Police and thieves

February 21, 2011

Why don’t I feel happier? In the past week, Arsenal beat the best soccer team in the world (Barcelona), I went skiing and a metre of snow conveniently fell from the sky, Berlusconi was scheduled for trial in April, and Berlusconi’s soccer team Milan lost to Spurs. Surely that is a pretty good week?

Milan are clearly rubbish, the snow-boarding was definitely excellent, and Arsenal have a slither of a chance of holding on to their advantage in the return leg at the Nou Camp. So the problem must be with Berlusconi’s trial. It is. The press coverage grates on me because of the drearily repeated notion that one desperate old fool is the sum of Italy’s problems (here is the FT with some typically superficial coverage, though you likely need a subscription).

In reality, the investigation into Berlusconi’s latest lies and idiocies is a tale of a system failing to change. Details of the investigation, including testimony and wire tap evidence, have been leaked by police/magistrates in the standard contravention of the law and due process. (Here is one of many leaks, translated into English in The Guardian)

You would have thought that just once those who represent the legal system could have said to themselves: ‘Why don’t we try doing things the correct way this time? After all, we are dealing with an elected prime minister, so it might be smart to be impeccably professional.’ But oh no. Not for this lot the quiet, calm comportment of the thoughtful professional. For this lot, it is showtime, freshly-ironed magistrates’ togas, newly-pressed carabinieri trousers, and the rest — all of which allows Berlusconi’s followers to nurture their persecution complex.

I am reminded of remarks made by one of China’s bravest and most sensible lawyers, Mo Shaoping, at a conference last year. Mo, who defended as best he could the Nobel laureate Liu Xiaobo, offered his analysis of why the rule of law has been regressing in China in recent years. Strikingly, he said that one of the biggest problems is judges overstepping their role: ‘Originally [at the beginning of efforts to stregthen the rule of law in the 2000s], there was emphasis on judicial neutrality and passivity: the judiciary should be passive and neutral,‘ he remarked. ‘Now, the emphasis is on the active initiative of the judiciary. I myself consider this a step back.’ You are not alone, Mr Mo.

In vaguely related news:

The parents of Amanda Knox have been committed to trial for criminal libel for saying that their daughter was mistreated by police investigators. The trial, scheduled for July, will be the perfect opportunity for Perugia police and magistrates to produce THEIR TAPE-RECORDING of Knox’s illegal all-night interview. Then everyone can listen to what happened and make an informed judgement. Presumably the tape also includes the police explaining to Knox her right to have a lawyer present. (Note that The Guardian article behind the link is wrong that libel is only a criminal charge in Italy; it can be either criminal or civil — the police have opted for criminal. It is fair to say that criminal libel laws are typical of institutionally backward societies; such laws are opposed by all major writers’ and civil liberties groups that I am aware of.)

 

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Is it just me?

February 11, 2011

Sitting at home in Italy tonight, after a couple of glasses of red, I check the news. And suddenly I cannot quite remember who is refusing to give up a 30-year dictatorship and who is being fast-tracked to trial for paying an under-age prostitute. They all look the same.

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Beloved irony

February 8, 2011

Isn’t life a bitch? Just when you have good use for a few tens of billions of dollars to support a bit of old-fashioned modernisation in north Africa, it turns out you spent your whole budget for the next decade on a pointless war in Iraq. Dang, America’s Mr. Obama be kickin’ himself under the table.

It is the fifteenth day of protests in Egypt and the Arabs — despite much media conjecture to the contrary — show no sign of going home and being quiet. Cash-strapped Washington doesn’t know what to do. Hilary Clinton has said she would like the (ex-intelligence service boss) vice-president to run the country until scheduled elections in September. Obama’s special advisor on Egypt says that Mubarak must stay until the election. The crowd appears to be backing outlandish demands for a representative transitional government.

