Friday 29 November 2013

Demographics 1

There's been a series of articles recently on the one child policy in China, and how this is resulting in demographic problems due to Chinese preference for male children. As a result of the policy, and this preference, there is a massive imbalance of young males to females in China. The recent Party decision to create official exceptions to this policy can be seen in this light. 

It's interesting to reflect that the upcoming world power, China, is going through a demographic crisis that in some ways is  a mirror reflection of that of the declining world power, Europe. The baby boomer retirement has started: a major demographic bulge is hitting European pension systems, creating major fiscal pressure. 

European governments find themselves between two extremes: 

-  The first is how to manage a social security system designed for a worker : retiree ratio of 10:1, when the actual ratio is as low as 2.8 : 1 in many countries. 

-  The second is how to control their own tax impulses, where the Baby Boomer demographic bulge will create an inheritance and property transfer tax bonanza. This is an El Dorado of income confiscation to shore up the system for a few more years. 

With this in mind, I was interested by an Opinion piece today in the Financial Times on German policy under a Christian Democrat - SPD coalition. Entitled "Merkel is not leading a government for the future", the piece takes a quick (and probably too selective) look at coalition negotiations, and concludes: 

"Data just released by the German demographic institute show that the country’s population has the highest median age of all EU countries – 45 years, compared with 39.7 for the UK and 35 for Ireland. ... Both big mainstream parties have become parties of the old. It is this age bracket where they find most of their voters – and the most reliable ones as well. This is the strongest political message the new coalition sends out, albeit inadvertently. If this message sticks – that the old have won – then Germany will lose the confidence of a young, educated generation, and will in the end lose its future."

I can't say I find this surprising. We see the same trend in Germany in many areas (for instance, support pricing of apprenticeships) as well as in many other countries (Social Security and Medicare policy in the United States). 

Older people vote. Younger people tune out, and understandably so given the dismal state of domestic politics in most countries today. How we deal with the declining demographics in Europe is going to be a key policy issue. And as with most other ones, it is for the most part understood only when a single issue (e.g. retirement age change) hits the headlines. 

A real analysis of the impact of demographic change on consumer spending and B2B activity (investment, marketing) is rarely found among our corporate clients.   

(c) Philip Ammerman, 2013 

Thursday 4 July 2013

Second Memo on Snowden

Dear President Obama,

It looks like you didn’t receive my first memo on how to handle Edward Snowden. And what happened yesterday, when President Evo Morales’ plane was denied overflight through French,  Spanish and Portuguese airspace, only confirms the magnitude of the problem. 

Let’s start with what’s really going on. The United States has broken the law. Amendment I of the US Constitution reads:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

By granting government officials, sleazy contractors and the pimply youths they employ the technological access to retain and read every single one of my emails or texts, you are most certainly abridging my freedom of speech.

You have granted yourself these rights without any prior notification to me (or to anyone else), and without any possibility of redress for anyone living in the real world, who is neither going to appeal to the Supreme Court, nor run for elected office to try to “change” things.

The United States has also broken international law. Article 1 of the United Nations Charter adopted in San Francisco in 1945, reads:

To develop friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples, and to take other appropriate measures to strengthen universal peace;

By using surveillance technology to capture all “foreign” email and internet traffic passing through the United States, as well as by tapping into internet servers and telecommunications hubs in Germany, Belgium and a host of other countries, you are most certainly violating the principle of equal rights. Under current US law, the data on non-US citizens and US citizens living outside the United States is subject to a lower category of protection, and can be captured and stored without their consent, and without FISA approval.

Both in its legal underpinning (or semblance thereof) as well as in its actions, your administration’s surveillance efforts against European allies does nothing to develop friendly relations among nations. It does the opposite.

Thusfar, your administration’s response to the very real fury in Europe over these actions has been to mumble platitudes about the fight against terrorism and the arcane procedures used to safeguard privacy. Few people on the street believe them.  

And then the incident with President Evo Morales occurred. His jet was barred from the airspace of France, Spain and Portugal in rapid succession, as he was returning from a conference in Moscow. The ostensible reason was the suspicion that Edward Snowden was onboard. He was forced to sit for 12 hours in Vienna Airport while this situation was resolved. President Morales, quite rightly, is furious, and most of Latin America is furious with him.

