Summer Term 2020
Commentary on global economic and political issues
Table of contents The Bitesize Focus (section runner: Matthew Cresswell) Bitesize news Bitesize just got bigger: in conversation with Munira Wilson MP
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The Main Focus (section runner: Hector Coode) The spiralling crash of oil and repercussions for the global economy
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The Parliamentary Focus (section runner: Jack Lucas) The levelling-up agenda Keir Starmer – an electable leader? Opinion: the role of Spads in government The points-based immigration system: opening or closing the UK?
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The International Focus (section runners: Robbie Cox and Ben Green [Asia]) Are multinational corporations above the law? Below the surface: a closer look at Covid-19 in Africa Breaking point: the Hong Kong pro-democracy movement
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The Stock Market Focus (section runner: Dhru Dattani) Covid-19 and the stock market Winners and losers of the Covid-19 stock crash ‘Going short’ on the Covid-19 crash?
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The Historical Focus (section runner: Josh Bartholomew) Winston Churchill: political genius or flawed statesman? Opinion: Boris Johnson has lessons to learn from history Disunity and discord: a history of factionalism within the Labour Party
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The Impact Focus (section runner: Zach Whelan) How will Trump’s handling of coronavirus go down in history? The government’s grandiose guarantee
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The Behavioural Economics Focus (section runner: Toby Robinson) The rise and fall of economic man What would you do with £100 million?
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The Data Focus (section runner: Chris Austin) Has the 2024 election already been decided? How catastrophe affects US Presidential approval How can partisan gerrymandering be measured?
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The Cultural Focus (section runner: Oscar Leonov) The politics of music
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The Book Focus (section runner: Matthew Cresswell) EDITOR OVERSIGHT DIGITAL COMPOSITION
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Matthew Cresswell Jenny Field Ski Paraskos
The editorial deadline for this magazine was 22nd May, 2020, and we aim to cover important events up to that date only. The editor would like to thank all those involved in the production of this magazine. The Hampton Focus team, and Hampton School, assert no claim over the photographs, diagrams or data, used in this publication.
bright red and green on the colour of the note when UV light is shined on it, and that the dimensions of the £20 note are larger than the other polymer notes because of its greater value.
Bitesize news The Bitesize Focus explores some interesting, and unusual, news stories in brief. Controversy ensued in Canada when Conservative MP Blaine Calkins participated in a virtual debate on gun control measures, with a trophy head of a deer on the wall behind him. After a spate of similar non-neutral backgrounds, Speaker of the Canadian House of Commons Anthony Rota wrote a letter to the House Affairs committee, calling for the, “authority and dignity of Parliament and its proceedings,” to be upheld, even over Zoom.
In a blogpost for the Institute of Economic Affairs (IEA), commentator Alexander Hammond explained how, “in some African states, the police brutality that has come along with the enforced lockdowns has already claimed more lives than Covid-19.” By mid-April, at least 18 people had been killed in Nigeria by police enforcing the lockdown, compared to the 11 people who, at that time, had died from Covid-19 in the country. To read more about coronavirus in African countries, see The International Focus: Africa. 10 years on from the signing of the Lancaster House Treaties, a Senior Clerk of the House of Commons has suggested that strong Anglo-French interparliamentary relations are improving inquiries into issues. Using the example of the House of Commons Defence Committee’s Joint Inquiry with the Assemblée Nationale’s Standing Committee on National Defence and the Armed Forces, Senior Clerk Adam Evans suggested that this parliamentary ‘Entente Cordiale’ could, “offer a blueprint for future joint inquiries.” To read more about UK parliamentary proceedings, see The Parliamentary Focus.
In addition to wider pro-democracy conflicts, a row has broken out over a school exam question paper in Hong Kong, which asked candidates to assess the view that, “Japan did more good than harm to China in the period 1900-45.” The education bureau in Hong Kong later argued that the question should be removed from the exam paper, as it was leading students to a view that would, “seriously hurt the feelings and dignity of the Chinese people.” To read more about the geopolitical situation in Hong Kong, see The International Focus: Asia.
On 20th February 2020, the new polymer £20 note entered circulation, and features a self-portrait of artist JMW Turner, along with his quote, “Light is therefore colour.” Interesting facts about the new note include that the number ‘20’ appears in
In April 2020, Sir Richard Branson announced that he would be willing to mortgage his private Caribbean island (Necker Island, in the British Virgin Islands) to raise funds to prevent the Virgin Atlantic airline group from collapsing. He also called for a 3
£500 million loan from the British government, arguing that, “the reality of this unprecedented crisis is that many airlines around the world need government support and many have already received it.”
Bitesize just got bigger: in conversation with Munira Wilson MP “I really hope that ideology doesn’t get in the way of common sense.” All of the Members of Parliament have had a lot to deal with during the lockdown period, and Munira Wilson, MP for Twickenham and Liberal Democrat Spokesperson for Health and Social Care, is no exception. I steal 15 minutes of her time, via Zoom, for a bitesize conversation. I start the proceedings by asking Ms. Wilson how her role and priorities have changed due to the Covid-19 pandemic. “Early on, there was a big concern and question marks as to whether the government was taking sufficient robust action fast enough, and, whilst we were very keen to stay in step with government and make sure that we’re following the science, behind the scenes we were challenging quite hard to understand why [the government] weren’t doing more early on.
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“In the context of this current crisis, I’ve been contacted literally by thousands of people, and I’ve had thousands of emails in the last few weeks – it’s been overwhelming. There are a lot of individuals who are really struggling out there.”
“This crisis has shown us that a lot of these big issues that impact us do not know any borders at all, and I really hope that ideology doesn’t get in the way of common sense.” In addition to climate change, Ms. Wilson explains that mental health, especially among young people, is a key issue. In April 2020, Ms. Wilson coordinated a cross-party letter to Matt Hancock, urging him to improve mental health support during the lockdown period. Before the pandemic began, she had tried to amend legislation to make it easier to scrutinise government on how much money is dedicated to young people’s mental health. However, the attempt fell through due to government opposition. How frustrating was the experience? “I was never going to win a vote on an amendment in the House of Commons given the numbers. I did at least get a commitment from the minister that he would meet with me to look at this and see if we can find a solution. When [the government has] got a massive majority, that’s the only way you can achieve change.”
“We can’t afford to be cutting public services.” Over the lockdown period, there has been a growing concern about rising government debt levels due to the emergency fiscal measures taken during the crisis. However, Ms. Wilson asserts that a tighter government budget cannot come at the expense of public services. “The massive economic impact of the debt we’re going to be facing (as a result of the measures that have, quite rightly, been taken to support people through this crisis) has to be dealt with. “What I would say is we shouldn’t be going for deep, deep austerity. On a local level, certainly in the state side of things, we’ve seen in recent years huge cuts in education funding and a lot of schools are really struggling. There is a real crisis in funding for Special Educational Needs and disabilities. We can’t afford to be cutting public services.”
With the physical Parliament replaced by a virtual, Zoom-based version, I enquire as to whether virtual proceedings are more productive. Ms. Wilson confesses that, “In many ways it is, because of the very antiquated way in which Parliament operates. They now have to publish, in advance, a call list of when you’re going to be called to speak, which means you can plan your time better. Also, the remote voting is brilliant – if you’re on parental leave, or you’re ill, to have that facility [going forward] to make sure you can vote remotely would be great.”
Other than coronavirus, I ask Ms. Wilson what the biggest challenge for society is. “I’d say the biggest issue is climate change. We’ve all recognised we need to take radical action on the climate emergency and I think this crisis has shown us that actually, whilst it may not necessarily be our first option at the moment, we can all work and function without constantly travelling and driving everywhere as well.”
“I’m just always gobsmacked, amazed and over-excited to see the wonderful things that go on here.”
As a Liberal Democrat, Ms. Wilson has a very international approach to solutions to climate change, and to geopolitical relations in general. “I’m a passionate pro-European and internationalist and my party took a very robust position on Brexit. Things like the European Arrest Warrant, which means that we can work together on making sure that criminals are brought to justice, seem like nobrainers to me.
However, she explains with a smile that, “It’s a bit weird talking into a camera on an iPad rather than in this grand, green chamber where you’ve got people twittering away at you!”
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As a final question, before I thank Ms. Wilson for her time and she moves onto the next item in her busy daily schedule, I ask her what the experience of being an MP has been like so far. “The privilege of being an MP is lots of businesses, charitable organisations and other groups have opened their doors and invited me in. I’m just always gobsmacked, amazed and over-excited to see the wonderful things that go on here, whether that’s going to visit the National Physical Laboratory in Teddington and seeing a local organisation that’s at the cutting edge of its particular specialism in science, or whether it’s seeing the amazing things that so many local charities do to support our community. There are lots of highlights.”
Matthew Cresswell
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period of global confusion and economic disarray, it seems that we have stepped into the unknown, and the future roles of companies and commodities alike have been put into question. Previously, oil has been regarded as such a vital commodity that it has become synonymous with globalisation itself. However, the recent movements in its price shows that, just like any other commodity, it remains susceptible to large supply and demand shocks. Such uncertainty prompts the question: is there still a place to be had for oil in the 21 st century, or is it simply an obsolete fuel from a bygone industrial era?
The spiralling crash of oil and repercussions for the global economy Since the beginning of the year, Brent Crude oil prices have fallen over 40%, sending shockwaves through financial markets, redefining what analysts thought was possible as well as the idea of how oil is fundamentally perceived. Leaving a trail of economic destruction in its wake, the fall in global oil prices has left only the most bearish investors unscathed. Having consistently devalued since January, it would be easy to assume that the fall in price has simply been another unfortunate symptom of coronavirus. Whilst this is in part true, and the steep fall in demand for oil due to the virus has led prices to new lows, one cannot simply lay the blame solely on the one factor, without commenting on how other political and global events have affected the value of the fossil fuel. During such a
Now, before we answer the above question, it seems necessary to give a complete and unrefined account of everything that has happened to the global oil industry since the start of 2020, so that everybody is able to fully understand the magnitude of the situation. During January and February, fears over the spread of coronavirus led to a steady fall in demand and price, with Brent having
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dropped to just over $50 a barrel on 28 February, down from $66 on 2 January 2020. Prices began to move significantly on Friday 6 March, where disagreements between the Russian and Saudi energy ministers caused emergency negotiations of the Organisation of the Petroleum Exporting Countries (OPEC) to collapse, ending a 3-year alliance between the two nations. Two days later, on 8 March, Saudi Arabia announced price discounts of between $6-8 per barrel to its customers, causing Brent crude prices to free fall 30% over the course of the day, the largest single day drop since the Gulf War. Equally, the West Texas Intermediate (WTI) price dropped 20% upon hearing the news. This was the beginning of an oil price war.
mand shock, since Brent crude was still down c. 70% versus the beginning of the year. Yet, even with the staggering 9.7 million bpd reduction in supply, global spare storage capacity was rapidly diminishing, to the point where most storage units had already become more than 75% full. The oil industry reached breaking point on 20 April when WTI oil futures expiring on 21 April for a May delivery fell 306% into negative territory for the first time in history, getting to price as low as -$37 per barrel. This unprecedented situation was a result of firms realising they had little to no options to store any further deliveries. This led to owners of the May contracts selling at negative prices to avoid the situation where they couldn’t collect and store the oil they had contractually bought. This fallout blindsided most of the big players in the industry and sent shock waves across the rest of the energy market, pushing Brent Crude to 20year lows. However, in the following days and weeks, Brent crude oil and the WTI recovered slightly from their lows, although prices still remained far below pre-coronavirus levels.
When markets reopened the following day, the chaos caused by Saudi Arabia’s decision, coupled with already shaky markets, caused global indices to plummet, leading to the New York Stock Exchange (NYSE) dropping 7% in its opening minutes, setting off its first stage circuit breaker. In the days that followed, after oil prices had somewhat recovered from the initial news, Saudi Arabia announced that it planned to increase its daily output from 9.7 million bpd (barrels per day) to 12.3 million bpd, with Russia simultaneously announcing that it was also increasing supply by 300,000 bpd. Prices shrank even further on the news, reaching a 17-year low on 18th March when Brent crashed to $24.72 a barrel (down 64% year-todate [YTD]) and the WTI to $20.48 a barrel (down 66% YTD). Prices remained depressed for the rest of the month, but on 3 April, the Russian President Vladimir Putin called on the Russian energy minister, Alexander Novak, to announce an emergency OPEC meeting. Novak stated that, in order to counteract the surge in supply, OPEC should cut oil production by 10 million bpd. Upon hearing the news, US oil prices rose 25%, its largest single day price increase in history, and global oil prices increased by over 10%.
Many people are convinced that these events seem almost too good to be true for Saudi Arabia. While the country is weathering the storm of coronavirus, it will have positioned itself for maximum leverage over the oil market in the future once the crisis has subsided. As the figurative bully in the oil industry, the price war could be considered as a meticulously thought-out plan to take up an even larger portion of the oil market, at the expense of smaller oil-producing countries. Aggressive tactics like these can actively push off competition in
On 9 April, OPEC finally reached an agreement to cut global supply by 9.7 million bpd, in an effort to push up prices. This move ended the price war between Saudi Arabia and Russia but did little to tackle the impact on oil prices from the initial de8
commodity markets, in this case enabling Saudi Arabia’s Aramco, as the dominant producer, to maximise revenues by manipulating supply and therefore price.
tionately high compared to the small increase in profits that they yield, causing their investment to become less and less efficient. This is the moment where the dominant producer – Aramco – greatly increases oil output, forcing prices downwards. The more drastic the increase in supply, the more prices will fall and fewer firms will be able to produce and sell oil at a profit. Therefore, competitors will either go bankrupt as they are unable to operate with oil’s current market value, or massively reduce their production, subsequently shrinking the size of their share in the oil market.