Cripes. ‘Representative’ in the country that is the intellectual birth-place of Islamic fundamentalism and al-Quaeda? ‘Transitional’ in the country that has ‘Remember Algeria’ written all over it in CIA spray paint? No wonder we backed a dictator and encouraged economic policies that consign Egyptians to poverty and to an 80 percent youth unemployment rate. Why can’t we just have the same deal again?

It is really very tedious how unprincipled foreign policy comes back to bite you in the arse, like some whacked out dog you once threw a bone to. Much more of this and the Arabs will start to resemble the Persians, who are still hung up on us getting rid of their silly Mr Mossadegh, who thought he could nationalise our oil companies.

I am not terribly well read on Arab history, particularly the modern stuff, but if I were to recommend a single, highly readable and well researched tome to put contemporary Egypt in perspective it would be The Looming Tower. The Guardian contains a brief history of the main Islamic opposition group, the Muslim Brotherhood; it isn’t great and contains a very taciturn interview with a current MB leader, but it is readily available.

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Fragrant harbour

February 1, 2011

I make it five times that Stanley Ho has changed his mind over his inheritance… in the last week. It was ‘You can have it’, ‘No you can’t’, ‘Yes you can’, ‘No you can’t’, and yesterday, 31 January 2011, ‘Oh go on, take it and just leave me alone with my dogs.’ Today, glancing at the headlines, it seems he may have changed his mind again but, frankly, I can’t be bothered.

Instead, here is a bit of commentary on the three videos that have been released on YouTube by Stan’s lawyer (I have used the link posted by David Webb). Let’s meet Stanley at home:

Video 1. Stan opens with: ‘We must get back Lanceford [the holding company he held all his big stuff through]’, speaking like and doing a great facial imitation of the bad guy at the start of an episode of Flash Gordon. Then the lawyer, more on him anon, asks Stan about some further comment for the press to which Stan replies he’s game as ‘I want to make it [the story] very big.’ Stan is already laying into Pansy, the daughter who is seen as both the most capable in business and about whom the most malicious and serious gossip circulates (perhaps these two things go naturally together). Then comes the now-famous: ‘It is something like robbery’ quote. Stanley says he wants to go ahead with legal action. Note the furnishing of Stan’s time-warp mansion on the south-side of HK island. To the left you can just catch a glimpse of a hideous mock-baroque table. The staff, family and nurses sneaking by the camera are also good value. In the foreground is the mandatory Chinese tea flask (must admit I have been caught on film with one of those myself) and a glass of hot water. ‘I want a fair division among my family,’ says Stan, before appearing to be pained by some inconvenient fact inside his head (like he never organised a fair division?).   At around three-and-a-half minutes you get a look at the always-on television, the electronic tombstone of the fading godfather. Stan’s ex partner Henry Fok was a big soccer fan, so at least with him you would get to take in the football. Another of Hong Kong’s octogenarian big boys is a closet Arsenal fan, and even has comfy sofas. Many are the mysteries of Confucianism… At the end Stan thanks the lawyer for having ‘blown up’ the whole affair in the space of a few days. The lawyer jokes about a huge fee to come. Or let’s say he laughs while talking about the huge fee to come; it may just be coincidence.

