Martin Vander Weyer en The bottom line <div class="field field-name-field-subheadline field-type-text-long field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even">The Wal-Mart Effect: how an out-of-town superstore became a superpower Charles Fi</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Salmon used to be a luxury for the average American family, but nowadays it is a weekly staple - because Wal-Mart sells fillets of it, conveniently "pin-bone-out", for as little as $4.84 (£2.66) a pound. The fish are farmed by the millions in the fjords of southern Chile, processed in low-wage factories there, and freighted unfrozen to arrive pink and gleaming, within 48 hours of being killed, on the counters of thousands of Wal-Mart superstores across the US. The price per pound, Charles Fishman points out in this meticulously researched and richly anecdotal book, is less than the postage it would cost you to mail the fish back to Chile.</p> <p>The impact of that price on American grocery bills and eating habits, on the economy of Chile and on the ecology of a distant corner of the Pacific polluted by industrial quantities of fish food and faeces, is what Fishman calls the "Wal-Mart effect". It is, in his view, neither wholly bad nor wholly good - but it is very, very big. Wal-Mart is a force in America's economic life to a far more significant degree than its nearest British equivalent, Tesco, over here. The Arkansas-based chain, founded by Sam Walton in 1962, is not simply the biggest private-sector em-ployer and the biggest holder of retail market share. Its low-price strategy, so pervasive that other stores follow suit even when they are not direct competitors, plays a principal role in holding down US inflation; its relentless demand for low prices from suppliers has been a major driver in the export of US manufacturing jobs to China and elsewhere.</p> <p>But it is a relief to find that Fishman - an editor at <em>Fast Company</em> magazine - is not just another journalist on a mission to expose Wal-Mart as a monstrous conspiracy against the little guy, as the <em>Wall Street Journal</em> writer Bob Ortega tried earnestly to do in <em>In Sam We Trust</em> (1998). Fishman is clearly troubled by Wal-Mart, but he exercises an open mind. He recites the litany of cases against Wal-Mart for using and abusing illegal immigrant labour, and for sourcing goods from cruel third-world factories, but he acknowledges that the company now has a clear code of conduct for suppliers and a team of inspectors (albeit a relatively small one) trying to make it stick. He repeats accusations that Wal-Mart is excessively secretive and that its employees and suppliers speak to the press at their peril, but he accepts that there would be no profit for the company in giving away valuable commercial data. </p> <p>He reminds us that other supermarkets and vast numbers of downtown groceries have gone to the wall because of the arrival of Wal-Mart's soulless giant sheds. But he observes that Wal-Mart is not simply a predator. It does not just lower its prices until the competition has been destroyed, then raise them again: it keeps them low, as its slogan says, "always". And that is why even customers who declare themselves in surveys to be "conflicted" - actively disliking Wal-Mart for its impact on communities and jobs - still shop there more than once a week, spending almost as much as those who declare themselves to be Wal-Mart's "champions".</p> <p>In effect, Fishman concludes, Wal-Mart does nothing more sinister than sell a $3 item of merchandise for $2.97. The frugality and focus that have enabled it to do this consistently for 44 years are largely to be admired, even when they extend to forcing suppliers to install toll-free phone lines so that Wal-Mart does not have to bear the cost of calling for deliveries. Sam Walton himself, a bird-hunting backwoodsman who drove a dog-chewed pick-up long after he became a billionaire, was an authentic American hero of capitalism.</p> <p>Yet Wal-Mart today is no longer the company that Walton bequeathed when he died in 1992. It has multiplied in scale and reach at home and abroad (it owns Asda here), acquiring unprecedented market power - and this angers unions, environmentalists and journalists. But its managers do not have a secret plan to rule the world; they just sell as much cheap stuff as they can. If there is anything sinister in that, it is the hypnotic effect it has on American shoppers. They happily bought Wal-Mart's $2.79 gallon jars of pickled cucumbers even though they could not possibly eat them all - until the manufacturer went bust trying to supply them. When the price of underpants was slashed, they bought astonishing quantities and stockpiled them.</p> <p>In an era of rampant over-consumption, don't blame Wal-Mart for the "Wal-Mart effect": blame its customers, especially the "conflicted" ones.</p> <p><em>Martin Vander Weyer is the author of </em>Falling Eagle: the decline of Barclays Bank<em> (Weidenfeld &amp; Nicolson)</em></p> <p></p> </div></div></div> Mon, 22 May 2006 12:00:00 +0000 Martin Vander Weyer 153305 at A bit rich <div class="field field-name-field-subheadline field-type-text-long field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even">Top Man: how Philip Green built his high street empire Stewart Lansley and Andy Forrester Auru</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>One morning last summer, the chief executive of Marks &amp; Spencer, Stuart Rose, opened his car door at the entrance to his Baker Street office to find Philip Green steaming towards him. Green claimed he was just passing, but onlookers formed the impression that the stockily built, permatanned, chain-smoking entrepreneur had been waiting nearby, in his chauffeured Mercedes with blacked-out windows, for Rose to arrive.</p> <p>Green started to drag the M&amp;S boss out of the car by his lapels, shouting, "I want a fucking word with you." During the 20-minute altercation that followed, he rang his wife, Tina, in Monaco and handed the phone to Rose so that Tina could call him (so Rose told colleagues) "the lowest form of life". Afterwards, Green dismissed the incident as a bit of fun: "If I'd been serious, he'd have gone through the window."</p> <p>It sounds more like a scene from <em>The Sopranos</em> than the sort of tactic normally deployed in a takeover approach to a major public company. In fact, that approach was in the process of being rebuffed - which was why Green was so cross - but playing by his own rules had already brought him ownership of two major high street retailers, Bhs and the Arcadia Group (which includes Topshop and Miss Selfridge), and the fastest £4bn fortune ever made in Britain.</p> <p>Green is a one-off, and the City's wariness of his short temper and foul mouth is probably one reason why he has made such an enormous pile: unwilling to observe the courtesies that might allow him to take risks with other people's money by raising it through the stock market, he has taken enormous risks with his own. "He puts his balls on the table every time," according to one admiring friend, the restaurateur Marco Pierre White. The most recent result is that he has been able to pay Tina and himself a dividend from Arcadia of £1.2bn.</p> <p>That does not make him lovable, and neither does the portrait painted by Stewart Lansley and Andy Forrester in this meticulous but rather unsparkling account of Green's rise from West End rag trader in the late 1970s to the Monaco-residing business superstar he is today. He throws amazing parties, but not everyone would want to mix in his crowd, which includes Alex Ferguson, Michael Winner, Bruce Willis and "the Grand Prix set". He has a sense of humour, but not a subtle one - he likes, for example, to apply "the Kalashnikov test" to Oxford Street shops, which means: "You could walk in with a machine-gun, fire off a whole clip of ammunition and you wouldn't hit a customer." He rewards his staff handsomely when they meet his targets, but shouts obscenities at them when they do not. His dealings with the press have often been catastrophic, most notably when the <em>Guardian</em> recorded him ranting about its financial editor, Paul Murphy: "He can't read fucking English. Mind you, he is a fucking Irishman." Green finished up issuing an apology to the entire Irish community for that one.</p> <p>He does not apologise for many things but he does give to good causes, often making show-stoppingly large bids at charity auctions. However, "judged by the standards of some of the super-rich", write Lansley and Forrester in a concluding chapter which suggests that close study has not endeared their subject to them, "he is not especially generous".</p> <p>Maybe not, but how he spends his fortune is his own affair. The more interesting question is how Green made it: whether he is an entrepreneurial genius or just a lucky gambler. Some of his early ventures hit the rocks, and his diffi- cult relations with the City and the media date back 15 years to the time of his involvement in a company called Amber Day, when <em>Private Eye</em> tried to blacken his name by alleging connections with, among others, the disgraced financier Roger Levitt. Nevertheless, Green re-tained the loyalty of some powerful backers and went on to win the admiration of his retailing peers - even Stuart Rose. No one has ever accused Green of being a style guru or a sensitive man-manager, but he is a lot more than just a takeover shark: he lives and breathes the much-repeated maxim that retail is detail.</p> <p>As Sir David Sieff, the former board director of Marks &amp; Spencer, put it: "He know's what's selling, what customers want, when to buy, how much to pay and what everybody else is paying for it." His ruthless reshaping of Arcadia and Bhs is one of the smartest bits of work in the British business scene in the past decade - and the profits from it have bought him everything except serenity.