyhad an impact
on the Democratic primary, but it
wasn’t enough to defeat Mr Trump in
2016 and Mr Di Sano thinks it won’t
guarantee a Democratic victory over
the Republicans this year either.
Joel Rutherford, chair of the
Macomb Democratic black caucus,
says demographics make a difference
“only if people turn out to vote”. He
criticises the local Democratic party
for focusing too little onturnout,
noting that the influx of non-whites to
Macomb hasn’t just been of African-
Americans but also Bangladeshis and
Hmong immigrants.
Susan Demas, formerly a
Democratic campaign consultant, says
there has been a “backlash”. “Somewhite voters in Macomb liked the
stereotype of the county as an
alternative to (mostly black) Detroit,”
she says. “Diversification has created
some tensions.” So demographic
change couldhurt Macomb
Democrats as much as it helps them,
say some locals, adding that growth in
the black population mostly happened
between 2000 and 2016. That didn’t
stop Mr Trump in 2016.
Ed Bruley, the Democratic party
chair for Macomb, agrees that winning
back Trump Democrats is a long shot.
He says the party’s real target is the
tens of thousands f people who wento
to the polls in 2016 to vote for other
officials, but refused to choose a
presidential candidate.
But Nelson Westrick isone of those
Trump Democrats ho says he won’tw
be one bit tempted to return to the
fold. “Democrats are all such elitist
snobs and they look down on the
average folk,” he says, showing me a
Facebook message, purportedly from
a Democrat, saying “if I get the
coronavirus I’m going to attend as
many Trump rallies as I can”.
So, yes, much has changed in
Macomb — but much more has stayed
the same. Diversity could help Mr
Biden defeat Mr Sanders theretoday.
But it may not matter in the end, if
neither of them can beat Mr Trump.
I’m not betting on Macomb giving up
its taste for Republican populists
anytime soon. That has been decades
in the making.[email protected]Winning a
turncoat county
will be crucial
for Democrats
Michigan
Notebook
by Patti Waldmeir
In his column on the urgent need for
co-ordinated economic policy
responses to the coronavirus threat,
Wolfgang Münchau criticises European
Central Bank president Christine
Lagarde for talking too much about
green finance and climate change, and
wonders whether this has become too
much of a distraction from what he
considers the more urgent task at
hand. (“The eurozone is toocomplacent about the coronavirus
threat”, March 9.)
As much as I agree with his point
that we need urgent policy responses to
deal with the economic fallout from the
coronavirus, the notion that climate
change is something we can deal with
another time is utterly wrong. Indeed,
any crisis responses, be they fiscal or
monetary, should be judged on their
sustainability impact.All countercyclical policy measures
should be either carbon neutral or
carbon negative. We have already
missed the opportunity to implement
sustainable crisis responses during the
2008-09 crisis. We should not waste
another crisis.
Dr Ulrich Volz
Founding Director,
SOAS Centre for Sustainable Finance,
SOAS University of London, UKReaction to outbreak can’t ignore climate change
Letters
TUESDAY10 MARCH 2020Email: [email protected]
Include daytime telephone number and full address
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to the FT Editorial Complaints Commissioner: [email protected]OPINION ON FT.COM
Teresa Johnson
Tools created after the 2008 crisis could
empower regulators to act on environment
http://www.ft.com/opinionIt has been dubbed the oil market
equivalent of a declaration of war. A
split between two of the world’s largest
crude producers, Saudi Arabia and
Russia, on how to respond to the
demand shock from the spreading
coronavirus has sent markets into free-
fall. Oil pricescrashed y as much as 30b
per centyesterday — the biggest drop
since the Gulf war in 1991. Share prices
have followed suit, with billions of dol-
lars wiped off stock markets around
the world. It is hard to overstate the
consequences of the rout.
The split has underlined the dimin-
ished influence ofOpec, the club of oil-
producing nations that in its heyday
held the world in its thrall. Itsgovern-
ing statute stipulates that the group’s
goal is, among other things, to “work
together to ensure stable oil prices”.