Video 2. Here Stan is trying to explain why he just withdrew legal proceedings and announced he had fired the lawyer. ‘The problem is Pansy,’ he starts. At this point I begin to become more interested in the lawyer than in Stanley. For one thing, you might argue that the lawyer is leading his client at the point at which he responds to Stanley: ‘To which I say: “So what?”’ The lawyer, Gordon Oldham, has a faded (south) Irish accent, though his profoundly undetailed official biography says only that he arrived ‘from the UK’ in Hong Kong 30 years ago. After Stan says Pansy is the problem, a woman, who for me has a stronger Irish accent, says off-camera: ‘But he [Stanley] is not afraid of her.’ What is going on here? My wildly speculative first thought is that there has long been a wee Irish mafia connected with the dogs and the horse-racing in Macau, but this is indeed wildly speculative. I must check further. The only thing I learn quickly from someone who knows Oldham quite well is that he is ‘a clever fellow’. Meanwhile in the video it is subsequently, I think, the Irish-accented woman off camera who butts in again to say to Stan: ‘Gordon will still represent you, ok?’ I think this is right, but then an ethnic Chinese woman I do not know moves across camera right to left saying ‘They made him, they made him [Stanley sign documents against his will]’. Stanley says he was forced during his television appearance to read ‘the plaque’ [cue card] organised by Pansy and Daisy. The video ends with the lawyer saying: ‘Are you telling me that I can now go ahead with filing and getting back your interests in Lanceford?’ To which Stan responds: ‘I suppose so…That’s what I want.’ The lawyer gesticulates everything to Stan as if he is an idiot. But Stan isn’t an idiot, even at the age of 89. After all, he is the one looking at the silly gweilo. Upshot of video 2. I think the lawyer has definitely got some questions to answer. I find it creepy the way he refers to Stan as Dr. Ho, using the title he never earned. Stan’s slaves, like Henry Fok’s (‘Dr. Ho’s office’, ‘Dr. Fok’s office’!) have long done this, but a self-respecting lawyer does not need to. I would also like to see the written consent from Stan to post this stuff to YouTube; it should have been put up with the postings.

Video 3. Roll on to January 30. Stan says Pansy says he can have his shares back, but it is ‘only words’. Third ‘wife’ Ina, who’s got a bunch of stock, doesn’t want to meet. (Ina was the ailing first wife’s nurse when Stanley got the hots for her. If you have ever seen the UK sit-com Are You Being Served you’ll have a picture in your head at this point.) Note that Stan here is saying he wants to get all the share scrip back and ‘then decide what to do’; do you remember the fair division promised in video 1, Stanley? Not much of interest here. It ends with Stan pointing out what a stand-up guy he has been.

Video 4. (Not yet released). Stan sits in his favourite cardigan looking into a full-length mirror intoning the mantra: ‘Mirror, mirror on the wall, who has shagged the most among us all?’ From a pair of old speakers the voice of Michael Jackson responds: ‘You have Stanley, you have’, followed by a trademark yelp. At length Stanely picks up a hand-held mirror and quizzes it: ‘Mirror mirror in my hand, who’s the foxiest in the land?’. From another pair of speakers, the double-deep voice of Errol Brown (per his legendary BabyCham add)  replies: ‘You da one, you da one Stan…’ This continues indefinitely.

A note on the lawyer, February 2:

The verdict from various people who know Gordon Oldham, personally and professionally, is that he is by no means the most amoral lawyer in Hong Kong (a warm breeze wafts across the Big Lychee as Ron Arculli, Stephen Cheong, Charles Lee and pals breathe a collective sigh of relief). Perhaps the mid-point of the opinions is one that calls him ‘aggressive and innovative and he doesn’t give a fuck about anything’. The others range from ‘decent guy’ to ‘slipperier than a donkey’s dick’ (the last, I would stress, is from a journalist who has only seen Oldham’s press performances). Anyhow, there does seem to be some consensus that posting Stan to YouTube without publishing his written consent and a full explanation of what is being done begs various question; as — and several people have said this pointedly — does the posting of edited interviews. You will notice there are plenty of cuts in the tapes. Can we have the full tapes please?

Mr Oldham has not responded to an email to the contact address given on his firm’s site yesterday. I will send another one.

Other points of interest: it seems that Oldham has not acted for Stan on other cases (at least ones I know about). Of course Stan, being a godfather, has almost as many lawyers as girlfriends, and so this is hardly surprising. But it does maintain one’s interest in knowing how Oldham got on the roster for this job. Finally, one who knows Oldham claims the accent is northern Irish, tho it sounded poshed up southern to me.