</p> <p><em>Martin Vander Weyer is the author of </em>Falling Eagle: the decline of Barclays Bank<em> (Weidenfeld &amp; Nicolson)</em></p> </div></div></div> Mon, 12 Dec 2005 12:00:00 +0000 Martin Vander Weyer 152211 at Can free trade be fair trade? <div class="field field-name-field-subheadline field-type-text-long field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even">Fair trade special - It's unfair when poor countries can't sell their goods here. It's also unfair t</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Free and fair are words that often go together, like spick and span or Marks &amp; Spencer. Free and fair elections, for example, are events devoutly to be wished for everywhere from Baghdad to your local town hall. But what of free trade and fair trade? Do they go hand in hand, or is one the enemy of the other?</p> <p>The loose alliance of anti-globalisation protesters and fair-trade campaigners who subscribe to the view - expressed on a banner displayed during the Seattle protests - that capitalism should be replaced by "something nicer", clearly takes the latter view. To them, free trade is a conspiracy of the rich to get richer at the expense of the poor, with the World Trade Organisation - the Geneva-based, 148-member Tower of Babel that sets the rules - doing the dirty work on behalf of Washington and its corporate cronies. In the free traders' dark heart, the protesters claim, is a plot to steal the developing world's natural resources, wreck its environment and treat its workers like slaves while ensuring that Halliburton gets the infrastructure contracts, McDonald's gets the fast-food franchises and the World Bank gets its loans back.</p> <p>By contrast, a line of reputable laissez-faire thinkers from Adam Smith to the <em>Financial Times</em>'s Martin Wolf take the former view: that international trade without the interference of tariffs, subsidies, price controls and pork-barrel politics is by far the most efficient way of matching global supply to demand while making all the participants more prosperous - and that the best indicator of fairness in a broad sense is rising prosperity, the absence of which makes all the benefits of a just and well-ordered society so much harder to obtain. Crucial to this side of the argument is the idea that, as John Kay put it in his even-handed analysis <em>The Truth About Markets</em> (2003): "We who live in rich states are not rich because those who live in poor states are poor" - or P J O'Rourke, rather less even-handedly in <em>Eat the Rich</em> (1998): "Economics is not zero-sum. If you eat too many slices of pizza, I don't have to eat the box."</p> <p>You might expect George W Bush to subscribe to the right-wing O'Rourke's school, even if you suspect that he understands diddly-squat about economics.</p> <p>Here is what he said shortly after he became president in 2001: "Open trade is not just an economic opportunity, it is a moral imperative." But what did he do in March 2002 to drum up Republican support in "rust-belt" states for the midterm congressional elections? He whacked a 30 per cent tariff on steel imports, causing extreme pain to exporters in parts of the world with which the US was supposed to be friendly, including Britain, Japan, South Korea and Vladimir Putin's Russia. When Russia responded in kind by banning imports of US poultry, jeopardising jobs in 38 states, Bush stuck to his guns, because the steel votes outnumbered the chicken votes. And when pressure from the WTO and other factors - including the need for alliance-building for "the war on terror" - made it expedient to take the steel tariff off again, he declared the whole episode a victory against anti-competitive practices in world trade.</p> <p>Therein lies the problem in trying to judge whether free trade is fair. Like socialism, it has hardly ever been put into practice wholeheartedly; purists have to look back to Hong Kong in the 1960s for an example.</p> <p>Politicians pay lip-service to the social and economic benefits of open markets and are always ready to lecture other countries about it. But they invariably back away as soon as jobs and votes are threatened at home.</p> <p>And when it comes to agriculture (with the exception of subsidy-free New Zealand), politicians do not even bother to pay lip-service. In 2000, every cow in the European Union received the equivalent of $913 in subsidy, while every sub-Saharan African received $8 in EU aid. Two-fifths of the entire EU budget goes on subsidising farmers and putting food producers everywhere else in the world at an unfair disadvantage - except possibly American farmers, who are themselves comfortably protected by a $180bn subsidy deal also brought in by George W Bush in 2002.</p> <p>Yet we must also be fair to politicians: sometimes they must find the morality of free and fair trade genuinely confusing. Take the story of the humble banana, staple product of several of Britain's former Caribbean dependencies and of Latin America's so-called "banana republics", such as Ecuador, which fall within America's sphere of influence. For many years, Caribbean producers enjoyed privileged access to EU markets, while Latin American "dollar bananas" were subject to hefty tariffs and quotas. But small traditional farmers in the Windward Islands tended to produce small, expensive fruits, while big, efficient operations in Ecuador produced big, cheap ones. The Latin producers already had a large slice of the European market (Germans like their bananas big) but wanted more, and argued with some justification that they were being blatantly discriminated against.</p> <p>The WTO and the Clinton administration agreed with them - and the US threatened punitive tariffs on a list of luxury goods, including Scottish cashmere knitwear and "tartan" shortbread, unless the EU moved swiftly to remove the barrier. An open- and-shut case, you might think, but there were other factors muddying the water - not least that Carl H Lindner, the tycoon behind the Chiquita company of Cincinnati which controls most of the Latin American banana trade, happened to be one on Bill Clinton's major campaign contributors.</p> <p>If you were a trade minister, would you think it fairer to stick up for old-fashioned Commonwealth preference (it was, after all, we colonialists who converted these island economies to banana production in the first place) or for Ecuadorian farmers who had for so long been denied equal market access? The outcome so far has been a long foot-dragging exercise, in which the EU has provided aid to convert Caribbean producers to other crops but dollar bananas are still subject to higher duties; yet another "trade war" looms as a result.</p> <p>Or take another issue that stirs strong emotions: the exploitation of labour in poor countries - very often women and children - to produce cheap goods for export to rich countries. Martin Wolf tackles this one in <em>Why Globalisation Works</em> (2004), using the example of Bangladeshi women in the clothing industry. Is it morally wrong of us to buy shirts made in vile factories paying pittance wages?</p> <p>No, it isn't, Wolf argues: before these factories came along to meet western demand, tradition forbade women from such work; now they have "a measure of autonomy" and their wages make it possible for a higher proportion of family incomes to be spent on education, health and nutrition. To western eyes their conditions look dreadful, but compared to the alternatives - dependency as a wife or despised daughter, prostitution, farm labour, begging - the factories offer "enormous gains". Taking a stance against this kind of trade development, he says, is "mere tokenism. To be upset over poverty is entirely justifiable; to block a route out if it, in response, is not."</p> <p>In the end, most economists tend to agree with Wolf that developing countries gain more in terms of social progress and eradication of poverty when they engage more openly in international trade, while countries that do not do so - North Korea springs to mind - get left behind. Protectionism and closed borders encourage corruption, inefficiency and lack of opportunity; trade and inward investment encourage technology transfer, rising standards and rising aspirations.</p> <p>For sure, there are bad foreign-owned factories in Dhaka and Jakarta, and rapacious middlemen in the Kenyan coffee trade; for sure also, western governments have been shamelessly hypocritical in protecting their own markets, and the WTO has yet to prove itself a true friend to the poor. But in principle, free trade and fair trade can go hand in hand, and offer the best chance of a slice of the pizza of prosperity.</p> </div></div></div> Mon, 28 Feb 2005 12:00:00 +0000 Martin Vander Weyer 150052 at Viagra for the economy <div class="field field-name-field-subheadline field-type-text-long field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even">2005: Self-esteem - Aromatherapy, life gurus, shiatsu: self-esteem will be even bigger business in t</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>''Always have at least one treat to look forward to. Ideally you should have one mini-treat each day, a slightly bigger one every week and a bumper one each year. People with low self-esteem rarely treat themselves enough."</p> <p>So writes Gael Lindenfield, "the UK's number-one confidence expert", in the 51st of the 365 day-by-day tips that make up her bestselling <em>Self-Esteem Bible</em>. Contained in this nugget of advice is the key to a whole new way of looking at the British economy.</p> <p>Not many people realise this (not even the British Retail Consortium, whose spokeswoman had never heard of the idea until I put it to her), but self-esteem is one of Britain's fastest-growing industries, worth at least £15bn a year and possibly as much as £30bn, compared with £8bn for the whole of what remains of British agriculture.