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US debate intensifies over taxes on the rich from FT


US debate intensifies over taxes on the rich

Henry Bloch knows a lot about taxes and a lot about wealth. He is the retired honorary chairman of H&R Block, a Kansas City-based tax services company, which he founded with his brother in 1955.
Having amassed a fortune by helping Americans process their tax returns, the philanthropist – and registered Republican – believes the time has come for higher taxes on his richest fellow countrymen.

“It’s not going to hurt the wealthy to part with a little money,” Mr Bloch, 89, a navigator on B-17 bomber missions during the second world war, told the Financial Times this week. “This is a wonderful country and that’s the least they could do.”

Mr Bloch’s words highlight the intensity of the debate over the taxation of the highest-income Americans as the US struggles to find ways to reduce its long-term budget deficits.

On Monday, Warren Buffett, the billionaire investor, proclaimed that he too was in favour of raising more revenue from his cohorts. “While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks,” Mr Buffett wrote in The New York Times.

The call for higher taxes on the wealthy – which is shared by President Barack Obama and many congressional Democrats – appears to chime with the desire of most Americans. A CNN poll this month found 63 per cent of Americans favoured higher taxes on businesses and rich citizens to curb the soaring debt.

Even so, Republicans in Congress are showing few signs of backing down from their position that any tax increases would damage America’s weak economy – and that additional levies on the wealthy would hurt the generators of new employment at a time when it is desperately needed.

With some conservatives even decrying the efforts to impose higher taxes on the rich as “class warfare”, Republicans resisted any such measures in this month’s last-minute agreement to raise the US borrowing limit, which initially contained only reduced spending on government programmes.

The next front in the political battle will come when a bipartisan committee of 12 lawmakers has to decide – by November 23 – how to save a further $1,500bn from US budget deficits over the next decade. Republicans leaders have again indicated that they would not approve any deal containing tax rises. They also have some powerful backers among America’s wealthy elite.

Steve Forbes, the conservative publisher and flat-tax advocate, suggested Mr Buffett should simply give money to the government rather than have others shoulder higher tax burdens as well. “Treasury actually has a programme called ‘gifts to the US’ ... so, if he wants to send a couple of billion, I’m sure it would be gratefully received,” he told

However, most of the country’s richest have remained quiet in public on whether they should be taxed more, fearing the attention that might come from taking a position on either side. Opponents of higher taxes on the wealthy may not want to appear to be greedy. “No one wants to be the bad guy,” says David Logan, an economist at the Tax Foundation in Washington.

Mark Zuckerberg, the founder of Facebook, has seemed to embrace the idea of higher taxes. At a town hall meeting with Barack Obama in California this April, the president was pitching the White House deficit reduction plan, which includes higher taxes on the wealthy. “I’m cool with that,” Mr Zuckerberg said.

Also in April, Jamie Dimon, chief executive of JPMorgan Chase, told a conference: “I think those well off should pay a lion’s share, I have no problem with that.”

Last year, Washington state served as a microcosm of the national debate on the matter. Bill Gates Sr, father of Bill Gates Jr, the founder of Microsoft, led a campaign to approve a ballot initiative that would have imposed an additional levy on the wealthiest state residents.

Steve Ballmer, the chief executive of Microsoft, and Jeff Bezos, the chief executive of, donated money to efforts to defeat the measure. The “no” campaign won, perhaps in a sign that while Americans like the idea of taxing the rich, they fear that one day they too could be affected, either if they make more money or if it eventually leads to higher middle-class taxes.

But Frank Jernigan, a retired Google software engineer, is part of a group called the “patriotic millionaires for fiscal strength” that is advocating higher taxes on the rich and has been emboldened by Mr Buffett’s call. “Before Google, I lived my life like most Americans – barely making ends meet,” he says. Since then, Mr Jernigan says he has travelled the world, including Antarctica, and now resides in a luxury flat in San Francisco. “I don’t believe it would make one bit of difference” to pay higher taxes, he says.

FT graph


Japan's debt-ridden economy: Crisis in slow motion

*copy right on The Economist.


Japan's debt-ridden economy

Crisis in slow motion
Apr 8th 2010 | TOKYO
From The Economist print edition

Japan’s government will eventually have a disaster on its hands if it fails to tackle the deep-seated problems of debt and deflation

IF CHINA is the workshop of the world, Japan is the pristine, state-of-the-art laboratory in its backyard. You can see that by the sort of products shipped through the East China Sea in ever-greater quantities from Japan ever since China led a recovery in world trade last year. Forget the digital cameras and other high-tech gadgets. Japanese exports to China are reviving mainly on the back of products that seem to have all the sex appeal of gravel: plastic materials (up 105%, year on year, in January and February), non-metallic mineral goods (up 113%), construction machines (up 152%), textile machines (up 171%), vehicle parts (up 144%) and scientific instruments (up 133%).

Despite appearances, these are all high-tech products or high-value industrial ingredients that feed into a supply chain that snakes through the factories of East Asia to the rest of the world. With public money in China pushing growth there to a brisk canter, and inventories all over the world being restocked, it was only a matter of time before Japan’s exporters began to benefit.

The strength of the recovery has surprised many economists. Japan was one of the hardest-hit countries during the global financial crisis. The collapse in exports helped put a nail in the coffin of the Liberal Democratic Party (LDP), which had ruled Japan for most of the past 55 years, partly on the strength of its ties with Japan’s globe-trotting corporate giants. It was swept from power last September by the Democratic Party of Japan (DPJ), which promised to end the economy’s dependence on fickle exports and promote a more balanced economy.

Fickleness cuts both ways, however. Japan’s recession hit bottom in the first three months of 2009. JPMorgan calculates that over the subsequent nine months the export revival led to annualised growth of 3.1%, outstripping both America and the euro zone. Corporate profits enjoyed their biggest surge on record, albeit from very depressed levels. Unemployment has edged downwards and in January this year monthly wages crept higher compared with a year earlier for the first time in more than 18 months. JPMorgan recently upgraded its forecast for first-quarter GDP growth from 1.8% to 3.5%.

Last year’s rebound in GDP, JPMorgan notes, was only a quarter of what Japan lost in the first 12 months of the crisis, so it still has a long way to go. Unless growth in global demand is sustained, it remains heavily reliant on pump-priming, both in China and at home. The recovery is likely to be given an extra fillip this year by the 2010 budget, passed on March 24th, which includes handouts to families with children under 16. In principle, spurring domestic consumption by any means available is the right thing for the seven-month-old government to do, given the fragility of the rebound. But given Japan’s precarious public finances, a bigger question is: can the recovery be sustained?

The answer, disappointingly, is not for very long. That is because the cyclical upturn is unlikely to do any more than paper over Japan’s deep-seated problems. These include deflation, huge public debt, ugly demographics and a glaring lack of decisiveness among policymakers about how to deal with them. Unless things change radically, these problems seem destined to sap nominal growth for years to come, with possibly disastrous consequences.

Deeply depressing

To start with, Japan’s economy continues to operate far below capacity. The output gap stands at 7%, three times bigger than it has been at any time since Japan’s asset-price bubble burst 20 years ago, according to Richard Katz of the Oriental Economist, a newsletter. The gap between actual GDP and potential GDP (when the economy is at full throttle) correlates well with deflation, he argues (see chart 1). That suggests consumer prices have further to fall. In its latest estimate the Bank of Japan (BoJ), the credibility of which should rest on ending deflation, predicted that consumer prices would continue to fall until March 2012.

Falling prices mean that nominal GDP, which last year hit its lowest level since 1991, is likely to remain in the deep freeze. That will add to pressure on the public purse: in the 2010 budget, borrowing, at \44 trillion ($468 billion), is for the first time forecast to exceed tax revenues, at \37 trillion. It also means the gross debt-to-GDP ratio, already the highest in the rich world at 190%, will continue to rise.

Some argue that this combination of deflation-sapped growth and high debt makes Japan next in line for a Greek-style debt crisis. In a report last month, Goldman Sachs said some foreign investors were positioning themselves for a “meltdown”. They were buying options to prepare for two related events: a sharp rise in long-term interest rates because of an erosion in debt sustainability, and a slump in the yen caused by capital flight from Japan.

One senior bureaucrat in the finance ministry returned from a G7 meeting in Canada in February, his ears ringing with worries about Greece―and, by extension, Japan. But he appeared to find it more wearying than alarming. “For years we have been hearing warnings that Japanese-government bonds are going to collapse. It’s like the doomsday view of the dollar,” he moaned. Pointing to a trading screen on the wall where ten-year Japanese bond yields were yielding a meagre 1.4%, he noted that the market was still holding firm (in Greece, yields were about 7% at the time). He believes that Japan still has plenty of room to avoid a fiscal implosion.

In the short term, there are grounds for sharing his confidence. In many sovereign-debt crises, the trigger is not the level of debt, but the government’s inability to finance it. In a recent IMF working paper*, Kiichi Tokuoka notes that in recent years there has been scant linkage between Japanese government-bond yields and the size of Japan’s debt and deficits. Indeed, when net debt was less than 20% of GDP in the early 1990s, ten-year bonds yielded 7%. As the debt has soared, yields have moved in the opposite direction (see chart 2).

There are many Japan-specific reasons for this, he argues. The Japanese have a large, albeit now scarcely growing, store of savings that have helped finance the build-up of debt. At the end of 2008 domestic investors held 94% of Japanese government bonds, perhaps reflecting the risk-averse nature of Japanese society. More than half of the country’s \1,400 trillion of financial assets is held in cash and deposits (in America the figure is 14%), and a large part of these are invested in Japanese government bonds via the banking system. Big public institutions such as the Japan Post Bank hold lots of government bonds. So do Japanese firms, many of which have large financial surpluses after a long period of post-bubble deleveraging.

There may be other factors at play, too. Even with nominal interest rates so low, deflation has given investors a pretty good risk-adjusted return. Why diversify? Other assets, such as land and shares, remain at paltry levels compared with their bubble-era peaks. Investing abroad has been hobbled by the yen’s strength. Japanese government bonds, by contrast, have enjoyed one of the biggest bull runs in history. Some even suggest, with a conspiratorial wink, that one reason the authorities have done so little to tackle deflation is that they fear the consequences in the bond market if consumer prices were to accelerate.

Crisis? What crisis?

Paradoxically, however, the belief that there is no imminent crisis brewing may be Japan’s biggest problem. Without it, there may be nothing to force Japan’s policymakers out of a deep paralysis. The scale of the institutional lethargy in Japan is at times breathtaking. Everyone, it seems, puts the blame for deflation and rising debt elsewhere.

Take deflation, for instance. By any reckoning it has had a corrosive effect on consumption, debt and investment in the past decade. And expectations of further deflation are entrenched: more than 35% of people expect prices to be flat or lower in five years’ time. The finance ministry, led by Naoto Kan, a newish finance minister, argues with increasing stridency that it is necessary for the BoJ to root out deflation, so that Japan can once again resume nominal GDP growth. Yukio Hatoyama, the prime minister, has collared Masaaki Shirakawa, the BoJ’s governor, on the issue.

