Thursday20 February 2020 ★ FINANCIAL TIMES 9

Opinion

I

f only the US were more bitterly

divided along partisan lines. Oh, for

some rancour in Washington.

Before you check on this column-

ist’s health, compare the words of

Republicans and Democrats at the

Munich Security Conference ast week.l

From defence secretary Mark Esper

there was certainty about China’s threat

to the west and Europe’s naivety in the

face of it. From Nancy Pelosi, the

speaker of the House of Representa-

tives: certainty about China’s threat to

the west, and Europe’s naivety in the

face of it.

The US has entered anopen-ended

feud gainst the world’s largest nationa

with less debate than it musters for the

pettiest domestic affairs. Its two great

parties diverge on the weapons of

choice. They maul each other over the

wisdom of tariffs and subsidies. On the

basic rightness of the conflict, though,

the lack of dissent will strike genera-

tions to come as eccentric (and, if things

get out of hand, remiss).

By now, Europeans and other third-

parties to the superpower tussle know

that America will not soften its line

under a new president. What they tend

to underrate is the chance that it will

actually harden. For all his militant jin-

goism, PresidentDonald Trump iewsv

China in practical terms. The more

power, security and wealth that it

accrues, the less he believes there is for

the US. It is an impoverished idea of for-

eign relations but it is at least

transactional.

As proof, the Chinese can and often do

buy off some of his animus with mate-

rial concessions. Mr Trump’s quarrel is

not a principled one with the essential

nature of their government. In that

sense, his cynicism, so unbecoming in

other contexts, is a stabilising influence

on this fraughtest of relationships.

It is idealism that has the far messier

potential. Republicans were given to it

until the rout of the neo-conservatives.

It is now the Democrats whose griev-

ances with China go well beyond eco-

nomics to its civic and social model. One

presidential contender, Bernie Sanders,

views Beijing as part of an “authoritar-

ian axis”. The lesson of its awesome rise

— fears another,Elizabeth Warren —is

that “economic gains legitimise

oppression”.

As forHuawei’s role in Europe, to let it

build 5G networks would be “to choose

autocracy over democracy,” says Ms

Pelosi, with the Manichean crudeness

that nothing — not even the fiasco of

Iraq, which it helped to beget — can kill

off in Washington. Light and dark, good

and bad, free and unfree: this stuff still

trips off the tongue.

The trouble is that it also widens the

scope of the conflict beyond toy imports

and intellectual property law. It implies

that, absent a round of glasnost, there is

not much China can do to answer US

concerns. Its very system is the

problem.

The Democrats will not fret quite as

much as Mr Trump about the bilateral

trade deficit, and for this nod to Ricard-

ian logic we must be thankful. But they

seem more likely to define the US

against the Chinese way of life: to moral-

ise what is for now a largely material

conflict. No doubt, it will be meant well.

But then no one “had better motives for

all the trouble he caused” than Pyle, the

erring innocent in Graham Greene’s

novelThe Quiet American.

An odd thought, I know, that a belli-

cose president, the one who began the

US-China schism in the first place,

might be better at containing it than his

higher-minded successors. But the cold

war also metastasised beyond the plans

of those (including the diplomat George

Kennan) who never envisaged a world-

wide clash of “values”.

Mr Trump’s indifference to the

domestic doings of China, Saudi Arabia

and other governments has shown his

narrowness of human sympathy. But it

has also kept his squabbles with most of

them to what is tangible and negotiable.

It is not even as though he drives the

hardest of bargains, as the North Kore-

ans might testify between Cheshire Cat

smiles.

Perhaps the Democrats’ more ideo-

logical noises will turn out to be so much

electioneering. Neatly, their line on

China allows them to match Mr Trump

for vigilance without forfeiting their dis-

tinctiveness. It is just that Washington’s

vein of idealism is too persistent and too

chequered in its record to be dismissed

as easily as that.

A new president would need staff and

these would come from a diplomatic fir-

mament that hews to much of what the

Democrats are saying. The same belief

in America as an “idea”. The same wari-

ness of China as the opposite of it. And

the same affront that nations from Brit-

ain to the Philippines, without a market

of $21tn to fall back on, do not see things

with such piercing clarity.

[email protected]

Trump’s quarrel with

Beijing is not a principled

one with the essential

nature of its government

How a Democrat might worsen the US-China feud

Pre-eminence breeds complacency,

as the cases ofGE nda Boeing aveh

shown. Better to be a challenger, as long

as your business is financially robust.