</p> <p>Products, therapies, lifestyle advisers, magazines, books and television programmes aimed at boosting self-esteem and "well-being" have become big business in themselves, not least because boosting self-esteem is now heralded as a catalyst for improved productivity in every other business sector. People with high self-esteem, it is said, are more likely to enjoy their jobs, accept challenging targets, resist stress and cope with negative events, so selling self-esteem is more than just a good wheeze for those who claim to be able to package and sell it. It is like prescribing Viagra for the whole of Britain's productive economy.</p> <p>The social theorist we have to thank for this perception is Andy Westwood of the Work Foundation, whose recently published paper <em>Me, Myself and Work</em> (sponsored, significantly, by the Cosmetic Toiletry and Perfumery Association) sets out to examine why self-esteem is so important in our working lives today. In doing so, he provides some startling statistics. A survey of <em>Yellow Pages</em> directories since 1992 indicates a widespread decline in traditional shops and trades, but a 5,000 per cent increase in the number of aromatherapists. Roughly six million people in Britain pay a subscription to a private health club (though how often they visit them is another matter) and one British woman in five has attended a Weight Watchers class.</p> <p>We can all confirm these trends by observation: in Helmsley, my home town in Yorkshire, we have no dispensing chemist but we do have an alternative therapies clinic offering reflexology and shiatsu; six miles away in Kirkbymoorside, the last draper's shop has just closed, to be converted into a fitness centre.</p> <p>Down south, a City acquaintance tells me it is fashionable to spend your bonus on cosmetic dentistry. Michael Warshaw, chairman of the luxury bath and body products maker Molton Brown, told me his business is about "solutions to contemporary lifestyle challenges . . . People want to be cocooned."</p> <p>In all walks of life, it is OK to be "needy" (meaning self-obsessed, rather than poor) and to explore New Age answers to those needs: Tony and Cherie Blair led the way in 2001 when, according to the <em>Times</em>, they smeared their naked bodies with mud and papaya before primal screaming in a Mexican temple.</p> <p>Hold that thought, and let us consider whether this really amounts to an industry or a significant economic trend. Does it offer a smart stock-market play, in which investors should search for shares with a promising ratio of price to self-esteem? Or is it merely a passing fad based on what Frank Furedi, professor of sociology at the University of Kent, has called "the cultural myth of our times" - the idea that the pressures of modern life have made individuals more needful of reassurance about themselves?</p> <p>Investors certainly don't seem to have cottoned on. Nick Bubb of Evolution Securities, the stock market's leading retail-sector analyst, told me that it has never occurred to him to monitor competition between high street giants in terms of their appeal to self-esteem: if Hennes and Mauritz of Sweden is about to take over Marks &amp; Spencer's leadership position, it is because the Swedes offer better clothes and brighter shops rather than deeper appeal to vulnerable psyches. Boots, he points out, made a strategic move into "well-being services" not long ago that turned out a complete failure. But Bubb also let slip that he had just enjoyed an expensive holiday in India, which included an experience of Vedic massage: all but the most unreconstructed of us, it seems, have acquired the appetite for treats and treatments which Gael Lindenfield prescribes.</p> <p>Another investment expert, who should perhaps remain nameless, put all this in a clearer perspective for me. Yes, she said, the middle classes have more disposable income these days and everyone likes to pamper themselves occasionally; and yes, since you've asked, health clubs have been a hot investment for the reason that they tend to make oodles of money. But retailers and services seeking to hitch their brands to the "self-esteem" bandwagon are in danger of overegging it.</p> <p>"Suddenly, everything has to be an experience," she groans. "If you go to Space.NK in Notting Hill for a leg wax you just want it quick and pain-less, but you have to go through a whole ritual of fluffy bathrobes and scented candles. You go to an Aveda salon for a haircut and they insist you have a head massage first, with some 19-year-old idiot asking which oil you prefer, 'relax' or 'energise'. It just makes me want to slap them."</p> <p>Aveda, by the way, makes a big splash about protecting the planet, a theme that plays well with customers who want to feel better about themselves. On that basis, you might think Anita Roddick's Body Shop would be ripe for a self-esteem-fuelled revival - but my anonymous investment expert-cum-shopper tells me the brand is now too mainstream to catch the wave; the newcomer to watch in the "natural cosmetics lifestyle brand" stakes is Lush, maker of Buffy the Backside Slayer Body Butter - which is definitely on my Christmas present list. But back to the serious arguments.</p> <p>Clearly there is something going on in consumer markets, and it might be a response to a national epidemic of low self-esteem. Or it may be something much simpler: people have more money and time to spare for luxuries, and can overcome the guilt associated with luxuries by being persuaded that it helps address an inadequacy they did not realise was there in the first place.</p> <p>A recent research exercise by Bridgepoint, the private equity firm, points out that while personal spending on food and clothing has remained relatively stable since 1978, spending on "leisure services" has more than tripled, partly because consumers no longer see any point in saving. As to how that leisure spend is allocated, focus groups say they are less interested in lifestyle brands and more interested in bargains (on eBay, for example) or treats: but the treat they value most is nothing more complicated than a bit of peace and quiet in the midst of their increasingly busy lives.</p> <p>So I incline to the view that, as a framework for studying consumer behaviour, the self-esteem theory contains quite a high proportion of hot air and marketing hype. But Westwood disagrees; he goes as far as to argue that the self-esteem "industry" deserves government support because it offers a unique form of insurance against insecurity about jobs, money and personal circumstances, helping us collectively to maintain our competitive edge in a changing world.</p> <p>A cynic might respond that an economy which has lost swathes of businesses in its manufacturing and farming industries while enjoying an 800 per cent increase in the "male grooming market" since 1998 is an economy that has lost all appetite for competitiveness and given way to self-indulgence. If we are keener on moisturising than on making goods and growing food, perhaps it is not worth investing in us at all.</p> <p>It would be unfair to leave the subject at this point, however: there is another aspect of Westwood's analysis that deserves attention - and it is as far removed as could be from the world of Notting Hill salons and primal screaming holidays, not to mention Vanessa Feltz's <em>Cosmetic Surgery Live</em>.</p> <p>For yuppies, self-esteem deficit syndrome may be a largely imaginary excuse for shopping, but for those who are poor, jobless and have been failed by the state education system, it is much more real. Step forward here an unlikely hero of this story, though a keen adherent of alternative therapies: the Prince of Wales.</p> <p>When he was criticised in November for appearing to suggest, in a leaked memo, that children with little talent would do better to have a little less aspiration, his defenders pointed out that through his charity, the Prince's Trust, he has probably done more than anyone else in Britain over the past three decades to boost the self-worth and aspiration of young people on the edge of society - more than half a million of them.</p> <p>Earlier this year I watched for myself, at an after-school club for underachievers in a Burnley comprehensive and on a training course for 18- to 25-year-olds at the Bolton YMCA, how the trick is done. The key is to find a kernel of self-esteem in kids who would otherwise think of themselves as social rejects and no-hopers, and would most likely turn to drugs and crime.</p> <p>To the extent that the trust's self-esteem coaching makes troubled youngsters revalue themselves and become productive members of society, Westwood's thesis stands proud. However, it would be wise not to overload it with psychobabble about middle-class shopping habits.</p> <p>Meanwhile, more from Gael Lindenfield. Eighty-three: buy yourself a small book of motivational quotations. Ninety-nine: think of yourself as a product for sale. One hundred and seventeen: like celebrities, transform your appearance regularly. And finally, if Christmas shopping is getting you down, 119: imagine that you have three weeks to live.</p> </div></div></div> Sat, 01 Jan 2005 12:00:00 +0000 Martin Vander Weyer 149619 at You won't make money, so make love . . . <div class="field field-name-field-subheadline field-type-text-long field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even">That, more or less, is the advice of the billionaire Warren Buffett: even if the Iraq war ends quick</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Once the shooting starts, the stock market will wobble again like it did earlier this month, when it lost 6 per cent on Wednesday, falling to an eight-year low, only to climb back 15 per cent by the following Tuesday. "Wobble", by the way, is intended to suggest movement in one direction then the other, without trying to predict whether shares will move up or down first or whether they will finish the coming week higher or lower. Frankly, your guess is as good as mine - and at least as good as that of the overpaid City pundits who have misforecast the FTSE-100 index for the past three years.