Yet because the annual decline in consumer prices has been only moderate― they have never fallen by more than 1.4%, in contrast with the rapidly plunging prices of America’s Depression in the 1930s―the central bank tends to view deflation as insidious, rather than cataclysmic. As one insider rather nonchalantly puts it, it is a symptom of bigger underlying problems, rather than the problem itself.

The bank thinks the real problems are low productivity growth in Japan, which keeps wages low and suppresses demand for goods and services, and high public debt. In that sense, bizarrely for a central bank, it does not appear to believe that deflation is a monetary problem. Its own earlier experience of monetary stimulus since 1995, when it more than doubled the monetary base with little discernible effect on nominal growth, has left it unimpressed. As a result, it injected liquidity only half-heartedly into the system during the global financial crisis, putting it at odds with central banks in other rich countries.

The BoJ’s resistance to acting more forcefully may be rooted in its own analysis of its earlier experience. It also seems to be haunted by the potential consequences for its credibility if it acts and fails. That position might be understandable if it were a clearly stated policy. But the bank seems to want it both ways. After much government pressure, in March it said it would extend its emergency supply of three-month loans to the banking system by \10 trillion. But far from being seen as a principled move to jump-start lending, this was perceived as a weak attempt by the bank to get the government off its back―and the BoJ’s credibility took a further knock.

When it comes to public debt, the finance ministry’s ostrich-like argument that there is little it can do about it until the BoJ deals with deflation is just as frustrating. It, too, appears to think that things are not as bad as the outside world believes. As one central banker ruefully puts it: “Japan is not faced with an imminent debt crisis. But that is a mixed blessing.”

The torpor dates back years. The finance ministry is haunted by its premature attempt to raise consumption taxes before a recovery was fully under way in 1997. Another attempt to overhaul spending and taxation was launched in 2006, not long before the bursting of the global credit bubble brought it to a halt. According to the OECD, under previous LDP governments, much of the emphasis on improving public finances was focused on spending cuts rather than tax increases. Taxation as a share of GDP remains among the lowest in the OECD. But the tax system is hardly conducive to growth, with some of the highest corporate-tax rates and lowest consumption-tax rates in the rich world. To bureaucrats in the finance ministry, this suggests there is plenty of fiscal flexibility in Japan to deal with the debt problem. The trouble is they have never succeeded at tax reform.

Into this policy vacuum came the new DPJ government last year, with Mr Hatoyama vowing that he would not consider raising the consumption tax until the next elections in 2013. Greece’s fiscal mess may have knocked a greater sense of urgency into his administration. After his first G7 meeting in February, Mr Kan, the newly appointed finance minister, began to speak more publicly of fiscal reform.

Others have taken up his call. Yoshito Sengoku, Mr Kan’s replacement as strategy minister, says that the moment borrowing exceeded tax revenues in the 2010 budget, it was clear that Japan had reached a turning point. “I don’t think the situation will go immediately as it did in Greece. But going forward the Japanese bond market will always be under pressure and the government officials who are in charge of fiscal policies have to be ten times more cautious than before,” he says.

He favours an increase in the consumption tax and may also support cuts in corporate tax when he announces a medium-term plan for fiscal reform in the spring. But the politics of a significant overhaul are excruciatingly complicated. After a series of political-funding scandals involving Mr Hatoyama, support for his administration has fallen sharply ahead of upper- house elections in the summer. So it is a safe bet that any talk of tax reform will be accompanied by soothing promises of higher welfare spending.

We can’t go on like this

At present none of the ideas being aired to deal with Japan’s problems is anything like bold or concrete enough to sound convincing. And though the government may muddle through for a few years yet, ultimately the situation is unsustainable. At some point, unless radical steps are taken, Japan’s government will go bust.

The IMF’s Mr Tokuoka reckons that as the population ages, savings will dwindle, which could reduce inflows to the government-bond market. He calculates that even if the household savings rate remains at 2.2%, by 2015 gross public debt could exceed households’ financial assets, which might make domestic funding more difficult and lead Japan to rely more on foreigners. Meanwhile, government pension funds have more flexibility to invest in other assets besides government bonds.

With interest payments at 26% of tax revenues, rising yields would come as a huge shock to Japan. Already, some economists argue that flat bond yields give only the illusion of market stability. Ryutaro Kono, chief economist of BNP Paribas in Japan, says that given the fall in Japan’s potential growth rate and the drop in inflation expectations, yields should normally have plunged. “The fact that the long-term rate has generally been flat for the last 18 months suggests the risk premium is rising on questions of the sustainability of Japan’s public debt,” he says.

What’s more, rising social-security payments as the population ages are likely to put even more pressure on public financing, while the shrinking workforce will mean even slower growth and smaller tax revenues. In 1990 almost six people of working age supported each retiree. By 2025 the Japanese government expects that ratio to fall to two. At some point Japan may have no other option than a domestic default in which the older generation, who hold most of the government bonds, will see the value of their investments cut to reduce the pressure on the younger generation. Such an intergenerational transfer would come at enormous political and social cost, not least in a society with such a strong sense of communal well-being.

Economists suggest many schemes to forestall such a crisis, most of which involve the government and the BoJ producing what the Oriental Economist’s Mr Katz calls a “fiscal-monetary one-two punch” to kick-start nominal growth. Massive and well-targeted fiscal stimulus is one option, he writes: the current “eco-points” subsidy scheme, which has led to a surge in purchases of energy-saving durable goods, is a good example. In return, the BoJ should commit to keeping long-term rates low by increasing its purchases of government bonds. Others favour a sharp cut in corporate tax rates to boost competitiveness.

Many observers agree that fiscal looseness is the best first step to faster nominal GDP growth. Jesper Koll, a strategist at JPMorgan, plausibly argues, however, that raising the consumption tax in small increments each year might encourage people to accelerate their spending plans. Whatever their prescriptions, few are optimistic. As Mr Katz puts it: “To reject both fiscal and monetary tools is to say that Japan can only wait for the rest of the world to rescue it. That’s the passive mindset that has kept Japan stagnant for two decades so far.”

One of the biggest challenges in stimulating growth is to persuade households and firms to borrow again. Richard Koo of the Nomura Research Institute calls their reluctance to do so the “debt-rejection syndrome”. Having finally paid off their bubble-era bills, many are likely to have a visceral objection to borrowing. He thinks an investment-tax credit for firms, and a promotion of investment by homeowners in Japan’s feeble housing stock, would help.

Macroeconomic medicine, though essential, will not be enough to solve Japan’s problems. Structural reforms to raise the economy’s efficiency will be needed too. The list of areas which need a shake-up is as long as it is familiar. The heavily mollycoddled agricultural sector needs deregulating, and services from transport to power generation need to be opened up to foreign competition. Allowing more immigrants would boost the labour force. Many of these proposals are a hard sell culturally. But if the perils of inaction were well laid out, it would not be the first time Japanese citizens have been asked to accept big sacrifices in the national interest.

The trouble is, there is little tangible sense, either among politicians or in the country at large, that a crisis is brewing. And if the economy continues its cyclical improvement, the urgency of reform may appear even less compelling. It will be even harder given people’s abiding faith, Toyota’s humiliating recalls notwithstanding, in the prowess of Japan’s cutting-edge exporters and their growing links with China. As one businessman puts it, in a country that has been blighted by wars, fires and earthquakes throughout its history, people have grown accustomed to waiting until disaster is actually upon them before they focus on renewal.

A lot about this state of affairs―particularly the reluctance to do anything radical―is profoundly Japanese. It may mean the country is consigned to stagnation, which only makes an eventual default appear more inevitable. But the lessons from Japan are important for all countries, such as America, Britain and parts of Europe, that have suffered a big asset bust. It shows that in the aftermath of a meltdown, slow growth, low productivity, rising public debt and deflationary pressures can last a lot longer than anyone thinks―and that policymakers can make all sorts of mistakes as they try to escape them.

Auctioneers hope for £500m art sales


Auctioneers hope for £500m art sales

By Deborah Brewster in New York
Published: February 1 2008 17:53 | Last updated: February 1 2008 17:53

Sotheby’s and Christie’s together hope to sell up to £500m in artworks during their February auctions in London beginning next week.

If realised, the amount would be 20 per cent more than last year, which was itself 50 per cent more than the year before. Highlights of the Impressionist and Modern, and the postwar and contemporary, art sales include works by Francis Bacon, known for depicting contorted human forms, and Andy Warhol, a key figure in the pop art movement.

Christie’s has a Bacon triptych that carries an estimate of about £25m ($49m, €33m). If sold, the price could challenge the £26.6m record for Bacon, “Study from Innocent X, 1962”, sold by Sotheby’s in New York in 2007.

The triptych, a response to the suicide of the artist’s lover George Dyer, features two images of a figure writhing on a beach, while the third, central part shows a figure overlooked by two sinister faces. Dyer committed suicide in 1971 in a Paris hotel room that he shared with Bacon.

A few weeks later, Sotheby’s will offer a 1969 work by Bacon, “Study of a Nude with Figure in a Mirror”. The work carries an estimate of £18m to £25m. The auction house has promised the unidentified seller a minimum price of £18m – a record guarantee for a London auction.

The sales come as prices for Impressionist, Modern, postwar and contemporary art continue to rise – up by 40 per cent in the past two years, by most measures – in spite of regular warnings by collectors and dealers that they have reached a peak.

Christine Koerber, analyst with JMP Securities, said: “Everyone will be paying close attention to these auctions to see if the prices will hold up . . . there has been a lot of talk about buyers from the emerging countries, but . . . half the buyers are American, and the emerging countries’ buyers are just too small in number to offset major weakness in the US economy.”

A work by Bacon, showing a bullfight, was the star lot of November’s postwar art auction for Sotheby’s in New York, selling for $46m (€31m, £23m) after being estimated to go for $35m.

Bill Ruprecht, Sotheby’s chief executive, said: “There are always wealthy people. When art markets move up and down, you don’t have the severe contraction of demand, only of supply. Sellers don’t want to sell in a down market, the very best things come out at the top of the market.

“A few months after the credit market problems last year, we sold a diamond for $16m,” he added. The diamond was bought by Georges Marciano, the founder of Guess jeans.

Sotheby’s has guaranteed 19 per cent of its February contemporary auction, compared with just 13 per cent last year, according to Ms Koerber.

Buyers’ confidence in the contemporary art market – where prices have risen most – has dropped by 40 per cent in the past six months, according to a survey of 155 buyers by ArtTactic, a London-based research firm.

Christie’s will hold its Impressionist and Modern art evening sale on February 4, while the Sotheby’s sale will take place the next day. The Christie’s postwar and contemporary art evening sale will be held on February 6 with the Sotheby’s sale taking place on February 27.

Additional reporting from Reuters

Slow but sure


Slow but sure

By Niall Ferguson
Published: January 25 2008 19:31 | Last updated: January 25 2008 19:31

Has the democratic wave broken? Is the tide of political freedom now ebbing after the spectacular flow that began in 1989? Recent events on nearly every continent certainly give real cause for concern to those who dream of a world governed by the ballot box rather than the bullet. But they may also provide an overdue opportunity to think more realistically about the way the process of democratisation works.

