FT SPECIAL REPORT The World 2013Wednesday January 23 2013 www.ft.com/reports | twitter.com/ftreportsGlobal issues Inside »simmer as Treading water Polarised politics threatens confidence in the US economyprospects Page 2 India’s factories ‘must think big’brighten How the country can release its economic potential Page 3 Called to account Integrity and payLast year’s sense of panic has gone and the issues are likely tomood has lifted but there is still much for Davos dog banks as thedelegates to chew over, says Gideon Rachman future brightens Page 4I n the years before the financial The gloom clouds have also drifted crisis, boundless optimism was away from the two largest economies Glacial pace of the default setting for Davos man. in the world – the US and China. The The World Economic Forum was a US economy is growing at well over UN climate talks celebration of globalisation and its 2 per cent a year and unemployment With superpowerspossibilities. But the financial crisis is falling. Above all, there is greatput a stop to all that. The last four excitement at the prospect that the deadlocked, someDavos forums have been gloomyaffairs, dominated by a sense that glo- shale-gas boom could lead to energy independence for the US and a big look to alternativesbal capitalism is in crisis. Delegates boost to the competitiveness of Ameri- Page 5worried about everything – the euro, can industry. The heads of big oil andthe banks, inequality, unempIoyment. chemical firms – such as Shell, BP It is possible, however, that – this and Dow – are always well repre- and scandal around the leadership of last year, slowing growth and polit- ers for 20 years – are exciting a bit Unpluggedyear – the sense of crisis will lift. The sented at Davos, and they will be transition added to the sense of uncer- ical paralysis fed a mood of growing more interest, with a new reformistfear that the euro could crash and listened to with particular attention tainty. But Xi Jinping is now safely cynicism about the country’s pros- government, led by Shinzo Abe, tak- The changing wayburn within weeks – which was this year. installed as the new general-secretary pects. But, in recent months, the ing power in Tokyo. we interact withvoiced openly at last year’s forum – The prospects for the Chinese econ- of the Communist party – and the reform process has restarted and it The balance between optimism andhas dissipated, and with it so has the omy will be discussed just as eagerly. latest figures show that the Chinese has become clear that growth this pessimism is also always affected by next-generationbiggest threat hovering over theworld economy. There will still be ear- For much of 2012, gloomy talk pre- vailed – with much discussion of the economy is still growing strongly and that exports are resilient. year will exceed 5 per cent. The gloom was overdone. personal circumstances, as much as rational analysis. So the mood of gadgetsnest, even urgent, calls for reform in impact of rising wages and labour Opinion about India has gone Even the prospects for Japan – a Davos man will be lifted by the fact Page 6Europe. But the panic has gone. unrest in southern China. Mystery through a similar cycle. In the middle nation that has disappointed its boost- Continued on Page 4
2 ★ FINANCIAL TIMES WEDNESDAY JANUARY 23 2013 The World 2013Economy treads Old barrierswater as parties in way of Xi’sclose ranks bid for reformover budget China Jamil Anderlini assesses the scope for lysts are more sanguine is on the prospects for eco- nomic reform. While there is absolutely no consensus in Chinese policy circles on what needs to be done to change in politics overhaul the political sys- and the economy tem there is at least a gen- eral recognition of the basic direction the economy In the US the hiatus needs to go in. between the election of a “China has an unsustain- new President and the inau- able growth pattern and itUS Inability of system to settle policy questions guration ceremony lasts for just under three months will have to pay a cost in the form of slower growth,”threatens confidence, writes Richard McGregor but in China the transition period for an incoming says Yu Yongding, one of the country’s most promi- leader can be more like nent economists and aT three years. former member of the Chi- he way the US political class It is no surprise the US is still feel- In early March, Xi Jin- nese central bank monetary ushered in the new year ing the after-effects of the devastating ping will formally receive policy committee. would scarcely give rise to financial crisis, which started in 2007 his third and least impor- “To make its growth sus- hope that the country’s lead- and sent the economy momentarily tant title as President of the tainable China must shift to ers can come together in into freefall in late 2008 and in the People’s Republic of China, a new growth pattern thatways that can spur growth and invest- first six months of 2009. But beyond having already assumed the relies more on domesticment in the world’s largest economy. the backwash that comes with any roles of Communist party rather than external At 30 minutes to midnight on New financial downturn, the US economy general-secretary and com- demand