Although the dominant producer enjoys higher revenue when prices are high, competitors are also incentivised to allocate more resources to increase production, so that they are also able to increase their revenues further and maximise profits. However, the costs of production for Aramco are minute compared to other oil companies due to the ease of extraction in the Saudi oil fields. This means that Aramco’s average cost of production to extract a single barrel of oil is only c. $3, whilst the median cost of production for American oil companies is $36 a barrel. Since Aramco’s cost of production is so low, it is able to influence and alter the price of oil to best suit its needs, since oil would have to go below $3 per barrel for Aramco to cease making profits. However, the competitors’ increase in resource allocation is dispropor-
These astonishing movements in the oil markets are far from over but we have already seen the impact that they have had on global economies. Saudi Arabia, the world’s largest oil exporter, has already increased its debt ceiling by 20 percentage points from 30% to 50% of its GDP. As well as this, it has cut government expenditure by 5% in order
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to reduce its growing budget deficit, which has already been forecast to rise to 9% of its GDP. However, what is more worrying is the potential wave of defaults we could be facing in emerging economies that rely heavily on exporting oil to fund their economies, such as those in South America, where oil constitutes over 90% of their total exports. Countries like Ecuador and Venezuela, the latter being the largest oil exporter on the continent, have both defaulted 10 times over the past century, indicating the fragile nature of such oil-dependent economies. If countries such as Venezuela regularly default on debt in scenarios of stable oil prices, the likelihood of another default is that much higher now that their primary export good has halved in value and the market of buyers has shrunk considerably.
increase again. With such low prices, firms are able to buy oil more cheaply, so a decrease in a firm’s cost of production will mean that the supply of goods and services will increase, increasing with it their consumption of fuel. Moreover, the price at the pump for everyday consumers will be lower, leading to elevated consumption.
Unfortunately, these are the positions that many emerging economies are finding themselves in at the moment, as according to the International Monetary Fund (the IMF), oil should be priced at $100 per barrel for all emerging economies to break even. Countries with high levels of poverty such as Nigeria appear to be at greater risk in this environment, with it being the largest exporter in Africa but also a country where 40% of the population lives below the poverty line. In Latin America, Pemex, the state-owned oil producer of Mexico, is already burdened with considerable debt and employee obligations due to the decrease in production in recent years, which will be difficult to manage when their output is reduced further. In addition, the IMF has granted emerging economies debt repayment holidays and grants for debt relief, providing $1.4 billion in grants, proving to us that without sufficient foreign stimulus, many countries are already in technical default. The situation seems dire, but could the crash in the price of oil give economies enough of a push to begin to rely less on it? It seems like the logical thing to do. If a worldwide fuel is so easily but so disastrously disrupted in a matter of months, why should economies choose it to be their major energy source? There is hope that countries will consume oil less after the pandemic is over, but it is most likely that demand will not change from prepandemic levels, and consumption of oil is likely to
Looking to the future, there is hope that economies will rely more and more on alternative sources of energy, such as nuclear power. Oil has been the most prevalent fuel used by countries since the mid-1800s, but there have appeared to be few viable alternatives to it since then. However, the idea of nuclear energy has gained more and more popularity, as people have become more knowledgeable on the benefits of using it. Equally, people have become more aware that the radiation emitted by nuclear stations is far smaller compared to the radiation you expose yourself to by being in direct sunlight. Currently, 55 nuclear power stations are being built in 15 countries, and with the average power output of a single reactor being 5.1 terawatt hours of energy in a year, the combined power output of all 55 stations in a year would be able to power New York for 69 years (at current consumption levels). This information is staggering and gives an opportunity for countries to not only become less dependent on oil, but also to begin to invest heavily in renewable energy for 10
the benefit of the environment. Until then, it seems that not much is likely to change, and businesses will consume oil with their usual reckless abandon.
Hector Coode
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merely identifies that other regions also require increased investment to close the gap.
The levelling up agenda The UK is one of the most developed countries globally, and yet it contains some of the greatest regional inequality seen in Western Europe, with productivity significantly lower in the North of England than the South, and with a social divide as well as an economic one, with a lower quality of education provision and healthcare in the North of England and other disadvantaged regions. In the 2019 Conservative manifesto, Boris Johnson sought to address these regional inequalities by introducing the levelling up agenda, following the neglect that the Northern Powerhouse project had seen under Theresa May. This signalled a departure from the Thatcherite approach to regional management characterised by the cutting of regional spending and further centralisation of power and demonstrated a transition to a more investment-friendly government model coupled with increased devolution, manifested through the creation of new metro mayors and increased powers for regional authorities.
Education is one of the most important stepping stones to address this systemic inequality, as education quality in the UK varies wildly from region to region. A good example of this gap is that pupils in the North East are 4 times more likely to go to a school which is classified as lower than ‘good’ by Ofsted than in London. Another example is that 24% of working age adults in the North East have received higher education compared to 47% in London. This educational divide makes it significantly harder for employers in these regions to find workers who have the correct skill set for the job in question.
In most Western countries, a clear trend between productivity and city size can be identified. This holds true in France, Germany and the US, whereas in the UK no such trend can be determined. While it is true that productivity in London is significantly higher than in the rest of the UK (32% higher than the national average) this trend cannot be observed for other large cities. Once you take into account metropolitan zones for cities a positive trend can be identified; however, it is noticeable that many large cities and towns in the regions seem to be anomalous, with Manchester, Mansfield, Newcastle, Sheffield and Glasgow all being notable examples. If just Manchester was able to close this gap, the UK economy would expand by £15 billion (output in Manchester is 24% lower than the trend line) and if the eight largest cities which sit below the line were to close the gap the economy would be £47.4 billion larger. This does not mean that investment in London should decrease as it is a major driving force behind the UK economy (and costs to maintain the city are increasing, such as the management of congestion and a growing transport network). It
In the spring Budget, the government began to address this issue by increasing the funding of Further Education (FE) colleges by £1.5 billion, helping to pay for the equipment required by many FE courses; however, this money will not go far enough to expand the provision of this form of education, which is greatly needed in underperforming cities in the UK. The government are yet to make many other announcements about education as part of the levelling up agenda, but increasing spending on education in the areas with the lowest spending per pupil may not be a good idea as these areas are in fact some of the most economically advanced areas of the UK (such as the South East), as there are fewer disadvantaged pupils in these regions. Another crucial factor in assuring equality among the regions of the UK is improving transport links, particularly regional bus services and rail. In this regard, the government views allowing the HS2 12
project to go forward as particularly beneficial, improving links to Northern cities, expanding commuter zones and increasing productivity due to the easier dispersion of knowledge and skilled workers. However, despite further pledges to increase spending into transport in the North allowing for improved bus and tram services, the government still has a long way to go before even scratching the surface of this issue. This is clearly demonstrated by the spending per capita on transport in the UK, with the government spending £653 in London compared to £139 in Yorkshire and Humber. There are clear and obvious reasons why London’s transport spending should be higher than Yorkshire and Humber, given than London is a congested commuter city. However, the sheer magnitude of the gap could be a significant driving force behind the inequality between regions in the UK.
don (this may allow for TFL-like transport bodies to be set up in these regions). The government has also committed to moving roles in economic decision making out of London with 22,000 Civil Service jobs set to move. The government must be careful in this regard not to stifle London’s economic development but to also focus on other regions of the UK. Overall, the government has taken a few steps towards addressing regional inequality, however this is not an issue which can be solved in one 4-year governmental term. This issue will require the investment of government after government. While the provisions in the levelling up agenda provide a good foundation for change, they do not yet go far enough to address these regional disparities and will require review and alterations in order to have the required impact. Jack Lucas
Nevertheless, a whole range of other factors are also causing these regional disparities. For example, the spending on research and development outside of the golden triangle (of Cambridge, Oxford and London) has been increased by £400 million as a key commitment of the government’s agenda. While this will doubtlessly be beneficial, it will not automatically lead to improved regional performance, as this does not take into account research and development in the private sector. Further devolution is also critical to success in preventing regional inequality, and the government has committed to this, recently announcing that West Yorkshire would get its own metro mayor as well as giving extra funding to existing metro mayors to move investment more into line with Lon13
Keir Starmer has been lucky to avoid these problems for the time being, focusing on scrutinising the government itself rather than creating his own policy, but when the election looms, he will have to make difficult policy decisions, which could tear Labour apart. So far it seems that Keir Starmer is taking a more centralised approach to management, with all policy being conceptualised by the leadership, instead of incoherent ideas in incredible numbers being created by separate sections of the party, preventing Labour’s electoral pledges from seeming realistic, which was another cause of the party’s disastrous defeat in 2019. This in the end might alienate some of his party, but it might be the only means necessary to succeed in the 2024 General Election.
Keir Starmer – An electable leader? When thinking about Keir Starmer the first word that comes to mind is ‘forensic,’ a common analysis of his approach in Prime Minister’s Questions (PMQs) or to the media. While this is a somewhat accurate description, it does not take into account the emotional resonance that Keir Starmer has managed to evoke in this crisis. His approach is detail-orientated, clearly a by-product of his experience as a barrister and Director of Public Prosecutions, but his serious manner as well as his aversion to political point-scoring do stand him in good stead for the next general election.
Keir Starmer has been lauded by all sides of the political spectrum for his approach in the PMQs, a far cry from the emotional ideological conflict seen by previous leaders, famously described by David Cameron as ‘Punch and Judy politics.’ He has been shown to be particularly detail-oriented, which is a sharp contrast to the more populist approach of Boris Johnson. One notable trope of Keir Starmer’s approach is his use of graphs and data to illustrate his point, using a graph on care home deaths in order to undermine the government’s point. This seems a world away from the tactics of Corbyn who attempted to stoke human emotion by bringing forward stories of suffering individuals.
Labour faces the task of winning back the country after their worst electoral defeat since 1935, but before that battle has even begun Keir Starmer has the equally gargantuan task of uniting the Labour Party itself. When Corbyn became Labour leader in 2015, he focused himself on the consolidation of the far left in Labour by altering party structures to give them best chance of maintaining power. This gave more power to individual constituencies in creating policy and handed power to grassroots movements like Momentum. This makes the ideological shift from far left to centre left that Keir Starmer is trying to perform more elusive than ever. He cannot be seen to crack down on Momentum, alienating the grassroots of the party and damaging his electoral chances, but at the same time he cannot cede control to them, which would only inevitably lead to a repeat of the 2019 General Election.
This does raise the question of whether Keir Starmer seems compassionate enough to win a general election. His words may be cold and ‘forensic’ but in fact this approach is more effective in displaying the tragedy of the situation. His selective use of anger and emotion makes him seem more relatable to the electorate, especially when seen alongside Corbyn who was apparently unable to control his emotions at the dispatch box. Starmer’s now well-known statement, “How on earth did it come to this?” has particular resonance as it shines a light on his empathetic nature, understanding the despair faced by British people as a result of having the second highest coronavirus death toll in the world. It is important to note that Starmer’s approach, while forensic, is constructive, 14
congratulating the government in areas where they have succeeded but chastising them where they have failed. This approach may not be popular with Labour members, but it will help him in winning back the electorate, positioning himself as a helping hand in this crisis.
elected in 2024. Following Labour’s defeat in 2019, the path to success seems almost impossible and will require leadership with little scandal for 4 years, but so far at least Keir Starmer is doing a faultless job. Jack Lucas
Keir Starmer’s handling of anti-Semitism within the Labour Party again shows the contrast versus Corbyn. As soon as Starmer came into power he apologised for Labour’s handling of anti-Semitism in the party, while Corbyn refused to apologise until it was far too late and was slow to remove members who had discriminated against those of the Jewish faith. The Jewish Labour group noted that Keir Starmer has, “achieved in four days more than his predecessor [Corbyn] in four years.” His new approach can be seen as another step towards election, reversing one of the greatest failures of his predecessor, ridding himself of the tribalism which plagued the Corbyn years. It is also interesting to look at Starmer’s Shadow Cabinet choices, as he avoided appointing any farleft Labour politicians to the body (with the notable exception of Rebecca Long-Bailey) but it is important to note that he also avoided promoting Yvette Cooper and Hilary Benn as well. This signals his attempt to distance the Labour Party from its past, avoiding been seen as either Blair or Corbyn in his approach. This, while reassuring in many ways, does pose a threat to Starmer and might put him on a war footing with Momentum and also push away those who had previously voted Blair in swing seats in the Midlands and in the North of England. While Keir Starmer’s personal qualities may help him at this time, being honest, serious and dependable, he needs to be careful as not to seem cruel, cold and brutal. His approach so far will stand him in good stead, but he must consolidate his position by doubling down on the constructive approach ignored in the Corbyn years, using the establishment to enact change, instead of ignoring scrutiny as Corbyn had done. Keir Starmer at the moment appears to be an electable leader, but this by no means guarantees that he will be 15
role is becoming more and more centralised, with all governmental policy decided by the Prime Minister and his team of advisors. The resignation of Sajid Javid brought this increased centralisation to light, after he refused to allow the advisory teams of No. 10 and No. 11 to be merged. His replacement Rishi Sunak allowed this change, providing further evidence that Spads no longer directly report to their minister, with Dominic Cummings attempting to position Spads as a replacement for the politically neutral Civil Service. This centralisation questions why the role of the Spad even exists, as the government could instead use the Civil Service, who are policy experts in given fields.
Opinion: The role of Spads in the government Special advisers, often referred to as ‘Spads,’ are individuals who have been hired by the government, in order to either provide policy expertise or to manage the media. They differ from the Civil Service insofar as they are not required to be politically neutral, they can assist their ministers with speechwriting and media interactions, and they do not have to conform to the same hiring practice as civil servants. There is a strong argument for their existence providing political expertise to ministers, helping them to stick to their manifesto pledges and coordinate policy with the civil service. However, over the last 2 decades the role of Spads has been significant, with these unelected officials managing to amass considerable influence in government, some with little to no policy or media expertise. Firstly, the hiring procedure for Spads is in no way transparent. They are generally hired at a minister’s discretion and they are not judged on merit, which in some ways is beneficial, with ministers able to hire individuals who they best work with. However, since January 2020, Dominic Cummings has announced that all Spads will now report to him and also that all hired Spads must be approved by him. This change removes the important link between the minister and their Spads and also demonstrates their rapidly changing role within government. These opaque hiring practices are no more clearly demonstrated than by the hiring of Andrew Sabisky, who had in the past advocated for eugenics on social media. The lack of a thorough background check on these Spads is worrying given the fact most Spads do have access to very sensitive government information.
The power of certain individual Spads has been more noticeable over the last 2 decades, with Alastair Campbell exercising great influence within the Blair government, and Dominic Cummings exercising even more influence in Johnson’s government. In the case of very powerful Spads, it is important to note that they are unelected officials who do not have a mandate to govern and yet often exercise more power than ministers who have been elected by the populace. The number of special advisors is also ballooning with 109 in government in December 2019, compared to 84 in Tony Blair’s government and 38 in John Major’s government. While Spads play an important role in government, they should not exercise any power as they have not been elected by the population. Instead they should help bridge the uncomfortable gap between the apolitical Civil Service and the political government – however recent trends suggest they are only becoming more powerful.
