An optimist’s charter
Is the world becoming a better place? Globalisation’s optimists say it could be. So argues Martin Wolf in his
outlook for the world in 2023, in which he sets out the state we are in.
But progress depends on avoiding environmental catastrophe, nuclear war and facing down the forces of division within countries – and things are not going well, as he explains.
Efforts to reduce poverty have stalled. Human development - an amalgamation of national income per head, years of schooling and life expectancy is in decline, with progress reversed by the pandemic. And support for democracy is falling among wealthier people.
Martin’s assessment is based on
a UN report, which suggests “three I’s”: investment, insurance and innovation. The most important, he argues, are social and political.
“The last period of such renewal was in the middle of the 20th century. We cannot wait for a second period of catastrophe before we attempt renewal once again.”
In the short term, in the US, Europe and UK at least, high inflation is hampering progress. But there are signs
inflation may be entering a new phase.
The Fed’s
half-point rate rise this week, a shift down from previous 0.75-point increases, came ahead of smaller rises expected from the European Central Bank and the Bank of England.
Falling eurozone factory output, ending a period of strong industrial growth, gives the ECB more reason to slow rate rises. In the UK,
inflation slowed to below 11 per cent last month.
Economists maintain inflation has peaked in all three regions. But central banks are still worried that it will take too long to fall towards their 2 per cent targets.
Keep track of inflation wherever you are in the world with our
global inflation tracker.
The charges against FTX: ‘No record-keeping whatsoever’
“Fraud in shorts and T-shirts” is how Damian Williams, US attorney for the Southern District of New York, describes 30-year-old Sam Bankman-Fried, the “boy king of the shattered FTX empire”.
Bankman-Fried’s story is a cautionary tale for boards and investors everywhere. He stands accused of perpetrating
one of the largest financial frauds in US history. The FTX chief, known for his wild hair and relaxed clothes, is
in police custody awaiting extradition from the Bahamas to the US to face trial. His lawyer has contested the extradition.
One of Bankman-Fried’s close associates
tipped off Bahamian regulators in the days before the company collapsed.
How did Bankman-Fried’s crypto currency trading market suddenly collapse into bankruptcy in November, with $8bn in customer funds missing?
“I bit off more than I could chew, and ended up failing to focus on risk management,” Bankman-Fried said in prepared remarks, blaming a busy schedule that meant he was “less grounded in operational details than I had been before”.
But the depths of FTX’s governance failures and mismanagement were immense, according to John Ray, FTX’s new chief executive, who was appointed by courts.
During Bankman-Fried’s tenure, staff recorded transactions on Slack, the office chat software, and did the accounts on QuickBooks, software widely used by freelancers and small businesses.
There was no board of directors to exercise oversight. Large gaps in insurance and payments were made to Bankman-Fried’s family, the new chief executive told lawmakers.
“Literally, there’s no record-keeping whatsoever.”
The aftershocks keep coming, with
investors pulling more than $1bn in one day this week from Binance, the world’s largest crypto exchange.
Writing in the FT, Thomas Vartanian, a former regulator, lawyer and director of the Financial Technology & Cybersecurity Center, argues that FTX’s failings were predictable and show the need for controls.
“Many cryptocurrency holders who cherished its decentralised nature and freedom from government intervention will eventually be pleading for regulation,” he says.
The macroeconomic case for paying UK public-sector workers more
Can the UK government afford to increase public sector pay?
The Prime Minister, Rishi Sunak, claims current pay offers to nurses, ambulance crews, rail workers, postal staff and border officials, currently in the region of 5 per cent, were “reasonable and fair”.
Any more would stoke inflation. “It is high inflation that is eating away at people’s wages,” the Treasury said.
Unions disagree: UK strikes are intensifying, with nurses joining postal and rail workers in walkouts this week in
a wave of industrial action.
But experts say the government’s £28bn estimate on the costs of big pay rises is misleading. For a start, unions are disputing this year’s pay deal, not next.
Some economists say squeezing public sector workers is a political choice with an opportunity cost. Paying them better could bring wider productivity benefits - such as healthier workforce and commuters arriving in the office on time.
“There is a huge macro-economic case for sorting out the NHS, says Tony Yates, a former Bank of England economist, pointing to the record number of people who say they were not in the workforce because of long-term sickness.
Nurses in England and Wales staged a historic walkout today over pay, in what Pat Cullen, the RCN general secretary, described as
“a failure on behalf of governments”.
Cat Rutter Pooley argues that strikes in those sections of public services that have been privatised - the Royal Mail and railways - are hard to solve with pay rises.
There is a wider political cost to the UK Conservative Party to relentless austerity.
Robert Shrimsley points out that it is eroding its voter base by backing older generations while failing to make political choices appeal to working-age voters who may have voted Tory.
Simon Clarke, former cabinet minister, identifies three pressure points: house building, childcare costs and tax.
“A nurse or teacher in the north-east can have a four-bedroom house. That's not true in London or the south,” he says.
Best of the rest of business news
The European parliament is at the centre of
a major corruption scandal this week, after Belgian police seized €600,000 in cash and detained an MEP.
Police acted as part of an international investigation into claims that
football World Cup host Qatar sought to buy influence and soften language on its human rights record. Dohar has rejected allegations of misconduct.
But the charges have triggered resignations. Eva Kaili, a vice-president of the European parliament, has been stripped of her duties in the legislature. She had defended Qatar's human rights record in the EU last month to the parliament, hailing Qatar as a “frontrunner in labour rights”.
Transparency International, the anti-corruption group, said EU institutions needed an independent ethics regulator.
MEPs are also seeking a probe into a 2021 deal that gives Qatar Airways access to the entire EU market, following allegations of corruption against some of the parliament's former members. The carrier is allowed to operate direct flights from Qatar to any airport in the bloc.
“The parliament has allowed a culture of impunity to develop,”
Michiel van Hulten, its director, said.
And in a boost this week to clean-power hopes, US scientists say they have made a breakthrough in pursuit of limitless, zero-carbon power with a net energy gain in a fusion reaction for the first time.
Many scientists believe fusion power stations are decades away. But the potential is hard to ignore. Fusion reactions emit no carbon, produce no long-lived radioactive waste. A small cup of the hydrogen fuel could, in theory, power a house for a hundred years.
Catch up with our
explainer on how US scientists moved one step closer to the dream of fusion power.
