1 Triple-dip fears resurface (Phillip Inman in The Guardian) British banks suffered a loss of business in December, adding to fears that a slowdown in activity across several sectors of the economy at the end of 2012 will push the UK into a triple-dip recession. Banks were among several financial institutions to have suffered a drop in business volumes, according to a survey by the CBI and accountants PwC. Investment banks and insurance brokers also saw a decline in business in the final month of the year as financial services dragged on economic output along with manufacturing, high street sales and much of the services sector. Only construction has shown any strength in recent months, mostly from commercial building in London.
PwC said the loss of tens of thousands of jobs across the financial services industry in recent years would lead to staff shortages in 2013 and limit the potential for investment and growth. Of the 94 companies that responded to the survey, 25% saw business volumes rise, and 30% reported a fall. The resulting balance of -5% represented the second consecutive quarterly decline and depressed hopes of a return to moderate growth.
A contraction in the final three months of last year will not technically determine that the UK has entered a third recession in four years because output needs to fall in two consecutive quarters before the Treasury concedes the economy has reached that embarrassing situation. Nevertheless, it will be a blow to Osborne, who will be concerned that his economic plan is being knocked off course.
2 Inequality holding back recovery (Joseph E Stiglitz in The New York Times) There are four major reasons inequality is squelching our recovery. The most immediate is that our middle class is too weak to support the consumer spending that has historically driven our economic growth. Second, the hollowing out of the middle class since the 1970s, a phenomenon interrupted only briefly in the 1990s, means that they are unable to invest in their future, by educating themselves and their children and by starting or improving businesses.
Third, the weakness of the middle class is holding back tax receipts, especially because those at the top are so adroit in avoiding taxes and in getting Washington to give them tax breaks. Low tax receipts mean that the government cannot make the vital investments in infrastructure, education, research and health that are crucial for restoring long-term economic strength.
Fourth, inequality is associated with more frequent and more severe boom-and-bust cycles that make our economy more volatile and vulnerable. Though inequality did not directly cause the crisis, it is no coincidence that the 1920s — the last time inequality of income and wealth in the United States was so high — ended with the Great Crash and the Depression. The International Monetary Fund has noted the systematic relationship between economic instability and economic inequality, but American leaders haven’t absorbed the lesson.
The good news is that our thinking has been reframed: it used to be that we asked how much growth we would be willing to sacrifice for a little more equality and opportunity. Now we realize that we are paying a high price for our inequality and that alleviating it and promoting growth are intertwined, complementary goals. It will be up to all of us to muster the courage and foresight to finally treat this beleaguering malady.
3 The West Africa mess (Eric S Margolis in Khaleej Times) France, the colonial ruler of most of West Africa until 1960, has overthrown and imposed client regimes there ever since. Disobedient regimes were quickly booted out by elite French troops and Foreign Legionnaires based in West Africa that guarded France’s mining and oil interests in what was known as “FrancAfrique.”
Overthrowing African regimes was OK for France, but not for locals. When Mali’s French-backed regime was challenged, France feared its other West African clients might face similar fate, and began sending troops to back the Bamako regime. President Francois Hollande, who had vowed only weeks ago not to intervene in West Africa, said some 2,500 French troops would intervene in Mali. But only on a “temporary basis”, forgetting de la Rochfoucauld’s dictum “there is nothing as permanent as the temporary!”
Other shaky Western-backed West African governments took fright at events in Mali, fearing they too might face overthrow at the hands of angry Islamists calling for stern justice and an end to corruption. Nigeria, the region’s big power, vowed to send troops to Mali. Nigeria has been beset by its own revolutionary jihadist movement, Boko Haram, which claims Muslim Nigerians have been denied a fair share of the nation’s vast oil wealth, most of which has been stolen by corrupt officials.
Mali has become a crisis with the US, Britain, West African states and the UN involved in this tempest in an African teapot. A nice diversion from budget crisis. US air forces and small numbers of Special Forces from its new Africa Command are now entering action in Mali and Algeria. More are sure to follow as West Africa smolders.
4 Girls ‘hit hard by recession’ (BBC) Women and girls have been hit the hardest by the global recession, according to child rights and development organisations. "The world is failing girls and women," a report by Plan International and the Overseas Development Institute said. A shrinking economy sent girls' infant mortality soaring, and more females were abused or starved, they said. This could erode gains made in recent years towards reaching the Millennium Development Goals, they added.
"The
improvements made during the last five years are very fragile," Nigel
Chapman, chief executive of child rights organisation Plan International, said.
“It is shocking, because I don't think anyone's really noticing it. The
problems started when the girls were very young”, Mr Chapman explained.
The proportion
of baby girls who died when the economy shrank rose five times faster than the
proportion of baby boys who died, he said. Hence, a 1% fall in economic output
increases infant mortality by 7.4 deaths per 1,000 girls against 1.5 for boys,
said Mr Chapman, citing World Bank research into previous crisis in 59
countries.
5
Rahul Gandhi’s emotional critique of India (Amol Sharma in The Wall Street
Journal) In his first remarks as the newly-elected vice president of the ruling
Congress party, Rahul Gandhi didn’t spend much time ticking off the
government’s achievements after eight years in power in New Delhi. Instead, for
much of his emotional speech to a large Congress party gathering in
Jaipur, the 42-year-old politician sounded like a member of the
opposition as he offered a searing critique of the nation’s poor governance
setup.
He also took aim at the leaders India taps, arguing that the best informed people aren’t always those who wind up in powerful positions. “Every single day I meet people who have tremendous understanding, deep insight and no voice,” he said. “And then I meet people holding high positions with tremendous voice but no understanding for the issues at hand.” He added: “We don’t respect knowledge. We respect position.”
Mr. Gandhi had plenty of sweeping observations about India but no specific policy ideas. At times he sounded more like a political scientist than a politician. “All our public systems” he said, including administration, justice and education, “are designed to keep people with knowledge out. They are closed systems. They are designed to promote mediocrity. The answer is not to run these systems better,” Mr. Gandhi said. “We have to rethink these systems and transform them completely.” It wasn’t clear what kind of transformation Mr. Gandhi had in mind.
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