The picture is, as usual, especially bleak in Africa, where two erstwhile democratic role-models find themselves in serious difficulty. Only five years ago, Mwai Kibaki’s election as president was supposed to mark a new dawn for Kenya after 24 long years of misrule by Daniel arap Moi. But now allegations that Kibaki in effective stole last month’s presidential election from the opposition leader Raila Odinga have unleashed bloody ethnic conflict between Kikuyus and other tribes.

The problem in South Africa is not violent (as yet) but it is equally troubling. There, the African National Congress has chosen as its new leader, and therefore the country’s most likely next president, a man who currently faces serious corruption charges involving payments of more than R4m. Already, some of Jacob Zuma’s more radical supporters are warning that there will be “blood spilt in the courtroom” if he is convicted. It is not without significance that Zuma is a Zulu, while his arch-rival Thabo Mbeki is a Xhosa.

In Asia, too, democracy is in retreat. Benazir Bhutto’s assassination in Pakistan on December 27, two weeks before elections were due to be held there, has significantly reduced the chances of a peaceful transition from military rule back to democracy. In Thailand, the generals are still in power 16 months after staging a coup against Thaksin Shinawatra (another democratically elected leader facing accusations of corruption). Meanwhile, a much nastier military junta continues to rule Burma with the mailed fist, having crushed last summer’s protests by political dissidents and Buddhist monks. It is scarcely worth adding that the prospects for democracy in the world’s most populous country look little brighter. The Chinese Communist party shows no sign of wanting to relinquish its monopoly on power.

To be sure, communist rule is a thing of the past in the territory of the former Soviet Union. But Time magazine’s Man of the Year, Vladimir Putin, is making a mockery of the Russian constitution by, in effect, handing the presidency to one of his own sidekicks, who intends to appoint Putin as prime minister. Nor is Russia the only former Soviet Republic slipping back into old autocratic habits. In Kyrgyzstan, last month’s elections were condemned by international observers. Kazakhstan is little more than an Oriental despotism; the same goes for Tajikistan, Turkmenistan and Uzbekistan. Even Georgia’s “Rose Revolution” seems to be withering fast.

Latin America offers some consolations, though it still remains to be seen if Venezuela’s Hugo Chávez will really accept the unexpected defeat he was handed in last month’s referendum on constitutional “reform”. As for the greater Middle East, the Bush administration’s bid to spread democracy at gunpoint has proved far more costly in lives, money and time than almost anyone in Washington envisaged five years ago. Despite the success of the recent military “surge”, Iraq continues to teeter on the verge of civil war. Afghanistan is little better.

It was not supposed to be like this. Nearly 20 years ago, on the eve of the fall of the Berlin Wall, Francis Fukuyama published a seminal essay, “The End of History”, in which he prophesied “the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government”.

In fairness to Fukuyama, he was writing after more than a decade of sustained improvement in global governance. In the mid-1970s, roughly half the world’s states could be classified as “autocracies”. By 1989 the number had very nearly halved. And the trend continued much as Fukuyama foresaw – by 2002 it was down to fewer than 30. In its 1998 report, the International Institute for Democracy and Electoral Assistance was able to announce that, for the first time, a majority of the world’s population were living in democracies. There really did seem to be a democratic wave, beginning in the Iberian peninsula in the mid-1970s, spreading to Latin America and parts of Asia in the 1980s and sweeping eastwards from central Europe in 1989-91. All Fukuyama did was surf it.

The trouble with waves is that sooner or later they break. Every year, the think-tank Freedom House awards scores to the countries of the world according to their degrees of political freedom. According to the latest figures, no fewer than 57 countries have suffered a democratic ebb in the past five years. Among the worst performers were Armenia, Ivory Coast, Djibouti, Fiji, Gabon, Russia, Somalia, Thailand, Vanuatu and Venezuela. The list of “success stories” is almost as discouraging: Burundi, Haiti, Iraq, Lebanon and Liberia have all improved their scores by more than 10 points (out of a possible 40) since 2003. It would be a hopeless optimist who put money on the durability of those democratic transitions. A pessimist might wonder if we are about to witness another of those declines of democracy such as happened in the 1920s and 1930s, when the democratic wave that ended the first world war was followed by a riptide of reaction and repression.

Why does democracy flourish in some countries, but shrivel and die in others? The simplest answers on offer are economic. According to the political scientist Adam Przeworski, there is a straightforward relationship between per capita income and the likelihood that a democracy will endure. In a country where the average income is below $1,000 a year, democracy is unlikely to last a decade. Once average income exceeds $6,000 a year, it is practically indestructible. This certainly seems plausible at first sight. The countries with the maximum Freedom House scores are, with the exception of Barbados, the rich countries of north-western Europe. The countries with the lowest scores include some of Africa’s poorest.

Another appealing economic rule is the Harvard economist Benjamin Friedman’s: that sustained growth (rather than the level of income) is conducive to democratisation. At first sight, that proposition appears to fit the long-run historical trend, with the greatest challenge to democracy coming in the era of the Depression.

However, recent economic developments have weakened such arguments. The world economy as a whole has never enjoyed a boom like that of 2001-07. Yet democracy has gained little from all this prosperity. Moreover, the most rapidly growing economies in the world since 2000 have not been the democracies. Take the case of the so-called Bric (Brazil, Russia, India and China). While communist-ruled China’s share of world gross domestic product has increased by 2.5 percentage points in the past seven years, democratic India’s has risen by just 0.6 per cent. Russia has outperformed Brazil by a comparable margin. And this disparity between democracies and autocracies seems set to widen. From now until 2050, according to Goldman Sachs, China’s share of global GDP will increase from 4 per cent to 15 per cent, while that of the G7 countries – the world’s wealthiest democracies – will decline from 57 per cent to 20 per cent. Other emerging markets expected to achieve rapid growth in the next 40 years include Egypt, Iran, Nigeria, Pakistan and Vietnam, none of which seems an obvious candidate for successful democratisation.

Back in the 1980s and 1990s, it seemed as if capitalism and democracy were in some kind of mutually beneficial relationship. Not only was economic progress apparently conducive to political progress; the causation could go the other way, from democratisation to enhanced economic performance. These days it looks different. Rapid state-led growth is enriching China and other Asian manufacturers, regardless of their political systems, while their demand for energy and commodities is enriching democratic and undemocratic primary producers alike.

A quite different explanation for the success or failure of democracy has to do with culture rather than economics. It was Samuel Huntington who argued in 1993 that, following the cold war, western civilisation would find itself in conflict primarily with Islamic and Confucian civilisation. By implication, these two civilisations were much less likely to produce peace-loving democracies than the Judeo-Christian civilisation of the west. Of all the ripostes to “The End of History”, “The Clash of Civilizations” has been the most compelling.

Prima facie evidence in support of Huntington’s proposition is not hard to find. In the Freedom House rankings, for example, it is clear that western societies are much more likely to be democratic than Muslim societies. Yet such cultural explanations also have their defects. Taiwan and Indonesia show that democracy can work for “Confucians” and Muslims alike. If due allowance is made for economic and other variables, the gap between the west and the rest is much less significant. In any case, it was not so long ago that serious scholars were arguing that Roman Catholics were incapable of the capitalist work ethic, or that German-speakers could never make a success of democracy – hypotheses falsified by postwar European history.

History is indeed the key to understanding what makes democracy work. Over New Year in Cape Town, I diverted myself from the alarms and excursions of African politics by re-reading the second of Anthony Trollope’s Palliser novels, Phineas Finn. The setting is Westminster in 1866, the year before the second great electoral Reform Act. The youthful hero enters parliament as the member for a tiny Irish constituency, whose 307 voters generally do the bidding of the Earl of Tulla. He finds the House of Commons a den of iniquity, where his fellow MPs vote as the whips (rather than their own consciences) command, largely in the hope of securing the salaries that come with ministerial office, so that their grasping creditors can be satisfied and their club bills paid. There is general satisfaction, even among Liberals, when a popular demonstration in favour of the secret ballot is broken up by the police.

The England of the 1860s was, in short, hardly a model democracy, quite apart from its still-restricted franchise. Was there corruption? By today’s standards, certainly. Were the rich over-represented? Without a doubt. Yet three things are striking about the system Trollope so vividly describes. First, the political elite were agreed in condemning any kind of political violence – even the threat of it – out of hand. Secondly, those in government did not hesitate to leave office, and all its perquisites, if they felt their parliamentary position to be untenable. Thirdly, the overwhelming majority of MPs on both sides accepted the sanctity of the constitution and supremacy of the law.

These assumptions did not spring into life overnight. They were the product of around 200 years of political evolution, dating back to the Glorious Revolution of 1688. Only gradually did the two-party system arise. Only gradually did it become conventional for the prime minister to command a majority in the House of Commons. Only gradually did ideas about representation develop until finally – long after Trollope’s time – the right to vote became associated with adulthood alone, rather than with property-ownership, education or sex.

The reality about democracy is that it cannot be conjured up out of thin air in the absence of such assumptions. As a young Tanzanian once explained to me: “In Africa, if you give a man all the privileges of power – the money, the power, the big house and car – and then say, five years later, ‘Now you must give all this up to your harshest critic,’ he is quite likely to find a reason not to do what you ask.” Yet this is not a peculiarity of Africa. It was once the case everywhere. Only slowly, by sometimes painful trial and error, do elites learn that it is in their own interests to exclude violence from politics; to take turns at governing; and above all to submit to the rule of law.

Winston Churchill famously described democracy as “the worst form of Government – except all those other forms that have been tried from time to time”. This remains the case, not least because representative government with multiple parties will generally produce superior governance to dictatorships and one-party states, where rent-seeking behaviour is generally unchecked by free political opposition. There is corruption in most countries, but it is nearly always worse – and more economically distorting – in non-democracies. That is why, if they remain one-party states, China and Russia will sooner or later stumble and fall behind the democratic tortoises, Brazil and India.

The key to spreading democracy is clearly not just to overthrow undemocratic regimes and hold elections. Nor is it simply a matter of waiting for a country to achieving the right level of income or rate of growth. The key, as Stanford political scientist Barry Weingast has long argued, is to come up with rules that are “self-enforcing”, so that the more they are applied, the more respected they become, until at last they become inviolable.

There is no reason why that should not be possible in any of the world’s civilisations. As the British example makes clear, however, it can (and probably must) be a very protracted process. And that is precisely why it would be rash, after a few bad years, to prophesy the death of democracy – as rash as it was to predict its triumph after a few good ones.

