The cases for Dependency and Privilege

Here are two conflicting quotes that lit up my eyes this week:

Hugo Rifkind in satirical response to people telling him that the Conservatives, “hate the poor - they’re removing their benefits.”

“No, no, they do that because they want to help the poor... they genuinely believe that, for example, a single mother on benefits with 6 kids, the only thing that’s stopping her from being, say the CEO of a multinational company is that she is disincentivised by the government giving her too much money… They actually believe this!”

 “The News Quiz”, BBC Radio 4, 5th Oct 2012

And then came these words from David Cameron in his speech at the Conservative Party Conference, 10^th Oct 2012:

“I’m not here to defend privilege; I’m here to spread it.”

According to Allister Heath, editor of ‘City AM’ newspaper: “That is exactly what all pro-aspiration governments should be trying to do: they should not hit the already successful, but allow as many people as possible to become successful. They must encourage wealth-creation, not seek to redistribute existing wealth. Cameron also delivered a passionate defence of Michael Gove’s education reforms and Iain Duncan Smith’s welfare overhaul, making the case in moral terms for improving children’s education and allowing the poor to regain their dignity by moving out of dependency.”

UK news: Plebs and Clegg's "I'm sorry"

UK politics probably doesn’t stir me up as much as it should – perhaps because I have an ignorant sense of futility about it all. Perhaps I feel like I should have a say in it... but can’t...

The recent gaff by the Conservative Chief Whip, Andrew Mitchell, in which he allegedly called a police officer a ‘pleb’ – defined by my dictionary as ‘a person of low social class’ - has got me wishing my voice had more grit.

No, I’m not angry – in fact I wouldn’t be surprised if the word ‘pleb’ is just a standard insult from Mr Mitchell which he uses without much conscious affiliation towards class, however, that such a word is thrown about so casually in the vocabulary of the privileged set is where my problem lies. Mr Mitchell’s gaff has given the British media another excuse to start up a fresh round of Tory ‘posh-bashing’. And although I hate to paint with such broad brushes I do tend to agree.

I grew up in a very multi-cultural and relatively poor part of London, and until I went to University, I never really understood anything about the class system. Everyone I had grown up with and went to school with all seemed to be the same... I thought that privilege meant royalty and the aristocracy. University changed that. Work has changed that. I became friends with people who came from a completely different background to me – and there were lots of them. And suddenly, when I returned home to my local high street I no longer felt at home there – I had seen this was not the world that everyone lived in.

At University, I dated a boy who was part of this privileged set, and although he had a thoroughly good and kind character, his contempt for ‘chavs’ was completely incomprehensible to me. When I told him I wore hooped earrings in my youth he said he in a very matter-of-fact way that he doubted we would have got on then. I didn’t understand – I was exactly the same person. I began to learn that his sentiment was common. Those of a ‘lower class’ were different – lesser - foreign. There was almost no compassion.

Carol Midgley wrote in The Times yesterday, "Someone who achieves something through their own merits is more deserving of respect than someone brought up with a sense that they were born to rule… I’d rather be a pleb than a prat."

I have friends who are doctors, lawyers, bankers, etc, and who have achieved these careers through nothing except incredible hard work. With friends like that, it is very difficult to respect anyone who achieves success any other way.

But I don’t believe hard work is enough. What singles me and these friends of mine out from most of the other kids in our hometown is that we received a great education. We were lucky to get into a Grammar School. Honestly, I cannot believe there is any debate at all over the future of Grammar Schools. They are key to giving children from normal backgrounds opportunities which are on par with those provided by the independent education system. Similarly, by raising tuition fees at university, so many talented, intelligent children will be restricted from competing against children from independent schools for the top jobs and positions in society. Just how is that a good thing? This is a wonderful diverse country with incredible, diverse talent. The reality is that 'plebs' are the backbone of real society. Stemming the flow and development of that diversity will stem the growth of this country. Nick 'Westminster School' Clegg, you have no idea what it is like to really feel sorry.

Just as I know people from normal backgrounds who have worked hard to achieve what they deserve, I also know many people from privileged backgrounds who are incredibly intelligent and hard-working. Naturally, I like and respect them as they deserve to be liked and respected.

But, the more restrictions that are placed on this type of enabling education that I was lucky enough to receive, the more a good work ethic becomes irrelevant. 

I want to live in a country run by bright and hard working people. I don’t care where they grew up or where they went to school or who their parents are. I like and respect people for their attitudes, humility and ethics. In my opinion, if you don’t have those things, you don’t deserve to hold particular positions in society.

Education is the path to mobility – and I’m not talking about class mobility, I’m talking about individual opportunity and personal success. Class will never be able to define (negatively or positively) any individual in a society where hard work earns respect and achieves results. 

Hungary - Balance of Payments - Trade surplus to remain positive after a shaky 2012

Although Hungary posted its highest ever annual current account surplus of EUR 1.43bn at the end of 2011, with a weak macroeconomic outlook at home and external conditions continuing to hamper demand for investment, there are significant downside risks to this current account surplus in 2012 but figures should improve from 2013 onwards.

Net export figures are the biggest cause for concern, with export growth in Q411 falling to 3.6% y-o-y, having been 20.7% a year earlier in Q410. Import growth also slowed to just 3% y-o-y in Q411, down significantly from 20.4% in Q410. This downward trend in growth was also similar across the trade in services. While a trade surplus typically tends to point to an increase in exports, it is clear that the recent surplus figures from Hungary are the result of weakened import demand in the light of recent domestic austerity measures including significant cuts in benefits and the public sector.