As to Stan’s choice of lawyer, I think it is good. There is an illustrious history of godfathers using gweilos to front for them when they need to do something very public. Remember all KS Li’s public relations problems at Hutchison in the 80s when he paid himelf a huge special dividend he had said he would not take? That was when he hired Simon Murray. Isn’t it great that everyone trusts white people? I think it’s fan-bloody-tastic.

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Obama versus Osborne

January 27, 2011

If you would like a bit more compare and contrast (in the wake of Perugia versus Bristol, try Barack Obama and George Osborne in the sphere of economics. The former just gave a State of the Union speech (video or text in which he made a forthright case for America to expand fiscal expenditure in order to invest in infrastructure, in new commercial technology and in education. He grounded the case in the context of a rising geopolitical challenge from China (following the recent visit of Thunderbirds cameo Hu Jintao) and a US unemployment rate of 10 percent. He indicated the requisite funds ought to come from (in relative international terms) a less absurd fiscal subsidy for US oil companies and reduced tax breaks for the distinctly rich (following 40 years of decisions in their favour). Perhaps most important, he said all of this in the country which already has the world’s most competitive large industrial companies.

Over to Blighty. George Osborne, our to-the-manor-born Chancellor of the Exchequer, this week greeted the news that the British economy shrank in the fourth quarter with a promise not to entertain any expansion of investment. Instead, George’s plan for economic rejuvenation and job creation is to suck a boiled sweet and see what happens. Britain has fearfully few world-beating corporations outside of finance and legal and accountancy services (which largely serve the finance sector), but George can’t see a case for investment to nurture more of them. New world-beating corporations will arise from the vapours, according to the 101 neoclassical economics that George was spoon-fed at school and university. He says the Q4 shrinking economy was the result of bad weather, and one assumes he thinks the unemployment rate is the result of indolence and immobility among the lower classes.

Still, methinks it won’t much matter that George understands little about the world. The British government does need to cut recurrent expenditure after the excesses of Blair’s champagne socialism. Meanwhile, my bet is that George’s failure to make strategic investments in infrastructure and technology will be remedied later this year when Britain follows in Obama’s wake and increases capital spending. Where America leads, we follow. When was the last time that Britain influenced US policy? Keynes?

Worth reading: Robert Reich makes some good points about the pieces of the puzzle that Obama did not address in his SOTU speech in the FT (subscription likely needed):  Reich, who was part of a government that as I remember did sfa, is a little too harsh: Obama did touch (lightly) on the income distribution question.

After writing this, I see that in the FT Martin Wolf seems to have reached the same conclusions about George.

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Perugia versus Bristol

January 27, 2011

Sorry to keep banging this drum… It occurs that the recent high-profile murder case in Bristol (a British city I know well having been an undergraduate there) points up the differences between British institutional behaviour since important reforms of the 1970s and1980s, and the wholly unreformed conduct of the police and judiciary in Italy.

The Bristol case involves the brutal murder of a young woman who lived in Clifton, the posh part of town. Joanna Yeates’s landlord, a retired teacher called Chris Jefferies, was interviewed (like many people) and changed his story about what he saw on the day of the murder. Jefferies is eccentric (a friend he taught many years ago provides independent corroboration of this) and he sports a classic mad professor hair-do. Police arrest him. They are constrained by the system to interview him in the presence of a lawyer and to tape record the interview. He does not admit to murder and they do not have the evidence to charge him. They release him on bail — suggesting they still think he is pretty weird — but there is nothing they can do. The police continue their work. More than a month after the murder, a completely different man, a 32-year-old neighbour, is arrested for the murder and on 25 January 2011 is remanded in custody. The police and judiciary reveal no further details and remind a frenzied and all too often irresponsbile press of the Contempt of Court Act and the fact that the publishing further details could prejudice the court case to come.