Furthermore, the role of Spads within government has undergone a significant change, becoming less about advice and more about control. When Harold Wilson created the role, Spads were generally economists who would aid individual ministers, and he thought that they would be able to provide a counterweight for the Civil Service. However, the
Jack Lucas 16
In Home Secretary Priti Patel’s description of the new system, she insisted that it will be a, “global immigration system,” providing an, “employer-led route,” and an, “academic-led route,” into the UK. The emphasis on the economic usefulness of a migrant has reason behind it. The government fiscal watchdog claimed in 2017 that, if the UK took in only 100,000 as opposed to 200,000 skilled migrants each year, public debt would be 30% higher as a proportion of GDP by 2060. However, she also gave a nod to the cultural concerns of many UK citizens through her statement that, “they need to speak English.” Likely included as a requirement of the system as both a measure of practicality as well as to address such cultural concerns, the ‘Leave’ vote in many areas which had recently seen high levels of immigration was influenced by many migrants’ lack of ability to speak English.
The points-based immigration system: opening or closing the UK? Pledges to reduce immigration to the UK, particularly from the EU, were central to the ‘Leave’ campaign in 2016. Seen as one of the most important factors behind the vote for Brexit and cited by voters as the third most important issue in the 2017 General Election that followed, immigration has been a prominent issue in British society for decades. On 19 February 2020, the government announced that a new ‘points-based immigration system’ would be rolled out on 1 January 2021, the day after the transition period of Brexit ends. But what does this system actually mean for immigration to the UK? And will it achieve its aims?
The Australian points-based immigration system is well-known. A key difference from the Australian system is the UK system’s focus on a migrant’s usefulness to the economy, as opposed to the Australian system’s emphasis on usefulness to society and culture. Prospective immigrants can gain up to 60 of the 70 required points for eligibility (see table) for having been offered a relevant job. This means that medium or highly-skilled jobs with a reliance on foreign workers would still be able to access foreign labour. This applies to, for example, doctors, 30% of whom are foreign-born. The only additional requirement of a prospective worker for eligibility, after having received a job offer in a ‘shortage application,’ is that they speak a good level of English – something which a majority of graduates will do.
Where the points-based system could be less effective is in low-skilled occupations, defined as jobs which do not require A-Level qualifications or equivalent. Many such jobs rely on foreign labour to varying extents. Sectors such as hospitality, social care, farming, food and drink manufacturing, and construction will likely be impacted. There is no route laid out in the new system for low-skilled workers. The construction sector’s reliance on such workers is shown by the fact that 21% of the sector’s jobs in 2017 were held by EU migrants. The aforementioned sectors have been rather bluntly told by the Home Office to invest in technology, automation and staff retention to adapt to the, “end of free movement,” as well as to focus more on training British workers. Home Secretary 17
Priti Patel’s call to train the 8.45 million ‘economically inactive’ British residents, or people between the ages of 16 and 64 who are out of work, was somewhat flawed. As shown by the Office for National Statistics (ONS), only 1.87 million of these people are seeking employment; 2.3 million are students, 2.2 million have long-term sickness, and 0.9 million are retired, to list the main reasons why the majority of the 8.45 million people are not available to be trained to work in lowskilled jobs.
The system’s focus on encouraging workers from Science, Technology, Engineering and Mathematics (STEM) and similar skilled sectors which face labour shortages, and its notable discouragement of low-skilled workers, suggests a new vision of the economy for the years to come. One which envisages ever-increasing automation and mechanisation in low-skilled sectors, and one which sees technological advances as the future. This system could have wide-ranging impacts for the UK, as traditional migrant manual jobs, many seasonal, particularly for migrants from Eastern Europe, become less and less in demand, and immigrants to the UK instead increasingly work at the opposite, higher, end of the skills chain. Ross Hyde
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The idea surrounding money laundering laws is that a bank ‘knows its customer’ and if there is even a scent of something illegal then they should detect it and report it. When Zhenli Ye Gon, the owner of the Mexican pharmaceutical company Unimed, had his house raided in Mexico City by police this idea of knowing your customer hung over HSBC. The police found firearms as well as $205 million in cash and it was later discovered that the Mexican national was also a long-time customer of HSBC.
Are multinational corporations above the law? HSBC, one of the largest international banking and financial institutions in the world, and drug cartels, organisations that are often regarded as the most ruthless in the world, are not something that you would usually see in the same sentence. However, in December 2012, HSBC Holdings and HSBC USA were fined a record $1.92 billion for laundering over $881 million for drug cartels and terrorist organisations.
After more examples of suspicious activity began to mount, in 2010 the US OCC (Office of the Comptroller of the Currency) gave a 31 page intense order to HSBC to alter their methods. Importantly, one of these orders was to review backlogged transactions. HSBC decided to set up an office in Delaware, specifically for this undertaking and Everett Stern was hired as one of the compliance officers. His job was to go through alerts in the system. An alert was generated when a certain rule was broken in the system and Stern quickly found that there was a major backlog of alerts. Three weeks into this job Stern started relaying information to the CIA and, to this day, is widely regarded as the whistle-blower in the scandal. Stern’s largest findings were linked to the Office of Foreign Assets Control (OFAC) sanctions list. This is a list of companies and organisations that the United States is not permitted to do business with, such as terrorists and drug cartels. One specific company listed was TAJCO. TAJCO allegedly formed part of a multinational network that generated millions of dollars for the Lebanese militant movement Hezbollah, which the US regards as, “among the most dangerous terrorist groups in the world”. However, despite being listed, thousands of transactions went through the bank by TAJCO. Stern realised that HSBC had actually criminally tampered with the wire filter by putting dots and dashes in the names, such as TAJ-C.O, which allowed this money to pass through the filter.
In 2002, HSBC bought Bital Bank in Mexico City. Despite Mexico being a hub for drug cartels, acting as the gateway to the United States for drug trafficking, HSBC rated Bital as ‘standard risk’ which is the lowest risk on their scale and therefore there would be no need to look at previous transactions. Bital had a big presence in Sinaloa, a Mexican city plagued by the workings of the Sinaloa Drug Cartel that was at the time run by America’s previously most wanted drugs kingpin, Joaquin “El Chapo” Guzman Loera, with lots of money coming into Bital with limited monitoring. As a result, when HSBC took Bital over, they also acquired bank accounts that belonged to drug cartels as well as many workers who worked with the corrupt Mexican bank, so branches belonging to transnational HSBC all over the world now had money from illegal customers, exposing the company to tremendous risk. This was therefore one of the initial failures in HSBC’s inadequate Anti Money Laundering (AML) programme.
A prosecutor in West Virginia who worked on the case was prepared to indict the bank, however Lanny Breuer, Director of Justice chief criminal officer, asked him to stand down from investigating 19
HSBC. Instead, a settlement was reached with a Deferred Prosecution Agreement (DPA) in which HSBC admitted their guilt in violation of the Bank Secrecy Act and the Trading with the Enemy Act and promised to never let the failures happen again. However, there was no prosecution of the bank or any of its top executives, with no individual being held accountable. A statement of facts as part of the DPA was released by HSBC:
age to the economy. Nevertheless, drug cartels such as the Sinaloa cartel benefitted from this laundering by HSBC and are unquestionably responsible for tens of thousands of barbaric murders in Mexico. Since 2002, more than 100,000 people have been killed in Mexico as a result of drug cartel violence. In the same year that HSBC avoided prosecution, over 90,000 people were sentenced to federal prison for drug offences in the US, yet, “the preferred financial institution of drug cartels and money launderers,” as quoted in the US Department of Justice report, did not suffer a single arrest. Is this really equal justice?
“From 2006 to 2010, HSBC Bank USA violated the BSA and its implementing regulations. Specifically, HSBC Bank USA ignored the money laundering risks associated with doing business with certain Mexican customers and failed to implement a BSA/ AML program that was adequate to monitor suspicious transactions from Mexico. As a result of these concurrent AML failures, at least $881 million in drug trafficking proceeds, including proceeds of drug trafficking by the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia, were laundered through HSBC Bank USA without being detected.” [Quote taken directly from HSBC DPA Statement of Facts]
Once these companies become so critically important that any prosecution threatens to disrupt the world economy, they acquire the powerful presence of being ‘too big to jail.’ Robbie Cox
The bank also had to pay a fine of $1.9 billion. This was essentially five weeks profit for HSBC, and as a result it was argued that the bank could easily absorb this cost. However, at this time America and the rest of the world were still climbing out of the financial crisis of 2008, so it was feared that an indictment of HSBC would cause too much dam20
ing in the continent. With 60% of the entire population aged below 25, Africa is the youngest continent in the world due to high birth rates and low life expectancy. Covid-19 is much more prevalent among the older generation, with the majority of fatalities among over-65s and therefore Africa’s youthful population is a significant factor causing lower death rates.
Below the surface: a closer look at Covid-19 in Africa The Covid-19 pandemic reached Africa on 14 February 2020, with the first confirmed case in Egypt. Experts were extremely worried about the virus spreading to Africa because much of the continent’s healthcare is inadequate. This includes huge problems involving lack of equipment, funding and training of healthcare workers as well as inefficient data transmission.
Nevertheless, there is still fear that the lack of testing and under-reporting may mean that deaths in Africa due to Covid-19 will escalate as hospitals do not have the equipment to deal with people who fall ill, with only 2,000 ventilators between 41 countries. The pandemic is also expected to have a detrimental economic impact on the area with the WHO predicting that GDP in sub-Saharan Africa will contract by between 2.1 and 5.1%, which is the first recession in the region for 25 years, likely to impose even more challenges for development in Africa. Lockdown in Africa and around the world is also predicted to cause large-scale food shortages due to labour and supply shortages for farmers, restrictions on imports and exports and, in turn, price fluctuations. Ghana has already seen a 7.9% increase on the average price of food and the UN estimates that nearly 30 million people could fall into poverty. In addition, the number of acutely food insecure people could increase rapidly and as a result potentially lead to famine.
However, Covid-19 does not appear to be overwhelming Africa as many predicted. The World Health Organisation (WHO) suggests that the virus is spreading much more slowly in Africa than elsewhere, and it is certainly not seeing the same exponential growth rates that areas such as the United States have had to cope with. Africa has less than 2% of the world’s confirmed cases of Covid-19, despite being the second most populous continent, after Asia, with 17% of the world’s population.
Although Covid-19 may seem to be spreading slowly in Africa, in a continent that is already the poorest in the world, the economic impacts of the virus could be felt for many years to come.
Why is this? Firstly, a major reason for this is because of a widespread lack of testing and therefore under-reporting. Many areas in the continent do not have the facilities or supplies to carry out tests. The continent has tested just over one million people which is the equivalent of a day’s work for officials in Wuhan. The test-positivity rate is also high with Algeria, Sudan and Tanzania all having rates at or above 78%, suggesting there are many uncounted cases. As a result, the true number of cases is likely to be much greater than the reported figures.
Robbie Cox
The demographics of Africa also contribute to the less significant impact Covid-19 seems to be hav21
Kong authorities, often beaten or teargassed by riot police. The use of pepper spray and rubber bullets was commonplace. Outraged, the protestors continued marching for months, and while the bill was finally withdrawn in October, the demands of the protestors were not appeased. The protestors had set out four other objectives that they believed would put the problem to bed, including the resignation of Carrie Lam, Hong Kong’s Chief Executive, release of all protestors kept as prisoners, and an inquiry into police actions during the protests.
Breaking point: the Hong Kong prodemocracy movement As the West is preoccupied by the coronavirus and their own political strife, China looks at Hong Kong with the intention of crushing the pro-democracy movement once and for all.
While the protests were assumed to carry on well into 2020, the spread of Covid-19 from Wuhan necessitated a temporary hold on the protests. As the Chinese government put their efforts into combatting the virus in its early stages, the situation in Hong Kong developed into a stalemate. Recently, however, as China has begun to get a grip on the coronavirus situation, they have shifted their sights back onto Hong Kong. In April 2020, 15 key activists were arrested by Hong Kong police in a crackdown on democracy by the Chinese Communist Party. It is clear that the government used the lockdown as a means of guaranteeing the location of these activists. As well as this, it is believed that over 300 people were arrested on 27 May.
While the rest of the world was suffering hundreds of thousands of new cases each day, on 19 March 2020 the People’s Republic of China reported zero new cases of coronavirus. While this may seem like a good sign of the progress toward the end of the global pandemic, it may mean something very different for the people of Hong Kong.
The legislature of the Chinese government also passed a law under the pretext of ‘national security,’ that allows the legal crackdown on any movements toward secession from Mainland China or ‘destructive activities.’ The bill may be the beginning of the end for the Hong Kong democratic movement and will likely not be the last action Beijing takes to suppress the movement of democracy in Hong Kong.
In late March 2019, the Hong Kong Legislative Council introduced a bill named the Fugitive Offenders Bill, also known as the Hong Kong extradition bill. The bill would have allowed the extradition of Hongkongers to Mainland China, and subjected the citizens of Hong Kong to the legal system of Mainland China. This would have greatly eroded the autonomy of the region and potentially violated the ‘one country, two systems’ agreement reached by the British and Chinese governments during the 1997 handover of Hong Kong. Furthermore, the people of Hong Kong would have been subject to China’s authoritarian laws against free speech and democracy.
It is unclear what actions the international community will take to address this. Any serious intervention by a Western power may provoke global war, and just like with recognition of the Republic of China on Taiwan, any diplomatic action that does not go through the mainland Chinese government may anger China.
Fearing this, over the course of 2019, millions took to the streets to peacefully protest the bill. However, they were heavily suppressed by the Hong
Ben Green 22
Welcome to The Stock Market Focus, where you can read all about the current events in the stock market. Who are the winners and losers? What are the markets forecasting? All these questions and more answered in The Stock Market Focus!
UK based companies), have all felt monumental impacts from the virus and subsequently taken huge hits. However, with that being said, we can see, based on historical data, that the impact of this virus might not be as catastrophic as the media makes out.
Covid-19 and the stock market
In terms of the American stock indices, the S&P 500 experienced a level 1 circuit breaker in early March 2020 caused by a 7% drop. What is a circuit breaker you ask? A circuit breaker is a way to cool down the markets if a major drop suddenly occurs. If the S&P drops by 7% or more a circuit breaker is triggered, this causes a pause in trading for a minimum 15 minutes. This has three levels of escalation until trading will stop for a whole day! The largest drop seen in this recent period by the S&P was on 16 March, where it dropped by a whopping 11.98%, which is its third biggest drop in a single day ever. This circuit breaker also caused pauses in the trading in the Dow Jones, as it recorded a 12.93% drop on the same day, which is also its second largest drop in its history!
As we all know, the Covid-19 crisis has had a profound effect on all of our lives. This virus has struck the world economy with unprecedented force and the stock market reflects the impact the virus has had.