Trade Surplus Maintained Through Falling Imports

Total Imports, Exports and Trade Balance (EURbn by quarter)

Considering forecasts for contractional GDP growth in Hungary in 2012, import demand is set to remain low throughout the year. Beyond 2012, assuming the Hungarian government eventually agrees to the deficit targets which will pave the way for the IMF/EU for the funding deal to go ahead, domestic growth will continue to remain depressed and keep imports figures at the current level. In 2012, the contraction in the eurozone, will hurt Hungarian exports considerably as goods exports to the eurozone currently account for aound 55% of total exports. However, beyond 2012, as the eurozone growth improves again, export demand will pick up again considerably.

With the Forint having sold off sharply at the end of 2011 and reaching a record low of 321.73 against the Euro at the beginning of January, the weaker currency is also likely to add a further negative impact on import growth this year. Although the currency has been depreciating steadily since its brief recovery in February 2012, a deal with the IMF/EU – which looks to be unavoidable before the year end - should see the currency return to the previous levels of around HUF270/EUR. Despite expectations for the Forint to appreciate, with exports bolstered by Eurozone growth from 2013 onwards, this should still result in a growing trade surplus.

Room for HUF to Appreciate After Securing IMF Deal

EUR/HUF Exchange Rate

Following changes to the constitution which raised concerns over the independence of the judiciary and the Hungarian Central Bank and the resultant downgrade to junk status by all the three major Credit Rating Agencies at the end of 2011, Hungary saw a steep sell off of its financial assets which resulted in substantial net portfolio and other investment outflows in Q411. However, because securing IMF funding will be inevitable for the government given the soaring borrowing costs and upcoming debt repayments of nearly five billion euros of external debt, plus repayments of an earlier IMF/EU loan from 2008 due this year, the financial account surplus – of which portfolio investment has typically been a key component should increase once the deal is in place and investor confidence returns.

Portfolio Investment Outflows Drive Financial Account Narrowing

Hungary – Breakdown of Financial Account, EUR millions

Although Hungarian 5-year CDS spreads fell in March this year, they have since been creeping up as negotiations with the IMF continue to be stalled. These spreads will continue rising towards the high of 720 basis points seen at the start of January until formal talks begin. Once this safety net of external financing in place, we expect risk to be re-priced and for CDS spreads to fall in line with this. Similarly, 10-year government bond prices which have stabilised at around 87 basis points in the last month are set to rise once the deal is in place and the current yields which have reached nearly 9% start to fall.

Positive Outlook for Hungarian Assets
Hungary 5 Year CDS Hungary, bps       

                                        10 Year Government Bond, bps                                                

On the back of the financial account surplus, the income account deficit has fallen from EUR-5,366 million in 2010 to EUR -6,317 in 2011, largely weighted by the outflow of direct investment income resulting from the high levels of Hungary’s external debt. Outflows are likely to be exacerbated in the year ahead as the weak Forint pushes up interest payments, and with debt levels set to remain high, the financial account is set to remain in deficit for the foreseeable future.

High external debt levels maintain direct investment outflows

Hungary – Breakdown of Income Account, EUR millions

While Hungary’s trade surplus looks stable beyond 2013, the outside risk that financing from the IMF/EU will not go ahead would result in unsustainable debt levels and borrowing costs for the government, and capital outflows could fall to dangerously low levels. To avoid such a scenario, giving in to the IMF’s demands for policy change and finalising a deal for financial aid is the only course of action for the government and I'd expect this to happen before Hungary’s markets sell off any further this year.

United Kingdom – Falling inflation keeps hopes of recovery alive

Consumer Price Index (CPI) figures, which were released by the UK Office for National Statistics (ONS) on 20th March, indicate that UK inflation is continuing to head lower, hitting a 15-month low of 3.4% y-o-y in February from 3.6% y-o-y the month before. This reflects a considerable moderation in inflationary pressures since the headline figure peaked at 5.2% in September 2011. 



UK Inflation
Source: Bloomberg

As a highly globalised market dependent on imports, the UK is far more vulnerable to increases in commodity prices than other developed markets. However, core inflation – which strips out volatile components from the consumer basket such as food and energy – fell to 2.4% in February, the lowest figure since November 2009. According to the Office for National Statistics, the fall in inflation was due not only to falling energy costs, but also recreation, culture and transport costs, clearly indicating that underlying domestic pressures are declining.

Part of the current stabilising of prices is due to the impact of the VAT increase tailoring off after it was increased significantly from 17.5% to 20% in January 2011. Although the ONS declared on 28th March that the effect of new taxes and VAT hikes announced in the budget on 21st March on will add 0.17% to the CPI y-o-y rate, we don’t consider this is to be significant enough to deter the current disinflationary trend and believe the Bank of England is still on course to meet its target inflation rate of 2% by the end of 2012.



CPI inflation projections based on market interest rate expectations and £325 billion asset purchases
Source: Bank of England

The Bank of England’s Monetary Policy Committee previously expressed expectations for inflation to fall rapidly in 2012, helping the fragile economic recovery to gather momentum. Although February’s data was just short of the expectations of 3.3%, the steady fall will maintain hopes of supporting consumer spending and alleviating the pressure on households in the short term. This positive outlook for the UK economy reinforces many GDP growth forecasts in 2012, signalling that the UK will avoid another recession. As such, I would not expect the Bank of England to add further quantitative easing once the current asset purchasing programme ends in May.