Niall Ferguson is a contributing editor to the FT

Cash for answers


Cash for answers

By Tim Harford
Published: January 25 2008 19:32 | Last updated: January 25 2008 19:32

In 1737, John Harrison, a self-taught clockmaker from Yorkshire, stunned London’s scientific establishment by presenting an idiosyncratic solution to the most important and notorious technological problem of the 18th century. He was hoping to win a then-fabulous prize of £20,000 (about £5m today) for anyone who could devise a way for a ship’s navigator to determine its longitude and therefore its position at sea. Harrison’s approach was to build a clock that would keep Greenwich time faithfully; by comparing local time (measured using the position of the sun) with the time in London, the navigator would know how far east or west the ship had sailed. The theory was sound, but given the rolling of ships and changing temperature and humidity, the leading scientists of the day – including Sir Isaac Newton – reckoned that a sufficiently accurate clock would be impossible to build. Harrison proved otherwise.

The longitude prize, sponsored by the British government, was not unique. Prizes were also offered in France for a functional water turbine, and for a method of preserving food for Napoleon’s armies. The latter prize quickly inspired the tin can, more of a blessing than food snobs might acknowledge.

But such prizes then fell out of fashion. For commercial innovations, we now rely on patents to encourage and protect innovators. Basic research is funded not by prizes but by grants.

And yet two centuries after tinned fish hit the market, the way we look for solutions has come full circle. Governments, private foundations and even corporations are rediscovering the value of offering prizes for good ideas. Rather than paying for scientific and engineering effort as they have done for the past 200 years, idea-hungry patrons are returning to the 18th century, and paying for results.

The most famous innovation prize of this century, the $10m Ansari X Prize, was designed to promote private space flight. The pot went to Mojave Aerospace Ventures in 2004, after the successful flights of SpaceShipOne. And even the Ansari X Prize is dwarfed by a quasi-prize of up to $1.5bn that is about to be offered by five national governments and the Gates Foundation to the developers and suppliers of a more effective vaccine against pneumococcal diseases such as pneumonia, meningitis and bronchitis. The prize, called an “advanced market commitment’’ or “advanced purchase commitment’’, takes the form of an agreement to subsidise heavily the first big orders of a successful vaccine. Given that the top companies in the UK’s powerful pharmaceutical industry spent little more than £5bn in 2006 on research and development, a $1.5bn prize should be taken seriously on hard-nosed commercial grounds alone.

And if formidable obstacles to setting the prize conditions can be overcome, the pneumococcal diseases contest could be followed by a malaria vaccine prize twice as big and an Aids vaccine prize that would be bigger still.

Prizes need not have such lofty ambitions. They can simply be a way of turning a solution into a commodity. One company, Innocentive, provides an exchange where “seekers’’ can offer cash to “solvers’’. Both sides are anonymous, which is one of the selling points of innovation prizes: they reward neither connections nor seniority, but solutions alone. Innocentive’s problems read a little like the small ads on the world’s least romantic lonely-hearts website. “A technology is desired that produces a pleasant scent upon stretching of an elastomer film’’ ($50,000). “Surface chemistry for optical biosensor with high binding capacity and specificity is required’’ ($60,000).

Netflix, a film rental website which offers recommendations based on what you looked at, bought, rented or reviewed in previous visits, has skipped middlemen like Innocentive. In March 2006, the chief executive of Netflix, Reed Hastings, met some colleagues to discuss how they might improve the recommendation system, Cinematch. Hastings, inspired by the story of John Harrison, suggested offering a prize of $1m to anyone who could do better.

The Netflix prize, announced in October 2006, struck a chord with the Web 2.0 generation. Within days of the prize announcement, some of the best minds in the relevant fields of computer science were on the case. Within a year, the leading entries had reduced Cinematch’s recommendation errors by more than 8 per cent – close to the million-dollar hurdle of 10 per cent. And it has cost Netflix very little to mobilise all this effort. The company has had to pay out a mere $50,000 progress award, to a team of three AT&T data analysts.

Even Netflix is surprised at how well it’s been going. “We just didn’t think the relevant research community was so big,’’ says Steve Swasey, vice-president.

More than 2,500 teams from 161 countries and comprising 27,000 competitors have entered the contest. Teams from California, Budapest and Toronto have been battling away at the top. Clearly, the million-dollar prize has mobilised far more than a million dollars worth of research effort.

The Netflix prize has been helped by the ease of transmitting data around the world and the affordability of the computing power necessary to have a go. The fun of the challenge alone is one of the biggest attractions to participants. So, too, is access to Netflix’s huge database of recommendations – a dream for statisticians and computer scientists. And the competition has also been fanned by the fact that all improvements are incremental and the company is able to publish listings of the current leaders, meaning the race is verging on a spectator sport.

The X Prize and Netflix prize have managed to generate a tremendous amount of interest. That means more than free publicity for the organisers; it also means that the prize catalyses far more effort than one might expect on cold financial grounds. “One of the goals of the prize is to transform the way people think,’’ says Bob Weiss, vice-chairman of the X Prize Foundation. “We were trying to create a sea-change.’’

Weiss says that the founders of the X Prize foundation wanted to revive their childhood dreams of a day when ordinary people would be able to travel into space – expectations formed in the heady 1950s and 1960s. They may get their wish. To Weiss’s delight, Virgin Galactic claims it will soon be in a position to offer private space flights. It will be using the technology that won the X Prize.

Future X Prizes, each one funded by corporate sponsors and philanthropic donors, aim to kick-start other new industries. The Archon X Prize for genomics will be awarded to the team that can sequence 100 human genomes within 10 days, at a cost of $10,000 per genome. That is unimaginably quicker and cheaper than the first private genomic sequencing in 2000, which, according to the X Prize foundation, took nine months and cost $100m for a single human genome. (Craig Venter, the director of that effort, is one of the backers of the new prize.) It is the kind of leap forward that would be necessary to usher in an era of personalised medicine, in which doctors could prescribe drugs and give advice in full knowledge of each patient’s genetic susceptibilities.

Another prize will be awarded to the manufacturer of a popular mass-production car that has a fuel efficiency of 100 miles per gallon. The model is the same each time. The X Prize foundation identifies a goal and finds sponsors; it announces a prize and whips up the maximum possible enthusiasm, with the aim of generating far more investment than the prize itself; the prize achieved, it hands out the award with great fanfare and moves on to set other challenges. The prize winner is left with intellectual property intact, and may capitalise on the commercial value of that intellectual property, if any commercial value exists.

The X Prize foundation claims that the Ansari X Prize directly stimulated $100m of spending on research and development, 10 times the value of the prize itself. That is clever, and for a handful of sexy challenges it is likely to be a trick that can be repeated.

But the X Prize and the Netflix prize may give too flattering a picture of what might be possible if prizes catch on. Rather, prizes could become humdrum. For the problems listed on Innocentive’s website – “The challenge is to produce a specific citric acid ester in a faster cycle under current specifications’’ ($40,000) – the day of the humdrum has already arrived.

In other cases, for example the advanced market commitment for a pneumococcal virus, the sums of money being invested in the research are so huge already that it is hard to imagine the mere glamour of the $1.5bn “prize’’ weighing heavily on the minds of scientists and inventors.

For both the uninspiring innovation and the billion-dollar research programme, it is the prize money itself that has to do the talking. If that is not the case, the prizes will not multiply research efforts, as the Ansari X Prize and the Netflix prize have done, but will increasingly need to compete with alternative methods of funding innovation – that is, grants and patents – on a level playing field. To become a significant alternative to grants and patents, prizes will have to become very large indeed – large enough to cover, on average, all of the likely research expenditures of all those hoping to win. Is that desirable?

Champions of prizes see them as a component of a wider system to promote innovation, rather than as an outright replacement either for grants or patents. Instead, the hope is that prizes will help to compensate for the specific weaknesses of those alternatives.

The downside of a patent is fundamental to its design: in order to reward an innovator, the patent confers a monopoly. Economists view this as, at best, a necessary evil since monopolies distort prices. In the hope of raising profits from some customers, they will price others out of a market. The most obvious victims are consumers in poor countries.

In an ideal world, prizes could replace patents. Instead of offering a patent for an innovation, the government could offer a prize. The inventor would pocket the prize but would not be allowed to exploit any monopoly power, so the innovation would be freely available to use in products for poor consumers – cheap drugs for Africa, for instance – and, importantly, in further innovations. But to explain that idea is to see its limitations. How could the government know enough about the costs and benefits – and even the very possibility – of an innovation to put a price tag on it and write the terms of reference for a prize competition? For this reason it is hard to see prizes replacing patents in most cases. But it is not impossible.

The modern heir to 18th-century prizes for canning, water turbines and finding longitude at sea is the advanced market commitment for vaccines for the poor: the goal is clear, the costs and benefits can be guessed at, and the quasi-prize nudges the patent system to one side with a prize contract that respects the patent but, in exchange for a large subsidy, radically constricts the holder’s right to exploit it.

Prizes can also, in principle, supplement grants for basic research, paying scientists for results as well as for effort. There is, for example, an “Mprize’’ for creating long-lived mice. The eventual aim is to lengthen human life spans. And the Clay Mathematics Institute, a non-profit body set up 10 years ago by a Boston businessman, is offering million-dollar prizes for the solution of seven “Millennium’’ problems in mathematics.

These prizes are exceptions; but prizes were once the standard way of encouraging basic research. According to Robin Hanson, an economist at George Mason University, more than twice as many 18th-century scientific societies paid for results using prizes or medals than paid for effort with grants. As that changed, scientific societies sometimes ignored the wishes of donors, or even had the wills of deceased donors voided, in order to hand out grants rather than the prizes specified.

The standard historian’s explanation of this trend is that once science became a profession rather than the province of rich amateurs, prizes were no longer a suitable way of funding innovation. Hanson is not convinced. “Most academics who study the issue of prizes have focused on what a prize does to the behaviour of researchers, versus a grant,’’ he says. “But there’s another aspect: what does the person giving the prize or the grant get out of it?’’

He argues that grants are more appealing than prizes to bureaucracies for many reasons, not all admirable: “With grants, there’s all sorts of possible patronage and corruption.’’ Even leaving aside outright graft, there is plenty of opportunity for cosiness and cliques. Then there is the mundane fact that grants are easier to account for in an annual budget than a multi-million prize that could be paid tomorrow, in a year, or never. For Hanson, it was for these reasons, rather than any intrinsic merits, that grants elbowed aside prizes in the 19th century.

Prizes may be making a comeback because of all the money now available from private foundations – which demand results. Not only the X Prizes and the Millennium problems prize, but even the pneumococcal vaccine prize is part-funded by private money. Yet governments are getting in on the act. The US space and defence research agencies Nasa and Darpa both use innovation prizes, and other government agencies look likely to follow with, for example, an “H prize’’ for advances in hydrogen fuel technology.

If Hanson is right, this new trend is a welcome swing of the pendulum towards a modest use of prizes. But not everyone is convinced that prizes will live up to the hype.

“The literature has pushed them as a silver bullet; more recently there’s been a bit more sobriety in the debate,’’ warns Andrew Farlow, an expert in the economics of vaccines at Oxford University. “How much genuine risk-taking can it pull along?’’