and consumptionYear’s eve, a tired-looking Harry Reid, now carries a permanently heightened mander in chief of the mili- instead of investment, espe-the Democratic Senate majority level of political risk. tary in mid-November. cially real estate invest-leader, walked with one hand on the The equity and bond markets no Even after that it may ment. The Chinese govern-shoulder of a security guard to guide longer react with alarm to every take him years to place his ment understands this.”him through a throng of journalists moment of brinkmanship on Capitol own people into positions of But even with this con-into the Senate chamber. Hill. There are simply so many that Twilight zone: the sour, distrustful mood, with no good- But the optimists have been let real power, particularly and sensus it is not clear there Mr Reid and Senate Democrats had the regular stand-offs over spending Capitol on New will accruing from the fiscal cliff down before. In every year since the most importantly in the is a very much that Mr Xijust been briefed by Joe Biden, the and taxes have, in some respects, Year’s Eve with agreement. US recovery began in 2009, commenta- military. and his colleagues can dovice-president, on a deal over the fis- become like a shrill radio left on in both House and Even worse, the 11th-hour deal tors have been waiting for a big surge It was Mao Zedong who on economic reforms with-cal cliff struck with the Republican the background of US public life. Senate in session pleased no one. The White House and in the economy, and it was always said that political power out hurting some of theleadership in the Senate. The compro- But the inability of the political sys- Getty the Democrats managed to lift taxes due to arrive the following year. grows out of the barrel of a interest groups they rely onmise passed in the Senate in the early tem to settle big policy questions con- on the wealthy, but without gaining At the ends of 2009, 2010 and 2011 gun and in modern China for political support.hours of January 1, and through the tinues to threaten the confidence of what they considered to be sufficient there were forecasts of 3 or 4 per cent that remains just as true as Where Mr Xi is likely toHouse of Representatives later in the both business and consumers. Both revenues to bring down the deficit. growth in the year ahead. It never when Mao was fighting his be most different from hisday, avoiding or delaying a series of still periodically spark into life – the The Republicans, angry at their happened. Growth has been stuck at guerrilla war in the 1930s. predecessors and have theautomatic tax rises and spending cuts US economy remains more robust lack of negotiating leverage over the about 2 per cent. By many people’s reckon- most leeway to set his ownhanging over the economy. than continental Europe and the UK – fiscal cliff and annoyed at being At the start of 2013, while the threat ing, outgoing President Hu tone is on foreign policy. But far from being an example of but the economy has never regained backed into a corner, are adamant of recession has retreated, economists Jintao never totally man- The new administrationhow the US political system might its full footing in Mr Obama’s first that any new deals contain no new struggle to see where extra demand aged to consolidate his takes over at a time whenfinally be working, the deal was term. tax increases at all. will come from, especially as the gov- power and so his time in Beijing is seen in the regionanother episode displaying its dys- In the opening months of 2013, the The negotiations to lift the debt ceil- ernment stimulus from 2010 to 2012 is charge of the world’s most as increasingly assertive –function. White House, and Democrats, have ing bring with them a particular set of now going into reverse. populous nation ended up particularly on long-sim- Ron Brownstein, of the National three more showdowns over the bud- dangers. A similar confrontation in The fiscal cliff deal raised income as something of a “lost dec- mering territorial disputesJournal, said the 11th-hour agreement get pencilled into the diary: over lift- 2011 over raising America’s statutory taxes on the wealthy and ended a ade”, devoid of any brave that have boiled over into“may have been the best deal the two ing the debt ceiling in late February; borrowing limit hurt the economy and temporary 2 percentage point reduc- reforms.sides could have reached without over automatic spending cuts delayed resulted in a ratings downgrade. tion in payroll taxes, so a solid recov- That may not be entirelyactually tumbling over the fiscal cliff. until March 1 under the fiscal cliff The economy has proved relatively ery in the private sector is needed fair but it is a common “But no one should underestimate deal; and the need for Congress to pass resilient since then. Adding to recent merely to keep the overall economy refrain heard throughout The area where Xihow much of a missed opportunity it a new budget at the end of March. optimism are signs at last of a recov- on track. the Chinese bureaucracy is likely to have therepresents. The deal stands as the The parties to the upcoming series ery in the housing sector, which has For the US, then, the