</p> <p>Stock markets are about as predictable as shoals of tiny tropical fish, darting hither in greed and thither in fear, sometimes dodging a shark, sometimes dodging a shadow they think is a shark; sometimes sensing nutritious algae ahead, only to find worthless clouds of sand; sometimes seeing all these things at once and displaying no collective sense of direction at all. Stock markets have no more idea than you or me about what is going to happen to Saddam Hussein, or Tony Blair, or the global economy, or the behaviour of shoppers in Marks &amp; Spencer. They just guess wildly, correct themselves, and guess again.</p> <p>What's more, the stock market does not even know what is going to happen to the stock market. Asked whether the FTSE low of 3287 marked the end of the bear market, equity strategists could offer little except cliches about "the fat lady singing" - or not singing, as the case may be. Only one - Simon Davies of Threadneedle Asset Management - was honest enough to admit that he had not "the foggiest idea" how shares will behave in the short term. "You'd be barking mad," he went on, "to think there was no risk involved in investing at the moment."</p> <p>But millions of us are investing at the moment, whether we like it or not, through corporate and personal pension plans, unit trusts, ISA accounts and bombed-out shares that we already happen to own.</p> <p>It would be comforting to have a clue whether we can expect to feel richer or poorer by this time next year. So let me try to demystify the arguments on both sides.</p> <p>The case for imminent market recovery is based on the simple argument that shares have fallen far enough, for long enough, to address all the negative factors that started the fall. The FTSE index has been dropping for more than three years, which is longer than any bear market since the 1930s. It has lost half its value, which means that shares now trade at price-earnings multiples (the ratio of a company's share price to its expected profits per share) of 16 times, which is close to the long-term average.</p> <p>Shares also offer dividend yields above 4 per cent, compared to only 3.3 per cent on government stock - the first time since the 1950s that equities have offered better income than gilts.The yield is a reflection of the perceived risk: the higher the risk, the greater the return the investor expects. The relatively low return on gilts reflects the investors' belief that governments, which cannot go bankrupt, are still a safer haven for money than private companies.</p> <p>Meanwhile, optimists say, share prices are more than usually out of touch with reality: things are just not that bad. The British economy is still growing, albeit slowly; inflation is under control; unemployment is low. And the war in Iraq could be done in a month - the rally of 13 and14 March was prompted partly by trading-floor reactions to rumours that Iraqi battalions are ready to surrender en masse. If that turns out to be true, the oil price will swiftly drop back to a comfortable $20-$25 a barrel (in recent weeks it moved to above $30) giving growth an immediate boost. We will be back to business as usual, and share buying will be in fashion again by Easter.</p> <p>But then there is the opposite case: the market's nadir is still to come. IG Index, a spread-betting service popular with City types, is indicating that the FTSE will fall to 2780 before it finally rises again. Some pundits put the bottom below 2000, pointing out that, in percentage terms, the index has to fall to 1884 to match the bear market of 1972-75.</p> <p>Behind this pessimism is the realisation that the global economic woes that were depressing markets before George Bush decided to start a war will still be there after he wins it. The diplomatic drama of recent months has distracted us from America's trade deficit, Japan's deflation, Europe's sclerosis and our own soaring levels of household debt. We have forgotten that corporate America is so discredited by Enron and other scandals that investors no longer believe profit figures, or anything they are told by Wall Street analysts.</p> <p>We have ignored the dangerous exposures built up by traders in derivatives, the complex instruments recently described by the American billionaire investor Warren Buffett as "weapons of financial mass destruction" (see Patrick Hosking, page 33). We have overlooked the fact that, on historical comparisons, US shares are still strikingly overvalued - at a price-earnings ratio of 27, compared to a long-term average of 17. They could easily dive in response to more corporate scandals, another terrorist outrage, or a setback in Iraq. And if US shares dive, British shares will, too.</p> <p>They may dive again anyway, if a major life assurance com- pany declares itself insolvent and defaults on its obligations to pension policy-holders - a disaster that is daily more likely while the values of the assur-ers' share portfolios remain so depressed. Shares will dive if FTSE-100 companies' profits fall far below forecast because cash has had to be put aside to fill an estimated £65bn black hole in their own pension funds.</p> <p>Prices will sink if Tony Blair loses his career gamble on Iraq and is succeeded by Gordon Brown, a socialist (as the market sees it) with no apparent sympathy for private investors, pension funds, or companies struggling to make profits. While Blair remains in post, prices could plunge in response to the Budget in April, which is expected to contain lower growth forecasts and more tax rises.</p> <p>So what should we expect shares to do next? The best synthesis of history and punditry I can offer is that the rally in the run-up to war will be followed by a period of extreme volatility while fighting continues, a euphoric surge when Saddam falls, a jittery fall to a new low when the world realises what a mess it is in afterwards, and a long, slow recovery beyond that.</p> <p>Don't expect the FTSE 100 to regain its 1999 peak of 6930 for a decade; don't invest in anything you don't understand; and remember the wisdom of billionaire Buffett: "Money can't change how many people love you."</p> </div></div></div> Mon, 24 Mar 2003 12:00:00 +0000 Martin Vander Weyer 145064 at The New Statesman Profile - Institute for Fiscal Studies <div class="field field-name-field-subheadline field-type-text-long field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even">All the parties sought its approval during the election, but it sees itself as unravelling the decei</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>The search goes on for the real winners of the recent election. Politics itself was a loser, beaten into a poor second place by apathy. For punditry, the results were mixed: a raspberry to MORI for consistently overstating Labour's lead; a coconut to Matthew Taylor of the IPPR, for the largest number of television appearances, and to the American spin-doctor Frank Lutz, for his offbeat view. But a special prize for being clear, sensible and impervious to candidates' double-speak goes to a body of economists and tax accountants toiling in the salt mines of manifesto minutiae under one of the most yawn-inducing names in the London phone book: the Institute for Fiscal Studies.</p> <p>The IFS, personified by its director, Andrew Dilnot, occupies a uniquely authoritative niche in modern British political debate. When the institute said, at the beginning of the election campaign, that the tax burden had gone up under Labour, there was no point in anyone claiming that it had not. Every party was eager to say that its proposals had been given the once-over by the institute. Members on the House of Commons Treasury select committee listen like schoolboys when Dilnot takes them through the implications of legislative small print.</p> <p>The erstwhile Department of Social Security habitually sent its statistics to the institute's Bloomsbury headquarters for audit before publication - and did so ever since, in the late 1980s, the IFS spotted an accidental double counting of housing benefit in DSS figures that made low-income households look better off than they really were.</p> <p>The key to the institute's rise to judicial eminence is what John Kay, a former director of research at the IFS, calls "the objectivity thing". All the other think-tanks - whether the bow-tied free-marketeers of the Institute of Economic Affairs and the Adam Smith Institute, or the no-tie new-leftists exemplified by Matthew Taylor - look at the issues of the day through the prism of their own preconceptions and mission statements. The IFS, by contrast, sternly avoids any attempt to "plug a line or do good", says Kay.</p> <p>"It's our absolute intention never to come at something from a particular standpoint," echoes Dilnot. "We are quite deliberately independent, and we're our own regulatory mechanism."</p> <p>Is it possible to be genuinely objective in the institute's subject area? And is the success of the IFS really based on the in-depth quality of its output on riveting topics such as <em>Surplus ACT: a solution in sight?</em> and <em>A Recursive Algorithm to Generate Piecewise Linear Budget Constraints</em>? Or does it boil down to a brilliant marketing job by the television-friendly Dilnot?