Mr. President, you must surely understand how craven this looks. These actions are making an unwinnable and untenable situation worse. They are removing public support for the United States and the broader system of alliances and shared interests which lie at the heart of the Transatlantic Alliance.

Edward Snowden should be returned to the United States by transparent means. He should be granted his day in court. If he wishes to seek political asylum in another country, he should be allowed to do so, and an extradition request issued.

When all you have is a hammer, everything else looks like a nail. Put down the hammer, Mr. President. Address the very real revulsion felt by tens of millions of Americans and other citizens against the illegal and unwarranted seizure of personal information. Do not allow the search for solutions in the War on Terror to perpetuate it.

In what now seems like many years ago, a young Senator for Illinois who had just been elected President made a speech at Grant Field in Chicago, and said:

To those — to those who would tear the world down: We will defeat you. To those who seek peace and security: We support you. And to all those who have wondered if America's beacon still burns as bright: Tonight we proved once more that the true strength of our nation comes not from the might of our arms or the scale of our wealth, but from the enduring power of our ideals: democracy, liberty, opportunity and unyielding hope.

How different that sounded then.

Sincerely yours,


Wednesday 3 July 2013

Voodoo Economics à la Grecque

For what will it profit a man if he gains the whole world and forfeits his soul?
Matthew 16:26.

Kyriakos Mitsotakis, the son of Konstantinos Mitsotakis, former Prime Minister of Greece, was recently appointed Minister of Administrative Reform by Prime Minister Antonis Samaras.

Samaras was Foreign Minister under Konstantinos Mitsotakis’ government until he was expelled in 1992 over the issues of privatisation and the Macedonia name dispute. He lived in the bitter wilderness until 2004, when Konstantinos Karamanlis, scion of another political family, invited him back into the New Democracy (ND) fold for the elections against George Papandreou that year.

In an unexpected reversal, Samaras defeated Dora Bakoyianni for leadership of the ND Party in 2009, following Karamanlis’ defeat by George Papandreou. So it was the turn of the Mitsotakis family to go into the cold. Until now.

As Minister of Administrative Reform, Mitsotakis has been handed the poisoned chalice of meeting the Troika’s targets to lay off 150,000 public sector workers to 2015, and specifically 15,000 by 2014. Of these, 4,000 must be fired this year.

Kyriakos Mitsotakis is, in formal respects, a highly-trained, competent person. He studied economics and business at Harvard and Stanford, graduating with stellar marks. He worked at McKinsey, one of the top consulting firms, as well as Alfa Ventures and the National Bank of Greece’s Venture Fund.

Which makes his very public flip-flopping over Greece’s commitments a particularly tragicomic one in the past week, since he became Minister.

Last week, he stated that of the target of 4,000 lay-offs in 2013, 2,656 had already been achieved with the closure of ERT. This can only be described as a Greek form of “voodoo economics”:

·       The ERT workers have not actually been fired: the Greek Council of State has ruled that ERT must remain on air while its liquidation is implemented and the new broadcaster is formed. It is painfully clear that the way the “closure” has been implemented violated Greek constitutional law as well as European public law. The closure cannot be taken for fact at this point in time, especially since the full termination compensation has not been paid.

·       The government—based on a memorandum of cooperation between Prime Minister Samaras and Evangelos Venizelos—have agreed to re-hire 2,000 of the fired workers for NERIT. Based on their own words, many of these will be the same workers, hired based on “axiocratic criteria”.

It’s therefore a question of simple subtraction that in the best case, the prior “achievement” is not 2,656 lay-offs, but 656. And only once they are implemented.  

Does Minister Mitsotakis really believe the Troika will be pleased with this kind of juggling? Or does he believe that he can dodge the bullet of adverse public opinion?

But the Mitsotakis gambit does not stop here. In addition to the previous creative mathematics, he was also hoping to convince the Troika to grant more time to decide which staff to place in a labour reserve. On the face of it, this seems like an honest request: after all, he is a newly-appointed minister.

What this argument deliberately ignores, however, is that Greece made this public commitment to a labour reserve in mid-2011, but has never implemented it. Mr. Mitsotakis, as a member of Parliament since 2004, is surely aware of it. He also knows that it is a key monitoring point of the Troika who has been asking every quarter to see evidence that the labour reserve has started operations.

These two decisions are incredibly damaging to his personal credibility, as well as the credibility of the country.

What does this entire episode tell us about the state of the government today, and its key players?