What this has meant in practice is that
prices should be low enough to support
global growth but, most importantly,
high enough to sustain the budgets of
member countries.
But Opec’s grip on world production
is not what it was. The rising domi-
nance of homegrown American pro-
duction — the US has become the
world’s largest producer of oil over the
past decade — has upended the global
energy industry.
Since 2016 Saudi Arabia has relied on
other countries outside of the cartel,
notably Russia, to help it influence the
market as part of a wider, so-called
Opec+, alliance. It was Russia’s refusal
late last week to join in production cuts
that prompted Saudi Arabia to pull the
trigger and launch a price war, boosting
its own output and selling crude at a
discount. But Riyadh’s gambit, driven
in part by a desire to undermine debt-
laden US shale producers and to gain
market share from Moscow, is likely to
prove costly for everyone involved.
The alliance with Russia has all but
unravelled. Moscow made clearyester-
day that it is igging ind for a price war,
declaring it could withstand oil prices
of $25-$30 per barrel for six to 10 years.
Russian state group Rosneft is
expected to raise output next month.
A period of sustained low oil prices
would be bad news for an industry
already out of favour with investors
over its damaging impact on the cli-
mate. It could force largerproducers to
rethink their dividend policies and
curb spending. Energy companies have
been the biggest issuers of junk bonds,
accounting for more than 11 per cent of
the US high-yield market.
America’s shale industry would be
among the biggest losers. Even before
the coronavirus hit demand, there had
been ising concernsr about the sector’s
health given the accumulation of dan-
gerous levels of debt. A persistent low
oil price — West Texas Intermediate,
the US benchmark, dropped to $30 a
barrelyesterday — will hurt smaller
players. Hedging strategies may cush-
ionthe blow but at an oil price of
$30-$35 a barrel, vast swaths of the US
shale industry will be unprofitable.
There is also little appetite among
investors to help refinance these
companies.
There will be silver linings to a price
war. The lower oil price will benefit
some industries, including aviation,
although hedges will delay any upside
and for many carriers itwill not make
up for a collapse in passenger demand.
US motorists will reap the benefits of
lower pump prices. Yet, unlike 2014 —
the last time Saudi Arabia flooded the
market with oil — this time there is lit-
tle evidence of demand for more of its
supplies. The International Energy
Agencyyesterday warned global oil
demand will fall this year for the first
time since 2009. Saudi Arabia’s game-
playing would be risky at any time, but
when the world is battling coronavirus
it looks irresponsible.America will be hardest hit from oil price war with Russia
Riyadh puts the squeeze
on US shale producers
The echoes of 2008 are becoming deaf-
ening. The past weekend delivered a
second shock — anoil price war —on
top of the economic disruption of the
coronavirus.A third jolt will follow, as
the sharp falls in financial markets
destroy wealth and magnify the dam-
age to the economy. The declines in
safe bond yields to historic lows show
just how pessimistic investors have
become about the outlook for global
growth. Yet while the scale of the falls in
markets is similar to 12 years ago, what
is lacking — but still much needed
today —is a co-ordinated global policy
response.
In the autumn of 2008the centre of
global policymaking shifted from the
G7 rich democracies to the G20, whose
inaugural leaders’ summit took place
that November. The US, under presi-
dent George W Bush and the incoming
Barack Obama, played a vital leader-
ship role, along with Britain’s prime
minister Gordon Brown. Similar voices
are sadly lacking today, and the spirit of
multilateralism that flowered a dozen
years ago has shrivelled under Donald
Trump. The current holder of the G
presidency is Saudi Arabia — whose
brinkmanship with Russia triggered
theoil price conflict.
The nature of this crisis is different,
too. The 2008 shock first paralysed
the financial system, which caused a
collapse in demand. Covid-19 is an eco-
nomic shock, hitting both supply —
through factory shutdowns, disrupted
supply chains and travel restrictions —
as well as demand. Consumers who are
ill or trying to avoid falling ill go out less
and spend less. As the crisis progresses,
a cash crunch looms both for compa-
nies experiencing falling revenues and
consumers losing their incomes or jobs.