Compare Perugia. Here the issue is also the brutal murder of a young woman. Here there are also people around the case who appear suspicious — in this case the marijuana puffing students Amanda Knox and Raffaele Sollecito. The police get suspicious. But while the system in theory requires them to provide access to a lawyer and tape record interviews, in practice the accepted standards of the day are such that they interrogate Knox all night without either a lawyer or a tape recorder. They and the investigating magistrates (who join in the illegal interrogation) force a confession. At this point, the police and the magistrates stop doing their jobs and start leaking their case to the press, which fills acres of newsprint with lurid details about a weirdo murder conspiracy. Since there is no independent state prosecution service, the case is immediately ready for court. When the trial comes, the process is already thoroughly polluted, and only becomes more so in a system where jurors are not sequestered and where judges are present in camera to ‘assist‘ the jury as it decides a verdict.

My view is that England was almost this bad in the 1970s. Add another 10 years for the almost, and the Italian judicial system today is half a century behind England (which still has plenty of faults of its own).

Separately, on a totally unrelated but spooky note, thieves have stolen the decomposing body of Mike Bongiorno, about whom I blogged at his passing It is front page news  in the Corriere della Sera (they have even translated some of it into English). When I raised the grave-snatching issue with a couple of locals in our preferred bar, the nonchalant response was that ‘It’s happened before’, with two specific cases cited. ‘The straightforward explanation is they’re looking for a ransom,’ said a middle-aged lady who wasn’t drinking alcohol. ‘Of course you can’t count anything out.’ Am I getting older, or is kidnapping stiffs something we should be less relaxed about?

 

Addendum, 24 February 2011. Here is another famous UK miscarriage of justice case from the 1970s — a complex, bitter-sweet one — that is back in the news.

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150 years of not quite growing up

January 20, 2011

This year, 2011, is the 150th anniversary of the unification of Italy. Expect a lot of excuses. The most obvious and already well-used is: ‘We are a young country.’ Up north, where the Germans are presently pondering whether to bail Italy and more junior members of the Olive Belt back into the Euro, voters might be forgiven for wondering: ‘But wasn’t our unification 10 years after Italy’s?’ Truth be told, Italy today is one of the hardest countries in the world to defend: rich, established, and perennially juvenile. It is like your school friend who never grew up. When we were 15, the guy seemed like an interesting maverick. Today he’s just a bit of a tit, and one who still lives with his mother.

It may also be that 2011, this great anniversary, heaps an unprecedented level of bad publicity on Italy. There is likely to be a general election — which Berlusconi will win. What can you say? ‘Aging, plastic-surgery deformed teen-worrier romps home as housewives make lunch with increaingly limited resources.’? Meanwhile, it is ever more likely that the murder case in Perugia, about which I have blogged repeatedly (look under the Italy to Avoid tab), will fall apart in a manner that exposes Italy’s nastiest demons. No one comes up smiling from this one. The police, the magistrates, the press: all, I suspect, are set to be exposed for a congenital lack of professionalism. I am as happy as the next man if mamma makes good pasta, but if your pasta enjoyment bites into your professional life such that you are willing to see two innocent kids go down for 25 years, then the retrogusto is just not good.

The first appeal of Knox and Sollecito has started on a different footing to the original trial. After the cringe-making final statement to the court made by Knox first time around, in which she thanked ‘the system’ for its hard work (I gave my verdict here), she was sent out by a new legal team to deliver a dose of reality just before Christmas. The Guardian reported that the [what pass in this system for] jurors were ‘riveted’ when reminded by Knox in a 14-minute set-piece speech that their country is not among the G8’s leaders in institutional standards and efficiency. The new tone, for me, is the right one: show a hopeful respect to the court, but at the same time remind it that the world is watching. This is an uncomfortable position to be in for anyone who believes in the rule of law, but in an institutionally deficient country I have yet to see a better approach. Certainly it is an approach that everyone I know in China who deals with the monstrous Chinese justice system agrees on. In Perugia, Knox and Sollecito have been granted a review of DNA evidence by the appeal judge.