</p> <p>In his decade as director, Dilnot - who is still only 40 - has certainly upped the institute's profile. But its reputation in the cloistered world of serious thinkers about tax policy goes back 20 years before that. The institute was first mooted in 1965 by four City executives who were appalled by the then chancellor James Callaghan's introduction of capital gains tax, in what they regarded as a half-baked piece of legislation. One of them, the tax consultant John Chown, described the founding group as united in a determination that "never again should a government, regardless of its political colour and intentions, introduce far-reaching tax legislation without the benefit of deep and thorough analysis".</p> <p>If the civil service was not up to the job, a shadow organisation was needed to do it instead. A brainstorming weekend at The Bell hotel at Aston Clinton in Oxfordshire led to the founding of the Institute for Fiscal Studies, which was incorporated on 21 May 1969. The first director was Dick (now Lord) Taverne QC, who had been financial secretary to the Treasury under the chancellorship of Roy Jenkins. </p> <p>One of his contributions to the IFS was to commission the 1978 Meade report on the structure and reform of direct taxation in the UK, under the Nobel laureate economist James Meade, assisted by three bright young men: John Flemming and Mervyn King, who went on to be successive chief economists at the Bank of England, and John Kay. It was Kay who took the institute forward in the early 1980s, and who recruited Dilnot. Kay had taught at St John's College, Oxford, where he spotted Dilnot as a philosophy, politics and economics undergraduate with a flair for empirical data and an enthusiasm for computer modelling. Chatting in the quad one day in 1980, Kay offered him a summer job at the IFS. Dilnot has, in effect, been there ever since. After ten years of churning out learned papers on everything from the scale of the black economy to the future funding of the BBC, he emerged into the limelight as director of the institute in 1991.</p> <p>Small, neat, classless and personable, he has established himself as the nation's best explainer of fiscal change on Budget Day, and as a top-class soundbite artist at any other time. Neither bow-tie nor no-tie, Dilnot is a well-turned-out television natural, with a trustworthy face and a voice made more interesting by hints of his formative years at Maidstone Grammar and Olchfa Comprehensive in Swansea.</p> <p>He has the added advantage of being obviously happy in his work. "We have tremendous fun," he says, denying any urge to advance from analysing and explaining to real policy-making as a government adviser or "people's peer".</p> <p>Applying rigorous cost-benefit analysis to his own working life, he negotiated a salary cut at the institute in exchange for longer holidays, which he mostly spends at home in Oxford with his wife (an accountancy teacher) and two children. And he prefers to play down his own prominence as the public face of the IFS: in a team photograph in its 30th anniversary brochure, he appears in the back row.</p> <p>But what are his own politics, we might ask. His recent contribution to Channel 4's <em>Politics Isn't Working</em> series seemed to provide a clue. Subtitled <em>More Unequal Than Ever</em>, the programme was an artful exposition of the wealth gap in Britain - illustrated by Dilnot cycling up a Leeds hillside populated by families of varying economic altitude, from a single mother on benefits at the bottom to a millionaire entrepreneur at the top.</p> <p>Drawing graphs with his finger on a steamed-up cafe window, Dilnot went on to prove that the rich had got richer faster than the poor had got less poor, even under Gordon Brown's chancellorship. To narrow the gap, he concluded, would require more radical policies on tax, health and education. But was he actually recommending such a course? Close analysis of an accompanying <em>Guardian</em> leader-page article suggests he did not actually go that far: his message was simply that "we cannot have European levels of public service with British levels of tax, or American levels of tax with British levels of service", and that none of the three major parties in the last election "seems prepared to address the scale of the real choices we face".</p> <p>His mission is to explain rather than preach, but, by choosing income inequality as the subject for this personal essay, Dilnot has perhaps given us a hint of where he stands. His mentor, John Kay - talking about the IFS in general, rather than Dilnot in particular - says that it is almost impossible to be "100 per cent neutral" in economic analysis; there is a danger that if you claim you have no point of view at all, people will assume you mean "you're somewhere in the SDP-Lib Dem middle".</p> <p>Kay has become associated with ideas about corporate responsibility and stakeholding, placing him in the centre left of the business-school world. The tacit ideology in the work of the institute, he says, is that "there's always been a market orientation". But not enough of one, say right-wing critics of the institute. "There's always some degree of value judgement involved. In the IFS's case, they're basically happy with the general levels of current taxation. They reinforce the consensus view of the size of the state. They're just not radical enough."</p> <p>Such criticism deliberately ignores the limits of the institute's self-defined role, which is to unravel the deceits of politicians and civil servants so that the rest of us can judge for ourselves whether we are being cheated. With a chancellor who wants to tax us more without us noticing, and an opposition that wants to tax us less without us noticing what that means for spending, there has never been a greater need for Dilnot and his team.</p> </div></div></div> Mon, 06 Aug 2001 12:00:00 +0000 Martin Vander Weyer 140900 at A stake worth holding? <div class="field field-name-field-subheadline field-type-text-long field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even">From this month, salesmen will be offering the low-paid a new type of pension. But Martin Vander Wey</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Students of political language will relish the reappearance of "stakeholder". Once a power-word of the 1990s, it was so ideologically loaded that for a while new Labour found it too hot to handle; but now, like an almost forgotten hostage, it has emerged blinking into the light as the brand name for the government's personal pension scheme.</p> <p>Like all such words when used by politicians or corporate chiefs, it warns us of rhetorical sleight of hand, of an attempt to make something sound more benevolent and life-enhancing than it really is. Think of "community" in "care in the community"; or "sustainable", as used in company profit statements to suggest concern for the environment; or virtually any use of the word "inclusive". So the "stakeholder pension", operational as of the next financial year, seeks to suggest something more significant than a mere savings scheme.</p> <p>In its 1990s usage, stakeholding referred specifically to the idea - popularised by Will Hutton and John Kay - that employees, suppliers, customers and the community at large all had stakes in any given business comparable to the ownership rights of shareholders; and that managers had a duty to run the business in the interest of all stakeholders, rather than merely in the financial interests of owners.</p> <p>Tony Blair picked up the concept and enlarged it, in a speech in Singapore in January 1996, into an all-embracing "stakeholder society", which looked briefly as though it might be the big idea for his manifesto. But it played badly with focus groups (in one poll a month later, three-quarters of those asked had no clue what the phrase meant) and even worse with business leaders, whom Labour was trying urgently to befriend. So it was buried with scarcely another mention, and the loaded word itself was dropped from the Downing Street lexicon - until a use was found for it at last, to add sex and gravitas to personal pensions.</p> <p>But does the scheme live up to the claim for social justice that is packed into its name?</p> <p>In fairness to Alistair Darling, the social security secretary, the stakeholder scheme sets out to avoid the invitations to malpractice of personal pension arrangements nurtured by the Tories. What seemed a perfect expression of Thatcherism - encouraging personal responsibility, reducing the burden on the state - turned into the "mis-selling" fiasco, in which hundreds of thousands of people were lured by incompetent or dishonest salesmen into pensions that would have left them worse off than the established schemes they had opted to leave.</p> <p>The first personal pensions carried hefty fees to get in (upwards of 7 per cent), with even heftier penalties to change or get out again, and they often produced rotten returns.</p> <p>The stakeholder scheme, by contrast, imposes a maximum 1 per cent annual fee and allows the holder to stop, restart or change the level of contributions, or transfer to a new pension provider, at any time without penalty. So far so good - even if the terms are so tough on providers that it will take a decade for them turn a profit, creating a risk that only the biggest will stay in the market, while smaller providers pull out and leave their customers adrift. But where the scheme goes seriously astray is in its much-trumpeted ambition to reach parts of the population that even the most persistent pension salesmen never reached before: five million people in the £9,000- £20,000 income bracket.</p> <p>The first problem is that those at the lower end of this bracket simply do not have the habit or the means of saving. Even the minimum £20 monthly stakeholder subscription may be beyond them; and, so far, despite heavy advertising, nine out of ten of those with no pension arrangements in place say they have no intention of taking out a stakeholder plan.