economy looks and especially among thoserare event that could simultaneously of negotiations – the White House, been a drag on the economy for four to be treading water for another year. in China who had hoped for most leeway to setset back the goals of the left, right,and centre,” he wrote. and the Democrats and Republicans in Congress – all enter the talks in a years, and employment in the con- struction sector. As if that were not bad enough, parti- san politics could make it worse. reforms to the country’s secretive authoritarian his own tone is political system. foreign policy Since Mr Xi gave his first speech in mid-November as the new head of the party, outright confrontations inPolitical upheaval widens gaps in two-speed region some liberal intellectuals the last few years. and government advisers In Japan, the portion of have expressed hope he the population that feels may push through substan- goodwill towards China has tive political and economic reached a four-decade low reforms at an early stage in of 18 per cent and in most As the bank HSBC said in order has been defined by weight in the region. It was much better equipped and his first five-year term. other neighbouring coun-Middle East a recent research report, oil an ideological struggle in no small part Egypt’s his Alawite-controlled But others point out that tries the concern about producers are looking at a between Islamist parties active mediation that had officer corps has held firm. even if Mr Xi is somehow a China’s military rise is atPopular hopes for a year of plenty but for the that had been brutally helped secure a ceasefire The Syrian crisis, mean- closet Gorbachev admirer an all-time high.return to normality rest of the Arab world, repressed by dictatorships between Israel and the Pal- while, is already contami- his room for manoeuvre is The general angst among “intensified political risk and liberal groups afraid of estinian Hamas in Novem- nating neighbouring states severely limited by power- regional neighbours abouthave been frustrated, adds to a catalogue of head- the intrusion of religion on ber, bringing an end to a and concerns over a spill ful vested interests that China’s rise and ultimatesays Roula Khalaf winds that have led to weak growth, widening external their societies. Nowhere has this struggle week-long Israeli offensive in the Gaza Strip. over of sectarian tensions into Lebanon and Iraq are have become even more for- midable over the last dec- intentions is reflected among Beijing-based diplo- and fiscal imbalances and played out more intensely – Egypt’s troubles, of likely to grow this year. ade of Mr Hu’s tenure. mats, who have started toA year of feast and famine severe financial pressures”. and with devastating eco- course, pale in comparison In the coming months David Shambaugh, direc- speculate among them-is how one global bank The political turmoil was nomic impact – than in to the tragedy of Syria, western efforts will focus tor of the China policy pro- selves about the possibilitydescribed the fate of the always expected to take a Egypt, the Arab world’s where a popular revolt on trying to bolster the abil- gramme at George Wash- of a regional conflict involv-Middle East and north heavy toll on the economy most populous country and morphed into an insurgency ities of rival rebel groups – ington University, identifies ing China.Africa in 2013, as the oil- of North African states. its traditional trendsetter. that has attracted jihadis an objective, however, that the most imposing vested Most analysts and diplo-rich and largely autocratic But the transitions have The first democratically into a new war. With more is not easily achieved with- interests as the military, mats still believe it is aGulf spends its petrodollars been more turbulent than elected president, Mohamed than 60,000 people dead and out direct military assist- the bureaucracy, the bur- remote possibility but thiswhile emerging democra- many Arabs had predicted. Morsi from the Muslim Bashar al-Assad, the Syrian ance. geoning state security appa- sort of talk has not beencies wrestle with political Popular (though unrealis- Brotherhood, sent encour- leader, refusing to step While the UK and France ratus and the state-owned heard in Beijing since thetransitions and economic tic) expectations of a rapid aging messages of inclusive- down, the prospects for a are leaving their options enterprise sector. mid-1990s, when tensionsdownturn. return to normality and ness and openness to the Mohamed Morsi: tough line political solution appear open, and could push “The sheer scale of eco- were high across the Tai- True, the Middle East has economic have been disap- outside world when he took remote, despite a fresh dip- harder for a lifting of the nomic and social problems wan Straits.always moved at two pointed. over in June. lomatic push by UN envoy European arms embargo on in China requires policy The most persistent whis-speeds, with a dramatic eco- Perhaps the image that But his handling of the Egypt has been trying to Lakhdar Brahimi. Syria, diplomats expect no solutions that necessitate pers talk of a brief engage-nomic divide between oil most starkly illustrates the constitutional crisis at