Moving across the pond, the FTSE 100 also experienced its biggest decline since 2008. Approximately £144 billion had been wiped off its value which equates to an 8.7% drop in points. The worldwide panic induced by Covid-19 caused mass flight by investors and confidence to plummet. However, one could say that Covid-19 is not the only reason why the FSTE plummeted – read more about this and the ‘Oil War’ in The Main Focus. With all the doom and gloom surrounding the current state of these indices it can be hard to maintain any positive outlook. However, upon a comparison with prior economic shocks, it can be said that there is hope for a stable recovery. If one looks at the maximum market decline of the S&P
The principal stock indices like the S&P 500 (the stock index for the USA Fortune 500 companies), Dow Jones (the stock index for 30 USA companies) and the FTSE 100 (stock index for the leading 100 23
500 for these 5 crashes: Great Depression (1929) 86.2%, Black Monday (1987) 33.5%, the dot-com crash (1999) 49.2%, Great Recession (2008) 56.8%, and Covid-19 crash (2020) 33.9% [projected fallout as of March 2020]. One can already see that the Covid-19 crash has a far weaker projected maximum impact on the S&P; this data can also be used to see how long the recovery of the S&P will take. It has been forecast that it will take around 693 (± 48) days for the market to recover from this crash. This may seem like a long time but compare this to the 1,803 days it took for the market to recover from the dot-com crash. Illustrated on this graph is the days taken to recover compared to the percentage maximum impact on the S&P:
Winners and losers of the Covid-19 stock crash Even in times of crisis there are opportunities to be found, with the fall of the travel and hospitality sector accompanied by a rise in the online retail sectors. In this article, I will be exploring who have been slammed by this outbreak and those who have newly found profits. Winners: [All measurements for stock prices taken from lowest point in March 2020 to May 2020] Technology stock prices have seen huge surges as anticipated profits and revenues are expected to increase due to people working from home. Thanks to the closing of schools and workplaces, apps such as Zoom Video Communications, Slack and Microsoft Teams have seen exponential increases in users. As of April 2020, Microsoft Teams saw an increase of 32 million users which caused the price of Microsoft’s stock to increase 28.9% from its lowest point in March.
From these calculations and the graph, one can actually see that even though this is a severe market crash, there is hope that things will return to normal and that we should not lose faith in the markets. With all that being said, these are unprecedented times and therefore investor confidence and market volatility are at an all-time high. Therefore, do not expect a plain-sailing recovery from the markets as there is potential for events to shake up the markets even more. Dhru Dattani
Healthcare stocks have also seen an increase in value due to the integral part they play in fighting the virus. Consumers and firms rely on PPE and sanitary equipment to keep themselves safe, therefore a huge wave of demand has pushed up prices of stocks from the likes of the Clorox Company, whose share price has risen by 28.5%, and pharmaceutical company Johnson and Johnson (shares up 33.4%). It seems healthcare equipment providers are one of the biggest winners due to an increase in worldwide demand – keep an eye out for PPE companies such as Portwest to see potential gains. 24
Utilities are often seen as a stable investment even in times of financial crisis due to the fact that people need gas, water and electricity for everyday living. They may not yield large profits but investors prefer the safety net of steady income that they offer. Shares from the UK National Grid has seen no major declines and steady increase of 4%. Moreover, water providers like United Utilities (USA) are maintaining steady recovery after a drop off of share price at the beginning of March 2020. With that being said, thanks to ongoing fiscal stimulus for renewable energies and waste management, an increase in value due to new infrastructure could be possible in the future.
many conglomerates are feeling the effects of this. The Marriott Hotels share price has fallen around 31.1% and they hit a 5-year low on 3 April of $59.08 per share. European hospitality operator Accor had to close two-thirds of its hotels and had to lay of 75% of its staff, also having to cancel a £248 million dividend pay-out in order to preserve its cash, which led to a 28.4% drop in the company’s stock price. As global supply chains have been interrupted, cost of production has increased for firms so the demand for global shipping has decreased as a result. Golden Ocean Group has experienced a 13.7% fall in share price and Diana Shipping which has seen a 20% decrease. However, amidst the Covid-19 pandemic, there may be potential for these shares to regain position thanks to the decrease in the price of oil per barrel which could stimulate more demand for these shipping services in due course.
With the fall of one key commodity, oil, comes the rise of another, gold. Good news for those who are holding onto gold, currently the UK gold price in £/kg has increased by 14.7%. In any case of economic crisis, investors want to put their money into something which is liquid i.e. can be bought and sold quickly, and something that retains its value. In almost every case the commodity that investors turn to is gold. Using basic economic theory we can then understand that if more people want to invest in gold the demand for it will increase, therefore the price will increase.
Banks have also been hit pretty hard due to the increasing unemployment rates, with people less inclined to take out loans in these times. Even with monetary policy setting the interest rate lower than ever, banks are in a tough spot and their share prices reflect this. Wells Fargo have seen a 33.3% drop in share price, Barclays are down 25.8% and Deutsche Bank have seen a 13.6% drop respectively.
Losers: [All measurements taken from highest point in March to May 2020] It goes without saying that the travel sector has been one of the hardest hit industries. Due to the nature of the virus, many travel companies have been forced to close down and airlines have been crippled. The Boeing Company have seen their biggest decline this year with their stock price falling by 53.9%. Due to the US and EU travel bans, many airlines have grounded thousands of flights which has destroyed any hope of buying aircraft and maintenance from Boeing. Delta Airlines stock price has also fallen by 48.9% – Delta are experiencing a 5-year low which comes mainly due to the US travel ban.
In times like these, there are always going to be industries that have been hit hard. However from a long term trading perspective, the idea is to look for those which, instead of winning in the shortrun, are predicted to have a substantial comeback after the bulk of the crisis has passed. That said, the UK economy is now entering a recession, and this may present some opportunities for astute investors to capitalise in the short term. Dhru Dattani
Hospitality, mainly hotels, has also been damaged by the crash. Demand has never been as low and 25
‘Going short’ on the Covid-19 crash?
There are many different ways to make profit in the stock market – the conventional idea is that you buy low and sell high. This is true and it is the fundamental understanding of the markets; many firms have built complex strategies based off this idea. However, there is a way to make money when the price of something goes down. This is called ‘shorting’ or ‘going short.’
in order to sell them Person A will agree only if you promise to give back these 100 stocks later Therefore, if all goes well Person A won’t have lost anything, they just won’t hold those 100 stocks for a small period of time Person A lends you those 100 stocks for a small period of time, and then you sell those 100 stocks for market value of £10,000 and you now have £10,000 in your account You then wait a few weeks and you see that the price of stock for Company X has gone down from £100 per stock to £90 per stock In order to fulfil your promise to person A, you must buy back 100 stocks of Company X but this time they only cost you a total of £9,000 So you pay £9,000 and give the 100 stocks of Company X back to person A But now you are left with £1,000 profit!
As you can imagine, there is a bit more to it in terms of certain fees and margin accounts, but that is the general idea of shorting. This can be a really appealing trading strategy in times of economic crisis because it makes firms quick profit and it is not hard to see that the market will go down. The problem lies with whether the government should ban these types of trades because people are betting for their own economy to fail! Many businesses who are targeted by shorting firms feel like people are rooting for them to fail. Should the government, in times of crisis, ban shorting?
The main principle of this strategy is to predict the price of something (e.g. a stock, forex pair or commodity etc.) to go down – this is therefore particularly appealing in a situation like this, where several markets are taking hits. With that being said, it is frowned upon as a strategy because it is human nature to resent people who think you are going to fail.
An argument for this would be that by not discouraging shorting, firms would be much less inclined to support businesses and keep them alive. If firms wanted certain businesses to fail, they would not invest in to those businesses. This decrease in investments would reduce injections into the circular flow, which could make it even harder for economies to recover and grow out of recessions. However, in terms of keeping shorting legal, it can be used to root out the failing companies which could be detrimental to the economy themselves. If a bank is targeted by short sellers and the bank really is going bust for whatever reason, then short sellers help bring about this necessary eco-
Here is the basic strategy of ‘shorting a stock’: You, a budding investor, predict that due to the current circumstances of Covid-19, the stock price of Company X will go down over the next few weeks You decide to short this stock in order to make a profit Using a stock broker (usually online) you connect with someone (person A) who has 100 Company X stocks each valuing at £100, therefore holding a value of £10,000 You ask person A to lend you these 100 stocks 26
nomic restructuring. Moreover, they could use their new profits to reinvest into the economy with a positive outlook. The main hope for governments would be to maintain a healthy balance between shorting and other strategies which focus on the betterment of the economy. However, with all economic disasters, predictability is at an all-time low so very few people have an idea of what the future will hold.
Dhru Dattani
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When Attlee was asked what Churchill contributed to the Battle of Britain he replied, somewhat snidely, ‘words.’ Yet, in my book, his words were enough. Because, whether or not Churchill was the tactical mastermind behind the operation (and why should he be!), the reality is that he provided a sense of purpose and unity to all of the British people, both off and on the battlefield. A leading soldier, Sir Ian Jacob, stated, “we can only recall with gratitude the five years in which he inspired us by his leadership.” Churchill’s approval rating never fell below 78% during the war.
Political genius or flawed statesman? Joe Sykes and Josh Bartholomew debate the merits of Winston Churchill’s wartime leadership Political genius – Joe Sykes Ask anyone, anywhere, to say what comes to mind when ‘Winston Churchill’ is uttered and you will find that the words ‘great,’ ‘wartime’ and ‘leader’ seem to be part of the definition of the man himself. This belief is no misconception.
Churchill also successfully delegated most domestic power to Ernest Bevin, upon realising that his strengths lay elsewhere. Management of the Home Front was extremely successful during the war and Churchill, who made the decision to appoint Bevin in the first place, deserves credit for this. It is important to address the fact that Churchill was not perfect – he had his flaws. He made some tactical errors, such as approving the raid on Dieppe and failing to prevent the Japanese capture of Singapore. However, cherry-picking specific examples of Churchill’s failures are insufficient in proving that Churchill was an unsuccessful leader. Not only are these examples riddled with hindsight bias, they also ignore the various strategic successes Churchill was accountable for, such as the decision to send forces into Egypt and the Suez Canal which secured the area from Axis control.
Churchill’s speeches and persona had a galvanising effect on the British public, to the extent that it truly affected the outcome of the war. It goes without saying that being in Britain from 1939-45 was tough. 4.5 million men were conscripted, which broke millions of families apart, rationing was introduced in January 1940 which was imposed on every single person in the nation – need I go on! Yet, the British people had full faith in Churchill, depicted by David Low’s cartoon, ‘All behind you Winston.’
But also, and more importantly, these setbacks do not negate the vast positive effect Churchill had on the nation. According to Beverly Nichols, Churchill, “took the English language and sent it to battle,” and took the people of Britain with him. This is, above all, what the British people needed – a figure to follow in dark times. And, according to Attlee, “no one else could have done the job he did.”
This made otherwise invasive and unpalatable domestic changes bearable – changes which were necessary for Britain to stay afloat during the war. The effect which Churchill had must not be understated – Churchill created an environment full of unity and patriotism which allowed the Home Front to function effectively.
Yes, Churchill had his flaws. But to argue that he was not a successful wartime leader - I’m not buying it.
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Flawed statesman – Josh Bartholomew
deserves no credit for this.
If British popular culture is to be believed, Winston Churchill is the greatest political leader the world has ever seen: in 2002, he was voted the Greatest Ever Briton; he’s featured in cinematography over 30 times; he’s even had his own insurance company named after him (now isn’t that glamorous!).
Given that he wasn’t bothering himself with dealing with domestic affairs, one would expect that his military strategy was successful. But it was quite the opposite: during the Battle of Britain, if Sir Hugh Dowding hadn’t opposed Churchill’s decisions, it’s likely that the country would have been invaded by Germany. As Clement Attlee aptly put it: “What did Churchill contribute to the Battle of Britain? Words.”
There is little doubt that Churchill had an impact on World War II – before he entered No. 10, the war effort was languishing and Britain looked headed for defeat at the hands of fascism.
His military failings weren’t limited to the Battle of Britain, either. He overestimated the benefits of invading Italy (which went on to become one of the worst quagmires of WWII for the Allies), he approved a raid on Dieppe in August 1942 which he knew would fail, resulting in 4,000 deaths and he consistently overlooked South-East Asia, which became a disaster for Britain when Japan overran the colonies in 1942, leaving Singapore brutally exposed.
The morale of the British people undoubtedly rose after Chamberlain’s departure from Downing Street, but the idea that this can be attributed to Churchill seems deeply flawed. Chamberlain’s Appeasement is one of the most inept foreign policy decisions in history; it’s inevitable that his successor would cause an upturn in morale amongst the people.
This is the problem with Churchill: he removed strategic control from the military commanders yet made consistent and damaging mistakes on the battlefield. He refused to deal with domestic policy, considering it below him, but sidled back in with pre-recorded radio broadcasts every time some credit was due. Churchill benefitted inordinately from being the successor to one of the worst Prime Ministers in British history, took credit for successes that need not have been attributed to him and apportioned blame elsewhere when necessary. If you add in the fact that he extinguished much of the German civilian population in Dresden for little strategic gain, something that could have made him a war criminal, the picture of Churchill becomes rather murkier.
His oratory is widely considered to be the most notable feature of his administration, yet between July and September 1940 – with the Blitz beckoning – Churchill did not address the nation once. He was completely disinterested in directly addressing the nation anyway, instead opting to prerecord his messages. He also preoccupied himself with military strategy, showing utter disregard for internal affairs and inviting Clement Attlee into coalition to deal with the Home Front. Management of the Home Front is widely considered to be one of the most effective parts of the wartime coalition, yet Churchill
Besides, there’s a reason the British people voted him out so convincingly at the 1945 election, when they got the chance. Joe Sykes and Josh Bartholomew
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Opinion: Boris Johnson has lessons to learn from history
ing 189 seats at the 1945 election, giving Attlee the opportunity to govern with an 145-seat majority.
Throughout his political life, Boris Johnson has done little to hide his professional infatuation with Winston Churchill, once a comparable darling of the Conservative Party to the same extent. In 2014, he published The Churchill Factor, a fairly hagiographical account of Churchill’s career; he is widely considered to have modelled his oratory on the war-time Prime Minister’s fearsome speaking skills.