So the type of support, and how it
is delivered, will have to be different
this time. Without global political lead-
ership, central bankers and finance
ministers may have to rely more on ad
hoc networking. Monetary policy also
hasless scope o act as an antidote.t
Interest rate cuts help bolster senti-
ment by reducing borrowing costs. But
they will do little or nothing to mend
broken supply chains, hasten workers’
return to work or boost spending by
consumers confined to their homes.
With interest rates in advanced econo-
mies outside the US already close to or
below zero, many central banks in any
casehave limited firepower.
Wherepolicymakers can make a
bigger impact is through funding and
fiscal measures. The Bank of Japan has
already promised to inject liquidity
into markets. Just as important is help-
ing struggling companies and individu-
als pay their bills. Other central banks
should follow China in offering cheap
finance to banks lending to companies
worst-hit by the virus.
Among other countries with severe
Covid-19 outbreaks, Italy is offering tax
credits to companies with sharp reve-
nue drops; South Korea has pledged
cash to small businesses having diffi-
culty paying wages. Some loan forbear-
ance, so viable companies are not
forced into bankruptcy for missing
debt payments, could help. Govern-
ments also need to ensure workers,
especially those on precarious con-
tracts, can afford to take time off sick or
to care for children and relatives.
The overriding aim should be to safe-
guard companies and jobs, and limit
damaging knock-on effects, until the
virus abates and recovery can kick in.
How fast that happens will depend on
governments’ success in containing the
virus — and here is the biggest differ-
ence from 2008. Important as stimulus
will be, the biggest priority of all is an
effective public health response. Sadly,
that is where many governments and
health authorities have appeared, so
far, to be furthest behind the curve.Priority is safeguarding companies and jobs until recovery kicks in
Virus downturn needs
a global fiscal response
EU has an important role
to play in enhancing theconditions for industry
European business has a crucial role in
bringing prosperity to European
citizens and delivering on the big
societal challenges that Europe is
facing such as climate change.
European manufacturing industries
are a backbone of the European
economy, and services are becoming
increasingly important, not only on its
own standing but also within
manufacturing processes. With
digitisation increasing, industry is a
driving force. We are at the dawn of the
impact of 5G, artificial intelligence and
the “internet of things”.
Alongside important national
initiatives within areas such as
research and development, the EU has
an important role to play in enhancing
the conditions for industry. To
strengthen the competitiveness of
Europe’s companies, five areas should
be prioritised.
First, barriers still exist in the single
market that prevent companies from
taking full advantage of all the
opportunities it offers. The EU should
accelerate work on European and
international standards, eliminate
national rules and strengthen
supervision on member states
application of single market rules.
Second, EU competition rules
promote globally competing
companies, low prices and more choice
for customers. The European
Commission has announced that it will
review parts of theacquis. Our message
is clear — neither business nor
consumers in Europe will benefit in the
long term by a more politicised
competition supervision.
Third, the EU should strive for clear
and predictable common rules in
international trade. Reform of the
World Trade Organization and new
free trade agreements with individual
countries should be given top priority.
Fourth, research should have priority
in the EU budget as a complement to
national initiatives. Particular
attention should be paid to
instruments and infrastructure that
promote innovation.
Finally, the free movement of
services within the EU is crucial and
needs to be made easier.
Attempts to protect domestic
industry from competition and allow
state aid to support certain selected
industry sectors does not necessarily
deliver success. It leads to lower growth
and high costs for taxpayers without
promoting industry in the long run.
In a forthcoming industrial strategy,
the EU needs to build upon Europe’s
success factors and strengths, rather
than trying to turn back the clock.
Jan-Olof Jacke
Director General, Confederation of Swedish
Enterprise
Jyri Häkämies
Director General, Confederation of Finnish
Industries
Lars Sandahl Sørensen
Director General, Confederation of Danish
Industries
Ole Erik Almlid
Director General, Confederation of
Norwegian EnterpriseMARCH 10 2020 Section:Features Time: 9/3/2020- 18:52 User:alistair.hayes Page Name:LEADER USA, Part,Page,Edition:USA, 8, 1