Apart from being white, reasonably attractive and middle-class, Knox and Sollecito are also beginning to enjoy other kinds of luck. Early reports in the past couple of weeks said that a key witness who placed them, rather weakly, at the scene of the crime on the day of the murder, had been arrested for drug dealing. I figured a bit of marijuana and wondered how this could really undermine the (albeit marginal) testimony. Now a report in the UK tabloid Daily Mirror claims heroin dealing and that Curatolo has ‘testified’ in two other murder cases. One awaits more concrete information than you find in a Red Top, but the discrediting of this witiness, given the weakness of the other evidence, would have the potential to carry the case quickly into the arena of farce. At least for those who don’t think it is there already.

The great revelation for me in recent weeks has been the oped in The Independent written by a British doctor who now lives in Umbria and who was formerly caught up in a great miscarriage of justice in England. David C. Anderson likens that 35-year-old story to what is going on in Italy today. I remember the case myself, not least because it occurred close to where I was born. Anderson recalls how police sent down Stefan Ivan Kiszko for the murder of an 11-year-old child. A future Conservative Home Secretary of the 1980s (and capital punishment supporter), David Waddington was the defending barrister. A future Lord Chief Justice was the prosecuting barrister. The police and the justice system, seeking a swift reckoning for a brutal killing, decided Kiszko was the guilty party and fabricated evidence to make sure he was condemned. They were grotesquely unprofessional. Kiszko spent 16 years in prison and then died 6 months after the miscarriage of justice was acknowledged. He was one of the reasons behind the 1985 Police and Criminal Evidence Act (PACE) which meant the police finally had to do things like tape record interviews.

That was the 1970s and Kiszko was a fat unmarried man in possession of a few pornographic magazines who had been falsely accused by teenage girls of exposing himself. In cases which I dealt with as a young journalist in 1990, the falsely convicted ‘IRA bombers’ known as the Guildford Four and the Birmingham Six had been working class Irish men with Nationalist sympathies when they were jailed in the 1970s. But here, in Italy, today, in 2011, 26 years after the PACE was passed into law in the UK, they are still locking up middle-class white kids for murder on the basis that they were acting a bit weird and so might be part of a ritual Satanistic plot. It’s like a cross between The Crucible and Mediaset. No, it is a cross between The Crucible and Mediaset.

Anderson’s oped in The Independent also contains a hypothetical suggestion that seems to me explosive. Since the beginning of this case I have had no doubt about the professional incompetence of the police, the forensics team and the magistrates (though I would stress that I do not regard this as universal, merely common, in Italy). But I have always been troubled as to why Knox named the black bar owner Patrick Lumumba in her illegally extracted testimony during an all-night interrogation by 12 police officers without a lawyer. I can see the police brutality, the girl’s fear, and so on. But what I could not see is how a black bar owner would be offered up as the murderer by some liberal, west coast American girl with a vibrator. Anderson offers a potential explanation: he says that the police, conducting their illegal interview of Knox five days after the murder, must have already known that a black man was involved. It seems to me this would mean they had some early lead from the forensic investigation (Ivorian-born Rudy Guede’s blood, semen, DNA and more were all over the crime scene). So the police would have heard from the ‘scientists‘ that there was a black man involved, at the same time as what they had in their hand was two young whities they believed were behaving strangely. By leaning on Knox in the middle of the night, they could connect up the dots via a story about a black bar owner who Amanda Knox knew well. Knox, Sollecito and Lumumba end up together in a motiveless ritual Satanic murder plot. Except that then the police realised that what they really had was hard forensic evidence on Rudy Guede. So the prosecuting team needed to switch to Knox, Sollecito and Guede in a motiveless ritual Satanic murder plot. Anything else would require the capacity to say you were wrong. This is of course a hypothesis. But unlike Mr Mignini’s, it is plausible.

Separately, after much to-ing and fro-ing with lawyers and libel specialists, I will soon be able to bring you the full and bizarre story of my own legal entanglements in Italy. Although the accusations are frivolous by Perugia standards, you will note a striking pattern of behaviour by police and magistrates. This, for me, is the most important good thing that can come out of the Knox-Sollecito miscarriage of justice: that people accept that there is a systemic pattern of failure in Italian justice. It is not about the people, it is about the structure they are using.