A public desire for reconstruction is a fortunate situation to be governing over, giving a Prime Minister freedom to leave their mark on the country, but it’s an ominous expectation all the same. Despite introducing the Welfare State and the NHS in his 1945 government, Attlee’s majority was cut from 146 to just five at the 1950 election before losing office a year later; similarly, David Lloyd George’s perceived failures to build the, “homes fit for heroes,” that he’d promised as a Liberal Prime Minister in 1918 saw him lose power four years later. It is thought to have been the trigger for a miserable decline for the Liberal Party, who never governed again. Boris Johnson may seem like a politician whose popularity with the public will not be affected post -Covid, but Churchill seemed that way, and so did Lloyd George – no one is immune to public backlash. Cultural crises, like war and public health emergencies, invariably incite a popular unity amongst the country, regardless of the government’s competence – in the US, Bush’s approval rating hit 92% after 9/11.
Besides the parallels between their respective rises to power (Churchill, too, was thought by his critics to be an untrustworthy political chancer, willing to do whatever it took to reach power), Johnson would do well to remember Churchill’s plight post-war.
Yet cultural crises of the gravity of Covid-19 also bring deep societal introspection. When the final death is recorded, when hindsight allows greater insight into Johnson’s coronavirus policy, the public will reflect. Were the health services ready? Did the government have a coherent strategy? Did austerity leave the NHS unable to cope with a medical emergency on the scale of Covid-19?
Known for being particularly apathetic towards domestic affairs, Churchill allowed the Labour Party to join the war-time coalition in 1940, promoting Clement Attlee to Deputy Prime Minister and allowing Labour’s phalanx of ‘big beasts’ to occupy prominent roles and control the Home Front.
Now, Johnson – unlike Churchill – is fortunate in that the electorate won’t be given the opportunity to answer these questions until May 2024, leaving him with a priceless chance to rebuild the country over the next four years. But should Johnson fail to take this opportunity to change Britain, the electorate will act accordingly, especially with the option of a more centrist Labour Party, which can provide greater opposition than it did under Corbyn.
It was a decision that, politically, backfired miserably. Attlee oversaw a significant change in the zeitgeist of British politics, as the popular mood shifted from a desire to survive at war to a need for domestic reconstruction. Churchill was resoundingly removed as leader, los30
Beyond party politics, a failure to reform has serious, long-term deleterious consequences for the country. In 1941, Rab Butler was appointed to Churchill’s war cabinet as Education Secretary, with free rein to issue a complete overhaul of Britain’s languishing learning system. A national education system seemed in the offing. Yet Butler, largely, blew it: he was unable to override Churchill’s inherent favouring of public schools, and the education sector remained riddled with unfairness.
(double the foreseen cost), contributing to the pound’s value falling by 30 per cent that year. What is even more ominous for Johnson is that both administrations had the benefit of overseas funding, and still struggled economically: Attlee, especially, benefitted from the USA’s Marshall Aid programme – with the help of leading economist John Maynard Keynes – which allowed him to embark on his reforming policy. There will be no such equivalent for Johnson. The US’s economy has been damaged even more brutally than the UK’s – unemployment rates have reached levels not seen since those of the 1930s. The worldwide economic story is similar. No country will be able to offer a comparable lending programme, despite Shadow Foreign Secretary Lisa Nandy’s claim in April that Johnson should seek one. He won’t be able to send a member of the Royal Family to appease the US President, either, as Harold Wilson did, sending Princess Margaret to persuade Lyndon Johnson to bail out the UK’s economy in 1965.
It is thought that Britain is still suffering from Butler and Churchill’s failures today. Numerous Prime Ministers have tried and failed to introduce change to the education system. For example, Harold Wilson’s Education Secretary Anthony Crosland vowed to, “destroy every Grammar School in England and Wales,” but failed to do so; later Margaret Thatcher opted to adopt a Napoleonic, vicelike grip on schooling, implementing a national curriculum and reducing teachers’ influence over what was taught. The point is that, often, a crisis is needed to implement wide-spread, effective reform. Education is a good example of where Johnson could start. No other Western education system tests at 16 – perhaps the enforced year’s hiatus from public examinations may compel Johnson and Gavin Williamson to seek a better alternative to the intensive public examinations which dominate education in this country. The Covid-19 crisis could also force the Conservative government to reassess whom they judge as ‘low-skilled workers’ and subsequently initiate a re-think of Priti Patel’s immigration policy.
Johnson has vowed that there’ll be no return to austerity (or ‘the a-word,’ as he called it in Prime Minister’s Questions in May), signalling that his intentions may well be to reconstruct the country, but the economy will need rebuilding too. It gives Johnson an impossible decision to make: reform, and potentially cripple government finances irreparably, or follow a more constrained approach at public services’ expense and pay the price politically. His decision-making in the forthcoming months as the UK emerges from the Covid19 outbreak will decide his legacy.
Should Johnson, as would be prudent, adopt a broad reform program, the problem becomes an economic one. Rebuilding a country, historically, has always proved expensive: three years into Lloyd George’s reconstructive 1918 government, he was forced to appoint Sir Eric Geddes to axe public spending – by 1921, departmental budgets had been cut by 15 per cent. Equally, the NHS almost financially crippled Attlee’s great reforming administration. In 1949, it cost £250 million
If Johnson wants to maintain the popular support upon which he thrives, he could do worse than to learn the lessons of history and employ a combination of the public relations of Churchill, the fiscal prudence of Macmillan and the constructive instincts of Attlee. Josh Bartholomew
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Disunity and discord: a history of factionalism within the Labour Party
values he shared with Conservative Chancellor Rab Butler, in a post-war consensus dubbed by detractors as ‘Butskellism.’
Tony Blair, the Labour Party’s most successful electoral leader, once remarked to a senior aide that, “the job of being Labour leader is to save the Labour Party from itself.”
Ramsay MacDonald, though, is reviled within the Labour Party even more deeply than Blair. Despite being one of the first Labour MPs, in 1906, and later becoming the first Labour Prime Minister, in 1924, MacDonald has become demonised on the left. Herbert Morrison, Deputy Prime Minister in Attlee’s 1945 government, even had a portrait of MacDonald on his wall turned over.
Blair’s words were, as it turns out, close to prophetic. It seems remarkable that any mention of his name within the Labour Party is often greeted with scornful disdain, from whichever quarter. This is not just a contemporary development, either. Even before his legacy was blighted by events overseas, Blair was plagued by the rebellious dissent of the Labour backbench. His 2001 government was, at that time, the most fractious in the modern era, seeing a rebellion by Labour MPs in 21% of divisions.
MacDonald is thought of as a traitor amongst the left, though more recent history has painted him in a rather more favourable light. After becoming Prime Minister for the second time in 1929, he was forced to deal with the consequences of the Wall Street Crash, the greatest economic turmoil the world has ever seen. In response, he cut unemployment benefits and reduced public spending under strict conditions imposed by the Federal Bank, from whom MacDonald was attempting to borrow money in order to save Britain from economic collapse.
In January, a YouGov survey found that, amongst Labour members, Blair is the fourth-most unpopular Party leader of all time. He surveyed below Michael Foot, who led the Party to their disastrous defeat in 1983, and James Callaghan, whose loose economic policy opened the door to 18 years of Conservative rule at the end of the 20th century. Even withstanding the impact of the Iraq War – which was antithetical to traditional socialist principles – Blair’s standing in the Labour Party speaks volumes of the standards upon which the left holds its leaders. Amongst the Party membership, Labour’s most popular leader is Jeremy Corbyn, despite his apocalyptic performance in the 2019 election. Factionalism is so strong within the Party that being a true, principled socialist matters far more than any form of electoral pragmatism.
What followed, in 1931, has shaped the legacy of MacDonald within the Labour Party. Under the economic strain of the Great Depression and the Parliamentary strain of a minority government, MacDonald proposed a national government to ease Britain’s recovery. Cabinet was in favour (just) and MacDonald approached Conservative leader Stanley Baldwin, who agreed to form a national government.
Two of the three men to poll below him in the YouGov survey are Hugh Gaitskell and Ramsay MacDonald. What Blair, Gaitskell and MacDonald have in common is a perceived conservative tendency – Blair’s economic policy was viewed as a continuation of Thatcherism (especially after he removed Clause IV from the Party’s manifesto in order to gain the support of The Sun); Gaitskell was widely ridiculed on the left for the economic
The response from the Labour backbenches, though, was tempestuous. In resigning the Labour leadership to take control of the national government, MacDonald had – they claimed – selfishly put country before Party. These cries ignored the 32
fact that MacDonald was a vital reason for Labour’s very existence as a governing Party.
So how does Keir Starmer deal with it? He’s already been blighted by more troubles, after a report detailing purported attempts by members of the right to set Jeremy Corbyn up for failure was leaked only two weeks after he became leader.
It's an interesting case in point of the problems which face any Labour leader. MacDonald placed the needs of the country before the perceived needs of his Party and paid the price with the Labour membership – he was later expelled from the Party.
Starmer will have to appease both left and right to maintain their support. This is, of course, far easier said than done. But if he doesn’t, he’ll struggle to ever gain the power that really matters and enter the door of No. 10 Downing Street.
Aside from the Party’s major splits, there is also a history of petty infighting from the left and right of Labour Party. Principled, hard-left socialists argue that the pragmatic, progressive ‘Blairites’ sacrifice their values for success; the right-wing of the Party say that you’ll never be elected by being a staunch advocate of socialism.
Josh Bartholomew
The debate has raged since the Party’s advent – it seems fairly clear that the values of the Labour membership and the values which bring a party electoral success are not attuned. At the 1960 Labour conference, leader at the time Hugh Gaitskell said that, “what brings cheers at this conference does not necessarily get votes at elections.” But the Labour Party continues to be plagued by the factionalism from both sides. After Sir Keir Starmer’s election as leader, grassroots pressure group Momentum issued the following statement: “In this new era Momentum will play a new role. We’ll hold Keir to account and make sure he keeps his promises, champion big ideas like the Green New Deal and build the power of Labour members.” It’s a statement that you’d expect to hear from the opposition, not a pressure group that supports your own Party. At times, it feels like the Labour Party hates itself more than its political opponents do.
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In order to fully analyse Donald Trump’s response to Covid-19, you have to start back on 20 January 2020 when a 35-year-old man who had recently returned home from visiting family in Wuhan (China) became the first recorded case of the virus in the US. Coincidently, on that very same day, over 5,000 miles away, the first confirmed case was reported in South Korea. Unfortunately, the concordance between these countries ended here.
In the months that followed its first confirmed case, South Korea adopted an aggressive approach of rigorous testing which has led to their emergence as one of the major potential winners over the pandemic. In fact, by mid-March when the World Health Organization (WHO) issued its plea to ‘test, test, test,’ South Korea had already spent weeks doing just that. Authorities had quickly developed the capability to carry out 0.27 tests per thousand people on 8 March (see Figure 1) and by 20 March, exactly two months after the first case, the total number of tests reached a staggering 316,664.
There are external factors such as the US’s higher levels of obesity and high-density cities which partly explain the different experiences of the US and South Korea in addressing coronavirus. However, it is the performance of the respective governments which seems to have played the major role in determining the fate of their respective countries.
Since then, the South Korean government has exported test kits to over 20 other countries, including the US, and released a coronavirus playbook, ‘Flattening the curve on Covid-19: the Korean experience,’ which says they, “successfully flattened the curve on Covid-19 in 20 days [see Figure 2] without enforcing extreme draconian measures that restrict freedom and movement.” Overall, the
How will Trump’s handling of coronavirus go down in history?
Figure 1 34
ruling Democratic Party has received widespread praise resulting in their comfortable victory in the most recent National Assembly elections.
Although failures in manufacturing contributed substantially to the low number of tests, the real issue came in the rolling out of these tests. By the end of February, the CDC had only used 4,000 tests from the 160,000 produced.
The US response tells an entirely different story. On 22 January, two days after the first case, Trump received his first public question regarding concerns about the coronavirus. He responded: “we have it totally under control. It’s one person coming from China. It’s going to be just fine.”
Despite this, Trump remained adamant that, “one day it’s like a miracle – it will disappear.” In one particular interview, he told reporters that, “anybody that needs a test gets a test.” “They have the tests. And the tests are beautiful.” This could not be further from reality. Anybody who needed them was not getting them. Similarly, on 4 March, Trump dismissed the WHO mortality rate (3.4%) as, “really a false number,” and instead cited a ‘hunch’ that it was actually, “a fraction of a percent.”
It was not until 29 February, almost six weeks later, that the Trump administration finally allowed laboratories and hospitals to conduct their own tests. Up until this point the absence of effective diagnostic testing caused in part by the failures of the Centre for Disease Control and Prevention (CDC) had halted any attempt to track or contain the virus. According to both the CDC and the Food and Drug Administration (FDA), they ran into significant manufacturing delays throughout February. It has later been revealed that such delays were largely due to flawed designs which resulted in the defects seen in many of the initial test kits.
Trump’s reckless downplaying of the dangers of the virus did nothing but polarise the US as public concern over the coronavirus became a matter of political allegiance to the right or left. In a poll released in early March, roughly six in ten Republican voters nationwide said they were not espe-
Figure 2 35
cially concerned that the coronavirus would disrupt their lives. Two-thirds of Democratic voters said the opposite.
of testing and clear communication will become a model for countries to follow in the future. In contrast, according to Ron Klain, who led the fight against Ebola in 2014, “the US response will be studied for generations as a textbook example of a disastrous, failed effort.” Jeremy Konyndyk, who was part of the government’s USAID programme from 2013 to 2017 has argued a strikingly similar case: “we are witnessing in the United States one of the greatest failures of basic governance and basic leadership in modern times.”
Many of Trump’s supporters dispute claims that he has failed to act with the appropriate urgency on the grounds that most of the blame should instead be directed at the CDC. Whilst understandably Trump is not entirely to blame for the CDC’s ineffectiveness and high levels of bureaucracy, his failures in office can be dated well back to even before coronavirus entered the scene. There is evidence that, not only was he warned about the potential of a pandemic and its dangers to Americans, he was given a plan on how to deal with it, which he promptly shelved.
Zach Whelan
During the Obama administration, in the wake of the 2016 Ebola outbreak, the National Security Council introduced a special pandemic unit and a 70 page ‘playbook on fighting pandemics.’ According to an anonymous White House official Trump was briefed on the playbook but it was, “thrown onto a shelf,” and the pandemic unit was disbanded in 2018. Trump even proposed a 16% cut in the CDC’s funding on 10 February just days after the WHO declared a public health emergency over Covid-19.