Samaras has made a macabre political decision—he has appointed Kyriakos Mitsotakis to Minister of Administrative Reforms, knowing that the full political cost would fall on the son of his hated former mentor and rival Konstantinos Mitsotakis.

Kyriakos Mitsotakis was ambitious or foolish enough to accept the position, and apparently thought he was too clever for the troika, or for public opinion, and that Mitt Romney-scale flip-flopping would see him through.

Once again, absolutely no one in government appears to have a rational plan for public sector restructuring or lay-offs. There are some 6,000 Greek civil servants who have been found in dereliction of their duty, but even these 6,000 have not yet been fired. The political cost is simply too high: the margin of seats in Parliament is too low.

Yet perhaps the most depressing finding is that people who have had the benefit of education at top international universities, who were appointed to bright jobs on the strength of their political families, apparently think they will “win” by a craven behaviour that displays a total lack of respect for the truth, or for common sense.

This succession of failure can only be described as systemic, and total. The CVs of the last four prime ministers of Greece are eerily similar: top US universities (three of the four were at Harvard), high positions greased by political influence, every opportunity for honest success which most “outsiders” never have. Yet not a single one has behaved honourably.

And judging from the antics of Mr. Mitsotakis this past week, there is no shortage of future candidates for Prime Minister who share the same elite background, and who will behave exactly the same way.

«Αν σπάσει το ταμπού των απολύσεων στο δημόσιο, η κυβέρνηση θα κερδίσει ένα σημαντικότατο διαπραγματευτικό όπλο, για να μπορέσει να πετύχει παρεμβάσεις και στην φορολογική πολιτική και σε ζητήματα που αφορούν την μεγαλύτερη πλειοψηφία των πολιτών όπως τα κόκκινα δάνεια»

“If the taboo on firing workers in the public sector ends, the government will win an important negotiating weapon, in order to achieve changes in tax policy and in questions which affect the larger majority of citizens, such as non-performing loans.”

Happy hunting, Minister.

© Philip Ammerman, 2013

 Photo of Kyriakos Mitsotakis courtesy of 

Monday 1 July 2013

Managing Snowden: A Cynic’s Perspective

For whatever little it’s worth, this is what I would do regarding the Edward Snowden case if I were President Barack Obama and/or a cynic*.

1.     I would recognise that the value of information that Snowden has not released remains of greater value that the information he has.

2.     I would recognise that it would be better to treat him with a minimum of human dignity and bring him back to the United States, rather than drive him into the hands of Russia’s secret service.** The Reuters report today that Snowden has applied for asylum in Russia is the worse possible outcome for the United States, since Snowden will have to release all information in order to justify his asylum there.

3.    Therefore, I would give him back his passport, a safe flight home and legal representation. Let the press meet him at Dulles. 

4.     Once in the United States, I would take him into custody and provide him the opportunity to testify in a partly open, partly closed Congressional inquiry into the NSA and the real cost benefit of surveillance: his moment of glory. Obviously this inquiry won’t lead anywhere—none of these do—but it will make for excellent press and a brilliant report which no one will read (your modern Facebook friend has forgotten how to read anyway), and certainly no one will remember 46 months from today when it is finally published.

5.     After serving 10 years on a Club Fed minimum security prison somewhere, I would assure him a job somewhere in the United States, perhaps at a comfortable state university or think tank somewhere providing he violates no more state secrets. He can even consult the FBI on data security (seriously—remember Frank Abagnale?)

The opposite course, which the full weight of the Federal government and the usual blow-dried members of Congress are pursuing, has no ground for resolution: it merely confirms the conspiracy theories which, rightly or wrongly, are now part of popular lore. And it only really works if Snowden is killed and no further information is leaked.

Can the United States really take that chance? I doubt it.***

© Philip Ammerman, 2013

* I am definitely a cynic.

** Let alone being condemned to spending the rest of his life at Sheremetyevo Airport - a fate worse than death which surely must count as a crime against humanity. 

*** Before you get your knickers in a twist about how Snowden is a traitor and deserves execution, tell me what the Gulf of Tonkin Incident, the Church Committee Report, Iraqi Weapons of Mass Destruction and the Financial Crisis Inquiry Commission have in common? Answer? They all show us that the greatest crimes occur in broad daylight and are committed by the system itself. And they have all been forgotten. So go get hissy somewhere else.