Meanwhile, look at these:

The chief investigator boasts on television that physical evidence was unnecessary in the Perugia investigation because the Italian police’s psychological interrogation techniques are so advanced. You really could not make this stuff up. Please send it viral. There are 5,000 hits so far.

http://www.youtube.com/watch?v=sWkZPWRS3N0

This site I had not seen before. It looks, at first blush, to be carefully and sensibly done, though it places, for me, too much emphasis on Mignini and too little on the systemic failings of the Italian justice apparatus.

http://www.injusticeinperugia.org/

They have translated a small amount of the above site into Italian, though I have not yet had time to look:

http://www.amandaknox.it/

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Yo, Lloyd!

January 14, 2011

Sebastian Mallaby, author of More Money Than God: Hedge Funds and the Making of a New Elite, has written an oped in the FT (subsciption likely needed) highlighting the exquisitely self-interested spinelessness of Goldman, Sachs, which has just published a hippy-shit manifesto of promises to love its clients more after paying out a bunch of money to the SEC rather than defend its conduct and business model in court. Particularly righteous is Mallaby’s defence of hedge funds, which have taken such media stick in the past couple of years when it was really the money pigs of the investment banking establishment who deserved the spanking. I don’t go a bundle on either group as a species, but the Wall St. investment bankers are so obviously more malign.

All you actually need to read of Mallaby’s piece is the last two pars, so here they are:

‘The truth is that investment banks are rife with potential conflicts – first between their trading and that of their clients, and second between various classes of customer, whom banks may serve as advisers, market-makers, underwriters or as a fiduciary. No amount of yogic incantation can harmonise these split personae; the solution is to break banks into functional units, so that merger experts, marketmakers and proprietary traders no longer cohabit. A refashioned Wall Street of specialist boutiques would be healthier for customers. And since the boutiques would be smaller than today’s megabanks, they might be small enough to fail.

Of course, this has long been evident to anyone who cared to look. An army of specialist advisory firms and hedge funds – ignorantly attacked as “shadowy” because they lack publicists and friends in Washington – has sprung up on the principle that focused private partnerships are preferable to conflicted behemoths. But for years policymakers have shrunk from challenging the big investment banks, comforting themselves with the thought that if the customers did not like them they would vote with their wallets. The customers, for their part, have been either awed or ignorant. Perhaps Goldman’s pieties will encourage them to wake up.’

I am not sure the very last bit is quite right: that customers have gone with the investment banks only because of awe and ignorance — though there is plenty of both about. Customers have also gone with big investment banks because the regulatory structure hasn’t given them options. You can’t go to a hedge fund for an IPO or working capital. The politicians are therefore doubly to blame. And who has put more of its people into senior US political jobs in the past 20 years than any other big bank? Goldman. One day I will blog about my bizarre encounter with Hank Paulson in a West Virginia toilet.

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Tidings

January 12, 2011

The last working week before Christmas is spent in Jakarta. Outside the five-star hotels where the elite congregate, the doormen and cab-boys are under a collective instruction to don Santa Claus hats. They do look quaint. But in a country where Islamic terrorists’ preferred bombing site is the five-star hotel, I wonder if this is not a tad provocative and lacking in concern for employee welfare.

At the end of the trip, in my role as billionaire agony aunt, I spend half a Sunday listening to one of the richest men in Indonesia lament the condition of his country. The China-driven commodity boom, he says, masks a qualitative economic slide back into the ranks of Third Worldism. Or, as he puts it: ‘The real value-added here is practically nil… You cannot just keep digging from the ground.’ We stare morosely at his 50-metre swimming pool as liveried retainers refill our coffee cups. Coming from a guy who, personally, cleaned up roughly two thousand million dollars on mineral investments in the past few years, his testimony is striking. And the point is simple: the asset trading game which passes for economic activity may yield a billion bucks for each of 15 or 20 people, but it is facile, puerile and beneath the dignity of a nation of more than 200 million people. Indonesia no longer has any industrial policy, any manufacturing ambition beyond luring multi-nationals’ processing ops, any sense of developmental destiny.