the stem the depletion of its for- The perception in Europe change in the attitude of some significant systemic ment some time in the nextimporters and exporters. frustrations is in Tunisia, end of last year and his eign exchange reserves as is that 2013 will bring the the US Obama administra- political changes,” wrote two years between ChinaBut the gaps are now even the country where Arab insistence on pushing a pressures on the pound end of the minority Alawite tion, which is putting great Prof Shambaugh in a recent and Vietnam, which haswider as a time of historic revolutions started in 2011 draft opposed by non-Islam- have escalated, raising the regime. But even though emphasis on trying to reach essay. But “there is no cer- overlapping territorialpolitical upheaval. after a young and desperate ist segments of society pressure for an agreement Russia, the chief interna- a diplomatic understanding tainty that the incoming claims in the South China Saudi Arabia, hardly street vendor set himself through to a referendum with the International Mon- tional backer of Mr Assad, with Russia on Syria. group under Xi Jinping will Sea and no formal defencetouched by the Arab awak- aflame. exacerbated divisions in etary Fund on a $4.8bn loan is beginning to share the Policy analysts say the be able to (or wants to) treaty with the US.ening, recently unveiled a In recent months, protest- Egyptian society and that has been twice predictions of his demise, it administration’s greater change this leadership cul- As the ambassador ofmassive budget with record ers have been taking to the eroded confidence. delayed. is far from clear that civil focus will be on trying to ture in order to tackle the another regional countryspending, and Qatar’s deal- streets again (though in Mr Morsi’s attitude also The unfolding crisis in war will end even after his resolve the high-stakes wide range of pressing eco- engaged in territorial dis-making is as frantic as ever. smaller numbers than dur- confirmed the fears of the Cairo has been closely departure. nuclear dispute with Iran to nomic, political, social, putes with Beijing told theNorth Africa, by contrast, ing the uprising) demand- liberals who charge that watched by the western And, despite steady gains avert what is likely to be environmental, legal and FT recently: “My main jobremains blighted, even ing jobs that the Islamist Islamists have less than a world, where governments by rebel groups and renewed Israeli threats to foreign policy challenges in the next few years is tomore than in the past, by government has not been genuine commitment to see stability in Egypt as a increased control over large attack the Islamic Repub- confronting China and cry- make sure that if Chinalow growth and a lack of able to provide yet. democracy. priority given the country’s swaths of Syrian territory, lic’s nuclear facilities after ing out for decisive action.” does go to war that itjobs. The new Arab political For the past three weeks diplomatic and political Mr Assad’s forces are still Israel’s election this month. The area where most ana- doesn’t do it with us.”Unemployment and low growth remain bloc’s big challenge it takes” to prevent the mic growth. National lead- further brake on eurozone rate conceals stark country- these reforms are not worth Flanders. “Many countries will come out of recessionEurozone euro from breaking up, and ers will find themselves fire-fighting for the German by-country differences. Job- it and say we’re not seeing are experiencing the most and enter low growth later the agreement among EU attempting to stick to tough chancellor as she cam- lessness is still near two- the benefit,” says Marie severe economic crises in in the year.There is little scope leaders on a bail-out mecha- austerity regimes in order paigns at home, where a cri- decade lows in Germany Diron, economic adviser to living memory,” says But that very low growthfor extra stimulus to nism and closer financial to cut budget deficits and sis-fatigued electorate sees but in Spain and Greece Ernst & Young. Moritz Krämer, sovereign is dependent on the wider integration have soothed to press ahead with struc- itself as footing the bill. one-in-four people are out of These social strains have risk analyst at Standard & global economy and there ishelp the continent financial markets and tural reforms designed And as last year’s con- work, with the rate nearing started to be expressed in a Poor’s. little in the way of extraout of recession, helped lift the sense of imminent threat against the to improve competitiveness. They do this in an environ- cern about a possible Grexit, or Greek exit from 60 per cent among those under 25. rekindling of smouldering separatist and regionalist “The social contract around which a country stimulus waiting in the wings to support it.writes Michael Steen euro. ment where voters and oth- the euro, has diminished, a An upwards trend in tensions, as seen in elec- coalesces may become The ECB, which already “Today, those still pre- ers will question whether new European political unemployment in countries toral advances made by increasingly strained.” has its main refinancing dicting a break-up of the such harsh medicine is