The G20 protests

The G20 summit takes place in London this week. The economic crisis needs continued and coordinated global response and will be the main focus of the summit. But what is happening outside in the streets of London beggars belief.

As with most other world events, every conceivable group wants to use the opportunity to protest against something. it is peeved about. London is bracing for a virtual war. 10000 police personnel have been deployed and the security arrangements alone are expected to cost £ 7.2 m. Violence is widely expected.

The following are a small sample of the protests planned

• Anti-war march, organised by Stop the War Coalition, Campaign for Nuclear Disarmament, Palestine Solidarity Campaign and the British Muslim Initiative


• FOSSIL FOOLS DAY demonstration. Environment campaigners plan a "Climate Camp" in front of the Bank of England and at the European Climate Exchange in London's Bishopsgate area


• Web site Anarchy.net is urging followers to meet in the Square Mile on April 1 and "take back what's ours." It continues: "Join thousands of disgruntled, angry, pissed off people on the streets of the financial district. As the bankers continue to cream off billions of pounds of our money let's put the call out -- reclaim the money, storm the banks and send them packing."


• Government of the Dead, a radical group, which believes "the only Government is a dead government," is set to meet outside the Bank of England at midday on April 1. The group hopes to create a better world from the "train wreck bequeathed to us by the decadent, decomposing corpse of capitalism."


• Regional group Bristol Dissent has asked followers to crash the stock exchange on April 2 and, in their words, "eat capitalism for breakfast" and "disrupt the traders whose financial egomania perpetuates global injustice."

There are innumerable such outfits, some bordering on lunacy, who are planning to create havoc. A sensible and civilized discussion is no longer possible, without radicals yelling at each other. In all this, the ordinary London citizen suffers and has to foot the bill for the actions of these protesters.

Enough is enough. The right to protest has been abused totally. It looks like any sensible global discussions can only be held in totalitarian countries. Methinks there must be a global consensus on how to handle protests.

• Protesting online is best. Everybody can air whatever view they hold. A large number of people can read about the protest, if they wish to, and can either accept or ignore it.


• If people want to protest in person, they have to send a representative to a designated place where they can have their say for 15 minutes and the press and TV can cover it to their heart's content (China and Singapore have such a policy)


• If they do a mass protest, they have to pay for the cost of security and the cost of cleanup. (India has such a law, but it is ,alas, rarely implemented)

I completely fail to see why I, as a tax payer, should pay for the cost for some clown yelling his head off and trashing the place. Do you ?

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Did you turn your lights off on Saturday ?

(photo from www.webwombat.com.au)

Saturday 8.30 PM to 9.30 PM local time was Earth Hour as most people know by now. 4000 cities and towns in 88 countries joined the event initiated by the World Wildlife Fund to dim non essential lights to highlight the threat of climate change. The organisers had hoped to reach 1 billion people, and possibly succeeded.

Climate change is a key issue facing the world today. Most people would agree that the threat is real and that all of us need to act. An event such as Earth Hour is great for building awareness and touching people. I too switched off my lights yesterday.

However, the issue of climate change, is a very complex subject. It is in some danger of being hijacked by sensationalists, who are completely intolerant of any other viewpoint. Very often, some of the actions urged will actually make the situation worse. There is no simple answer - every action by humans will leave some carbon footprint or the other and sometimes what seems apparently eco friendly may actually be not so good at all. Take even the case of the Earth Hour.

What did most people do for illumination when they switched the lights off ? They probably lit a candle. Most candles are made of paraffin, a heavy hydrocarbon derived from crude oil. An article published in the Christian Science Monitor says that if you burn a paraffin candle for one hour, you would probably release 10 grams of carbon di oxide. If you had turned off a CFL bulb, you would probably have saved 5-13 gms of CO2, depending on what the source of your electricity was. So if you had a candle lit party in Kansas, for example, and lit a candle for every CFL you switched off, you actually added to the climate problem; not reduced it.

Of course, the Earth Hour did greatly reduce the CO2 emitted. A lot more lights were extinguished than candles lit. And by no means is CFL everywhere. Incandescents still rule the world and they emit for more CO2 than paraffin candles. So overall, this was a great event.

But my point is that an action is not always what it seems. A lot more research is needed , preferably under the auspices of the UN, to bring out a guide to the most sensible steps that mankind should take. This should not be left only to the tree huggers. You need a cross section of experts who can recommend the right actions that make the most difference and who can balance the needs of development and the needs of protecting the environment.

I switched off my lights, but can, will, and should, do more. But it would help if somebody (not Michael Moore) told me what's truly the best to do.