The problem is not the principle, he argues, but the details. A vaccine for HIV is a distant and costly prospect, and might require a $10bn or $20bn prize. Inevitably, companies and their shareholders will question whether the prize would be honoured in full. The triggers for releasing some of the prize money are difficult to define: early vaccines would probably be expensive, fallible and risky, but better than nothing. Donors would not want all the money to go to those efforts and leave none to encourage superior successors. Try framing “good enough’’ in legalese, when billions are at stake.

Donors might pay a lot more than they needed to for a substandard product, or the prize might be too restrictive and too small to generate any interest at all. That would drain attention, enthusiasm and political will. “It all sounds like good economics, but whether you could ever set a prize big enough or correct enough to work in those cases is doubtful,’’ Farlow concludes.

But the proponents of advanced market commitments (AMCs) believe the problems can be overcome. “There’s no question that there’s going to be a way to deal with these challenges in a sensible, analytically based way,’’ argues Ruth Levine, vice-president of the Center for Global Development, a think-tank based in Washington, DC, which has been a leading force in evaluating and advocating AMCs. “By that I mean that a proposal or contract will be written that makes sense and is based on good empirical work.’’

The pilot is the pneumococcal vaccine pledge, made in principle back in February 2007, and now being hammered out. It is a big deal – a lot of money is on the table, with the potential to save many millions of lives at a low cost. Yet compared with other possible AMCs, the pneumococcal problem is relatively simple: two credible vaccines are in the late stages of development. Levine acknowledges that this example is as close to a procurement contract as to a pure innovation prize, but believes there is much to be learned from the exercise about whether donors can make a commitment together and handle the legal and accounting challenges. “What this won’t be is a pure test of whether putting a market-like offer out a long distance into the future will give firms an incentive to do early-stage R&D,’’ she says.

That is the dream of AMC proponents, but the true test – a malaria or HIV prize – is some way off yet. Only then will we see whether private companies will take the bait, and the public purse will get value for money. We can be sure that big Pharma will be checking the small print: John Harrison, master clockmaker, was eventually rewarded for his brilliant, accurate maritime clock only by appealing direct to King George III. Neither he nor anyone else was ever judged to have satisfied the conditions necessary to receive the longitude prize.

Tim Harford’s new book, ‘The Logic of Life’, is published next week

The new face of Sweden

The new face of Sweden

By Matthew Engel

Published: January 18 2008 21:55 (FT on 19/Jan/2008)

The Islamic Centre was firebombed at midnight. The mosque itself was fearfully damaged; the adjoining school and meeting rooms were destroyed. No one knows who was responsible, but the list of possibles is a long one.

It took two years to rebuild. After it reopened there were another two attacks inside a month. People talked about a climate of fear and a breakdown of society.

Is this Baghdad, or Cairo, or Karachi? Not even close. It’s Malmö, the port on the southern edge of the Scandinavian peninsula, and Sweden’s third-biggest city. Normally, it is docile to the point of tedium: for decades Malmö has been seen as a sanctuary from the troubles of the world. And that has become the problem.

Unnoticed by the rest of the world, Sweden has changed, and Malmö has changed dramatically to become one of the most racially divided cities in Europe. Already, 37 per cent of the population were either born abroad or had both parents born abroad. Among children, that figure rises to almost half.

The numbers have been somewhat inflated by the other big change to Malmö – the opening of the bridge across the narrow Oresund seven years ago, linking the city to Copenhagen. Many Danes have moved to this side of the strait, attracted by lower property prices.

Even so, Malmö (population 278,000) is now one-quarter Muslim. And that proportion is rising rapidly due to continuing immigration and differential birth rates. Officials accept that most of the inhabitants will be of non-Swedish origin within a decade, and that a Muslim majority could follow soon after that. Like more obvious multi-ethnic places such as Birmingham and Rotterdam, Malmö would be a “majority minority” city. And that does not factor in the possibility of a new Middle Eastern cataclysm (war in Iran? The disintegration of Iraq?) producing a new surge of refugees.

Local and national politicians are struggling to adapt and respond to these rapid changes. But there is a growing acceptance that “the Swedish model” – exceptionally generous welfare policies combined with an exceptionally generous approach to immigration – is now unsustainable. That has been the basis of Sweden’s image abroad, and of its own self-image. And, in a very quiet, very Swedish way, its collapse is likely to be traumatic.

At first sight, Malmö is everything you expect of a Scandinavian city: clean, pretty, cycle-haunted, quiet, overpriced, dull. Even the lights at pedestrian crossings click discreetly. I fancied that the police cars didn’t have sirens but a recorded message saying “Excuse me!” But I never heard one. The main threat to a pedestrian comes from irate cyclists guarding their cycle lanes against trespassers. This does not feel like a place with problems.

That’s partly because it is one of the most segregated cities in Europe. The migrants are concentrated in one district, Rosengård, with the newest ones in the sub-district of Herrgarden, where the male unemployment rate is 82 per cent. Other locals mention these names with a shudder.

You don’t need a road sign to show you’re in Rosengård. A satellite dish is attached to the balcony of just about every flat, some looking massive enough to draw in pictures from Alpha Centauri, all of them showing channels from home, wherever that may be. Very occasionally, there is an exception: a balcony with the last, lingering flowers of summer, belonging to a rare Swedish-born family who have not moved away.

But if Rosengård is a slum or ghetto, it is a showpiece slum or ghetto. The blocks of flats – no more than eight stories high – are mostly well-maintained. There is no more litter there than anywhere else in town. There are very few graffiti. And although there are many men and teenagers hanging round even on a weekday afternoon, the atmosphere is entirely unthreatening, indeed welcoming. (Very different, said our Danish photographer, from the equivalent areas in Copenhagen.) Within an hour of arrival, we were having coffee and pastries in a Turkish family kitchen. The seventh-floor flat was not opulent, but nor was it uncomfortable. Instinctive eastern hospitality battled with northern reserve and the migrant’s understandable suspicion of the stranger. But it felt like a refuge against an uncertain world.

Down below on the estate, crime is an issue. “It’s easy to get into problems,” says Lulli, a 16-year-old boy from Kosovo. “Fighting, drugs, stealing. But it’s very hard to get out.” However, these problems might seem very low-grade in other cities. People kept telling us, in shocked tones, about the fires started in the wooden buildings used for burning rubbish. The banlieues of Paris and the gun-ridden estates of south London would be delighted to have such troubles.

In Herrgarden, kids from diverse backgrounds do mix. But at schools composed almost wholly of migrants, they find it hard to feel an attachment with wider society. “My passport says I’m Svensk, but in the apartment, no,” says Lulli’s Turkish pal Nihad. “In Herrgarden, if someone has a problem, we help him. The Swedes, they are very cold. They shake hands. We kiss. Not like gays, like brothers.”

Fuelled by resentment against native Swedes, some go into town on a Friday or Saturday night to indulge in a little light mugging of what they call “the Svens”. The police think only about 150 youths are involved. At least these youngsters speak Swedish. For their parents, it can be much harder. Cushioned by social security but imprisoned by linguistic inadequacy, many of the unemployed hardly go out. The migrants are here physically, but many have not made the mental leap.

“It’s OK here,” says Nihad’s father, Sala, who still works in Turkey. “But it’s cold, and it’s not home. Nihad, though, he has more chance.”

Four years after the big arson attack, the Islamic Centre has responded to its own troubles by becoming ever more open. “Everyone can come here, Muslim, Christian, Jewish,” says the centre’s director Bejzat Becirov (from Macedonia), offering coffee and lunch. And at the centre’s elementary school, the 11-year-olds give their verdict on what Sweden means to them. They, at least, are positive. “We have clean water,” says Rayan, from Somalia. “Candy!” cries Hussein, also from Somalia. Then Omar from Lebanon chimes in: “Nice cars!”

The 260 children learn in Swedish, and the girls do the counting in their skipping games in Swedish. I asked one eight-year-old where she was from. “Iraq,” she replied. Several others shouted her down. “Sweden!” they cried. They all learn Islamic studies, but on the door of the classroom is an Olympic-style motif showing five religions interlocking and overlapping: Islam, Christianity, Hinduism, Buddhism and Judaism.

And this positive mood is reflected among the many Swedes who believe that their charitable impulses have brought them rewards. “Twenty years ago Malmö was a very dull city,” says Julia Janiec, an adviser to the city council’s Social Democratic leaders. “We had almost no restaurants, no bars, no theatre, no university, no young people, no nothing. Now we have a dynamic multicultural city.”

This dynamism is not wholly obvious to a visitor. “There is a lot to see and do in Malmö!” says my map. But number three on its list of attractions is the public library. To an outsider, Scandinavian countries seem much the same. That’s not how the Scandinavians see themselves, however, and 20th century history provided a new and sharp division. In the past hundred years, 25 of the 27 members of the European Union have endured either foreign occupation or home-grown dictatorship. The exceptions are Britain and Sweden.

While Norway and Denmark were under Nazi rule, Sweden maintained neutrality by making unheroic compromises and accommodations. It emerged with some guilt – in part survivor’s guilt, but guilt nonetheless. Its reparation was to set itself up as clergyman to the world: “a moral superpower”.

Sweden opened its door, its wallet and its heart to refugees from the planet’s most traumatised places. There is still a substantial cohort of leftist Chileans opposed to the Pinochet regime in the 1970s. And the list of the most common birthplaces for Malmö’s population is like a reprise of global headlines: Iraq, Bosnia, Lebanon, Iran, Afghanistan, Vietnam, Somalia, Croatia.

Other Scandinavians often find the Swedes rather bleak: humourless, pedantic, rulebound, a bit stingy. (Trying to grasp the linguistic differences, I asked a Dane if he could understand a Swedish film. “Oh yes,” he said, “but I’d never watch one.”) I also met a Norwegian, Agnes Domaas. “These newcomers have made Sweden so much better,” she said. “They are so happy. Sweden needs them.”

The poor Swedes have worked so hard to be welcoming, it seems harsh that they get so much criticism. But higher standards apply here. The Swedes did not ask The Guardian to call their country “the most successful society the world has ever known.” But they, and the world, do expect the country’s policies to work, just like the drainage and the electricity.

Yet there is an increasing sense, even on the left, that the combination of Sweden’s welfare and migration policies was foredoomed. The “Swedish model”, often seen as a middle way between communism and capitalism, dates back to the 1930s. The intellectual roots of the policy lie in the concept of folkhem (“people’s home”); scholars have noticed its similarity to the interwar German idea of Volksgemeinschaft (“people’s community”). One turned malignant, one did not, but they were grown in similar cultures.

Nick Johnson of Britain’s Institute of Community Cohesion has studied race relations in various multicultural cities. “In both Sweden and Denmark,” he says, “it was very striking that people on the left were saying they hadn’t realised the extent to which their social model was predicated on a strong sense of nationalism. And diversity was starting to open the debate about the kind of society they want.

“Some were thinking that they can only maintain strong support for individuals if they control their borders. They are now facing the problem the UK has wrestled with for years: that of having a permanent ethnic minority underclass.”

If the left is starting to think that way, it is inevitably far more true on the right. Though Malmö is still Social Democrat, the country made one of its rare political shifts in 2006 and elected a centre-right coalition led by Fredrik Reinfeldt.