“For too long we were in denial about

being a bank,” said one insider. No

longer. Running savings accounts and

lending to smallonline vendors ouldc

turn into a decent business. Meanwhile,

big branch networks will handicap

rivals if retail banking digitises heavily.

Mr Solomon’s task is to make a busi-

ness that once reeked of entitlement feel

like a scrappy outsider. That should be

easier than it seems. Such quirks as call-

ing support staff“the federation” ug-s

gest an institution as imbued with elite

history as Eton College. Instead, Gold-

man only elbowed its way into Wall

Street’s front rank in the 1970s.

Goldman executives now have reason

to hustle hard again. The laughter of

rivals will only matter if it persists. For

the moment it is Mr Solomon’s greatest

asset in motivating his staff.

[email protected]

carps one critic. It is pushing into areas

such aspersonal banking, here it is aw

minnow to such leviathans asBank of

America nd Chase.a

Goldman’s influence engine is also

losing traction. Alumni are either going

or gone from the top jobs at the US’s

National Economic Council, the Euro-

pean Central Bank and the Bank of Eng-

land. The book that former Goldman

CEOHenry Paulson wrote about his

campaign to cosy up to China’s authori-

tarian leaders reads queasily these days.

But so does the “vampire squid” meta-

phor. For caricaturists, interfering

octopi have personified communism,

colonialism — and Jewish-founded busi-

nesses like Goldman, against which hate

has proliferated this decade.

Such bigotry is wholly despicable. But

there is less to deplore in Goldman’s loss

of status on Wall Street, even for its

executives. If the business had truly

been able to manipulate capitalism’s

casino rules, it would not be languish-

ing. Instead, it has been prosaically

handicapped by post-crisis curbs.

Goldman has an enviable lead in cor-

porate finance advice, where contacts

are vital. The bank topped league tables

for handling takeovers and US flotations

compiled by Dealogic last year. It has a

strong position in technology deals. Last

week, tech bros flocked to Goldman’s

annual San Francisco conference at the

swanky Palace Hotel. “It’s a super-excit-

ing time for engineers at the firm,” said

co-chief information officer George Lee.

An affinity with Silicon Valley, and a

big fund management arm, are not

enough to save Goldman from an igno-

miniously low share rating.JPMorgan

Chase, which has hefty scale in retail,

commercial and investment banking, is

rated twice as highly. Goldman’sdiversi-

fication strategy s “spray and pray”,i

rents from asset bubbles, the common

pursuits of bankers for centuries. More-

over, Mr Taibbi’s fear that nothing

would change has been proved wrong.

Regulated lenders, which was what

Goldman became in 2008, have since

paid a penalty for any bailouts they

received. Ever-rising balance sheet buff-

ers are the reason Goldman’s securities

trading business now drags on returns.

Goldman has the smallest market worth

of its peers. But critics still equate it with

global capital: omnipresent, calculating,

amoral. The downside to that became

clear in 2016 when British MPs ubliclyp

roasted Michael“Woody” Sherwood,

Goldman’s most prominent British boss.

His involvement inPhilip Green’s con-

troversial sale of failing retailerBHS adh

been peripheral, but he ended up step-

ping down all the same.

More damagingly,Tim Leissner,

another former partner, pleaded guilty

in 2018 to helping fixerJho Low oot bil-l

lions from1MDB, a Malaysian wealth

fund. While there is no suggestion of

wrongdoing by Goldman, both cases

reinforced suspicions its bankers

depend on connections to make money.

In fact, all bankers seek to win fran-

chises and befriend the powerful. A leg-

acy of partnership gives Goldman exec-

utives a special advantage. The group

became a quoted company in 1999, but

it still appoints a privileged tier of “part-

ners”. After a decade or so of elite toil,

many take prestigious external jobs.

They constitute an influence network as

formidable as McKinsey’s.

L

aughter. You could hear it

above the noise of traffic in

Manhattan last month.Gold-

man Sachs ad sweated bul-h

lets to deliver itsfirst ever

investor day. Rival bankers were tick-

led, not terrified. “Is that all they’ve

got?” chuckled one. Thepitch, ed byl

chief executiveDavid Solomon, was as

slick as any Apple product launch. But

the modesty of ambition — for group

earnings to exceed capital costs by a few

percentage points — signalled how

badly the bank’s fortunes have waned.