</p> <p>What is worse, if they do take one, those at the lower end of the bracket may find themselves - just like the previous set of victims - poorer than they would otherwise have been. They may finish up with too small a pension to live on, but too much to allow them to qualify for certain means-tested state benefits. In a classic example of the over-complexity of Gordon Brown's approach to tax and benefits, a modest stakeholder pension could wipe out entitlements under the minimum income guarantee and pension credit schemes, as well as rebates of rent and council tax. The unhappy recipient may be left with the suspicion that the plan was designed not so much to help him pay for his old age, as to help the government not pay for it.</p> <p>The scheme will prove equally unpopular with another section of "the people". By the autumn, when the stakeholder scheme will come into full effect, Britain's small businessmen, never slow to complain, will be obliged to set up staff pension schemes if they have five or more employees. Even though they will not necessarily have to contribute to these funds, the cost of administering them will add to the burden - put by the Confederation of British Industry at £12.3bn a year so far - of what is known in small-business circles as "Tony's red tape". Around 250,000 employers will have to comply or else face £50,000 fines.</p> <p>On the other hand, the stakeholder scheme looks like a winner for the kind of people Brown is least eager to help: the already well-off and well-advised. Since the maximum £3,600 annual stakeholder allowance can be invested on behalf of a non-working spouse, a fat-cat banker who already has ample pension provisions of his own can use it to cut his tax bill and provide his wife with a nice little pension as a Christmas stocking-filler, instead of a diamond necklace.</p> <p>The allowance can also be used to establish pension funds for children, though the money will be untouchable until they reach the age of 50. A rich grandfather, himself already enjoying the benefits of well-cushioned retirement, can pay full stakeholder contributions for a favourite granddaughter until her 18th birthday: in doing so he will reduce his remaining assets for inheritance-tax purposes, while she will be sitting on a fund worth £425,000 by the time she is 50.</p> <p>Far from achieving the Chancellor's aim of stealthily redistributing the national cake, the stakeholder scheme looks set to put more icing on the slice devoted to dynastic wealth.</p> <p>Meanwhile, independent financial advisers and pension providers are feverishly at work devising tailor-made schemes for other categories of sophisticated customer. Massow Rainbow - run by Ivan Massow, who was tipped as a Tory candidate for London mayor before defecting to Labour last year - offers a scheme designed to fit stakeholder rules while catering specifically for gay investors by paying death benefits to same-sex partners.</p> <p>As with ISAs and the whole gamut of tax reliefs and credits, it is those with time and cash on their hands who will read the small print and gain the advantage. The unsophisticated and hard-pressed - the housewife working part-time in a call-centre or a nursing home, for example - most likely will not. The stakeholder scheme is an improvement on what went before, but it will not make the poor less dependent on the state, nor hand them a stake to hold unless they themselves make the leap required to grasp it.</p> <p>In that sense, its portentous name will serve only as another reminder of the gap between reality and political rhetoric.</p> </div></div></div> Mon, 23 Apr 2001 12:00:00 +0000 Martin Vander Weyer 140134 at Why Brits prefer foreign bosses <div class="field field-name-field-subheadline field-type-text-long field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even">Martin Vander Weyer detects a loss of national confidence behind our growing practice of filling top</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>What special quality does Bob Kiley share with Luc Vandevelde, Matthew Barrett, Clara Furse, Sven-Goran Eriksson and Pierre-Yves Gerbeau? Each of them was appointed to manage a crisis-torn feature of British national life: respectively London Underground, Marks &amp; Spencer, Barclays Bank, the London Stock Exchange, the England football team and the Millennium Dome. They range widely in age and experience, from service in the US Central Intelligence Agency for the 63-year-old Kiley to a spell as an international ice-hockey star for the 35-year-old Gerbeau. But they have one important thing in common: they are not British.</p> <p>It is a curious paradox that a nation which remains resolutely chauvinistic in some respects should suffer a collapse of self-confidence when it comes to picking managers. We still think of ourselves as producing the world's best fighting soldiers; we nurture the wisest judges and the most versatile film actors; we remain proud of our architects, scientists, oarsmen and yachtswomen. But when it comes to picking people to run high-profile businesses and projects that have run into trouble, we call for Johnny Foreigner every time.</p> <p>Why should that be so? There was a time, not long ago, when we were good at managing everything from ceremonial fireworks displays to the entire workings of the Hong Kong government. Brits were unflappable, incorruptible, authoritative, good at dealing with nuts and bolts: no challenge was too big, no detail too small. We were the nation that produced Sir Alf Ramsey, the world-beating football manager, and Montagu Norman of the Bank of England, the role model of central bank governors the world over, and the admirable Crichton, the butler who took charge of his desert island with such natural aplomb.</p> <p>But we seem to have lost all that, or at least we think we have. To be a top-class manager requires stamina, judgement, leadership and a grasp of the minutiae of the project in hand, but today's British candidates rarely measure up.</p> <p>Those of a right-wing persuasion might say that the moral fibre and attention span of the generation now eligible for top jobs were sapped by being formed in the 1960s and 1970s, the decades when teachers ceased to demand decent classroom standards, industrial bosses gave up the struggle against union militants, and no one had any economic incentive to strive for excellence. They might go on to say that serious managers are less willing to offer themselves for jobs in the public eye today because the Blairite demands of focus groups and political correctness are too constraining. The left might then retort that the roots of the trouble lay in the example set in the previous generation by a decaying officer class that believed it had a God-given right to command; and that the problem today is the short-termist greed which makes clever people want to cut and run with their bonus cheques, rather than commit themselves to difficult long-term projects.</p> <p>But both sides might agree that the British education system was never particularly well designed to produce top managers in the first place. Too many bright people, according to this theory, pursue degree courses in literature or history, which tell them little about the real world. Many Americans point out that we do not treat management itself as a science akin to engineering, and that Britain's poor track record is a reflection of the relatively small numbers of British managers who hold the MBA qualification - a prerequisite for reaching the upper strata of US corporations.</p> <p>Have we become too narrow to be top-class managers in the modern world? British clearing banks, for example, used to be criticised for promoting executives who had joined as school-leavers and were judged to lack the sophistication and breadth required to run global operations in fast-changing markets. But the two most successful British bankers of recent years, Sir Brian Pitman of Lloyds TSB and Sir William Purves of HSBC, finished their education at Cheltenham Grammar and Kelso High School respectively.</p> <p>As for the value of an MBA, most British personnel directors would regard it as an opportunity for up-and-coming executives to take a refreshing mid-career break, do some useful networking and enlarge their vocabulary, but not as the key to releasing latent powers of front-rank leadership. Some would argue that what we need is a different American attribute, usually seen at its most vivid in movies such as <em>Airport </em>and <em>Earthquake</em>: the habit of tackling management problems with cigar-chewing, profanity-scattering aggression, as though they were military skirmishes. The bite that Bob Kiley looks capable of bringing to London Underground may owe something to his time at Harvard Business School - but it will owe a lot more to his eight years of experience as chairman of New York's Metropolitan Transport Authority, not only because he knows what he is doing but, crucially, because the media and the public <em>believe</em> that he knows what he is doing.</p> <p>"Management? It's all about confidence and trust," Ron Manager, <em>The Fast Show</em>'s celebrated soccer pundit, might readily opine. And the core problem with many British managers today is not that they lack the talents of their predecessors, but that the press and stock-market analysts have destroyed the public's confidence in them to such an extent that it is impossible for them to do an effective job.</p> <p>Thus did soccer journalists write off the chances of any native-born football manager succeeding Kevin Keegan as England's coach - and then gave vent to traditional tabloid xenophobia when the Football Association yielded to pressure and gave the job to Sven-Goran Eriksson. Similarly, an unknown Belgian, Luc Vandevelde, had to be parachuted in last year as executive chairman of the tottering Marks &amp; Spencer, while the London Stock Exchange - until recently a bastion of English male chauvinism - has just appointed a Dutch woman, Clara Furse, as its new chief.