Risks
With current prices sticking around the US$124bbl mark, the immediate upward risk on price pressures from rising oil prices is still considerable. However, in line with some forecasts for Brent crude to average US$115bbl in 2012, oil prices to fall in the second half of the year as the risk of Iran closing the Straight of Hormuz is priced out of the markets. In addition, should prices spike above the US$127bbl highs of 2011, the International Energy Agency will use its capacity to release its stock piles to calm prices. Indeed, in recent days there has already been talk of the UK, US and French governments releasing emergency oil stocks to ease pressures.
 

Crude Oil Prices
Source: Bloomberg

Russia

My Impressions...

Russia.

“I love Russia.”

“Why?”

“I just do.”

I just do... it is such a fascinating country, with such a traumatic, turbulent, emotional and important political history. The Russian Revolution was hands-down my favourite topic during my high school history lessons. Why? Because I really felt those words I wrote above – the trauma, the turbulence, the emotion and the importance, it all reverberated through me from out of the pages of my school textbook. Russia was also a symbol for me – cold but beautiful. The image of Bloody Sunday, red drops of blood in the pure white snow. What more potent image could you ask for? At the turn of the nineteenth century, women in luxurious furs, grand balls and banquets - aristocracy at its most opulent – destroyed in a blur by men from the underground, installing a grey, metallic vision of factories and engines...

… but the romantic vision I had of Russia has long since faded. The medium of the written word can only have a limited effect. As human beings, we need to engage all five of our senses to understand something fully. In the lead up to the Russian Elections last weekend, I went to a screening of two documentaries on the country in which faces and voices spoke new volumes to me. I saw the toothless faces of babushkas who melted snow for water when the only water tower in their village froze for months on end, I saw the black-ringed eyes of young men in Moscow holding placards condemning ‘enemies’ of the motherland.  I saw the fear, I heard the anger, I became aware of a Russia I had been completely ignorant of.

All the Russians I have met in London have been dressed in designer clothes, watches and jewellery that sparked obscenely, and all educated at the best British boarding schools… What was this Russia that I was seeing now where wizened old women drank vodka with their lunchtime picnic and youths took it upon themselves to shit on the cars of Putin’s political opponents? I did not know this Russia.

The Russia I knew was a tragic one, built on waves of dreams and beautiful ideology – red drops of blood in the pure white snow. I always felt sorry for the Tsar, modern media always seems to portray him as a bumbling fool, out of his depths and out of control. I imagined him to be a pampered rich boy who arranged his precious toy soldiers in neat lines but didn’t know a thing about leading real men, a man who could host a lavish party with the most exotic spices, but couldn’t solve the problem of getting bread to his starving people. Do I think he was cruel? No. Foolish and ignorant with no understanding of the real world? Absolutely – but you could say the same for the majority of people born into wealth in any society throughout history.

Perhaps the reason why I hold so much sympathy for the Tsar and his family is that I abhor murder – and yet why do I not feel sympathy for Bin Laden or Gadaffi? History, I think, remembers the Tsar romantically. The story of him and his family being shot by the Communists is always told with sadness; perhaps because with hindsight, we know that in many ways, the Communist rule was crueller and more deceiving. The Tsar was not evil; he was incompetent. And while the suffering and hardship of the people may terrible under either type of autocrat, I believe the way you dispose of the autocrat responsible should be. Many of Russia’s leaders in recent history will be remembered negatively by history books. What will be the deserving fate of Putin? I wonder how much history is offering us a premonition for this current Russian era.

Impressions from history...

Leaders such as Khrushchev were committed to creating utopia, believing that the future had to be wonderful as it was the only thing that could justify the past. Soviet Russia was supposed to be the realisation of Marx’s dream of a ‘land of plenty’, but this naive optimism of a country already on its knees only faded into a worse reality of famine, slaughter and senseless massacres. The Soviet plan to reach utopia neglected the suffering of the present and committed itself to a form of industrialisation which was hopelessly and fundamentally tyrannical. It was a world in which there was plenty of room for steel and concrete but very little room for intellectual ideas and debate. The failure of the Soviet dream was proof that an economy could not be run by scientists and engineers alone but requires human needs and social considerations to play a key part in the ideology.

Soviet economists were the first to apply mathematics to national economic planning and Leonid Kantorovich, a mathematician and economist during Khrushchev’s leadership, won the Nobel Prize for Economics in 1975 for creating the mathematical formula behind ‘linear programming’ which was designed to aid the output of the perfect planned economy. Soviet ideology believed that the absence of ‘free market’ operations could be compensated for by a centrally planned Soviet economy. The idea was based on optimal inputs and outputs – aiming to introduce frugality into the planned economy and finding a logic which could be exploited to get the most out of the least. Throughout 60 years of central planning, all economic policy and activity and all decisions regarding investment, production, and consumption were made by the state and after Communism finally collapsed in 1991, the country has struggled to evolve into a market based economy with steady economic growth. When Russia’s new non-Soviet president, Boris Yeltsin, came to power, he brought in reform through market-determined prices and fiscal and monetary policies to promote economic growth in an environment of stable prices and exchange rates. As well as setting up commercial and institutional entities, the domestic market was opened up to foreign trade and investment.