In the noughties, Goldman Sachs fig-

ured as the world’s most powerful

investment bank. Heads of state

courted its bosses. Its share rating was

stratospheric. During the financial cri-

sis, hostility supplanted awe. The bank

was “a great vampire squid, wrapped

around the face of humanity”, raged

Rolling Stone ournalist Matt Taibbi.j

The piece could have been written by

Hunter S Thompson, if the gonzo jour-

nalist had been taking economics

classes, not acid. But, like its subject, Mr

Taibbi’s polemic has not aged well. It

implied that Goldman was special in its

ardour for networking and skimming

The humbling

of Goldman

Sachs

An infamous description of

the powerful bank as

‘a great vampire squid’

has not aged well

A

round the world, public

media institutions are con-

sidered the most trusted

sources of news in their

respective countries. But

something worrisome is afoot.

As chair of the newly formed Global

Task Force for Public Media, I am

alarmed by how quickly the tide of pub-

lic opinion can turn for institutions like

mine in Canada, and others in Britain,

Australia and Denmark.

The UK government has questioned

the BBC’s impartiality andthe spectre

has been raised of scrapping he televi-t

sion licence fee that British households

pay as the broadcaster has announced

job cuts as part of savings drivea.

Last year, Australian policeraided the

offices of the ABC, purportedly seeking

evidence gathered by the state broad-

caster relating to the national security

activities of the country’s special forces

in Afghanistan. In 2018, the Danish pub-

lic broadcaster DR announced 400 job

losses, and the closure of three of its tele-

vision channels and three radio stations,

as part of a package of reforms that cut

its budget by up to 20 per cent.While all

of us accept that public organisations

created 80 years ago warrant moderni-

sation, we should proceed with caution.

My own organisation, CBC/Radio-

Canada, is lucky that support from

many stakeholders, including govern-

ment, is holding firm. We operate on the

same principles as many of our counter-

parts: clear journalistic independence

from government, a mix of public and

private funding and a mandate to

inform, enlighten and entertain.

We, too, are “under review”, with the

release of areport ast month on the leg-l

islative framework governing Canada’s

broadcasting and telecoms sectors, and

upcoming public hearings on the

renewal of our TV and radio licences. In

these reviews, we will defend public

service media and the critical role we

play in a healthy democracy.

CBC/Radio-Canada operates a media

business across six time zones, in two

official languages (English and French)

and eight indigenous languages, deliver-

ing services on TV and radio, as well as a

full slate of digital services — all this at a

cost of the equivalent of $25 annually

per Canadian, less than most of our

peers around the globe. Yet there is

mounting debate about our raison

d’être. Critics say that with state funding

comes political meddling — despite the

robust safeguards in our journalistic

standards and practices.

Our public funding and commercial

revenue provoke the ire of private

organisations, which are suffering the

pressures of an industry that is under-

going existential disruption.

But competition between domestic

players is not the problem. In Canada,

our digital advertising revenue accounts

forless than 1 per cent f the total mar-o

ket;Google nda Facebook ogethert

account for78 per cent. Another chal-

lenge comes from foreign original con-

tent, which next year is expected to sur-

pass the$120bn pent in 2019. Ours

annual programming budget s less thani

$265m.

The real issue is the galloping, unreg-

ulated invasion of the digital giants — as

Tony Hall at the BBC nd Delphinea

Ernotte at France Télévisions have

pointed out. And he true challenge tot

our democracies is the impact of the

internet and social media driving public

discourse on platforms that are opti-

mised for commercial purposes.

So, how do we secure a safe public

space for civil civic exchange? How do

we secure a place for fact-based argu-

ment, for science, for enlightenment?

I hope we pause and reflect on how we

can bring public service to the internet,

that we consider what is at risk: non-

partisan, validated, fact-checked infor-

mation.

Imagine the alternative: a world

where the interests of under-repre-

sented communities have no place, and

where the voices of minorities are extin-

guished once and for all. That would be a

world without public service media.

The writer is president and CEO of Canada’s

national public broadcaster

A world without

public service

media would be

a darker place

The galloping, unregulated

invasion of digital giants is

the true challenge to

our democracies

Catherine

Tait

AMERICA

Janan

Ganesh

D

iscussion of the nextEU

budget s one of thei biggest

and most contentious issues

currently faced by the bloc.