But the biggest recent change came from a court, not government policy. In 2006 immigration appeal judges said the situation in Iraq constituted “difficult circumstances” rather than an “internal armed conflict”. The Swedes do like understatement.

Refugees from Iraq now have to jump higher hurdles to gain admission. Yet in 2006 Sweden still took in nearly half the 22,000 Iraqis who made it to the west. One small town near Stockholm, SOdertalje, welcomed 1,000 – more than the US had done in total since it launched the war. (Other Swedish towns are less hospitable – and Malmö officials are especially bitter about their neighbours in Vellinge, who refuse to help at all.)

A new anti-migrant party, the Swedish Democrats, wants to emulate the success of rightwing groups in other countries in northern Europe, including neighbouring Denmark. But even the far right are fairly understated. The Swedish Democrats are expected to pass the 4 per cent threshold for parliamentary representation in 2010, and in Malmö one poll put them over 11 per cent. Yet their local leader, Sten Andersson, insists that he does not want to prevent admission of genuine refugees or families of existing migrants. “You could not say stop,” he says. “But we cannot give jobs to this big number, and we cannot find flats for them.”

There are success stories, of course: Zlatan Ibrahimovic of Inter Milan grew up in Rosengård; the father of another Swedish footballer, Henrik Larsson, came from the Cape Verde Islands. Nyamko Sabuni is an uncompromising Burundi-born woman who is now minister for integration (“The firmest handshake in the government,” a journalist told me). But one senses the journey here has been so wearying that many first-generation migrants have exhausted their sense of adventure just by travelling. None of the newcomers speaks Swedish. The government provides the classes, but that in itself is a traumatic process. Only then can they even contemplate the possibility of finding a job. And that’s not easy.

I was told of a Kosovar electrician – much in demand, theoretically – who took seven years to get work because his qualifications were not accepted and retraining him to Swedish standards was so grindingly bureaucratic. Kent Andersson, Malmö’s Social Democrat deputy mayor (no relation to the Swedish Democrat Sten) accepted that the story was probably true but insisted they were working hard to streamline procedures.

For some, it is too late. Mohammad Jabbar, 52, fled Iraq five years ago. At home he was an architect and engineer; in Malmö he has a little gift shop. “It is better here,” he says. “Not for me, but for my babies.”

Sweden, you could argue, has not really helped the world, its incomers or itself. When I met him, Kent Andersson was just back from the International Metropolis conference in Melbourne, where he had been startled to hear the mayors of both Toronto and Melbourne complain that they weren’t getting enough migrants.

The difference is that Canada and Australia – countries which have been built on immigration – generally make sure they get the newcomers they want. Sweden gets those it gets. The main criterion for admission has simply been the fact of making it to Sweden. Many have endured terrible journeys to get there, but for them travelling hopefully has often been better than arriving. They have found no American-style melting pot, and Swedishness has proved an elusive prize.

This is not the only European country with humane impulses that has got itself into a mess over immigration. For too many years, mainstream politicians regarded discussion of the subject as illegitimate, dangerous and inherently racist. But in Sweden the altruism is more profound, and the sense of failure more acute.

Swedish politicians, as wary as the British of Brussels initiatives, now think the “blue card” system for potential migrants with marketable skills proposed by the European Union may offer them an honourable way out of their dilemma. But taking the best-qualified and most skilled people out of the under-developed world is not an act of kindness: it will severely damage the third world’s chances of improving itself.

At least the debate is now happening in Sweden and elsewhere. I asked Kent Andersson if he thought Sweden had damaged itself by being too liberal towards migrants. “No,” he said. But he admitted that “we can’t give them the life we want to give them.” And there was a very long, very Swedish, pause before the “No.”

‘Interculturalism’ in Leicester

By William MacNamara

At the end of their safari, 50 women from the Leicestershire Women’s Institute gathered for lunch and raised toasts to the marvellous sights they had seen. They had journeyed by bus to the heart of their county seat, Britain’s most ethnically diverse city, and visited a mosque, a Hindu temple and a Jain temple.

“I didn’t know they believed in God,” said one woman after hearing a Leicester imam speak. “I suppose I never thought about it.”

Leading the women was Asaf Hussain, an interfaith leader and scholar at the University of Leicester. He calls his tours “safaris” in recognition of the exotic sights to be seen by mostly white, middle-class audiences. For Hussain, the trips demonstrate the power of “interculturalism”, a philosophy that he has spent 30 years refining and teaching.

“The multicultural state is not an end in itself,” he told students during one of his lectures. The statement is his central critique of Britain’s immigration policies, which he believes foster a culture of suspicious tolerance without meaningful integration. Ultimately, he asserts, the limits of multiculturalism show themselves through terrorism, when British-born Muslims express their alienation by bombing their homeland.

“We live together, we coexist,” he said. “But deeper down there are problems. We want real relationships with each other.”

With charm, connections and boisterous humour, he nudges Leicester toward his vision of interculturalism. One year he organised a Lord Nelson festival that introduced the city’s south Asian population to the “great hero”. The next year he organised a Lord Ganesh festival.

Leicester, he acknowledges, has a record of racial harmony that improves matters. The first wave of immigrants, Asians expelled from Uganda by Idi Amin, arrived in the 1970s. Since then, the city has taken in Africans, eastern Europeans, Mongolians and many other groups.

While the population fell after a 1960s peak of 290,000, new immigrant groups have pushed the figure past that level in the past three years, according to census projections. By 2011, the Commission for Equality and Human Rights estimates, whites will be a minority, making Leicester Britain’s first “pluralist” city, where no race is in a majority.

The city’s multicultural status quo, Hussain said, hides frictions. As whites have moved further into the suburbs, they understand their city’s racial dynamics less and less. To reach a point where whites welcome an immigrant neighbour, he said, they must understand that neighbour’s religion. That is why he started his “intercultural safaris”.

The visit to the mosque seemed to be the Women’s Institute group’s favourite part of the trip. “I went in to the mosque and came out with a heart full of love at what the imam was saying about tolerance,” said one woman.

Such encounters need to be multiplied, Hussain believes, if the city is to handle its largest immigrant wave to date. In the past four years, an estimated 20,000 Somalis have arrived in Leicester from the Netherlands, where many allege discrimination.

New groups often strain the city’s existing race relations, said Freda Hussain, a head teacher and former High Sheriff of Leicestershire, as well as the other half of Leicester’s race-relations “power couple”. In some cases, she said, children of eastern European immigrants refuse to sit next to black students and disrupt classes by calling them pejorative names.

“This is a totally dynamic, fluid situation,” her husband said. City agencies are doing much of the work of keeping Leicester harmonious.

For now, however, he teaches oversubscribed classes in “intercultural understanding”, and fields more requests for safaris than he can meet.

Copyright The Financial Times Limited 2008

A dynasty to look up to


A dynasty to look up to

The Borbons exude sincerity and sophistication, the Windsors are plagued by scandal and dysfunction. It's not easy being royal these days, but Spain's first family is showing them all how it's done. Elizabeth Nash reports on a very modern monarchy

No one watching last week's memorial service in Madrid for the bereaved families will forget the moment when King Juan Carlos and Queen Sofia moved towards the devastated men and women from the workers' suburbs and embraced them as if they were members of their own family. Queen Sofia, tears streaming down her cheeks, handed her shawl to a lady- in-waiting then hoisted the gold chain of her little black bag across her body to free both hands to touch and caress her weeping subjects.

She and the king moved slowly along the pews of the Almudena cathedral, individually talking and listening to each of more than 500 relatives of those who died in the bomb blasts. In their wake followed the princesses Elena and Cristina and their spouses, Prince Felipe and his fiancée Letizia, who all did the same. It took more than half an hour, during which political leaders of the world's most important countries were kept waiting on their feet, and the Spanish royal family secured nationwide, perhaps worldwide, admiration and affection.

This is what they are for, you might think: to console a traumatised people in the name of the nation, above party, regional or special interest. But this surpassed the job description. The royals "broke all the rules of protocol", exclaimed the Spanish media in amazement. They were the only public figures to reach across the chasm dividing the ruling elite, the Church hierarchy and the world's dignitaries from those for whom the whole show was orchestrated, but who until that moment were mere observers of a frigid, alien spectacle. Can you imagine Britain's royals making such a gesture?

And therein lies the difference, in stark relief. The Spanish royal family, dismissed here as Hello! fodder and historically irrelevant beside the house of Windsor, have proved themselves to be more dignified and better in touch with their subjects. Their emotions are real and empathetic. Not for them a reluctant, distant gesture of sorrow, a lowered flag and a five-minute walkabout. What the Spanish royal family dis- played was no formal act of condolence, nor a histrionic performance for the cameras. It was the physical enactment of every Spaniard's feelings for those afflicted by the tragedy, a spontaneous human response that not one of the dignitaries present in the cathedral was capable of making.

Spontaneity is not a word that occurs frequently in Spain's manuals of protocol. Spanish ceremonial etiquette has been famed for centuries for its remote and elaborate formalism. Spaniards love procedure. You can attend academies and take a degree in protocol. Journalists have been invited on a crash course on etiquette to prepare them for the royal wedding of Prince Felipe, heir to the throne, on 22 May.

There's not much that Queen Sofia and King Juan Carlos need to learn about ceremonial. Each from a royal dynasty, they were rigorously trained from childhood for their destiny to rule. But they combine their regal bearing with a common touch unique among Europe's crowned heads. And it's not a stuck-on populism designed to curry favour. These are no cycling monarchs. They exude wealth, style and regal sophistication. The king may don leathers for a burn-up on his Harley, but that's for his own pleasure, not to chum up with the biker fraternity.

Spain's royals have evolved a regal but relaxed counter-protocol, partly reflecting the cheery, straightforward personalities of the king and queen and their three children, and partly because their survival depends on retaining the affection of their subjects. Juan Carlos summed up their philosophy in a rare television interview in November 2000 that marked 25 years of his reign: "I always wanted the monarchy to be open and near the people, for many people to be able to reach the king and queen, for them to be able to see us, to talk to us, to speak to us. Because the truth is that, before being king, one of the things I learned and which is still of great use to me is to listen."

Compare that with Elizabeth II. Certainly, lunches for women of achievement help, but what meaningful dialogue can she have with 180 women at the same time? Prince Charles, who has it in his power, potentially, to modernise the Windsors, is yet more remote, seemingly spending his time launching foods from his estates. Those further down the royal hierarchy in Britain are generally acknowledged only when there is a scandal; one has to think of a failed television career, a toe-sucking wife, a drug-addled teenager or petulant princes unwilling to engage with their subjects (apart from the odd lap-dancer, of course).

Juan Carlos and Sofia, meanwhile, were never guaranteed popular support: they had to earn it. And both directly experienced the terrible costs of losing popularity: exile. Juan Carlos was born in Rome in 1938, where the house of Borbon took temporary refuge after Spain proclaimed a republic in 1931, which was then crushed by General Franco's fascist forces in the ensuing civil war. Sofia's brother, King Constantine of Greece, was driven from his throne in the 1960s. Foisted upon Spain in 1975 by the will of Franco, who died that year, Juan Carlos made it his mission to be loved, and has shown a surer touch than any politician.