However, after six years of economic reform and almost immediately after recording its first year of positive economic growth since the fall of the Soviet Union, in August 1998, Russia was forced to default on its sovereign debt, devalue the ruble, and declare a suspension of payments by commercial banks to foreign creditors. While the collapse of the ruble strengthened exports, imports remained low and direct investments into Russia have continued to be inconsistent. Although many saw the crisis as proof that Russia would never successfully reform its economy, significant improvements have been made under President Putin, much of which can be attributed to the import substitution effect after the devaluation; the increase in world prices for the country’s oil, gas, and commodity exports; and stronger monetary and fiscal policies.

Political impressions...

When Putin came to power in 2000, he was a symbol of renewed hope, stability and growth to the Russian people. Since 2000, Russia has had an average annual growth rate of over 5% and inflation has fallen from over 20% to single digit figures. The persistent budget deficits that plagued the economy throughout Yeltsin’s leadership have been replaced with surpluses – primarily the result of high and continually rising oil prices, but arguably significantly helped by Putin’s fiscal reform and wise management.

12 years on from his first election, many Russians have maintained their allegiance to Putin for fear of losing what has been achieved under his leadership, particularly in the face of no credible alternative candidate. Many argue that much of Putin’s campaign is based on the idea that his departure will throw the country back into the economic chaos that it had known for so many years previously. Fear and paranoia purposefully resounded through his victory speech last week, in which he claimed that the country had overcome “political provocations that aimed at only one thing – to destroy Russian statehood and usurp power”. This imaginary external (read Western) threat to Russia is reminiscent of the fascist movements that believed that war and fear of a common enemy could rally domestic national sentiment and unite people behind the party who would fight and suppress this imaginary threat.  My eyes were opened by the new documentary film “Putin’s Kiss” to a barrage of frightening similarities with an era I thought had long been banished from Europe. The film focused on Nashi – widely referred to by commentators as the Russian Hitler Youth – an organisation in which young Russians gathered at political Summer Camps, singing of their love for the Motherland and pledging to fight against all her enemies. An attempt, I fear, at brain washing the next generation and encouraging angry youths to channel their violent tendencies towards ‘enemies’ of Putin/Russia.

According to Putin, this was “not just an election for president. It was an important test for all of us…a test of political maturity, of self-sufficiency, of independence.” I am in no position to repute the idea that perhaps these were the fairest elections that Russia had ever seen – but the point of true ‘political maturity’ should only be an election in which everyone is uncertain of the result. Not so in Russia - every newspaper in the world was writing about Putin’s victory even before the polls opened – even if there were no stuffed ballot boxes or forged voting papers, the election was overtly skewed in Putin’s favour from the start. But similarly, newspapers have been quick to cover the growing discontent on the streets of Moscow since the claims of vote rigging during the elections for the Duma at the end of 2011. Reporters did not overlook the temperatures of -22°C which were braved by 100,000 protesters on 4th February, indicating that these were a people whose anger and resolve should not be taken lightly. While a final result of 63.7% may be a big drop from previous election figures, the cynics among us could say that anything well above 60% would probably have resulted in an increased number of opposition protests and outcries of fraud, thus driving away foreign investors to a greater extent than a clear whitewash victory would have helped reduce political risk.

Macroeconomic impressions...

One story from rural Russia that particularly moved me was that of elderly people being stranded and forgotten about in villages as the snow fell and they became cut off from resources. The authorities would not clear the roads and so doctors and food supplies could not reach them in time. Where is the infrastructure in this country to ensure that all villages are accessible and where are the facilities to run electric currents through water towers to stop them freezing over? This is the country that made billions of dollars of profits from the oil price rises in 2010. Where did those profits go? The wealth made from its domestic energy resources is not filtering down to the general Russian population and the polarisation of wealth and the gap between the rich and poor is greater than ever. Something in the Russian system is wrong.

High oil prices boosted Russian growth in 2011 and helped Russia reduce the budget deficit inherited by the 2008-09 global economic crisis when oil prices plummeted and the foreign credits that Russian banks and firms relied on dried up. Shale-gas discoveries elsewhere in the world are pulling down the price of gas and demand for these resources are particularly at risk in the short term as a result of the ongoing crisis in the Eurozone and expectations of slower growth in China. Over the long term, Russia will need to diversify its economic plan into more innovative sectors such as technology and encourage investment in sectors not based on natural resources. The reliance on commodity exports – notably gas, oil and steel - makes Russia vulnerable to the volatile boom and bust cycles of global commodity prices and it is well known that Russia's budget balance is dependent on the oil price. Reducing the public budget’s dependence on oil revenues would further modernise the Russian economy, but doing this will require a wider political agenda.

Russia still has an image problem – corruption, red tape, political uncertainty and instability are still at the forefront of foreign investors concerns. These are long term concerns which need to be tackled by Putin perhaps by strengthening the judicial system and rule of law to start root out the widespread corruption and encouraging a more business-friendly environment and effective social policy reforms to reduce income inequality. As well as plans for the part-privatisation of state assets and announcements of new spending initiatives, the government will need to attract foreign investment to raise capital for these major infrastructure projects. While the government understands the importance of FDI, it continues to struggle to attract the levels it needs to modernise the economy and move it away from its long-standing dependence on oil and gas revenues.