Although the Trump administration made countless mistakes leading up to the crisis, the six to seven weeks from 20 January to early March will go down in history as perhaps the most pivotal time to respond to the emerging pandemic. On the one hand, South Korea’s efficient introduction 36
The government’s grandiose guarantee
For much of April, Hancock was seen to have 'bitten off more than he could chew' with testing averaging around 20,000 a day for most of April. This would be a nail-biting finish for Hancock as much of the left was calling for his resignation if he did not meet his pledge. Instead, the minister rose to the Downing Street podium on 1 May to announce that on the final day of the month, 122,347 tests had taken place. Despite audacious claims from the left that the tests had been counted fraudulently to upkeep Hancock's reputation, it appeared as though the government had delivered on its promise and that the UK was firmly on its way to assuming a test, track and trace strategy.
Britain wasn't the first country to have been hit by the tsunami of economic, social and healthcare problems that Covid-19 had infused in others. Thus, one would presume the UK government would have learnt from the strategies that had started to work in other countries. One of the first strategies that comes to mind is a lockdown, which indeed many countries have defaulted to. But it is self-evident that a lockdown does little more than slow down the monster that is lurking around the corner – it is not enough on its own. Thus, a lockdown alone wouldn't bring about the change that the UK public both desired and expected of the British government.
It seems as though Hancock ought to have savoured the moment of triumph as he has been the target of much opposition scrutiny since. With the government subsequently missing the test target seven days in a row by 9 May, claims that Hancock's data was disingenuous have resurfaced. Only time will tell whether the public will accept that no government is perfect especially in these circumstances, or whether they deem that so much is at stake (both socially and health-wise) that a government creating utopian goals in an attempt to satisfy public belief is unfit to run the country.
Perhaps there is a solution to all of this. Whilst it could co-exist with a national lockdown, some would argue it could exist as the sole means of coronavirus defence if done correctly. This would be the strategy of test, track and trace. Some of the countries that appear to have been coping the best in these unprecedented times, for example Austria, Norway and South Korea, have optimised this approach.
Lucca Froud
With this in mind, the UK government decided to experiment with this scheme as announced by Matt Hancock at the start of April insisting that by the end of the month the nation would have the capacity for 100,000 tests a day. It was inevitable, of course, that some form of testing was already taking place in hospitals but the government's decisive move involved drastically ramping up the capacity from only 10,000 a day. 37
made, and the rationality (however small) of the individual decision makers, this model of human behaviour was reasonable on a large scale; people’s decisions tended towards rationality when aggregated. Economists such as Milton Friedman also argued that, although people may not calculate the expected utility of their decisions, their decisions can still be rational. To explain this concept, he used the analogy of a professional billiards player, who doesn’t know the mathematical formulae which determine the results of his shots, but plays as if he does.
The rise and fall of economic man Perfectly rational and omniscient; do these descriptions apply to you? If yes, then well done, you are a ‘homo economicus,’ if not, then don’t worry, you’re just another fallible, irrational human, like the rest of us. To those who have studied economics, the presumptions of human capabilities may seem extremely optimistic, especially if you’ve ever met a human; economic man epitomises rationality, humans epitomise stupidity. But what does this rationality of economic man mean? Three conditions make up this form of economic rationality: transitivity, the absence of cyclical preferences e.g. preferring good A to B, B to C but also C to A, continuity, the consistent relative value of goods, and completeness, either preferring one good to another or being indifferent (not simply saying, “I don’t know”). Many early thinkers, such as René Descartes, Jeremy Bentham, and John Stuart Mill, incorporated the idea of economic man in their work. Mill wrote that while humans may have motivations driven by things other than material gain, these elements of human behaviour should be left out of economics to make it more logical. This seems like a reasonable judgement but can lead to imperfection in models among other things, potentially with disastrous implications.
The flaws in the traditional view of economic man led to a more precise and accurate view of decision making: behavioural economics. Behavioural economics uses the rationality conditions underpinning economic man, and incorporates psychology and neuroscience, along with ‘experimental’ or real-world results, to ascertain the specific factors affecting the decisions of normal people. A key example of the use of behavioural economics was David Cameron’s ‘nudge unit’ tasked with nudging the public into certain decisions, rather than implementing more traditional economic incentives.
Over time, however, the assumptions and models of human behaviour have changed dramatically. John von Newmann’s 1944 book Theory of Games and Economic Behavior laid the foundations of modern game theory, incorporating many of the assumptions made of economic man, and using them to create a theory of ensuring maximum expected utility for decision makers. While this was a step forward in the modelling of ‘perfect’ human behaviour, it still didn’t resemble what we would recognise as real human behaviour.
While the homines economici among us may be indifferent about the advances made in behavioural economics, us humans ought to be grateful for the ‘choice architects,’ a phrase coined in the book Nudge, helping us to make the right decisions for us, and the people around us.
This fault, however, isn’t as bad as it may seem. While individual decisions may not be made perfectly rationally, due to the number of decisions
Toby Robinson 38
What would you do with £100 million?
completely useless. It may, in fact, reveal one of the most interesting aspects of current research in behavioural finance: home bias.
Imagine that you’re an investment fund manager at a major firm, such as BlackRock, looking after and helping to grow the wealth of high net worth individuals. One day, a EuroMillions winner wanders into the office, and asks you to personally manage a £100 million fund of their winnings, offering you a generous reward if the investment is successful.
When faced with similar situations to the EuroMillions example, rational investors of the homo economicus type would spread out their asset purchases across the global economy, proportional to the individual market share for stocks for each country. So, a Swedish investor would invest just 1% of their fund in Swedish equity, compared to 52% of their fund being invested in US equity, for instance, given the equivalent share of global equity that these countries possess.
Where do you invest the money in? What stocks and assets will you choose in your portfolio, to achieve the highest returns possible, without losing any of the initial investment?
Despite this, empirical evidence suggests that the vast majority of investors disproportionately favour domestic equity. For instance, the average social security plan portfolio chosen by the Swedish population in the early 2000s had 48.2% of the fund devoted towards Swedish equity purchases. How many of the readers of this article allocated over £6 million of the EuroMillions winner’s fund to UK companies?
Regrettably, the opportunities for teenage speculators to be entrusted with such a significant sum of money to invest are likely to be very few and far between. However, this thought experiment is not
(Depiction of share of global equity market by country. Source: BunkerRiley; as of 31st December 2017) 39
What causes home bias?
transaction costs are definitely not as significant a factor as they once were.
The vast majority of readers will have exhibited some home bias in their EuroMillions allocation. To try and identify the causes of home bias, we have to work out what factors could have influenced your thinking...
Were you influenced by a lack of information about overseas investments and markets? There’s always going to be an element of asymmetric information in the global economy – a UK investor will often know far more about which UK companies are creditworthy than they will about firms in Japan, owing to the media’s focus on the domestic economy, and potential language barriers preventing seamless information flows. As such, investors and traders may stick with what they are familiar with, and exhibit a home bias. However, we can’t forget globalisation – with an increasingly technologically-capable population in the UK, it is easier than ever to find out about foreign assets and international markets. The readers of this article will undoubtedly be far more knowledgeable about other countries than the average investor was 30 or 40 years ago.
Were you influenced by patriotism and loyalty to the UK? A sense of duty to the home nation has always played a significant role in the behaviour of investors; for example, in the months after the 9/11 attacks, the renaming of the Series I and EE Treasury bonds in the United States as ‘Patriot bonds’ led to a 43% increase in their sales. When people over-allocate their investments towards domestic assets, or when trading companies prioritise internal trade in goods and services as opposed to international trade, they may gain added utility from ‘doing their bit’ for the national economy. This may even make it the social norm to have a bias in favour of domestic assets and trade.
Did you answer no to all of the questions above?
Despite this, a study by Adair Morse and Sophie Shrive revealed that patriotism can account for just 5% of the variation in foreign equity holdings from the level expected by rational analysis. Other factors may have been more important in your decision-making process than a sense of duty to the country.
Don’t worry! Researchers have spent decades trying to unpick the causes of home bias, especially after Maurice Obstfeld and Kenneth Rogoff designated home bias in equity portfolios and home bias in trade as two of the so-called, ‘Six Major Puzzles in International Macroeconomics,’ in 2000. There is still, however, considerable disagreement on what the main causes of home bias are, and there are certainly going to be underlying reasons for the phenomenon that haven’t been identified yet.
Were you influenced by your knowledge of the potential costs of investing abroad? The traditional attempt to explain home bias centres on transaction costs: with an internationally diversified investment portfolio or trading system comes added uncertainty and risk, due to tariffs and exchange rate volatility. As such, risk-averse investors may feel it is ‘safer’ to devote their fund towards domestic equity purchases.
How significant is home bias? Levels of home bias have fallen noticeably over time. Recent research by the European Central Bank has found that home bias in trade in both goods and services has fallen, and that the longer a country has been a member of the EU (i.e. the more integrated they are in the European econ-
Nevertheless, opponents of this argument often point out how globalisation has led to an increasingly inter-connected global economy, and so 40
omy) the lower their levels of home bias. Analyst Rosen Valchev also suggested that the fall in the costs of IT in recent years could have caused a simultaneous fall in home bias. Nevertheless, home bias still exists, with the average UK investor holding 26% of their funds in domestic equities.
(Source: Vanguard report, 2017, based on 2014 data. Note there are small differences in the percentages displayed for shares of the global equity market between this and the previous graphic, likely to be because of the different sources and points in time which the diagrams are based on)
So, what’s the real cause of home bias? Will levels of home bias change because of Brexit and the coronavirus pandemic? There’s no conclusive agreement on these issues at the moment. Maybe one of the readers of this article will find an answer one day. In the meantime, if you happen across a large sum of money, make sure you think twice before investing all of it in the UK‌ Matthew Cresswell
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deal. For the first, they need to win 124 seats, whereas for the second they simply need to deprive the Conservatives of their majority any way they can, and hope they have the bargaining power to unite with other parties.
Has the 2024 election already been decided? From the moment the exit poll was unveiled at 10pm on 12 December 2019, Labour knew they were about to experience an electoral disaster. Between John McDonnell’s justification of left wing policies and blaming ‘the Brexit Election’ and the coverage of Boris Johnson’s ‘People’s Government’ the question was asked: can Labour actually win 2024? Presuming that there isn’t another snap election, Labour have four years to figure out how to fundamentally change their electoral strategy and recover from their worst defeat in modern history, but just how feasible this is can be hard to determine – do they need to just pivot back to the centre to regain working-class Northern constituencies, will Brexit play a significant factor, and where are their seats going to come from?
2019 results in Scotland
Firstly we need to set out the terms of what we mean by: “has the election already been decided?” At the moment the only likely possibilities for the formation of a government are under the Conservatives, who have ruled for over a decade already and will have ruled for 14 years by the day of the next election, or under Labour, who last won in 2005 (sorry Lib Dems, maybe next time you’ll get a shot). Thankfully, things will not be made as complicated as they could have been, with the government deciding in March to scrap the boundary changes which had been planned since the early days of the coalition government.This means that, all things being equal, the 2024 election will be a First-Past-The-Post (FPTP) election with 650 constituencies in competition across the country, 18 of which are in Northern Ireland, and with 326 seats required for a party to win an absolute majority and thus form a government.
The key question for Labour both now and over the past few years has been whether Scotland is winnable for them. As a former heartland where Tony Blair won 56/72 seats in 1997, and which he and Gordon Brown continued to do well in even through the boundary changes, the dramatic flip to the SNP in 2015 transformed Labour’s electoral strategy. Where 5 years before Gordon Brown had won 41 seats, only 1 remained under Ed Miliband, and, despite small swings in 2017, that is how it remains today. Labour don’t have to be entirely despondent about their chances though – in 2010, Labour won 42.0% of the vote and 69.5% of the seats, with Alex Salmond’s SNP winning 19.9% of the vote and 10.2% of seats, before the swap over to 50.0% of votes and 94.9% of seats under Sturgeon compared to Labour’s 24.3% vote share and 1.7% seat share. Now look at the 2019 numbers, and you will see a familiar pattern: 45.0% SNP votes and 81.4% SNP seats, with 18.6% Labour votes and 1.7% Labour seats. The realities of the FPTP system mean that by opening up a sizeable votes lead, even when in the minority, the plurality party in Scotland tends to win the vast majority of seats – an average of 44 since the new boundaries were drawn up.
Currently the Tories have 365 seats (40 above the majority line) and Labour have 202 (124 needed to win a majority). Other than the status quo of a Tory majority (presumed by some to be the inevitable ‘pre-decided’ result), there are 2 results which could be goals for Labour: a majority government, or a coalition/confidence and supply 42
There is one issue which Labour will face in Scotland, which has been the driving force behind years of SNP success – independence. The question of Labour vs SNP is really a question of left wing economics and Scottish devolution vs left wing economics and Scottish independence. Despite the establishment of the Scottish Parliament by Blair and the gradual increase in powers it has gained, particularly as a result of the Better Together campaign’s promises in the wake of the 2014 referendum, support for independence is still relatively high. This is far more so than when the referendum was held, even if polls do not on average believe the pro-independence movement to have been leading at any point since 2014. Brexit, dissatisfaction with Westminster and the Tory party and increasingly positive views of Nicola Sturgeon in light of her response to the coronavirus crisis when compared to Boris Johnson have kept the SNP dominant with that all-important strong plurality that they need to keep hold on power.
turn to Labour who share otherwise similar policies. This means that, unless there is an extreme and unexpected change in Labour policy or in the minds of Scottish voters, or another impossibly unlikely event happens, the Tories are in a prime position to keep Labour out of Scotland come 2024.