</p> <p>Whether the pressure for these foreign appointments comes from journalists or, in the case of public companies, from stock-market analysts, it is not based on inside knowledge of the shortlist of candidates, but on the simple urge for a headline-making story. For analysts, that means finding something new to say to institutional investors about the company concerned which will generate turnover in the company's shares - and profits for the analyst's firm and bonuses for the analyst. Meanwhile, board directors whose own remuneration is tied up in stock options must be tempted to vote for the candidate whose funny foreign name will do most to boost the share price. The market loves a Yank (Marjorie Scardino of Pearson) or an Irishman (Niall FitzGerald of Unilever); and Sir John Browne of BP Amoco likes to point out that his mother is Hungarian.</p> <p>And so we go on importing our bosses, and devaluing our native talents. As the <em>Daily Telegraph</em> lamented on the day of Eriksson's appointment, even the headmaster of Eton is a New Zealander, while the only top management job which seems certain to remain in British hands is that of Archbishop of Canterbury. Or is it? Even now, one suspects, headhunters are trawling the globe for that glamorous Commonwealth prelate whose name might boost the Church's fading stock . . .</p> <p><em>Martin Vander Weyer's </em>Falling Eagle: the decline of Barclays Bank<em> is published by Phoenix (£8.99)</em></p> </div></div></div> Mon, 19 Feb 2001 12:00:00 +0000 Martin Vander Weyer 139661 at So, who still wants to be a millionaire? <div class="field field-name-field-subheadline field-type-text-long field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even">Wealth is no longer the target of class envy. Now the press goes gunning for men and women of taste,</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>The horror writer Stephen King caused a ripple in the money world last month by announcing that his latest novel, <em>The Plant</em>, would be published only on the internet, bypassing the book industry. The moral, as pointed out by several investment gurus, was that, in the new economy, the most significant assets are the intangible ones - ideas, images, authorship - while the tangible hardware and real estate of the old economy (in this case, printing presses and bookshops) are suddenly a lot less important than they used to be.</p> <p>In Britain's social order, a corresponding shift is beginning to appear: there is a new kind of aspiration and a new kind of envy, attached not so much to tangible wealth as to the intangible attributes of sophistication and social presence that wealth can bring.</p> <p>The rich are no longer interesting to the rest of us just because they qualify for the label "millionaire", even if parts of the press still lazily use it to signal disapproval, as in "Gay Tory millionaire defects to Labour" or "Blair's millionaire pal in tax row". <em>Who Wants to be a Millionaire?</em> - the hugely popular television show - is hypnotic viewing not because it makes people's dreams come true, but because it humiliates them with the crudeness of the urge expressed in its title.</p> <p>These days, what provokes fascination - more often tinged with hostility than admiration - is not the meat and potatoes of wealth itself, but the side salads and savouries it brings to those who understand the new menu: to be a man or woman of influence, taste, freedom and cool is a much more conspicuous sin than to be a person of property, a true, old-fashioned millionaire.</p> <p>This is partly because millionaires in the strict arithmetic sense are now ten a penny. Thanks to rising share and house prices, total personal wealth in Britain increased by almost 50 per cent in the past decade. Over the same period, the sum required to win one of the top 200 places in the <em>Sunday Times</em>'s annual Rich List tripled from £50m to £150m. At the entry level of millionaireship, an actuary will happily certify your seven-figure status if you own a family-sized property in central London and have any sort of decent job with pension rights attached to it. What with the sale proceeds of the Islington house, the little weekend place in Sedgefield and Cherie's income from the Bar, the Blairs - who were, until the recent horizontal-Euan incident, Britain's undisputed model family - could clearly claim the title. If your surname happens to be Patel rather than Blair, your likelihood of be-ing a millionaire is as high as one in 72, and you have a one-in-a-thousand chance of breaking the more challenging £5m barrier. That's a seven times better chance than if you're called Smith, incidentally. But, whatever your name, material wealth is waving at you from not very far away.</p> <p>What all this really means is that, as a result of inflation and economic growth, a million ain't what it used to be, here or anywhere else. There was probably a time when being a lire millionaire made you a big pecorino in Italy, but so what? All we have to do is add the prefix "multi" to restore the lost <em>frisson </em>of exclusivity. But that misses my point about the intangible assets that distinguish new fortunes from old ones.</p> <p>What interests the tabloids about the Downing Street adviser Gavyn Davies is not that he has just sold £15m worth of shares in his employer, Goldman Sachs, and has another £85m-worth up his sleeve, but that he made it on to the Brown-Macaulay wedding invitation list, and once commissioned the building of a prize-winning modern house in Devon. By contrast, no one seems to give a fig - to pick two out of many possible examples - about the newspaper-owning Barclay brothers, holed up unseen on their private Channel Island with £650m; still less do we care about the £2bn empire of the conscientious, stressed-out Duke of Westminster, who gains so little joy from owning whole postal districts of prime London property.</p> <p>So we have the beginning of a sociological theory here. The puritanical streak in the British nature - which underpinned, for much of the past century, the socialist streak - disapproves at heart not so much of assets as of attitude. Expansiveness, eclecticism and membership of powerful, mutually admiring elites are things that money can, but doesn't always, satisfy, and they are things that the wider British public and its media tribunes regard with the deepest suspicion. They are also precisely the things that the switched-on new rich aspire to, rather than richness itself. Thus the ultimate hate-icon of the new puritans is fox-hunting, while the ultimate aim of the new rich is, as it were, to hunt with the Beaufort and dine with the Blairs, a combination that is almost bound to get them into tabloid trouble. But if the alternative is to sit in a tax haven clipping dividend coupons, or to work a 15-hour day in some City bear-pit, well, what's rich about that?</p> <p>Time to spare and a measure of originality are essential elements of this new wealth. The most basic ingredient, the money itself, has to be made quickly or in short bursts of intense creative activity (inheriting it can be OK, too, if you spend it right), so that it doesn't interfere with the self-expression. It may even be possible to acquire the attitude of new richness without actually acquiring the assets first, but what used to be called "independent means" will certainly help.</p> <p>For a while, until the bubble burst, making a dotcom fortune looked like the best way to reach that starting point, because it could be done in a year, in a casual, dressed-down way, setting your own work patterns and astonishing your friends with the blue-sky boldness of your business plan. Television production is also cool, Lord (Waheed) Alli of Carlton TV being, in every perfect detail, an archetype of new richness. Fiction writing, the source of wealth and new-rich recognition for the likes of Robert Harris and Ken Follett (or, across the Atlantic, Stephen King), is even cooler.</p> <p>But what is uncool, what nobody cares about these days, or wants to write about, is the old-economy wealth of bankers, industrialists and landowners, burdened with all that hardware and real estate and feudal responsibility. In the case of the first two, they are probably condemned to years of arduous full-time office work before they can cash in their share options and even begin to emulate the new rich, with their spacious, balanced, pick'n'mix lifestyles, their networking and patronage and passionate causes. Bankers and their ilk once occupied the staterooms of life's great cruise ship, courted and waited upon; now they are no more than well-paid mechanics down in the engine room. Poor fellows: nobody wants to be their kind of millionaire any more, so no one really hates them.</p> <p>Meanwhile, the new rich, harbingers of the new economy, with time on their hands, opinions to express and a deep belief in their own importance, jostle for places at the captain's table. They're the ones the reporters are watching and the tabloid-reading steerage passengers envy. In the conflict between "us" and "them", they are the new "them", the new class enemy.</p> </div></div></div> Mon, 14 Aug 2000 12:00:00 +0000 Martin Vander Weyer 138341 at The New Statesman Profile - The Sainsbury family <div class="field field-name-field-subheadline field-type-text-long field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even">From tradesmen to trustafarians in four generations: a nose for business has turned into anxiety for</div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden view-mode-fulltext"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Profits are down again, the share price is tottering, the historic head office is up for sale and a couple of dozen senior executives are heading for the door. J Sainsbury, once a benchmark of quality and top-to-bottom management grip among British supermarket operators, has comprehensively lost its way, a classic example of a dynastic company that has run out of dynasts. It has lost its sense of identity and purpose because the dynasty itself lost its appetite for business, but lingered too long before relinquishing control to meritocracy and marketing science.