Mr Putin's extravagant pre-election promises include wage and pension increases for public sector workers and increased spending on defence and police services. These initiatives will add as much as $160 billion to the budget, which will push the current ratio of 40% of GDP on public spending even higher. With the federal budget already requiring oil prices of $120 a barrel to stay even, the risk of the government trying to buy popularity with a spending spree of this scale could mean that the federal budget could need oil prices close to $130 a barrel in the year ahead. This could begin to eat away at Russia's hard-earned fiscal credibility, particularly if investors worry about the integrity of the new political cabinet. However, with oil prices remaining near this level and with a strong sovereign wealth fund built from previous oil revenues to provide injections into the economy when needed, Russia’s fiscal sustainability is unlikely to be greatly at risk for the time being.

In fact, I think the overall short term economic outlook for Russia is likely to remain sustainable. Inflation has been continuing to fall and hit an all-time post-Soviet low of 3.7% y-o-y in February, remaining well below the central bank’s full-year target of 5-6%. Although prices are likely to spike when the pre-election utility price freezes are lifted later this year, the weak global economic picutre means these spikes are unlikely to be maintained. Low inflation gives the Russian Central Bank the freedom to significantly cut interest rates in order to encourage banks to boost lending and boost internal demand and overall economic growth. Russian assets will benefit from declining interest rates and strong foreign investor interest off the back of higher oil prices. Furthermore, as Russia’s stock market rose to a 7 month high after the weekend of Putin’s victory, it confirmed views that the markets will take comfort from Putin’s win, seeing it as a sign of stability in the short-term. However from a purely economic perspective, the long-term focus will be on whether or not Putin will deliver on his economic and political promises. This is what will make or break Russia.

Impressions for the future...

In the absence of real democratic institutions, Russia is run by oligarchs, security forces and bureaucrats, all consolidated by Putin. Corruption is at the core of the Russian power system, and the path to reform will not be easy and will require many, including Putin to give up much of the power they currently enjoy. However, repression could be just as harmful to their hold on power. If promises of change are not realised, Russia will continue to be a country built on repression and economic stagnation and filled with disillusioned citizens. History tells us these people are not afraid of a revolution when they find a new figurehead.

For many readers outside Russia, Putin has become laughable. He is no longer a respected, credible candidate for Presidency but a Berlusconi-type character hanging on as his unpopularity grows and economic problems worsen. Whether he will respond to protestors by trying to repress them or by giving in to their demands is still difficult to call, but what is certain is that the history books will not remember him kindly if he makes the wrong choice.

I have written about both Egypt and China with a positive and hopeful view on their respective futures, but I struggle to find the same kind of hope for Russia. The people of Russia have not been able to choose between parties with competing views on governance or policy issues for so long, and I fear that this is highly unlikely to change. Elections have merely become a method for reasserting power over the people by forcing their hand to vote, but the international community who they are trying to appease with a phoney democracy are not fooled. If the oil prices were to collapse next year, Russia’s economy and leadership would collapse with it. No one has yet to provide a plan for the country which will bring about sustainable domestic growth and demand. The country is fragmented – too fragmented socially to stage a resolute revolution like Egypt - and too fragmented ideologically to build prosperity and commercial and industrial success like China.

Recommended for your own impressions...

Red Plenty by Francis Spufford

Our Newspaper – Eline Flipse

Putin’s Kiss – Lise Birk

Hope

"I don't want to have lived in vain like most people. I want to be useful or bring enjoyment to people, even those I've never met… and that's why I'm grateful to God for having given me this gift, which I can use to develop and to express all that's inside me!" 5th April 1944, Anne Frank

Writing is a gift. Sometimes I am blessed with inspiration for it, but often I am just a vacant existence amongst thought.

I have written extensively in another blog about my sources of inspiration; how writing about sadness does not make you a good writer, how it can merely be a method of self-indulgent self-harm. Since my late teenage years, I have always tried to give my writing an important meaning, a message or a moral. I often wonder how successful I am.
One of my inspirations over the years has been Anne Frank.

I wonder what you think of when you hear that name. For me, thinking about the Holocaust is like thinking about the expanse of the universe. The universe is so infinitely vast, so great that it is all-consuming to the mind, so incomprehensible, so far beyond my imaginative capability that it makes me sick to think of it. You can sum up the Holocaust in a figure: 11 million. 11 million innocent lives; 6 million Jews and 5 million disabled, gypsies, homosexuals, political prisoners and Eastern Europeans.
"11 million" – It's just bunch of characters on a page, forming a word, forming a number, and thus forming something inconceivable, beyond imagination, beyond my use of language and communication.
How could human beings have been responsible for this?
Just, HOW?

And none of these figures even start to take into account the lives emotionally lost to heartache, trauma and agony: the survivors, the family members, the loved ones left behind…

And still, every day I read a new story about genocide, murder, oppression….the human race has been fighting a great civil war with itself since the beginning of history, and we never learn and we never change. Anne Frank’s message is loud and clear - full of inspiration, full of lessons to teach our children, full of so much hope: "I still believe, in spite of everything, that people are truly good at heart." 15th July 1944
But what does her writing mean and more importantly, what is its worth? Can words of history ever have enough weight to change us and our future? Is it really possible to have hope?


I was quite young when my father died, and I have never really written about his death and how it effected me at the time. I either can't write about it or I won't. Again, language fails me. When I look back on it, I just see a fresh-faced girl of 11, writing a message on a card for a wreath of flowers on the coffin. I don't remember what it said and I only know that my crying and sadness was instinctive.