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Credit Cards

I received a very kind message from my credit card issuer saying that the interest rate is revised to 42% p.a . YES FORTY TWO PERCENT

Readers of my blog may remember my rant against credit cards. Click here to read my earlier post.

Please show me one expenditure that's worth paying 42% interest on and I'll eat my hat. When will the idiots who borrow on credit cards stop ?

Shylock seems a positive angel before credit card companies.

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Swiss Banks and Secrecy

The legendary secrecy of Swiss banks is coming under sustained attack, especially from the US. I read an article in the FT today, that some Swiss banks are imposing a complete ban on their senior executives travelling outside Switzerland for fear that they may be detained and questioned.

The US is mounting a sustained campaign against tax havens, as is Germany. The case against "Swiss bank secrecy" has been loudly made and is not worth repeating. What is however not heard amidst all this noise, is the case for secrecy. Let me make the case, including arguing against some of the myths about Swiss banks.

Firstly what novels and movies portray about the fabled numbered accounts is plainly wrong. You cannot open a numbered account without the same disclosures that you have to make when you open a normal account. Then only additional secrecy in a numbered account is that fewer bank employees know who the account holder is, since the account is referred to by a number. That's all.

A second common fallacy is that tyrants and despots loot their countries and stash their wealth away in Swiss banks. Cases such as Ferdinand Marcos, Mobutu Sese Seko and Sani Abacha, come to mind. Add to this criminals and money launderers. This may have been true in the past, but much has changed. Today the Swiss laws on Know Your Customer and the rules against money laundering are some of the strictest in the world. Treatment of assets by "politically exposed persons" is governed by strict laws in elaborate detail. Today, if a crook wanted to stash his money, Switzerland is not the country that would come to mind.

Thirdly Switzerland's secrecy laws do not apply to tax fraud. If a tax fraud is committed and proved, Swiss banks will disclose information. They are required to do so by Swiss law. Period. And the Swiss follow the law better than many other countries.

Its a common feeling that the success of the Swiss banking industry is due to the secrecy laws. This is largely a myth. Switzerland owes its success due to economic and political stability. Stability of laws. Absence of sudden controls on currencies. To well run banks, to a freely convertible currency that is not restricted. To geographical location. Less to banking secrecy.

What Swiss banks don't do is routinely provide every information regarding your account to the authorities as the banks in many other countries, including the US and Germany, do. This is what is behind the current spat. Swiss banks will not entertain fishing expeditions by the tax authorities. The US wants the banks in Switzerland to disclose any information they want on the bank accounts of US citizens. The Swiss say, show a tax fraud and we'll give you the information. But we are not going to just give you every information on every customer.

I think there is some reasonableness on the part of the Swiss banks. Why should your financial transactions be known to every authority. Privacy has been encroached in every sphere of our lives. Big Brother watches everywhere, even in the so called freest of countries. Anybody who has been at the receiving end of a tax dispute with any government knows how unreasonable tax authorities can be. They don't cover themselves with the glory of fair dealing.

In the end, political pressure will be brought on Switzerland and it may buckle. But that's a pity. Just imagine - the United States can detain a Swiss national employee of a Swiss bank, fully complying with the laws of his country, if he comes into the US, just because he hasn't acceded to a demand of the US government. Did I hear that freedom was a virtue in the US ?

For an excellent research report on Swiss Banking secrecy read Swiss Banking Secrecy: Origins, Significance, Myth by Robert U Vogler.

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The Chinalco Rio Tinto affair

The proposed acquisition of a 18% stake in Rio Tinto by Chinalco is starting to get more and more messy. The deal raises a number of issues and hence this post.

First the facts. Rio Tinto is an Anglo Australian mining giant. It is listed in the UK and in Australia (as separate companies, but managed and run as one). Its mines are mostly in Australia. Through acquisitions made at the top of the commodity cycle, it is saddled with $ 38bn debt in its balance sheet. Now with the financial crisis, it is in trouble. Cash is needed to repay tranches of the debt that fall due in October.

Step forward Chinalco. A Chinese state owned metals company. It has offered $ 19.5 bn dollars for minority stakes in iron ore, copper, and aluminium mines and a 18% stake in Rio Tinto itself. Rio's Board unanimously passed the proposal.

The deal has raised howls of protest form all sorts of people.

The UK shareholders are howling because it dilutes their stake in the company. While the price Chinalco is paying per share is higher than current prices, it is lower than what it was in the boom days. They want a rights issue. But there is no certainty that the rights issue will raise the cash that Rio requires. In fact it is very likely that it won't. Then what ?