kill- debating point has emerged such as France and the independence movements He expects nationalist interest rate at a historicIf last year saw the euro- eurozone are sadly behind ing the patient. in the form of the Brexit, or Netherlands – that were not in Scotland, Catalonia and voices to become more low of 0.75 per cent, startedzone survive an existential the curve,” said Olli Rehn, The big political set speculation about a British directly hit by market jit- alluring but sees a break-up the year with a signalcrisis, 2013 will be the year the EU’s monetary affairs pieces are the Italian elec- exit from the EU. ters over a euro break-up – of a European state as that it was not minded toin which the resolve of commissioner, in a speech tion next month and this But the big challenge is also reflects how groups unlikely. Indeed, Mr cut further for the timeEurope’s leaders is tested to this month, before adding: autumn’s German poll. unemployment and growth. have delayed investment ‘Many countries are Krämer’s forecast for the being.stick with economic “We cannot afford to lower The former has the poten- About 26m people are out of across the bloc. experiencing the year is that this could be a “Other economic policyreforms as millions of their our guard.” tial to stall reforms in one work across the EU and the “That is probably the big- watershed – the beginning areas will need to makevoters endure unemploy- What remains is a conti- of the countries that saw its unemployment rate for the gest risk to the eurozone – most severe of the bloc sustainably over- further contributions toment or falling wages. Last summer’s commit- nent still mired in reces- sion, suffering from record bond yields rise higher last year on speculation of a 17-nation eurozone has hit a record 11.8 per cent. It is the longer the recession goes on and the higher the economic crises in coming the market volatil- ity and fragmentation of ensure a firm stabilisation of financial markets andment by Mario Draghi, unemployment and with lit- euro break-up. The latter, forecast to rise yet further unemployment rate, the living memory’ the last few years. an improvement in theEuropean Central Bank tle prospect this year of likely to return Angela Mer- before any improvement. more there is the risk that The consensus among outlook for growth,” saidpresident, to “do whatever anything but the most anae- kel to power, will act as a Worse, the eurozone-wide electorates express that all economists is that the bloc Mr Draghi.
FINANCIAL TIMES WEDNESDAY JANUARY 23 2013 ★ 3 The World 2013Factory owners in private sector companies with 10 or more workers, although 10m young people are joining the labour force every year. Labour laws are not the only prob-urged to raise lem for businesses. Add in India’s notorious bureaucracy, poor transport and electricity infrastructure (last year the north of the country experi- enced the biggest power cut in historyambitions for when more than 600m where without electricity for the best part of two days), and the occasional imposition of retrospective taxes and you have a recipe for driving away both Indianexport success and foreign prospective investors. Large companies with deep pockets are so awed by the potential future size of the Indian market that they usually persevere. For example, MeadWestvaco, the US packaging group, is taking a bet on the inevitable growth of the consumer goods market in India, buying a localIndia Economists say labour and land reforms packaging company and announcing plans for a total of more than $180m of investment over five years.are key to releasing economic potential and Walmart, the huge US supermarkets group, has invested in the wholesalestimulating investment, writes Victor Mallet trade and is hoping to start in retail following the easing of governmentA restrictions on foreign investment in t first glance, it looks like tiny, overpriced stores that thrive the sector. Indeed, the US company is good news for India: an because successive governments have being investigated over accusations Indian carmaker announced resisted the building of department that it has already secretly invested in this month that it sold more stores and supermarkets, particularly supermarkets in contravention of the vehicles than ever last year, foreign ones. ban previously in force.China overtook the UK as its biggest A search for a basic household Population growth, farming, govern-market and the company is planning smoke alarm – an essential safety ment services, frantic constructionto hire another 800 workers for its device in a land of shoddy electrical Stitch in time: unlike many of its counterparts, this clothing factory on the outskirts of New Delhi is a big exporter AFP/Getty and real estate activity and the mod-factory. installations and frequent fires – is ern outsourcing and IT services Unfortunately for India’s millions of met with blank stares from shopkeep- sectors will ensure robust growthjobseekers, the plant is in the English ers, until finally the object is located failure to accompany trade and prod- clothing, shoes and toys. Instead, undermine progress and addressing for the Indian economy in the comingMidlands. The company is Jaguar and