I heard exactly the same story from another billionaire in Malaysia in the summer. But since he has been down a few quid in recent years, I suspected the tale might be sour grapes. Not so. Even those who have made out like bandits of late say that south-east Asia is going down the tubes. Philippines, Thailand, Malaysia, Indonesia is the presently apparent order of keeling over. In sum, the region has decided, for want of a better expression (I have watched more than one series of The Wire of late), that the best it can hope for is to be China’s bitch. The interesting geo-political takeaway is that these countries in recent decades set themselves up as rather slavish US allies and they are failing. Meanwhile the state which is challenging the US in an increasingly aggressive and frightening manner — China — looks relatively rather successful. They told us in school that economic development was a win-win game, but I think this may have been a simplification. ‘Please Miss.’

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Pity for the rich

October 20, 2010

It has been a very long break while I write the first part of a new book. When you are spending all day working on writing, the idea of writing a blog as well becomes rather less attractive. Nonetheless, with all the fun things going on in the world, I am going to see if I can get back into it after the summer break.

Joe Stiglitz (you will need a subscription) has come out swinging with an attack on what has been dubbed ‘QE2’ or a second round of quantitative easing of the US money supply. What is best about his analysis is that it points out the fallacy that monetary interventions are costless (whereas fiscal interventions raise public debt, as we all know). Stiglitz points out that QE1, which involved the purchase of around US$1 trillion of US government bonds and mortgage securities will have a cost down the line as US bond prices fall (or, put another way, as interest rates rise to more normal historic levels). With QE2 set to be of the order of as much as US$2 trillion, the quantitative easing expected to be confirmed in November will involve long term public costs of an even greater magnitude.

Stiglitz points out that fiscal interventions (can) have clear benefits. Of course there is the money you throw down in welfare benefits to those who lose their jobs. But over and above this, you build schools, railways, new energy infrastructure, etc, etc, which has a long term benefit to society. Things may not be the same with the long-run public cost of unconventional monetary policy.

What Stiglitz doesn’t do is to say where the gain from quantitative easing investment is likely to end up. The answer, surely, is that much of it will end up in the hands of the rich. The expectation of QE2 is already driving a big rally in the US stock market. Where QE1 probably prevented rigor mortis in the banking system during the initial shock, QE2 is mainly telling the financial system that stock prices are likely to rise, if only for ‘liquidity’ reasons. From a bullish stock market, the rich benefit disproportionately. The poor see little or no benefit, consistent with a 40-year trend in the US to make the rich richer relative to the poor.

The real gainers from QE2, I think, are going to be the decidedly rich and the super-rich. This is because, unlike the loose monetary policy after 2001 which fed housing bubbles, this time the liquidity is going to drive asset bubbles and stock market bubbles in developing country markets in which ordinary people do not much play. A flood of cheap dollars, passing through the hands of hedge funds which serve the rich, is headed for the stock markets of Thailand and Indonesia, condo purchases in Hong Kong and Singapore, Latin American local currency government bonds, and so on. The financial managers of the already-rich know how to trade these markets, ordinary Europeans and Americans do not.

There was an Asian stock market bubble in 1991-4 during the last great Euro-US recession. But that was largely based on ‘discovery of Asia‘ overexcitement. The emerging markets bubble we should expect next year will be based much more on domestic US monetary policy (remember that interest rates were high in the early 90s). It may serve, indirectly, to force some warranted currency realignments by pushing up the value of currencies that have been artificially held down by government interventions in east Asia. But above all, within the US, the experience is likely to see a large transfer of wealth from the taxpayer to the already opulent.

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Posted in North-east Asia, South-east Asia | Comments Off on Pity for the rich

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