</p> <p>"Clogs to clogs in three generations" is an old northern expression for the way descendants of self-made men tend to fritter their inheritance. The Sainsburys lasted longer than that, and if any of them wear wooden shoes it is entirely for environmental reasons. But still they have conformed to the pattern: tradesmen to trustafarians in five generations.</p> <p>Of the fifth generation Sainsburys - there are ten - not one works in the business founded by John James Sainsbury and Mary Ann Staples. Some tried it briefly, but didn't like it: Alexander, the son of the former Tory MP Sir Timothy Sainsbury, joined as a graduate trainee, but chucked it in after a matter of weeks. Only one, Mark - the son of Lord Sainsbury of Preston Candover, chairman of the firm from 1969 to 1992 - has made a successful stab at a related kind of business, as a restaurateur at Moro in London's fashionable Clerkenwell.</p> <p>All of them, however, have followed the family's other tradition of supporting charitable causes. Trade and charity very often go hand in hand; those who make money often take satisfaction in giving it away. But something counter-intuitive can happen in the genes: the money-making instinct - surely a hard-nosed little fighter in any struggle for genetic supremacy - eventually atrophies and is driven out by softer, more benevolent urges. In the history of the Sainsburys, the evolution of these two strains is particularly vivid.</p> <p>John James, the son of a picture-frame maker, and Mary Ann, the daughter of a St Pancras dairyman, were a humble, hard-working couple who married in 1869 and opened a shop selling butter, eggs and milk at 173 Drury Lane. The business prospered and their son John Benjamin (1871-1956; known as "Mr John" within the company) expanded it into a chain of 250 grocery outlets throughout the south of England, East Anglia and the Midlands. John married Mabel Van den Bergh, an heiress from a Dutch Jewish family whose fortune was made in margarine. Their sons, Alan and Robert, built the reputation of the business for quality and innovation. Having inherited both Victorian and Jewish traditions of philanthropy, they also set the tone of the family's prevailing left-liberal social conscience.</p> <p>Alan (1902-1998) was the first of three Sainsburys to receive a life peerage. He was a fiery personality and an energetic shopkeeper. It was he who imported from America - to Sainsbury's Croydon branch, in 1950 - the concept of self-service grocery shopping, overcoming protests from customers offended at being asked to fill their own wire baskets. He introduced oven-ready frozen chickens and the simple but powerful slogan "Good Food Costs Less At Sainsbury's". He also stood as a Liberal parliamentary candidate in the 1930s, and joined the Labour Party in 1945. In 1981, he was one of 100 prominent supporters of the "Gang of Four" who broke away from Labour to form the SDP.</p> <p>Sir Robert, Alan's younger brother and co-general manager - who married another Van den Bergh, his second cousin, Lisa - was a gentler soul, much concerned with staff welfare and passionately interested in art. An early patron of Alberto Giacometti, Henry Moore and Francis Bacon, he eventually gave his vast collection of modern and primitive art to the University of East Anglia. He died a few weeks ago, aged 93, his 18 per cent shareholding in the business having long ago passed to his only son, David, now the Department of Trade and Industry minister, Lord Sainsbury of Turville.</p> <p>The children of Alan and Robert display, very distinctly, the contrast of hard and soft genes that differentiated their fathers. All three of Alan's sons - John, Tim and Simon - went into the business. In the eldest, John Davan Sainsbury, Alan had produced an heir who, despite his Stowe and Oxford education, turned out to be a grocer to his fingertips. Born in 1927, "Mr JD" took as his guiding light the principle that "retail is detail".</p> <p>A short-tempered autocrat, he approved every packaging design himself, and liked to patrol the aisles checking that produce was fresh and cans stacked to the front of the shelves. During his 23-year chairmanship, Sainsbury's rose from ninth to first in the league of Britain's most profitable retailers, finally overtaking Marks &amp; Spencer in 1992, shortly before his retirement. The company's market value went from £100m when it was floated in 1974 to a peak of more than £8bn - of which the extended family still owned more than a third, making them Britain's richest business dynasty.</p> <p>Created a peer as Lord Sainsbury of Preston Candover in 1989 and (most exclusive of all Establishment accolades) a Knight of the Garter in 1992, JD is best known for his patronage of the arts and architecture. He and his ex-ballerina wife, Anya Linden, funded ballet productions and studios; he was chairman and chief benefactor of the Royal Opera House; and he and his brothers gave a new wing to the National Gallery. His politics are pro- European and he is probably a Tory centrist in the same mould as his brother Tim, who was John Major's industry minister. If JD was ever tempted to become a Thatcherite, temptation passed when Downing Street suggested that he might like to fund the Opera House's running deficit out of his own pocket, instead of asking for more from the taxpayer.</p> <p>JD stayed in command at Sainsbury's Stamford Street headquarters until his 65th birthday. His cousin David, who succeeded him, might once have expected to do the same - holding the reins until 2005. As it was, he lasted only until 1998 when - as profits slid and Tesco established a clear market lead - he responded to shareholder pressure and yielded the chair to its first non-family occupant, the former GrandMet chief Sir George Bull.</p> <p>The trouble with David was that he was no grocer at all, and not much of a leader. His real interests lay elsewhere, in politics, science and social reform. He had been the chief financial backer of David Owen and the SDP, sticking with Owen after the party's demise. Later, seeing new Labour as a reborn SDP, he helped to fund Tony Blair's leadership campaign. In private, he devoted much of the dividend income from his £1.5bn worth of Sainsbury shares to scientific research and work on social exclusion and mental health. This was done through a trust he named the Gatsby Foundation - after Scott Fitzgerald's playboy character, whom he resembles not at all, living modestly, and even suppressing his Eton education in his <em>Who's Who </em>entry. He was happy to come into service as Labour's science minister, despite the hostility he was bound to attract from both ends of the political spectrum.</p> <p>Living quietly, worrying about society, supporting the arts, being immensely rich: these are the essential activities of modern Sainsburys. And it must be said that the third and fourth generations did them all extremely well. They did not buy art for prestige, but because they liked it. They did not do philanthropy to advertise the company name, but out of a sense of duty; indeed, until the Sainsbury wing of the National Gallery was unveiled, the wider public knew little of their benefactions through a multitude of trusts - and still has little idea of the range of causes they have supported, from electoral reform to Christian-Jewish dialogue. When JD bought his 18th-century mansion at Preston Candover in Hampshire, it was said that the previous owner - the flamboyant Peter Cadbury - had cut down trees near the house to make it look bigger from the nearby road; JD replanted them to make it look smaller again.</p> <p>So it must have been a worry that the younger generation might break ranks and go to the bad. Twenty years ago, there was some tabloid bother with Jamie, the elder son of Sir Tim and his devoutly religious wife, Susie, involving right-wing dining-club antics at Ox-ford. But Jamie is now well within the fold; he helped fund the think-tank Demos and the one-off revival issue of <em>Marxism Today</em>, as well as the Winnicott child psychology research unit and Schumacher College in Devon, which teaches businessmen about sustainability. His brother Alexander collects modern art; their sister Jessica supports women's centres and groups. Only their second sister, Camilla, seems to have got the formula wrong, having chosen to fund her husband, the former Tory MP Shaun Woodward, with a £4m home and a butler in his Oxfordshire constituency, as well as a holiday home in Mustique.</p> <p>Little is known of some of the other young Sainsburys - David has three daughters, all in their twenties - but all of them are understood to have followed the family habit of putting part of their inheritance into trusts through which to support the causes of their own choice. Environmental issues are high on the list. Seventeen separate Sainsbury trusts currently provide more than £40m of annual grants.</p> <p>Old Sainsburys were confident, conscientious, Victorian paternalists. Young Sainsburys belong to the new age: soft-focused, reluctant to come into harness, anxious about the planet, a touch naive. As we watch the troubled grocery giant struggle to recover under non-family management, we can reflect on the beneficent outcome of four generations of capital accumulation, in which the old created so much for the young to give away.</p> </div></div></div> Mon, 12 Jun 2000 12:00:00 +0000 Martin Vander Weyer 137851 at