Negotiating a budget deal is

not a purely arithmetical exercise.

Rather, it must be a translation of

political priorities into a financial

framework.

Most member states acknowledge

that there are a growing number of chal-

lenges for the EU. However, significant

disparities between member states and

regions persist. Therefore, a majority of

members favours setting an ambitious

level for the next multiannual financial

framework, which will cover the period

2021 to 2027. The current MFF, at 1.

per cent of the EU’s gross national

income, should be a starting point for

the negotiations. But it is clear that

lowering spending would mean weak-

ening the European project.

The EU budget is closely linked to the

functioning of the single market. Data

show that the relationship between

gross contributions of member states to

the budget and the benefits that accrue

to them from the single market is

significant.

This means that focusing onnet

balances whether countries pay in(

more than they receive) when consider-

ing the EU budget is misleading, as it

does not reflect the true benefits and

costs of integration.

For instance, between 2010 and 2016,

the so-calledVisegrad Four countries

(the Czech Republic, Hungary, Poland

and Slovakia) received funds amount-

ing, net, to between 1.5 and 4 per cent of

their gross domestic product. Mean-

while, the outflow of dividends and

income from property to investors

based in the EU15 (states that were

members of the bloc before May 2004)

amounted to between 4 and 8 per cent

of GDP. The single market lifted trade

barriers and opened access to central

and eastern European markets.

We need to communicate the benefits

of economic integration better. Empha-

sising net balances threatens to

exacerbate anti-EU sentiment in some

northern European member states.

We should also show how cohesion

policy benefits net contributors to the

budget. The implementation of the

2007 to 2013 cohesion policy n thei

Visegrad countries was worth€96bn ni

increased exports, and direct capital

benefits to the EU15, including €23bn

for the “frugal four” of Austria, Den-

mark, the Netherlands and Sweden.

The EU budget should not be

regarded as a financial burden, but

rather as an investment tool that has the

very important macroeconomic

function of stabilising investments

during a crisis.

A budget has to be fair and balanced.

Therefore, the costs related to Brexit

and other challenges should be more

equitably distributed. Deep cuts to both

the cohesion policy and the Common

Agricultural Policy, for instance, cannot

be justified. The burden of such cuts

falls disproportionately on poorer coun-

tries in eastern Europe.

“Equal pay for equal work” should be

the basic principle of the CAP. It should

lead to convergence of direct payments,

which currently serve as remuneration

to farmers for the delivery of public

goods and production at higher

standards than those that obtain

outside the bloc.

Apart from stimulating convergence,

cohesion policy and the CAP also

effectively address many of the new

challenges faced by the EU, especially

the transition to a low-carbon economy.

One also has to bear in mind that the

blocpursues a liberal trade agenda. If it

wants to continue with this approach,

which is the target of considerable

criticism, we need to be able to offer our

farmers and consumers some measure

of security.

Any changes to the financing of the

EU budget must not result in higher

burdens on citizens in the less devel-

oped countries. On the contrary, the

focus should fall on sectors that benefit

the most from the single market.

Attention should therefore be given to

the following proposals: a financial

transactions tax; a digital tax; a single

market levy;and an aviation fee (which

is also progressive).

In 2017, theVAT gap —the difference

between expected revenue and the

amount collected — was €137.5bn.

Member states are losing billions of

euros in VAT revenues. In Poland, by

contrast, the VAT gapdecreased yb

around 10 per cent between 2015 and

2017. Poland is ready to share its exper-
      tise on how to create additional fiscal
      capacity in order to finance an ambi-
      tious EU budget.
      If savings are required, we should look
      at reducing increases on administra-
      tion, defence and Horizon Europe, the
      European Commission’s research and
      innovation programme.
      We should be more ambitious about
      the size of the next MFF in order to
      address a range of priorities. A strong,
      safe and prosperous Europe requires
      proper financing. We simply cannot
      afford to spend less.

The writer is prime minister of Poland

Focusing on net balances

is misleading and does not

reflect the true benefits

and costs of integration

Setting an EU budget is about more than arithmetic

Mateusz

Morawiecki

FINANCE

Jonathan

Guthrie

FEBRUARY 20 2020 Section:Features Time: 19/2/2020- 18:07 User:alistair.hayes Page Name:COMMENT USA, Part,Page,Edition:USA, 9, 1