I am scared of death more than anything; not my own, but of others. If I were dead I would feel no pain, but when others die, the pain spreads out from where they fell, seeping deepest into the closest hearts around them. Even the most vibrant and vivacious person in our community can have his life snatched away in a moment, like the flick of a light switch – off - and its gone, contents and memories in darkness.

I am scared of what I see in the world and I am scared that we will always be helpless to make it better. Not just silent writers like myself, but the think tanks, the activists, the politicians, how much hope can they really have?

I feel so futile, just writing, just thinking, just getting upset about things completely beyond my control. In my Religious Studies lessons at High School, I remember we tried to write about why God allowed suffering in the world. I got A's in my essays but never really understood what I was writing. Some may say it is just nature and the circle of life - but no, surely not when death has been engineered by human vice or evil. And how could this evil have become so manifest?

I know good people, I see good deeds done, I know that goodness exists in so many! So why, why can't the goodness have outweighed the evil, then and now, why do we still continue to lose this battle?

"Sometimes I think God is trying to test me, both now and in the future. I'll have to become a good person on my own, without anyone to serve as a model or advise me, but it'll make me stronger in the end." 30th October 1943

Which leads me on to another inspiring figure: Vincent Van Gogh, a man whose madness was so incredibly beautiful. He may have been a manic depressive, fragile and unstable, he may have been terrible, ugly things; but he saw things in the world that the others didn’t – couldn’t. The normal people, the healthy people; they wake up in the morning, get out of bed and live – and by living, so carefree, so physically engaged in the world, they can’t see it or feel. They feel so little compared to the ones whose senses are so engaged and raw - not only to pain, but also to human strength and beauty.

It’s something I used say to someone I loved a long time ago. You don’t see the world like I do. He didn’t see pain and sadness, but similarly, he didn’t see beauty. And I mean real beauty – like Van Gogh saw it – the beauty in the complex magic of nature. Van Gogh didn’t paint flowers, he didn’t paint stars - they were so much more exceptional in his vision, and he captured it, he captured everything in his wild, untamed head beautifully. It is a similar beauty that I often see in so many people who have felt pain.

“He transformed the pain of his tormented life into ecstatic beauty. Pain is easy to portray, but to use your passion and pain to portray the ecstasy and joy and magnificence of our world – no one had ever done it before – perhaps no one ever will again.”

There is so much goodness in the world, so much integrity – I have always looked for it and always cherished it in order to keep alive the hope that such virtues grow in me. This is what we write, think and debate for. We can't stop. We have to write. If we don’t write... if I don’t write, it’s because my mind is empty and emotionless, because lives don’t matter. If we stop writing we stop thinking, and then all that is left is just plain living and dying.

I don't want answers to my questions, I don't want to debate if I'm right or wrong - but I must desperately deny the futility of this writing, of Anne's writing, of all the people thinking and crying and writing in the hope that they will make a difference or save a life, so I just want you to think
and remember
and hope.

George Orwell: Why I write: Aesthetic enthusiasm... Perception of beauty in the external world, or, on the other hand, in words and their right arrangement.

China

My Impressions...

Gong xi fa chai!

Last week, Chinese people all over the world welcomed in the New Year of the Dragon.

“Why are there no Chinese films on the television?” my Mother asked perplexed that evening, “It’s Chinese New Year!”

Half smiling to myself, I replied, “Well, BBC Newsnight are doing a special on Chinese growth...”

In fact, it seems like every time I open a newspaper or journal, those words spring out at me: ‘Chinese growth’. You could be forgiven for thinking that the West was obsessed with charting the progress of its Eastern rival – when will China overtake the USA? Cast your bets!

My impressions of China have always been very confused – perhaps as a result of my very confused identity. Genetically, I am half Chinese, half English. But, having been born and raised in a Western culture, I almost feel like a fraud when I identify myself as half Chinese. I have no idea what it is like to look at Western civilisation from the outside, I have always known the luxury of being British, of living in an open, democratic, free society. Like most Westerners, I have never questioned that our way is the right way - our way of governing, our way of culture, of politics, of society is the right way, and anything else is backwards, corrupt, immoral or doomed.

But what do I see when I look at China? I see a great mass of people, driven to succeed and achieve, driven to pull themselves out of the poverty they have known for generations, driven to be the best, the fastest, the most innovative. I see a country that has prospered where other Communist states have failed, a party that has succeeded in channelling Communism into the great, powerful, all-producing state machine that so many in the Soviet Union had once envisioned. I see a great country, which for all its many shortcomings, I still respect immensely. A psychologist once told me, “From the hottest fire, comes the strongest steel.” I could not agree more. The strongest, steeliest people I know are of Chinese heritage – their backbones forged from ambition and heartache, and their resolve fortified with the desire to prove the world wrong - to prove that they will not be broken at any cost.

When Amy Chua published her novel last year “Battle Hymn of the Tiger Mother”, the Tiger Mother debate became one of the hottest topics of conversation. The basic argument of the book was that Western parents were too soft and too ‘laissez-faire’. Chinese parenting produced better results – strict routines, harsh punishments, high expectations and hours of dedicated study – this is what made you the best. Is she right? I can only speak from the experience of my own upbringing and tell you that my Tiger Mother was certainly the one who lit my ambition and my obsession with work and achievement. Being anything less than top of the class meant I was a failure, and that is still something I carry with me in everything I do today. I am not scared of pain or hard work; I am scared of failure. In a recent BBC documentary on ‘Tiger Mothers’, the interviewer asked one mother: “Why do you have to work so hard?”