The king was the first establishment figure to step on Galicia's polluted beaches during the Prestige oil disaster in 2002. He strode in his brilliantly buffed shoes across the black slime to express his admiration and thanks for the fishermen and volunteers helping to clean up. Shamed by the king's example, ministers hurried to the scene but barely glanced at the sea and kept well clear of both the filth and the people shovelling it. Prime Minister José Maria Aznar, when he finally made it to Coruña, studied charts in the maritime tower. The fishermen whose livelihoods were destroyed were heartened by the king's gesture: "He went down and got his feet dirty," said one, approvingly. They scorned the politicians for not doing the same.

The queen, too, hailed by her husband as "una gran profesional", has won hearts by well-judged, but mostly low-key, gestures. She attended the mass funeral of 24 children killed in a bus crash held on a municipal football pitch in Soria in July 2000. And her face, ravaged by grief as she leaned towards the devastated relatives and gently caressed their faces, produced the Spanish press photo of the year.

The royals work hard to be popular by leading an unpretentious lifestyle. They shun the opulent royal palace in Madrid, except for formal functions, in favour of the Zarzuela, a former hunting lodge out of town whose dining table, it is reported, seats no more than 14. More importantly, the king nurtured Spain's fledgling democracy. In his message to the nation after being proclaimed king on 22 November 1975 he pledged to restore democracy and reign as king of all Spaniards, "without exception".

None the less, he was dubbed "Juan Carlos the Brief" by sceptics who thought him destined to follow his predecessors into exile. The rightful heir was Juan Carlos's father, Juan de Borbon. But Franco opted for the son to succeed him, and Juan Carlos inherited full powers after the dictator's death. The young king skilfully shed those powers and reinvented himself as a constitutional monarch, approved by popular ref- erendum three years later. His standing was further enhanced when he defused a coup attempt in 1981, when Lt-Col Tejero burst into parliament and held MPs hostage at gunpoint. The king pledged his commitment to Spain's democratic constitution and ordered the military back to their barracks.

Then there are the three children, Elena, Cristina and Felipe. No Sophiegate here, no toe-sucking, no ugly divorces; a scandal-free zone. Elena married a lugubrious duke, Jaime de Marichalar, and quietly fulfilled her duty to bear children. Cristina caused a minor flurry by picking the ex-handball champion Iñaki Urdangarin. But that wedding, as well as being a happy one, was a political masterstroke: the Spanish princess married her Basque husband in the cathedral of Barcelona, the city where they live, reconciling at a stroke Spain's three competing centres of political and economic power.

And Prince Felipe, trying the nation's patience with his prolonged bachelordom and unsuitable girlfriends, finally settled on Letizia Ortiz, a divorced television presenter who is hailed by the nation as the perfect modern princess. Felipe's first serious romance was as a teenager with the aristocratic beauty Isabel Sartorius. The queen cut that relationship - in a steely gesture reminiscent of Queen Elizabeth's veto of Camilla for the young Charles - because Isabel was deemed too old, came from a broken home and was niece of a leading communist. Letizia is divorced, and of non-aristocratic birth. But she is beautiful, Spanish and her profession, even her "past", are praised as proof that she is a woman of her time. The couple cancelled their stag and hen night parties out of respect for those afflicted by the bombings. Felipe also asked Madrid's city hall to cancel a multimedia spectacle to celebrate their wedding and to donate the money to a monument to victims of the attack. The wedding celebrations have been scaled down to a shadow of the national fiesta that was planned, but perfectly in tune with the country's sombre mood.

There have been blips, of course, but only small ones. There was a half-hearted murmur when Juan Carlos took delivery of a £11m luxury yacht in 2000, paid for by Mallorca businessmen in appreciation for the prestige lent to the island by the royal family who holiday there. Scorn was heaped on Prince Felipe's new house, condemned as a tastelessly decorated, ostentatious pile (shades of Prince Andrew's "Southyork"). No one quite knows, or cares, how the princesses' husbands earn their living.

The family is helped by the hermetic self-censorship of the press. Royal finances, for instance, are off limits. Spain's monarchs have virtually no private fortune. Anyone investigating how the king spends the £40m a year received from the Spanish taxpayer is politely invited to get lost. Rumours of peccadilloes circulate but never see the light of day. All this helps the house of Borbon to avoid scandal. Even the Guiñoles - the satirical puppet show based on Spitting Image - never touches the royals. The taboo is partly due to genuine respect, but also reflects the royals' peculiar role in Spain's transition to democracy after Franco. To attack the crown is tantamount to attacking the country's democratic identity.

With Felipe's engagement, even republicans conceded that King Juan Carlos is a both a good thing and a good king. As the El Mundo columnist Fernando Lopes put it: "Spain is not a monarchist country. In little more than half a century, Spain ejected three kings and installed two Republics... which were suppressed only by force of arms." Franco destroyed the last republic in 1939, but before that, Spaniards had cheerfully thrown out Alfonso XIII, Isabel II and Amadeo in a space of just 70 years. Many republicans try to square the circle by declaring themselves "juancarlistas", a sort of provisional adhesion to the monarchy so long as Juan Carlos is king.

A question mark therefore hangs over the future of a post-Juan Carlos monarchy. The media's sympathetic approach may not transfer automatically to King Felipe, despite the prince's efforts to earn the nation's affection too. That's why last Wednesday's appearance of the three junior royals was so important. They need to display their commitment to the people as convincingly as their parents. And their actions that day will probably confirm the monarchy's safety and popularity for at least another generation.

Are you watching, Buckingham Palace?



Arguably the most "evolved" of the Euro-royals, Crown Prince Haakon attended state school, married a single mother, sired a female heir (a first for Norway), and reads that socialist Henrik Ibsen. And he frequents coffee bars... in jeans.


The Grimaldi family's reputation hasn't been helped by the antics of Princess Stephanie. The one-time wife of bodyguard Daniel Ducruet was engaged to Franco the elephant trainer before settling down with a circus acrobat last September.


King Abdullah, a former racing champion, played his trump card when he wed Queen Rania. She gave him three babies, kept her model figure, and set up a charity to help entrepreneurs. Oh - and they take it in turns to read bedtime stories to their brood.

Help Me Love My Baby


This heart-warming, two-part series follows two mums as they discover how to do something most mothers take for granted – fall head over heels in love with their babies.

Baby blues, antenatal depression or postnatal depression, if left untreated, can damage the mother's relationship with her children – and one in six women are known to be affected by mental distress during pregnancy or following childbirth (source: MIND 2006, 'Out of the blue? Motherhood and depression).

Help Me Love My Baby follows two brave women who confront their fears, admitting they feel anger and resentment towards their babies, not a loving bond. Their journey is an emotional, but ultimately uplifting, one. Working closely with parent-infant therapist Dr. Amanda Jones, they unlock psychological clues, buried deep in their past, allowing them to repair the bond with their own babies. Along the way they learn to unlock the hidden code of baby behaviour that will help them forger a deeper bond with their child.

The fact that post-natal depression can create a 'wall' between mother and child is a difficult topic to confront. As Amanda says: 'For a mother to express negative feelings towards her baby… it's just a taboo. And it makes it very hard to ask for help. But in my experience mothers that I meet are grappling with very difficult and hostile feeling towards their babies, which they feel awful about.'

Zoe (28) may look like a model parent to outsiders, but the reality is very different: 'I don't think I can cope at all – I wish I'd never had her, I resent her… I haven't enjoyed one minute of having Izzy.' Zoe and her partner Dave were both delighted when she got pregnant with Izzy, so Zoe's reaction to their new-born daughter came as a shock to them both.

Born six weeks premature and with jaundice, Izzy's mum Zoe struggled to feel anything other than numb when she first saw her. Feelings of guilt mixed with an overwhelming sense that she did not have a connection with her baby. After six months Zoe feels so negative about Izzy that she keeps her at arms' length. In turn, Izzy avoids her mother's face – like all babies she gets upset by stressed or blank faces, and copes by turning away. When she gets upset, she can't look to her mother for help – turning her into a grizzly and unhappy baby.

Slowly Amanda starts to unlock Zoe's secrets of an unhappy childhood, a troubled relationship with her own mother, and the fear of raising a clingy child. Through cuddles, play and intense eye-contact, Amanda helps both mother and baby to develop intimacy and an emotional attachment. Zoe learns what Izzy's body language and cries mean, helping her to respond and understand her daughter.

In a remarkable transformation, over a year of filming, Izzy begins to respond to her mother and Zoe begins to feel a powerful maternal bond. They learn a blueprint for their future, and hope their fragile bond will grow stronger in years to come – as Zoe says: 'It's more precious for me now because I didn't have it before.'

Life in a goldfish bowl


From The Times
May 24, 2007

Life in a goldfish bowl
There are few rulers more burdened with care than Emperor Akihito of Japan. As he prepares to visit Britain for a conference, Richard Lloyd Parry profiles a troubled monarch who finds solace in the study of the goby fish

To plenty of his own people as well as to foreigners, there has always been something cosily reassuring about Emperor Akihito of Japan. Like many monarchs, he and Empress Michiko have cultivated a personal style over the years, as practised and familiar in its own way as the British Royal Family’s handbags, corgis and stiff G&Ts.

There are his double-breasted suits and her old-fashioned hats, as smart as they are unfashionable. There is their public demeanour, one of intense solicitousness and earnest courtesy, without a trace of aristocratic hauteur. And then there are the Emperor’s enthusiasms – his love of tennis, of the cello, and, above all, his passion for a small, unglamorous fish called the goby.

In a few days, in recognition of his contribution to goby studies, Akihito will deliver a keynote speech at the august Linnean Society, an organisation of natural scientists in London, at which his esoteric expertise will be on full display. He will talk of binomial nomenclature and the history of Linnaean taxonomy. He may refer to his own painstaking work in distinguishing different goby species by minute comparison of their shoulder-blades. It is an appealing, almost Pythonesque image – the dotty boffin Emperor ensconced in his palace, sifting through fish bones. And yet there are few monarchs today more serious, or burdened with greater care, than Emperor Akihito.

The carefully cultivated image of bland serenity conceals one of the most complicated, tense and, in many ways, troubled royal houses in the world. Virtually unnoticed by the outside world, first as Crown Prince and now as Emperor, the 73-year-old Akihito has overseen a transformation of Japan’s Imperial Family from a controversial relic of war and dictatorship to a symbol of peace and antimilitarism. Out of an ancient aristocratic history, he has recreated his family as emblems of middle-class liberalism. And he has kept at bay conservative ultranationalists who would hijack the Emperor as the vehicle of a right-wing revival.