Even more difficult for Labour is the fact that no Conservative government in their current ruling streak has needed Scotland as a cornerstone of its electoral strategy. In 2010, Scotland didn’t make much of a difference to the Tories or to the Liberal Democrats, as David Cameron only won a single seat there and both were so far from a majority that the coalition had to be formed to get anywhere near government anyway. Again in 2015, Cameron only held 1 Scottish seat as part of an overall UK majority of 12, and in 2019 Johnson only won 6 Scottish seats despite his huge majority. Arguably Scotland was vital for Theresa May in 2017, especially given that she couldn’t win an outright national majority. Even with the DUP she only had a majority of 3, but even so her 13 Scottish seats didn’t form a huge proportion of her total seats. As such, the current government has absolutely no electoral incentive to appease Scottish separatists and as long as they can hold the Union together, which doesn’t seem too unlikely given the status quo has remained anti-independence for so long, the SNP is unlikely to lose any support from those that want more devolution and power but not explicitly independence, who would likely
Given the presupposition that Labour will not win back Scotland, does it remain plausible for them to meet either of the two end goals set out at the beginning? Let’s be generous to Labour and say that the Tories return to 1 Scottish seat and Labour push a little past their 2015 total to win 10 seats, taking us to 360-211. Let us presume for the sake of argument that Northern Ireland is unlikely to change drastically in its composition, and that if the Tories do lose their majority, then the DUP will be prepared to ally with them and Labour will lose. Under the current circumstances, with 8 DUP MPs and the impartial Speaker of the House being taken into account, this means Labour needs to win 44 target seats back to deprive them of their majority and prevent a 2017 scenario where they have an obvious route back to power. Only then will they be in a position to unite the left wing and centrist parties. The reason this is the best shot for Labour is that they would need an astonishing swing to win an absolute majority. Even presuming a route to power in which Labour wins every seat below a certain threshold of votes, Labour would need to win back dozens of places 43
where the incumbent has around a 10,000 vote majority. Using uniform national swing, a method where the swing between parties in the national vote share is directly translated to swings in vote share in each individual seat, Labour would need a swing of somewhere between 9.9% and 10.5% according to various estimates to win – even Blair only got 10.2%. This method is slightly naïve, as increasing polarisation and different regional circumstances (such as there being a larger swing in the North if voters there who made the Red Wall fall decide to go back to Labour while on a national scale there is less change) could require a small change to topple the government but a huge one to establish a majority government. However, if the country turns from the Tories, Labour may find it even easier than expected to form a minority government. The polling website Election Polling calculates that a 4.19% swing is needed for Labour to win those remaining 44 seats, but if what you’re aiming to do is remove Tory seats and not just gain Labour seats, then the steady Liberal Democrat gains in vote share will certainly come into play. From 2015 to 2019, the Lib Dems have, vote wise, gone from 7.9% to 7.4% to 11.6% whilst going from 8 to 12 to 11 seats. Since their fall from grace in 2015, the Lib Dems have had issues trying to translate their vote share into seats – when they get fewer votes they get more seats and vice-versa, but by the end of 2019 they had reached second place in 91 different seats, compared to 38 in 2017.
this even more feasible. Mathematically, the total swing required would be minimised with a 3.85% Labour swing and no Lib Dem swing at all, but with both being opposition parties they are inextricably linked together – if you pair the two together and presume they will both swing equally as cooperative anti-Tory parties, a 3.47% swing would be needed, making it even easier for Labour to win. In 2017, Jeremy Corbyn achieved a 2% swing at an election he seemed likely to lose, so with 4 years for Labour to build their new coalition of voters combining their recent gains with traditional heartland voters, this seems perfectly within their grasp. And so while the mathematics just doesn’t stack up in Labour’s favour for what many would consider the ‘ideal’ solution or victory – dazzling wins in Scotland and a majority government – the claims that 2024 is already settled don’t hold up too well either. Labour’s path to victory is a narrow one, and it involves many assumptions and prerequisites – the Liberal Democrats will side with Labour over the Tories, the SNP will be able to get on side, the threat of a ‘coalition of chaos’ as frequently claimed by the Tories doesn’t sink their chances – but Keir Starmer isn’t a lame duck, nor is Boris Johnson the pre-ordained victor for the next electoral contest. A hung parliament is easily within Labour’s grasp, and it’s still all to play for. Chris Austin
While the Lib Dems may have lost seats and only made modest gains in vote share, they have positioned themselves well to make inroads into many more seats come 2024, and the vast majority of these are Conservative held. With just a 3% swing to them, they would win an additional 11 seats, 9 of which are Conservative held (though Sheffield Hallam, Nick Clegg’s old seat, is currently Labour held and 3rd on the Lib Dem hit list, it doesn’t detract from the overall Lib-Lab-SNP coalition that would be needed if the Tories were denied their majority). Most importantly, as Labour promotes its own campaign and attempts to attack the Tories in doing so, they will weaken Tory candidates in potential Lib Dem seats by extension, making 44
mourned the attacks, Bush’s approval rating suddenly soared, peaking at 88.1% a few weeks after the attacks, according to FiveThirtyEight who aggregate, review and average polls. How does a president go from barely having half the country support him to having the highest approval rating of any post-war president?
How catastrophe affects US Presidential approval Disasters and tragedies tend to dominate the news whenever they happen, and have hardhitting effects in a plethora of areas which are felt for years afterwards in the worst cases – effects on life and health, property destruction and damage, political ramifications and much more. While each and every one has a tragic and saddening real cost in terms of the families who lose their loved ones, their homes or their livelihoods, at the same time politicians can capitalise on them to make their opponents seem weak and themselves strong, by accusing those in power or by showing off their competent responses. And it is in these debates and point-scoring matches that we can see just how varied these effects actually are on news coverage and polling data – from +80 net approval ratings to little bumps and even declines or plateaus.
The answer is the ‘rally round the flag’ effect – a term coined in 1970 by political scientist John Mueller. By his definition, there were 3 key tests which needed to be met for this effect to kick in: the event had to have international standing, had to involve the US directly (and have the President be very involved), and had to be, “specific, dramatic and sharply focussed.” Since the initial conception it has been shown that, time and time again, Presidents experience a spike in approval ratings, such as George H. W. Bush’s 89% approval rating in February 1991 after Operation Desert Storm’s success, having come from 59% just a month earlier (Gallup). Altering Mueller’s initial conception for the modern post-Soviet era, he suggests that major military developments, such as rapid interventions (as shown with H. W. Bush’s spike and W. Bush’s Iraq spikes), technological developments (such as the launch of new extraterrestrial objects during the space race) and big diplomatic events, are the things which trigger this event.
The most important US President, and perhaps the most telling, to examine is undoubtedly George W. Bush. As most presidents do, he started out with a mediocre approval rating of a little over 55% according to Gallup polling, which isn’t particularly bad – Ronald Reagan started with a little over 50% and Obama had an enviable 65% start. Over the first year of his presidency his popularity began to slowly decline to 51.2% on the 234th day of his presidency. Day 234 of the Bush presidency has another name however: 9/11. As the country
There are different theories as to why this happens. The first comes from the political structure of the US – the President is not just a political leader, they are the head of state, and a symbol of America on the world stage; the poster person for America as a nation. Patriotism and a feeling of common sorrow and unity among the populace 45
drives them to support whoever it is they associate most with the nation as a collective. Others maintain that it is the lack of serious and consistent opposition in Congress and in the news, derived from a desire not to look opportunist and to not hinder possibly essential rapid response, that prevents people forming negative opinions of a President’s actions at a time when the entire news cycle is dominated by that singular event. Typically the latter is attributed to the length of the effect – as pointed out by Marc Hetherington and Michael Nelson in a 2017 paper, which demonstrated that the 9/11 rally had, “lasted longer than any in the history of polling,” with Bush having a far higher than previous approval of 68% well into late 2002. This could also explain why Donald Trump has experienced very few bumps and spikes in his ratings – tragedies such as the El Paso and Dayton shootings actually led to a slight increase in disapproval ratings of around 1% – and why coronavirus has continued to cause a plateau of around -10 favourability. There’s simply too much opposition and negative press for him to handle.
NYTIMES gives a x2 multiplier to the beta 1 coefficient if the conflict got a headline, a x1 multiplier if it was on page 1 in the main body, and a x0 if it didn’t feature in either). However, the paper itself found that on average, in cases of the use of military force, there was no discernible rallying effect whatsoever on approval ratings. Other attempts to quantify the effect include Dieuwertje Kuijpers’ paper on how the number of casualties incurred changes things. Her dataset relies on global information form 10 OECD countries looking at conflicts from the post-Cold-War era, and her findings state that, perhaps due to a feeling of increased patriotism and unity in sorrow, a conflict with increased casualties helps the ruling party for up to a year, but after 4.5 years, when the people begin to tire of endless war, support for the party in charge begins to decrease. Findings like these have given rise to a new theory of war: the diversionary theory. Politicians using the rally round effect to distract from difficult domestic situations is a nasty side effect, with lives being sacrificed in pointless wars to improve political ratings. Yet O’Neal’s study seems to suggest that this isn’t (or perhaps wasn’t) as possible, with the large spikes shown for 9/11 and Saddam Hussein’s capture being as much diplomatic events as military.
However, as there always is in the court of public opinion, there are many factors and situations or category-specific data points which can also have some effect, and social scientists have sought to find ways of quantifying this: John O’Neal published a research paper entitled Presidents, the Use of Military Force, and Public Opinion in 1993 in which he develops two scary-looking equations to try and calculate what size the rallying effect will be. The second looks like this:
The final thing to consider is the reverse of the rally round effect – whether a poor response to a crisis and criticism by the media or the opposition, despite the usual crisis response being to rally round, can lead to a decline in approval rating. This has already been alluded to a little earlier with the slight decrease in Trump’s approval over the back-to-back shootings, but once again W. Bush is an interesting President to look at, from both sides of the crisis response coin. ‘X’s Katrina’ has become a byword for a poorly handled crisis or disaster, even though some of today’s voters may have only been 3 years old when it happened. Sometimes regarded as the beginning of the end for Bush, Hurricane Katrina had the President looking cold, distant and incompetent, praising a crisis director who was eventually ousted for poor work and botching a publicity stunt of him looking
The beta values are all coefficients which are estimated by O’Neal which he calculates by taking every ‘major’ use of force between 1950-1984 and using the known factors for each of them, and applying various analyses to calculate separate sets of coefficients which can be applied to the rallying effect on all people, party members, and opposition members. RALLY as a variable denotes the increase in approval rating, with the other capitalised variables making amendments (for instance, 46
out of the Air Force One window at the wreckage, only to be seen as a distant, far-away leader who hid in the back rather than leading from the front. And the effect on the approval ratings? The conventional wisdom was that Katrina ruined Bush’s approval ratings, coming near the beginning of what was to be a long slow drop to abysmal approval. However, in 2006 Gallup argued that there was a lack of evidence for this assertion – indeed, there was only a very slight drop in approval from 43% in August to 38% in November and then a bounce back to 43% in January. It is true that soon after Bush began to fall, but this could be put down to any number of issues including a withdrawn Supreme Court nomination for Harriet Miers or the death of the 2000th soldier in Iraq, so whether or not Katrina lost Bush approval later, acted as a trigger or a constituent of many events, or had no effect whatsoever remains to be seen – in an age of increasing polarisation, making a terrible mistake means it’s harder to lose support from your own fanatical party or to make the opposition dislike you any less.
How can partisan gerrymandering be measured? The process of gerrymandering districts in the US is as commonplace as it is concerning. A nonpartisan activity done by both Democrats and Republicans (though it was calculated in 2016 that four times as many US House and State Assembly seats are gerrymandered in Republican favour), partisan gerrymandering is when the boundaries of various districts are deliberately shaped so that a particular party is given an advantage when competing. The process doesn’t necessarily cause the winning party to succeed in every district – indeed a key gerrymandering strategy is to allow the opponent party to easily win a small handful of seats by packing their supporters into a limited area to maximise the opportunity for their party in the vast majority of seats. The landmark Rucho v. Common Cause US Supreme Court case has demonstrated that, while this partisan gerrymandering is, “incompatible with democratic principles,” federal courts cannot rule against partisan gerrymandering as it is a non-justiciable political question. As partisan gerrymandering evidently poses a threat to American democracy, but the judicial system cannot be relied upon to fix this, it is up to the political system, and thus up to the people, to make the decisions necessary to end the practice. But in order to do this, the people must make an informed decision, which begs the question as to how exactly we judge a district to be gerrymandered.
What is abundantly clear, no matter which opinion, analysis or research you listen to, is that when the time is right, a President can soar in their approval as the rest of the nation tries to deal with a difficult crisis. Perhaps this can be used as a tool, with soldiers’ lives being sacrificed to meet political goals, or perhaps the long term, or even average short term effects are so negligible it doesn’t matter either way. What is important when viewing crises such as the coronavirus is to understand exactly why and how Presidents gain approval. Both the current and historical data as well as the underlying political theory shows that there is perhaps less in common between this crisis and 9/11 as the current administration would like before the next Presidential election in November.
A simple method of measuring gerrymandering is the Polsby-Popper test, which was developed by Daniel Polsby and Robert Popper in 1991 as a gerrymandering measuring tool. The result is a ratio between 0 and 1 of the district’s area to the area of the circle which has the same perimeter as the district. This is basically saying, “what if we took the outline of the district and squished it up until it made a circle. How much more space would the district have?’ In other words, long thin objects tend to have very little space in the middle, meaning they are not very compact, they are wasting lots of potential space which they may otherwise
Chris Austin
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have gotten if they were more circular. Mathematically, this is written
plary proof that the district is actually gerrymandered in this way.
where D is the district in question, PP is the Polsby -Popper ratio, A is the area, and P is the perimeter. This formula isn’t perfect for determining partisan gerrymandering, nor is it a definitive guide to establishing how gerrymandered a district is. A district may be compressed in places because of natural features, and a circular district is hardly the natural optimum.
NC-12 boundaries
IL-04 boundaries
In order to determine just how much a certain party has gained, we must look to different metrics. In fact, in 2016 the Wisconsin State Assembly map was struck down in the Gill v. Whitford case before the Supreme Court prevented such decisions being taken, where the Efficiency Gap formula devised by Nicholas Stephanopoulos and Eric McGhee was used as evidence of gerrymandered districts. The method relies on the fact that there are two key tenets of gerrymandering: packing and cracking. Cracking splits the opposition vote up so they are never a powerful enough voting bloc to undermine your party. The packing method forces all the votes from the opposition party into a small area so they have very little influence. While they seem to be polar opposite strategies, they work on the same underlying maths: wasted votes.