ordered from a distant ware- uct market liberalisation with reform highly restrictive and old-fashioned new challenges (Collins Business, years in all but the direst of politicalLand Rover, the luxury car manufac- house, arriving three days later at of markets in the “factors of produc- labour laws have undermined the 2012). They analyse data showing that crises.turer owned by India’s Tata Motors. three times what it would cost in Lon- tion” – particularly labour and land – advantages of India’s low nominal nearly nine in 10 jobs in the Chinese Allready there are signs that GDP Indian corporations do make cars at don. It is – like many other electronic is the biggest obstacle to investment wage costs and discouraged formal textile industry are provided by medi- growth, which retreated steeply fromhome as well, of course. But India’s and electrical products sold in India – in manufacturing and the accelerated employment, driving employers to um-sized or large firms, giving them more than 8 per cent a year to lessfailure to adopt enough of the large- made in China. job creation and gross domestic hire casual labour and keep their an advantage in export markets. In than 6 per cent in 2012, is starting toscale, labour-intensive manufacturing Some Indian intellectuals were mor- product growth that it would bring. firms as small as possible. India, the proportions are reversed, pick up again.that has propelled the successful tified last year when neither President “Product markets are reasonably “Manufacturing units in India are with almost all workers employed by That is faster than many emergingdevelopment of China and other east Barack Obama nor Mitt Romney men- open, reasonably competitive,” says discouraged from growing beyond the small enterprises. and most developed economies, butAsian countries is now regarded as tioned India in the US presidential Shankar Acharya, former economic very small scale,” says Mr Acharya. “It is ironic that in a country with those who study India’s economicone of the greatest weaknesses of the election debate on foreign affairs, but adviser to the Indian government. “We’re not exploiting our comparative nearly 470m workers, all evidence progress say growth would be fasterIndian economy. they know that India lacks inter- “What’s missing in India in a huge advantage.” indicates extreme and even increasing still if the government’s reforms were This shortcoming is obvious to any- national clout in part because its way is a large factory class.” Over Economists Jagdish Bhagwati and reluctance of Indian entrepreneurs to to extend to the markets for labourone trying to shop for manufactured economic weight is not commensurate the past four decades, he argues, Arvind Panagariya make the same employ unskilled workers,” write and land and so unleash the billionsgoods in one of Delhi’s “markets”, with the size of its population of India, like China before, should have point in their book India’s Tryst Messrs Bhagwati and Panagariya. of dollars of manufacturing invest-which in reality are collections of 1.2bn. Economists reckon that the become a big producer and exporter of with Destiny: Debunking myths that Only about 10m Indians are employed ment that the country needs.Continent’s twin poleson different trajectoriesAfricaIn spite of rivalry,South Africa andNigeria have muchto offer each other,says William WallisSub-Saharan Africa’s voiceon the global stage has beenstrongest in the past decadeand a half when its twomost powerful players haveworked together. When Thabo Mbeki andOlusegun Obasanjo were At odds: Goodluck Jonathan (left) and Jacob Zumaheads of state in SouthAfrica and Nigeria, respec-tively, this was often the of services and agriculture ard & Poor’s, the ratingcase. The two men had a – while South Africa strug- agency, upgraded the coun-shared history dating back gles with rising unemploy- try in November. Theto when Gen Obasanjo was ment, decreasing competi- upgrade still leaves the sov-military head of state in the tiveness and industrial ereign rating three notcheslate 1970s and Nigeria sup- unrest. below investment grade andported Mr Mbeki and other South African businesses, far below South Africa.African National Congress from MTN, the continent’s But as Ngozi Okonjo-exiles from apartheid South leading telecoms company, Iweala, the finance ministerAfrica. to smaller tech companies, and co-ordinator of eco- In different ways the retailers such as Shoprite, nomic policy, notes, it is ingruff, former general, and banks such as Standard the right direction, at aelected as civilian leader in Bank, have all won an time when many countries1999, and the prickly intel- important foothold in the are heading the other way.lectual, who succeeded Nel- continent’s most populous That said, compared toson Mandela as head of nation as they seek – as do South Africa, Nigeria isstate the same year, had other foreign investors – to coming from far behind. Itclout and influence across tap into the faster growth of ranked 178th out of 185the globe. Controversial as frontier markets as the rest economies, for example, forthey both were at home, of the world slows down. access to electricity for newwhen addressing African Nigeria’s economic