Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: The road to recovery gets steeper
What is one to make of recent economic data, particularly in the advanced countries? Is the world economy slowing? If so, should policy do anything about it and, if so, what might the alternatives be?, asks the FT’s economics commentator. In his FT blog of June 5 2011 Gavyn Davies notes that the “speed and extent of the decline in the manufacturing growth has been unusually severe, especially in the US”. What is even more important politically is an estimate that the US private sector created only 38,000 jobs in May, well below a forecast increase of 175,000. Mr Davies notes that “if we add together all of the business survey evidence for May, we get a picture of a global economy which is probably continuing to expand, but not at a very rapid rate.”
Luke Johnson: The dismal science is bereft of good ideas
I fail to see the point of professional economists. They purport to know about trade and finance, about markets and credit, but I struggle to identify the actual benefits of all their expensive advice and esoteric debates, writes Johnson, who runs Risk Capital Partners, a private equity firm, and is chairman of the Royal Society of Arts. For example, they really should be able to provide the answers we need about job creation, but where are they? How are new jobs created, by whom and under what conditions? Countries such as Spain are crippled with 40 per cent youth unemployment: what pragmatic solutions do the economists offer to this disaster?
John Kay: New rules to protect the many from the few
It has been another uneasy week for relatives of the residents of the 700 care homes in Britain run by the struggling Southern Cross group. David Cameron, prime minister, has given assurances that people too old to look after themselves will not be woken one morning by an insolvency practitioner asking them to leave, writes FT columnist John Kay. But the legal basis on which he does so is not clear. Still, Mr Cameron knows that if necessary parliament will give him whatever retrospective authority he needs to make good on his pledge. We have been here before. Alistair Darling, former chancellor, found himself in a similar position as queues formed outside the branches of Northern Rock. We will invent a way to ensure that the intolerable does not happen. There is evidently a policy gap.
Lex on Tepco
The market keeps on punishing Tokyo Electric Power, notes Lex. Shares in the operator of the stricken Fukushima nuclear plant have sunk to less than a quarter of a heavily eroded net asset value. R&I, one of the two top Japanese credit rating agencies, has moved Tepco down to four notches above junk, noting “confusion” over the government’s compensation framework. The imminent departure of prime minister Naoto Kan, however, should not obscure the fact that state support is the only plausible long-term solution for the company supplying power to a third of the nation. Atsushi Saito, president of the Tokyo Stock Exchange, may want to shoo Tepco off his main board into a court-backed restructuring.
Sebastian Mallaby: Radicals are right to take on the banks
This week Tim Geithner, US Treasury secretary, declared that the capital requirements in last year’s Basel III deal must be raised for large banks, writes Mallaby, an FT contributing editor. Three days earlier Daniel Tarullo, Federal Reserve Governor, went further, suggesting as much as a doubling of the Basel ratios for the very biggest banks. Meanwhile Michel Barnier, European Union financial services commissioner, takes the opposite position: “We can’t rush forward,” he says. The radical reformers are lining up against gradualists. On any serious reading of the evidence, the radicals are right.
Editorial comment: No more waiting for Diamond
The withdrawal of Peter Diamond’s nomination to join the Federal Reserve’s board of governors is a serious blow to that body, and the circumstances surrounding it are another sign of Washington’s dysfunction, says the FT. Mr Diamond is widely regarded as among the most brilliant economists of his time. Republicans in Congress delayed his nomination for more than a year – and Democrats, it must be said, did not try very hard to force the issue. Out of sheer exhaustion, Mr Diamond has given up. It is a lamentable outcome.
Glenn Hutchins: Failure to lift US debt ceiling risks fresh crisis
There is no doubt that the US has the capacity to retain its status as the world’s most dynamic economy and to create high-value, well-paying jobs for generations to come, writes Hutchins, co-founder of Silver Lake, is vice-chairman of the Brookings Institution. Entrepreneurs across the country are forming companies and determinedly racing towards the future. There is a well-understood public policy agenda that can facilitate this surge in jobs and prosperity. But it would all come to naught in a fiscal meltdown.