“Because we’re Chinese,” came the reply.

Impressions from history...

What we are currently witnessing in China is a Golden Age – a strong central government, a stable society, improved living standards and rapid development. 150 years ago, during one of the most crushing events of the so called ‘Century of Humiliation’, nothing could have been further from the truth. To punish the Chinese Emperor for refusing to accept the demands of Western Capitalism, the British and French destroyed the Emperor’s Summer Palace – a beautiful building which had taken generations to construct. For those 100 years from the British Opium Wars to the formation of the communist state in the mid twentieth century, China was dominated by foreign powers. But now, the tables have turned, and as China continues to rise, her former enemies lie stuck in a self-made financial crisis.

Chairman Mao’s grand plans led to the enforcement of extreme industrial and social policies which caused misery for a generation of Chinese people. China turned inward, cutting themselves off from the flow of ideas and goods that had made Japan and other smaller Asian economies wealthier. The closed economy meant that large areas of industry were protected from foreign competition by high import tariffs and income in China shrank to just 5% of that in the US as the economy floundered in stagnation and isolation. However, when Mao’s successor, Deng Xiaoping finally opened China’s doors to the rest of the world in 1976, a string of economic reforms followed to bring foreign trade, technology and investment into the country, and the economy started to flourish towards the growth we see today.

But how does the Communist Party in China continue to remain relatively unchallenged and stable when we have seen similar parties in the Soviet Union and Eastern Europe fall throughout the course of recent history? For many, the answer is simple – growth.  Deng Xiaoping is often cited as the man who made modern China – and his mantra: “To be rich is glorious” continues to resound throughout the country. The Chinese economy has grown from strength to strength and with this growth has come economic and political legitimacy. Delivering social justice and wealth has become The Party’s mandate to govern.

Political impressions...

There is no denying that Communist and authoritarian rule has allowed Chinese leaders to undertake ambitious initiatives, mixing political control and market reform to create a potent new formula which has yielded annual economic growth averaging at 10% a year. And here, I go back to clash of the Tiger Mum and the Western Mum. Sometimes Westerners forget that on the other side of the world, a different set of values are held dear. Rights and freedom seem less important when contrasted with the promise of wealth and stability. Opinion polls consistently reflect the strong trust in the central leadership in Beijing and the optimism that many Chinese continue to hold for the future.

While the spread of the Arab Spring, recent demonstrations against Vladimir Putin and movements towards freedom in Myanmar have not gone unnoticed by Chinese citizens, it is fair to say that these events have done little to stir up similar feelings of dissent. Similarly, though I always felt resentment towards my Mother for never allowing me the freedom to watch TV or go out with my friends, I will always be in her debt for the excellent work ethic which she instilled in me and has enabled me to aim high. Ultimately, freedom is a relative term. My Mother gave me the freedom to pursue a career in anything I put my mind too. The Party has similarly given many Chinese people the freedom to work hard, prosper and better themselves. This is a communist regime that feeds its citizens by satisfying western consumerist capitalism – and so far, it seems to have worked.

But of course, no analogy is perfect; this is not a story about Tiger Mothers. In researching for this piece, I was genuinely shocked at the accounts of honest, simple livelihoods which have been destroyed in the name of a bigger Communist project for growth and the stories of ongoing brutality at the hands of corrupt leaders and police on those who showed any signs of resistance. In a country where the state has a say in planning everything, the small businesses will always be the losers. The horror stories from the era of Chairman Mao upon my ancestors had brought tears to my eyes, and I found myself weeping again for hopeless and voiceless strangers living in a land I feel so disconnected from. It is no secret that for all its tremendous growth figures, China is still a poor country. Wealth per capita remains low and many migrant workers continue to struggle with poor access to education and healthcare services. Many lives have been improved – but not enough.

In the last few years there have already been a number of under-reported protests against closing factories, wage cuts, job losses and poor working conditions. How long will it be until the majority of silent Chinese workers are no longer willing to endure hardship and sacrifices for the national good and join in with these protests? Demands for a fairer division of the wealth from the recent economic growth will only continue to get louder, and if the slowdown that has started to emerge in the final months of 2011 continues and the global crisis takes a further toll on exports, the unrest and protests amongst workers in poverty are likely to grow in size and volume too.

In the absence of democratic elections, this October will see power handed over to a new generation of leaders in the Communist Party. Looking through the history books, the cycle of dynastic collapse in China has been continuous – and collapse of his own dynasty is likely to be a fear that will weigh heavily on the shoulders of the new President Xi Jinping. Average income in some parts of China is rising to the level at which the South Koreans and Taiwanese demanded greater freedom, and while strong government and growth may have been the answer for the last few years, the potential for volatility will remain, especially if growth continues to slow significantly. 

Macroeconomic impressions...

Figures of 8.9% growth in the final quarter of 2011 compared with the same period in 2010 drew headlines when they were published at the beginning of January. Despite it being a still very positive and robust figure, it was a significant slowdown – and the slowest since the second quarter of 2009. Most reports, whether bullish or bearish on Chinese long-term growth, all agree that growth in the first quarter of 2012 will fall below an annualised rate of 8%. This is concerning to Chinese leaders who have long built up policies around the idea that a growth of 8% was the minimum needed to create enough jobs to keep citizens happy and maintain political control without unrest. While China may be second behind the US in terms of GDP, in terms of GDP per capita is still behind 100 or so countries. While 40% of the urban population is now part of the huge emerging middle class, there are still 700 million living in the countryside and 155 million people on an average wage of $1 a day – well below the poverty line.

