Comment, analysis, and other offerings from Thursday’s FT,
Alan Greenspan: Meddle with the market at your peril
Whatever the imperfections of free-market capitalism, no regime that has been tried as a replacement, from Fabian socialism to Soviet-style communism, has succeeded in meeting the needs of its people, the former Fed chairman writes. Capitalist practice needs adjustment. I was particularly distressed by the extent to which bankers, previously pillars of capitalist prudence, had allowed their equity buffers to dwindle dangerously as the financial crisis approached. Regulatory capital needs to be increased.
Occupy London: How Hayek helped us to find capitalism’s flaws
Fans of Friedrich von Hayek may be surprised to learn that the Austrian economist is the talk of Occupy London, write members of its economics working group. Hayek’s observation that distributed intelligence in a voluntary co-operative is a hallmark of real economy rings true beneath the bells of St Paul’s. Occupy is often criticised for not having a single message but that misses the point: we are committed to incorporating different preferences before coming up with policies.
George Soros: How to pull Italy and Spain back from the precipice
My proposal is to use the European Financial Stability Facility and the European Stability Mechanism to insure the ECB against the solvency risk on any newly issued Italian or Spanish Treasury bills they may buy from commercial banks, writes Soros. This would allow the European Banking Authority to treat the T-bills as the equivalent of cash, since they could be sold to the ECB at any time.
John Gapper: Money shovers can live without tax perks
For the world’s financial elite, now might be a good time to be on a Swiss mountainside, protected by a cordon of armed police, and able to take one’s mind off things by skiing and popping into a private bank, the FT columnist says. I’d say it was an awkward time to be a hedge fund or private equity manager. They have mountain-top problems, however, which aren’t really problems at all compared with being unemployed or – heaven forbid – paying standard income tax.
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Analysis: Food security — Dampened prospects
Come 2050, the UN predicts earth will be home to another 2bn people; in order to feed us all, production needs to increase by an estimated 70 per cent, report the FT’s Louise Lucas and James Fontanella-Khan. That is a big task, not least since the land that humans have so long been tilling is itself facing a revolution. Agriculture, which provides a livelihood to an estimated 2.5bn people, is lagging behind population growth.
Michael Skapinker: People are right to be angry over pensions
Most people going into employment now are in defined-contribution schemes, where their eventual payments depend on the investment performance of their pension savings, the FT columnist writes. They know what they are letting themselves in for. Those who spent years paying into final-salary plans did not. Almost all those whose defined-benefit schemes are now closed to them will suffer financial damage as a result. Unlike their counterparts in state employment, many private-sector staff have quietly, if unhappily, accepted this fate.
Lex on the UK recession
Austerity measures in the eurozone – the UK’s main export market – hardly help. But limp post-crisis household spending as rising prices eroded real incomes is also to blame for the UK’s economic contraction in the fourth quarter. This means a rebound depends largely on inflation continuing to moderate relative to income levels, Lex says. The Bank of England, for one, expects this trend to kick-start consumer demand later in the year. Throw in some more quantitative easing – and any recession could be shortlived.