The Australian shareholders are crying foul over the valuation. But then in today's market that's all they will get. No point in crying over what might have been in the boom days. They want asset sales. But that's what Rio is trying to do and there's no evidence that it can raise any better with anybody else.

The Australian public and the politicians are howling over an entirely different issue. They are scared of "China taking over Australia". This is plain nonsense. I can bet that if it was an American company or a British company, there would have been no protest. Just because Chinalco is state owned in China, there is yelling. This smacks of jingoism and many posts can be devoted just to trashing this fear. The Australian Competition authorities cleared the deal yesterday, but it is stuck with the Foreign Investment Review Board who will decide whether it is in Australia's "national interest".

End result , complete uncertainty. If the deal falls through, there will be serious trouble for Rio come October when a major debt repayment is due. In the process, their Chairman is going away and the man they announced as his successor also went away. They have now announced a new successor. No prizes for guessing where Rio's management attention is now. All this after the soap opera of last year of BHP Billiton's proposal to acquire Rio Tinto, which finally fell through as the stock market tanked.

Methinks that the deal would not have had anywhere near this chorus of objections, if the suitor was not Chinese. That's the real pity.

Neither the shareholders, nor the authorities have covered themselves with glory on this matter.

For more reading on this deal

Chinalco deal raises questions for Rio Tinto - Financial Times

Rio Tinto shareholders continue to oppose Chinalco deal - Domain-b.com

Controversy Swirls Around Rio Tinto-Chinalco Deal - Businessweek

Pressure grows on Rio Tinto-Chinalco Deal - Daily Telegraph

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They just don't get it

Some companies have shown amazing insensitivity in recent days. What was AIG thinking when it decided to go ahead with the bonuses ? How could they not foresee the furore that this would cause ? How could the Chairmen of GM, Ford and Chysler even consider coming to Washington in their private jets to press for a bailout ? And to compound the disaster, when one of the Congressional leaders asked if any one of them would consider going back in a commercial airline (first class), not one offered to do so.

These are tall business leaders. They make complex decisions everyday and are extremely intelligent and capable. Despite all this, how could they be so insensitive ? Obama summed it up beautifully. He said "they just don't get it "!

I believe senior business leaders have become divorced from reality. They move in a rarefied world, that bears little resemblance with the real world and have become cocooned in it. They meet only other company chairmen. They live behind fortified walls. They fly to Davos. The ordinary mundane things of life are taken care of for them. In that world, flying in a private jet is the normal thing to do. No wonder that even after the story broke, the auto companies still couldn't see what they had done wrong.

This is extremely dangerous for the companies, as well as for the leaders personally. It actually makes them lesser human beings - and that's why "they don't get it". Once in a while, they should inhabit the real world, just for the experience. They should make an occasional trip, coach class. They should catch a bus to somewhere. They should walk around the park and go to a McDonalds with their kid. They should volunteer for a day and work as an orderly in the hospital. They should try manning the checkout counter of a supermarket. They should teach in a primary school . All just for a day; occasionally.

Or, should they really feel upto it, spend a day in the Democratic Republic of Congo. In fact not just business leaders. Any human being will have a different perspective on life after a day in Congo.

Just once in a while. Doesn't even have to be often. Even the most overworked business leader can spare a day in a quarter (after all they they aren't all that busy as is made out, as I posted before). I suggest it would be enormously uplifting for their soul. They would become actually better human beings. With their intellect and capability, the "experience of the real world", would make them even more effective.

Perhaps, they would then, "get it".

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Thus spake Jack Welch

Jack Welch in a recent FT interview was quoted to have said "on the face of it, shareholder value is the dumbest idea in the world".

This has created a storm with many columns, articles, blogs being written about how one of the doyens of capitalism had turned against it.

This is a classic case of sensationalising a quote taken out of context.

He was asked what he thought of "shareholder value as a strategy". His response was "On the face of it, shareholder value is the dumbest idea in the world," Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products."

All he said was that shareholder value, by itself, cannot be a strategy, but is an outcome of a strategy.

The interview with FT is an interesting read. Click here.

In response to the storm, Jack Welch published a question answer session with Suzy Welch. Click here to read this.

They have their own website http://www.welchway.com/ with many excellent articles.

By the way, Jack & Suzy Welch have commented on how important the HR function is and how the process of layoffs could be handled more professionally (my pet peeve at the moment). Coming from "Neutron Jack", this is an excellent read. Click here for this superb view point.

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