There is still a long way to go before China can call itself a stable, developed country, but it is clear that Chinese leaders intend to get there as quickly as possible. Infrastructure projects have been a key part in a plan to generate returns to the economy – by increasing productivity, economic activity and future tax revenue, the cost of investment will eventually be repaid. In the last decade, China has undergone a massive internal infrastructure transformation – the speed of which has been incredible. High speed trains up to 380km/hour were unheard of in China 6 years ago – today there is more high speed rail track in the country than the rest of the world put together. This phenomenal infrastructure project was the result of a specific government plan in which thousands of engineers, academics and workers were mobilised. Not having to waste time of campaigning for votes clearly has its advantages.

As China’s exports have grown, its state-controlled companies have looked abroad to capture more commodities and high technology. China has done direct commodity deals in Africa for many years – usually in exchange for infrastructure built by Chinese engineers and is now using the foreign reserves built up from export success to buy mines directly and cut out big Western companies. Indeed, the clash of cultures between undemocratic, state-planned China and the democratic, free market ideology of America has caused a great deal of tension. By keeping the value of its currency artificially low – some claim by as much as 40% - Chinese exports are cheaper than they should be on the international market. Many US politicians have accused China of unfair state-controlled trade tactics and citied the resulting damage to American manufacturing as a reason for rising unemployment in the country. With so many countries relying on trade with China, and with so much domestic employment also reliant on the export sector, this is an issue which is not going to be easy to solve.

In response to the banking crisis in 2008, the Chinese government pumped the equivalent of over half a trillion dollars into its financial system. The amount of credit creation and lending that has taken place in China since 2008 to inflate the economy has led to a significant build up of risk in the system, particularly in the banking sector. China will have to find a way to manage the resulting problem loans or non-performing projects which are not going to pay back their capital before the system is slowly dragged down. Furthermore, as well as infrastructure and industrial development, a large portion of this new money was invested in housing. This asset bubble resulted in a massive surge in house prices and the government became concerned from a social point of view that middle classes in the urban areas would be left without adequate housing. Focus was moved towards providing affordable housing at the mass market level rather than at the high end, and a correction in the residential real estate market is now underway after two years of policies aimed at controlling the soaring prices. However, this has brought about new problems for the government. Housing-related spending is estimated to make up between 10% - 30% of GDP (depending on your sources), and the continued slowdown in the economy is set to intensify as the housing market weakens. Again, a collapse in this sector will have serious repercussions not only in China but also in countries which export commodities to meet Chinese demand.

Impressions for the future...

It is sadly ironic that exports and real estate - which were the two sectors which predominantly drove growth in the past decade - now pose the two biggest risks to the economy. Although the gentle slowdown of 8.9% growth has been in line with government efforts to prevent overheating, the ability of China to successfully weather the storms of the current global crisis is going to be severely challenged. The hit to Chinese exports at the end of 2008 was followed by a RMB 4 trillion stimulus package and resulting recovery to the market was relatively quick. This time around, Chinese leaders will be less inclined to further burden the financial system with more debt, plus there is the added problem that developed economies also lack the funds for similar stimulus projects which they were able to implement a few years ago. Falling demand from the eurozone and the US (which currently accounts for 18% and 17% of exports accordingly) will hurt Chinese manufacturing, and the numbers of underpaid factory workers who already gain very little dividends from the growing overall wealth of their country will undoubtedly become more incentivised to protest and strike.

With wages rising sharply, the low tech, low pay economy which powered China’s economic miracle is under strain. For China to keep growing at the rate it has in recent years, the existing model for growth will need to shift away from investment and exports and towards domestic consumption. While the Chinese government may be outstanding at implementing incredible infrastructure projects, it has been traditionally poor at supplying basic services like health and education. Considering the country is in the luxurious position of having a relatively low budget deficit of 2.5% of GDP, they have the ability to spend more on boosting the private consumption of goods and services through increasing social housing, subsidies, tax cuts, etc, and should aim to do so.

And what do I personally hope for the future China? I cannot deny that I am torn. China has been a phenomenal success story - it’s wonderful to see people drag themselves out of poverty with hard work. However, to continue growing and to maintain stability, China needs to evolve into an innovative, ideas-driven economy, and I find it impossible to believe that you can have the freedom to create if you don’t have the freedom to think. I will always be a Westerner at heart, and I hope we see a peaceful transition from a nation dominated by state power to one where individual rights and law really count and where individual success and entrepreneurship learns to thrive in a free market.

We are heading into uncharted waters. Throughout history, successful growth has come from nations starting with institutions, freedom of speech and a free press, and then going on to  develop technology, economy, healthcare etc. Only time will tell how successful development is when it starts the other way round. Whatever happens, China is biggest emerging market and has increasing international influence and increasing responsibilities. Many countries now depend on the growth of China, and the direction of its progress in the next few years will have either positive or negative ramifications around the world.

Recommended Reading to build on your own impressions...

Mao’s Great Famine, Frank Dikotter

When China Rules the World, Martin Jacques

And with a pending application to study at the LSE-PKU Summer School of 2012, I am hoping to further develop my impressions on the “Power Shift? The decline of the West and the New International Relations of the Twenty-first Century” course!