There’s also the fact that there are other kinds of gerrymandering which, while controversial, aren’t as pressing concerns as the partisan kind. These include bipartisan gerrymandering, which aims to create electoral maps during redistricting which favour the incumbents in every district rather than one party or another in order to satisfy all the current lawmakers, as well as racial gerrymandering. Racial gerrymandering can either be positively gerrymandered so as to give a minority race a majority in a particular district so as to prevent their vote becoming diluted or unimportant in an America increasingly divided among racial lines, or the opposite, the negative where a particular race is kept out of decision-making and loses their voting power as a malicious and racially-motivated attack from partisan lawmakers. Fortunately racial gerrymandering is still judiciable due to the Voting Rights Act of 1965 which prevents this kind of discrimination. However, the PP index still serves as a good baseline benchmark – districts like the old NC-12 or IL-04 (‘The Earmuffs’) are undeniably shaped in such an extreme and inordinate fashion that their gerrymandering becomes extremely obvious at just a glance. In fact, in 2014 it was calculated that NC-12 had a PP score of 0.0291, the lowest in the country, before being redrawn to a far more ostensibly sensible shape. So while the PP index gives us a very strong initial representation of just how far the partisan ‘redistricters’ have had to stretch to shape the district unnaturally, it does not give us a precise measurement of specific partisan gerrymandering, nor does it give us exem48
In cracking, opposition votes are wasted by voting for a loser. In packing, opposition votes are wasted by the winner having an unnecessarily high margin of victory, with additional votes being better served helping losing candidates elsewhere. The Efficiency Gap formula therefore takes a measure of this. Let
parties’ votes and their vote shares. Nagle describes the weighted version as ‘party-centric,’ enabling a party to ensure a fair amount of seats gained, and the relative version as ‘voter-centric,’ ensuring that every voter has the same effectiveness (their formulae are shown but not discussed here in detail). This means that the efficiency gap now gives us three different ways of judging gerrymandering’s effect rather than its plain appearance, meaning we have a nice simple measure which gives us a number we can assign to a district to see how gerrymandered it is.
be the number of wasted votes W in dis-
trict i for party P. If the party loses where V is the number of votes for party P in district i. Otherwise
i.e. the number of
votes gained minus the number of votes necessary to win (half the votes, a majority). For a map with n districts, the total wasted votes for each party is
So, does this mean that the EG is a silver bullet which allows us to undeniably prove that gerrymandering has taken place? Perhaps not, as Boris Alexeev and Dustin Mixon argued in their paper An Impossibility Theorem for Gerrymandering. They posit that there are three key desiderata for creating a districting system (which they conceive as a mathematical function outputting the desired partitions): that one person equals one vote (the districts have roughly equal numbers of voters and so each constituent has the same political power as one in another district when choosing a representative), that the PP index is greater than some arbitrary constant, and that the efficiency gap is always below another constant. Their paper proved that no matter the constants chosen, it is not possible to construct such a function that it meets all three conditions – any system providing an equal number of votes per district and with the desired compactness rating will always have some potential arrangement of voters by which the efficiency gap that is desired cannot be reached, and, by logical extension, any equally divvied up districts with a good efficiency gap will end up snaking into strange and geographically undesirable patterns as were seen when flagging potentially gerrymandered areas up.
given by The efficiency gap, i.e. the difference between how efficiently each party has its votes distributed, and therefore how biased and packed/ cracked the electoral map is, where A and B are our two competing parties. As at most half the votes can be wasted, the magnitude of the efficiency gap is always below 0.5, though 0.08 was thought to be the minimum value to flag up a gerrymandered area according to Stephanopoulos and McGhee.
This is the most simplistic definition of the efficiency gap, and many alternate formulae have sprung up to deal with this, and the work of John Nagle in particular was vital in creating the Weighted Efficiency Gap and the Relative Efficiency Gap, which are variations designed to appease those that do not believe the EG is a perfect measure due to the way it considers ‘wasted’ votes and takes the overall gap as a proportion of the total votes rather than inefficiencies between
The Alexeev-Mixon paper demonstrates that if we wish to have a fairly designed voting system, then the places the representatives represent will be 49
forced into odd shapes. This brings into question the idea of representatives at all – if you design your districts so that there is total democratic fairness, but in the process you lose the coherency of the geographical location, essentially lumping random people in to be represented by someone who has no clear direction for what the district stands for, what its industry is like, how its geography is formed and so on, then what is the point of having a specific localised geographical representative anyway? Evidently within the current system of American democracy it remains impossible to fulfil every single desire. But does that make it impossible for us to present a clear number which the American people can look at and say ‘my district has value x, that’s bad, my lawmakers should change it?’ Arguably not. Even if we cannot reach a mathematically perfect settlement for gerrymandering, there are still so many other potential democratic issues outside of it that the interference from this will obfuscate any minor infractions from gerrymandered areas on unfairness. The REG will tell a voter how much their vote actually counts and the PP index will tell them how contorted and misshapen their district is. From these numbers, it is reasonable to conclude that someone would be given a fair insight into how broken their and their state’s districts are, and so if we were to show them, perhaps combining them with a different ratio of how under- or over-sized their district is populationwise, as stated by desiderata 1 of the AlexeevMixon paper, it would become immediately easier to put pressure on lawmakers to adopt fair and unbiased redistricting practices. Chris Austin
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there. “Traded in my god for this one/And he signs his name with a capital G.”
The politics of music Music has always been intrinsically linked to politics. As a medium of artistic self-expression, it has never shied away from tackling issues facing its contemporary generations. Pieces showing nationalist pride, like Arne’s iconic Rule Britannia, as well as scathing indictments of the class system, like Elvis’ rendition of Big Mama Thornton’s Hound Dog are some of the most notable examples. It can certainly be argued that, of all genres which are popular today, rock and politics have the closest connection. Like any good genre, rock started as a subversion of the status quo; sometimes it was peaceful à la John Lennon imagining all the people; sometimes it was the angry, thrashing noise of 80s punk band Black Flag.
The war in Iraq is also criticised by Armenian/ American metal band System Of A Down (SOAD) in their song B.Y.O.B. (standing for Bring Your Own Bombs). Serj Tankian and Daron Malakian, the band’s singers, question Bush’s administration: “Why don’t presidents fight the war?/Why do they always send the poor?” The chorus of the song is an almost hauntingly positive recruitment message: “Everybody’s going to the party, have a real good time/Dancing in the desert, blowing up the sunshine.” SOAD condemns the flagrant waste of US troops’ lives in the name of the American flag.
When political rock music was born, yelling and screaming into the world, it was something of an unrefined art. Worry not, for the 90s, noughties and 10s delivered us a much needed renaissance of better sonic design, a wider range of subgenres and, of course, modern socio-political sensibilities. In the maiden voyage of The Cultural Focus, I’ll be exploring some of my favourite music that has a political twist.
Moving onto a global scale, the fight for climate justice has become an essential focus for rock bands in the last decade. Enter Shikari, a band closer to home (from St. Albans, no less) are on the front lines of the movement. Arguing with Thermometers from their album A Flash Flood of Colour (2012) is a roaring protest against many modern political regimes which, according to the band, are more interested in strengthening their economic position than in safeguarding the already fragile environment for future generations. Rou Reynolds, the band’s singer and main lyricist delivers the powerful lines, “That’s the sound of another door shutting in/In the face of progress, in the face of progress/They’ll plant their flags in the seabed/Shackleton is rolling in his grave.” Ernest Shackleton, mentioned several times throughout the song, was a famous polar explorer in the 20 th century, his notability being earned for his leading of several expeditions to the Antarctic. Enter Shikari imagine (probably correctly) that Shackleton would be disgusted by the current state of affairs
Let’s begin with a modern concept album. Nine Inch Nails’ Year Zero (2007) tells the story of a dystopian 2022 – the American government has taken full control of the country; America has been reborn in a new age, starting with the titular date Year Zero; society has reverted to a Christian Fundamentalist Theocracy. Of course, this all sounds like a worst-nightmare scenario that Trent Reznor (NIN’s frontman and lyricist) has thought up. Certainly, the softly purred war cry, “Into fire you can send us/From the fire we return/You can label us a consequence/Of how much you have to learn,” (My Violent Heart) is rebellion at its finest. However, below the surface, the album is a biting diatribe against George Bush Jr.’s government, which is especially obvious in Capital G. Reznor barks, “I pushed the button and elected him to office and/He pushed the button and he dropped the bomb/You pushed the button and could watch it on the television”. The references don’t stop 51
at the poles. Even Reynolds feels the guilt of living off the world instead of living in it: “You know there’s oil in the ice/You know there’s oil in my eyes/You know there’s blood on my hands.” He and bassist Chris Batten scream these lines, symbolically begging for forgiveness. Enter Shikari were also inspired by the Occupy Movement, a modern group trying to raise awareness of the socioeconomic issue that there cannot be infinite growth on a finite planet. In Rou’s own words: [our economic system, which puts Gross Domestic Product above all else] treats the earth like a business that’s about to close.” Their song Gandhi Mate, Gandhi (a reference to the members asking each other “What would Gandhi do?” when getting frustrated during long recording sessions) features a line criticising Western governments for silencing the voices of the people. Chris Batten returns, with the officious voice of a cabinet member: “See, if we keep them silent/Then they’ll resort to violence/And that’s how we criminalise change.” Whether you agree with the views and messages presented by Nine Inch Nails, System of a Down, Enter Shikari (and many, many other bands that a limited word count will not let me mention) or not, one thing is undeniable: rock music is a vessel for change. How much change we make depends on how loud we play it. Oscar Leonov
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The Iron Lady – Margaret Thatcher: From Grocer’s Daughter to Prime Minister (by John Campbell)
Prisoners of Geography (by Tim Marshall) ‘All leaders are constrained by geography. Their choices are limited by mountains, rivers, seas and concrete. Yes, to follow world events you need to understand people, ideas and movements – but if you don’t know geography, you’ll never have the full picture. It’s time to put the ‘geo’ back into geopolitics.’
‘John Campbell traces the life of Britain’s first female Prime Minister from her upbringing in Grantham and her unexpected challenge for the leadership of the Conservative Party to her eleven tumultuous years in Downing Street and her eventual removal from power.’
Recommended by: Mr Rigby, Politics and Economics teacher
Recommended by: Mr Paraskos, Head of Economics
“A fascinating and forward looking snapshot of geopolitics in 2015; five years on – this book remains insightful, relevant, and (in some cases) eerily prophetic.”
“A balanced account of the revolutionary impact of Margaret Thatcher and her policies, with a fair measure of praise and criticism added to a longer term historical perspective.”
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Factfulness (by Hans Rosling)
To Obama, With love, joy, hate and despair (by Jeanne Marie Laskas)
‘When asked simple questions about global trends, we systematically get the answers wrong. So wrong that a chimpanzee choosing answers at random will consistently outguess journalists, Nobel laureates and investment bankers. In Factfulness, Hans Rosling offers a radical new explanation of why this happens and reveals the ten instincts that distort our perspective.’
‘Every day, President Obama received ten thousand letters from ordinary American citizens. Every night, he read ten of them before going to bed. They wrote to Obama out of gratitude and desperation, in their darkest times of need, with anger, fear and respect. To Obama is an intimate look at one man’s relationship with the American people, and at how this extraordinary dialogue shaped an era-defining presidency.’
Recommended by: Zach Whelan, section runner for The Impact Focus
Recommended by: Miss Field, Head of Politics “Contrarian; fascinating; refreshingly positive outlook on the world; eye-opening; questions what you have always believed.”
“Inspirational; insightful; humbling; reveals the complexity of US societal problems; politics-meetsempathy.”
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The Accidental Theorist (by Paul Krugman) The Big Short (by Michael Lewis) ‘Paul Krugman has made a reputation for himself by telling us the truth about economics, however unlikely it may seem and however little we want to believe it. Krugman tackles bad economic ideas from across the political spectrum, giving us cleareyed insights.’
‘From the jungles of the trading floor to the casinos of Las Vegas, The Big Short tells the outrageous story of the misfits, renegades and visionaries who saw that the biggest credit bubble of all time was about to burst, bet against the banking system – and made a killing.’
Recommended by: Toby Robinson, section runner for The Behavioural Economics Focus
Recommended by: Hector Coode, section runner for The Main Focus
“Very interesting book which explains seemingly complex economic matters in a way that is easy for anyone to read – a great introduction to macroeconomic policy in the real world.”
“Insightful; informative; captivating; shocking; understandable.”
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Blair (by Anthony Seldon)
Thinking, Fast and Slow (by Daniel Kahneman)
‘We know Blair is a religious man, but what really motivates him? Is he, as has been suggested, merely obsessed with his place in history? Rejecting the constraints of formal biography, Anthony Seldon has produced a profile of the Prime Minister that rewrites the bibliography of Blair studies. Focusing on the interplay between the key turning points of his life and career and the key personalities with whom he has surrounded himself, it assesses the Blair psychology in all its forms.’
‘Why is there more chance we’ll believe something if it’s in a bold type face? Why are judges more likely to deny parole before lunch? The answer lies in the two ways we make choices: fast, intuitive thinking and slow, rational thinking. This book reveals how our minds are tripped up by error and prejudice (even when we think we are being logical) and gives you practical techniques for slower, smarter thinking.’ Recommended by: Lucas Gibbard, Upper Sixth student
Recommended by: Mr Hardman, Politics teacher “Blair re-models party and nation.”
“A very thought-provoking and personally enlightening book with interesting consequences for the economic and political landscape.”
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Super Imperialism (by Michael Hudson)
The History of Modern Britain (by Andrew Marr)
‘Michael Hudson’s in-depth and highly controversial study of U.S. financial diplomacy explores the faults built into the core of the World Bank and the IMF at their inception which – he argues – were intended to preserve the U.S.’s financial hegemony. Hudson’s critique of the destructive course of the international economic system provides important insights into the real motivations at the heart of these institutions.’
‘The History of Modern Britain is an account of great political visions – and how they were defeated – and of the resilience, humour and stroppiness of the British public. From the Second World War onwards, Britain has been a country on the edge: first of invasion, then of bankruptcy, then on the vulnerable front of the Cold War and later in the forefront of the great opening up of capital and migration now reshaping the world.’
Recommended by: Mr Khanna, Economics teacher
Recommended by: Mr Slater, Economics teacher
“Very interesting take on the structural inadequacies and assumption built into global financial systems.”
“A comprehensive and engaging account of British history for anyone wanting to understand Britain today.”
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Nudge (by Richard Thaler and Cass Sunstein)
Freakonomics (by Steven Levitt and Stephen Dubner)
‘Nudge is about choices – how we make them and how we can make better ones. Every day we make decisions. Unfortunately, we often choose poorly. We are all susceptible to biases that can lead us to make bad decisions. By knowing how people think, we can make it easier for them to choose what is best for them, their families and society.’
‘What do estate agents and the Ku Klux Klan have in common? How can your name affect how well you do in life? The answer: Freakonomics.’ Recommended by: Dhru Dattani, section runner for The Stock Market Focus
Recommended by: Matthew Cresswell, editor of The Hampton Focus
“Really entertaining read around the basic principles of economics; told in a way which is funny and relevant; has lots of hidden messages about how the world is flawed; explains how economic principles affect everyone from drug dealers to KKK members to estate agents; not too long so a perfect read in free time!”
“Very relevant when considering government policy; challenging; revelatory; pivotal in behavioural economics discipline; suggests easy solutions to difficult issues.”
The contributors to this section were challenged to recommend a book in one sentence, five phrases or just five words! Thank you to everyone for sending in these recommendations. 58