Margareta Pagano: Attack-dog Blanchflower needs leashing
Sunday 05 December 2010
The TV and radio soundbites are too short to give the proper context to Professor David Blanchflower's inflammatory outpourings against Mervyn King, the Governor of the Bank of England. But considering the extreme nature of Blanchflower's criticism, calling for King's head after his comments about David Cameron and George Osborne were disclosed on WikiLeaks, it's important that we should put his comments into the right framework.
Blanchflower is calling for King to go because he told the American ambassador that Cameron and Osborne lacked experience, tended to think about things in the political not the economic and hadn't taken on board how big the cuts would have to be. The professor's sensational and misjudged leap of reasoning was to conclude that, in so doing, King was being political, and had thus compromised the bank's impartiality.
Some would say the British-born economist, who has US citizenship, has been a troublemaker since he joined the Monetary Policy Committee (which he left in May 2009). Blanchflower called for the MPC to cut interest rates in 2007 while the housing market was still booming, and he now wants us to inflate our way out of disaster. Post-crash, he's been an attack dog, warning in Dr Doom language that if the deficit is slashed too much and we don't spend more, we will have a double-dip recession. It's time Blanchflower looked across the Channel to see what happens when countries don't get their debts under control.
MPC members are Crown appointments, and Blanchflower was invited on by the then chancellor, Gordon Brown, which is as close as you can get to a political appointment, as was the second American on the MPC, Adam Posen, who made his own attack on King two weeks ago over his alleged political interference, specifically over the way he hardened the coalition's strategy towards the fiscal deficit.
I do wonder if the problem with these two gentlemen is that they really don't understand how the British political process works. If they had bothered to listen to the Governor over the past two years they would have known that he has been persistently open about the need to tackle the deficit.
I remember well his speech – in March 2009 – calling for a "credible" fiscal plan, and even better the one at the Lord Mayor's Banquet in June that year. As I wrote at the time, you could hear the bullets flying off the walls and the blood splattering when he warned the Brown government that the national debt would be twice what it was before the crash unless ministers came up with a five-year plan. King was also vocal about the dangers during his June appearance before the Treasury Select Committee, when he made it quite clear that the government's priority would have to be reducing the structural deficit. It would be interesting to know whether Blanchflower and Posen think he shouldn't have replied to those questions. At the time, King was the only person with any gravitas giving such honest, impartial advice while the politicians were pretending everything was hunky-dory.
Whether Blanchflower and Posen remember all this, I don't know. But Blanchflower, who is best known for his work on happiness, should stick to measuring the effects of retirement, getting married and having frequent sex.
Don't be a wallflower, Vince. We need more women on top and that means quotas
Vince Cable is proving a hit with the ladies – and not just because of his dancing skills. The Business Secretary has received an astonishing 2,600 submissions from women, investors, headhunters and others in response to his call for evidence into the lack of women on boardrooms.
Even his department is surprised by the high number. It's nearly 10 times greater than the number received on other big policy issues such as the one on corporate Britain and three times as many as that for credit cards.
No wonder it's such a hot topic. A survey last week from the Cranfield School of Management showed that the number of female directors on FTSE 100 boards hasn't budged from 12 per cent in a decade. That's despite numerous government and non-government initiatives. What's more shocking is that over half of the FTSE 250 companies do not have one female member.
Lord Davies of Abersoch, who is in charge of the review, has until February to sift all this evidence before reporting back to Cable with his plan for change. I hope he will take on board the most compelling nuggets in the Cranfield report – there are only five big UK companies which have more than double the average number of female directors, executive or non-exececutive.
Surprisingly enough, three of them have women as their chief executives. They are Pearson, run by Dame Marjorie Scardino, Burberry, headed by Angela Ahrendts, and Alliance Trust, which is run by Katherine Garrett-Cox. British Airways has three female non-executives while Diageo has a female finance director and two non-executives. Surely no accident that Lord Davies is also a Diageo non-executive?
Setting the tone from the top works. That's why I hope Lord Davies changes his mind about quotas. He and Cable could gain even more admirers if they went for gold – let's say at least 20 per cent of all directors should be women by the end of this parliament. If we don't, the EU will do it for us.
Devilish Author takes aim at bankers' incentives
Vanity Fair journalist Bethany McLean braved the weather to fly over from Chicago to launch her latest book, All the Devils Are Here, at a lively lunch hosted by David Giampaolo at Pi Capital, his investment club. Her book, co-written with Joe Noceras, is already on the New York Times best-seller list but then she's an old hand at financial crises; she was one of the first journalists to break the Enron scandal.
Her greatest fear, she says, is that the authorities, desperate to be seen to be doing something, will bring in too much of the wrong kind of regulation, just as they did with Sarbanes-Oxley after Enron. The real issue is bankers' pay. "Unless the incentives change, nothing will change," she says. "Some Wall Street bankers are earning more than ever. Really silly money." Much the same as here then.
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