If there is a single theme running through Akihito’s life, it is war – its horrors and the importance of preventing it. He was born in 1932, the year after the Japanese invasion of Manchuria, and spent the Second World War as a privileged evacuee; he returned to a city burned flat by incendiary bombing. Since succeeding to the throne in 1989, he has made a point of visiting places associated with the worst suffering of the war, including Hiroshima, Nagasaki, the southern Japanese islands of Okinawa, and the Pacific island of Saipan where Japanese, Americans and locals died in a suicidally hopeless last ditch battle.

His father, Emperor Hirohito, might have ended up tried, or even hanged, as a war criminal. In the end, the postwar American occupiers merely forced him to renounce his divine status, and seized the lands and abolished the titles of the extensive aristocracy. The present Imperial Family’s studiously good behaviour is as much a necessity as an expression of good manners, a survival mechanism by an institution that feels lucky to exist.

The new postwar constitution defined the Emperor as a symbol of the state and the “unity of the people”. From early on, the then Crown Prince Akihito fleshed out this theoretical definition. His mentors included a female American Quaker, who would never have been allowed to teach a Japanese prince before 1945. His choice of bride was equally unprecedented – Michiko was the beautiful and stylish daughter of a wealthy industrialist, rather than the aristocrats who had supplied previous imperial brides. When the couple became parents, they raised their own children at home, rather than farming them out, as Akihito had been, to a lonely life among nannies and wet nurses.

This was not just the indulgence of personal taste but a deliberate effort to present an image of Akihito and his family as representative of the new and growing Japanese middle-class – and it was pursued, not for its own sake but as a matter of survival.“Unless the overwhelming majority feel comfortable, this system could be in trouble,” says one insider. “They have to prove that the existence of the monarchy means something – it’s a conscious agenda for them. For that purpose their solution is to work hard.”

They lead a remarkable life, different in almost all ways from that of foreign royalty. They rise at 6.30am, watch television news and stroll around the Imperial Palace, a moated woodland in the very centre of Tokyo, inaccessible to all but a tiny number of visitors and imperial employees. They lead lives of surprising simplicity.

The various buildings are of late 20th-century construction: smart and dignified but far from the opulence of a European-style palace. The Emperor goes between them on foot or, in case of rain, in a 14-year-old car, a cream Honda Integra, which he drives himself – rather touchingly, he insists on keeping the speed limit, using his seat belt, and renewing his licence, despite the fact that these private roads are almost traffic-free and exempt from the laws of the highway.

He receives visitors – government ministers, foreign leaders and royalty, newly-arrived ambassadors and the recipients of imperial awards – in a separate official palace. Thirty-two times a year, dressed in the garb of a Shinto priest, he pays his respects at a shrine to his legendary ancestor, the Sun Goddess, Amaterasu no Omikami. In the evenings are official receptions and banquets. Last thing at night, the Emperor and Empress might watch a nature programme on television or a video (on a VHS player – they have no DVD, just as they have no internet access) or read (The Times is among their daily reading matter, as well as Japanese newspapers and magazines).

Despite bearing the burdens and duties of royalty, Japan’s Imperial Family enjoy few of its perks. Apart from two modest seaside villas and a farm, there are no grand retreats. In the absence of a home-grown aristocracy, and vigilantly watched by courtiers, they have few playmates at all, and little free time from official duties. “If they can take one whole day off a week, they are very lucky,” says Makoto Watanabe, the Emperor’s Grand Chamberlain, who has served him for a decade. “They belong to this very frugal, serious, workaholic generation which almost views leisure or a wealthy lifestyle as immoral . . . It’s rather a cruel thing to say, but it will continue until the end of their lives. There’s no retirement. They don’t complain about it and they don’t show it in public, but I’m sure it affects them, physically and psychologically.”

A budget of 300 million yen (£1.25 million) a year is allocated to the Emperor’s private household, but all must be accounted for. He has no property or cash of his own – even the holiday villas are owned by the state. Once, courtiers report, the Emperor was being briefed by the governor of the Bank of Japan on the consumer economy. At one point, he interrupted with a puzzled question: “What is a cash-point machine?”

And the pressure on them is political, as well as physical and financial. The Emperor studiously avoids any explicit expressions of political opinion, but over the years it has become clear that he is a man of firm, liberal beliefs. On visits to China, Korea and SouthEast Asia, he has spoken with regret of the sufferings inflicted by Japanese forces during the war. All of this has infuriated the ultranationalist right, the successors to the Emperor-worshippers of the prewar period, who already resented Akihito’s modernising reforms. Emperor-worshippers, by definition, cannot criticise the object of their devotion – and so their target has been the next thing to him: his wife, Michiko.

A series of whispering campaigns has driven the Empress to several nervous breakdowns – as recently as this spring she suffered from internal bleeding, reportedly caused by stress. The intensity and isolation of life within the Palace, combined with the pressure to produce an heir, has also broken the spirit of his daughter-in-law, Crown Princess Masako, wife of his elder son, Naruhito. The succession crisis caused by the absence of a male heir has now eased, after the younger prince Akishino had a son last year. But Masako remains an unhappy figure, painfully unadapted to Palace life.

And this perhaps, explains the Emperor’s passion for biology. “His duties, inevitably, are related to political questions or government,” says Watanabe. “In natural science there’s none of that. He can straightforwardly pursue the truth . . . He has contacts with scientists who also pursue the truth and tell him he’s wrong regardless of whether he’s Emperor or not.” How appealing it must be to put aside cares of state and stand up in front of an audience of like-minded rationalists, to talk of species classification, and the shoulder-blades of gobies.

A world-class scientist
It is a 10cm-long bottom-feeder with a translucent, orange-speckled body and big bug eyes, by all appearances one of the humbler residents of the seas. The most recently-discovered fantail coral reef goby, however, is a blue-blood: it bears the scientific name Exyrias akihito, in honour of the only reigning monarch who can claim a world-class reputation in science.

Since 1967, when he completed the first of 38 peer-reviewed papers published in academic journals, Emperor Akihito has established himself as a world authority on gobies. This fish family includes more than 2,000 species and Akihito’s skill is in their taxonomy – identifying which is which – and he has contributed to the identification of several species.

Peter Miller, an emeritus professor at the University of Bristol, says: “He has made a very useful contribution, and I’m not just saying that because he’s the Emperor. I have referenced his papers myself. I doubt that there are more than a dozen scientists in the world who can match his expertise.”

Akihito learned his love of biology from his father, the Emperor Hirohito, with whom he would spend childhood summers collecting specimens of marine life from rockpools at the imperial retreat of Hayama. He was drawn to ichthyology – the study of fish – on the advice of Ichiro Tomiyama, of the University of Tokyo, who pointed out that taxonomy was the ideal specialism for the Crown Prince, because he would be able to work with a microscope in his own palace laboratory.

His visit this week has been timed to coincide with the tercentenary of the birth of Carl Linnaeus, the great Swedish naturalist who devised the standard binomial system of classifying species.

Akihito will visit Sweden before Britain, then on Tuesday he will address the Linnean Society of London. Linnaeus is one of Akihito’s heroes, and in a press conference last week he described his satisfaction at being elected to the eminent Linnean Society in 1980: “I thought I was not worthy.” His wife, the Empress Michiko, is well aware of Linnaeus’s influence. She said: “Shortly after we were engaged, His Majesty, then the Crown Prince, talked to me about fish. He would use the precise binomial nomenclature, such as Tilapia mossambica. I was astonished, slightly awed and overwhelmed.”

'Betrayed' Burberry staff clock-off for the last time


'Betrayed' Burberry staff clock-off for the last time
By Barrie Clement
Published: 31 March 2007

The combined voices of the Treorchy Male Voice Choir and the Cor Meibon Rhondda rang out in the damp, cold air as the workers processed out of the factory gates, pausing occasionally to turn back and wave goodbye. A Welsh flag hanging limp in the light drizzle, the procession began its sombre march into town. And as they walked away, a jazz band struck up one final tune of defiance.

It has been a long, bitter fight but yesterday the battle to save Burberry's factory at Treorchy in the Rhondda Valley was over. Television cameras from all over the world witnessed its last moments as more then 300 workers closed the gates for the last time, making clear their contempt for the company and its claims to quintessential Britishness. Manufacturers of the polo shirts once made at the south Wales plant are to be switched to China - and the slight has been keenly felt.

"Of course we feel betrayed,'' said Lisa Hazell. "I've not been able to think about anything else for months. We expected the factory always to be there. It was making a profit. The bottom has fallen out of our lives.''

Her husband Dean, 36, was a maintenance worker at the factory: "It's been very much a family thing, my mother, father and aunty worked there. We just feel shattered.''

The company's attention to geographical detail has always been suspect in the eyes of the Welsh workers - the shirts were sold with a "made in England'' label. But its decision to export jobs to China was the final straw - not only for the local people but for the glittering array of celebrities that took up their cause with somewhat surprising gusto.

The Oscar-winning actor Emma Thompson has delivered perhaps the most damning verdict on the company. "Burberry should not be making this move it will brand itself as greedy, unethical and - perhaps most importantly for the profile of the company - inauthentic,'' she said, accusing the company of a "bastardisation of the brand'' and the betrayal of the workforce.

Mr Hazell is undergoing retraining in order to seek work in a region which has never recovered from the pit closures in the 1980s. The GMB union and Leighton Andrews, Welsh Assembly member for the area, have managed to salvage something from the wreckage, largely through seeking support of celebrities for their campaign to keep the plant open.

Apart from Emma Thompson, campaigners enlisted the help of Ioan Gruffudd, the new "face of Burberry''; Sir Tom Jones; the Notting Hill star Rhys Ifans; Sir Alex Ferguson and the opera singer Bryn Terfel. The Prince of Wales contacted the Government to see if he could help.

Collectively they delayed the factory's closure and won a £1.5m donation from the company for community projects. Burberry has also agreed to consider providing the factory with work in the future, a promise secured by Mohammed Fayed of Harrods. The workers also received enhanced redundancy payments.

At a rally at the Parc and Dare Theatre at Treorchy, Chris Bryant, MP for the Rhondda, said the Burberry employees should be proud of their achievements. "They didn't think they would have to worry about some poor people in Wales. But how wrong could they get.'' He said any other company with a British brand would now think "very hard'' before switching manufacturing abroad.

Leighton Andrews told the rally: "I believe Burberry have made a big mistake. If they want to be seen as a British company, they have to keep manufacturing jobs in Britain. This will come back to haunt them and it will hit them where it hurts the most, in the profits.''

Mervyn Burnett, a senior GMB official, said his union was still pursuing the company over the pay and conditions of the Chinese workers. He said that no British company could guarantee that child labour would not be used. He said that while Treorchy produced polo shirts for £11, the two Chinese plants could turn them out for £4. "How can we compete with that?'' he asked.

"The factory was making a profit, but it wasn't enough for them. It's simply corporate greed. My members feel anger and bitterness. They feel betrayed. People have to learn there is a price to be paid for British goods.''

A spokesman for Burberry said the company did not employ anyone under the 16 and that there were regular "third party audits'' to ensure the rule was obeyed. He said the company retained a "strong manufacturing capability'' in Britain including two factories in Yorkshire and that Burberry clothing was 100 per cent designed in the UK.
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