trajec- businesses in the Worldcrises or mapping out a tory has meanwhile begun Bank’s latest Doing Busi-more collaborative to threaten South Africa’s ness report. More than halfapproach to the continent’s pre-eminent position, of the 160m population haseconomic future, they could although South Africa’s no access to the power grid,be an effective duo. the Bank found. The same cannot be said In South Africa, mean-of President Goodluck Nigeria could begin while, after some of theJonathan in Nigeria and his to gallop faster if most turbulent months incounterpart Jacob Zuma in the country’s post-apartheidSouth Africa, both of whom continuing reforms history, all three mainhave been struggling withdomestic crises in the past address chronic credit rating agencies have recently downgraded theyear – fuel subsidy protests power shortages country.and an Islamist insurgency Mr Zuma, in an interviewin Nigeria, and industrial last week, cast blame forunrest and social tension in physical and financial infra- the country’s economicSouth Africa. structure is still far more woes and social distur- These days, Africa’s developed. bances on the global eco-strongest poles have often Economists and invest- nomic crisis and legacies offound themselves apart in ment banks forecast that, apartheid.continental disputes. They for all its endemic corrup- “There’s a certainty thatare more often rivals than tion, structural shortcom- the ANC is going to be inallies in projecting an Afri- ings and infrastructure defi- government, the ANC hascan viewpoint, in advocat- cits, if Nigeria’s economy policies that are very cer-ing a permanent African continues to grow at 6 per tain and are very clear,” heseat on the United Nations cent or more it is only a told the FT. “As an investorSecurity Council, and have matter of years before its those are the things I wouldtaken positions that have $255bn economy overtakes look at, I would not look atsplit the continent in recent South Africa’s $400bn as the what people say.”conflagrations, such as in continent’s largest. But such talk has not pre-Ivory Coast and Libya. Forecast by the IMF to vented some investors from At one recent African grow at 6.3 per cent again taking fright. As one Lon-Union summit, Nigerian this year, Nigeria could don-based private equityand South African delegates begin to gallop faster if con- manager puts it, if Southstanding outside a trilateral tinuing reforms designed to Africa starts to presentmeeting at which Mr liberalise the power sector emerging market risks forJonathan and Mr Zuma deliver on one chronic developing world returns,were at odds nearly came to impediment to a more its relatively mature econ-blows. dynamic business environ- omy is not an especially Yet the two countries ment – electricity shortages. compelling prospect.have much to offer each Partly as a result of opti- The case for fund manag-other, as Nigeria’s economy mism over power reform – ers to leapfrog into poten-continues to take off on the and the prospect ultimately tially more lucrative Afri-back of soaring world oil of this unleashing Nigeria’s can markets, such asprices – and an expansion industrial potential – Stand- Nigeria, becomes stronger.
4 ★ FINANCIAL TIMES WEDNESDAY JANUARY 23 2013 The World 2013Regional ventures form part of new way forward Collaboration isTrade key to getting For Pascal Lamy, direc- tor-general of the WTO, it is whether the major pow- ers – China, the US, the Reinsch, president of the National Foreign Trade in the wake of their most recent talks in New Zealand and South Korea are laying the groundwork for their more from less was the latest sign that European Union, Brazil, Council, a Washington- in December, which for the own three-way trade pact,Progress this year is additional action was India – really want to put based lobbying group for first time also included Can- despite some geopoliticallikely to be on a required on a policy level to some energy into harvest- trade liberalisation. ada and Mexico. The 16th tensions. “The big thing rev up the engine of global ing what can be harvested Amid the search for a round of discussions will be which might emerge inpiecemeal basis, trade. “More needs to be from the Doha round,” says new path forward in the held in Singapore in March, 2013-2014 is a China/Japan/says James Politi done,” Mr Lamy said. “We need a renewed commit- Gary Hufbauer, a former US Treasury department offi- near-defunct multilateral trade agenda, many large and optimists hope that a deal can be inked by the Korea agreement,” says Mr Hufbauer. “At the moment executive of the World ment to revitalise the multi- cial who is now a senior countries are embarking on end of the year, though that it seems a bit far-fetched Philanthropy Affairs Council and theIn late September, economic lateral trading system fellow at the Peterson Insti- regional ventures to fill the may be wishful thinking. but it could be big stuff if Global Philanthropyweakness around the world which can restore economic tute for International Eco- An even more ambitious they decided to go forward.” Sarah Murray finds Forum. “And newcaused economists at the certainty at a time when it nomics. “The US has been project, arguably, is the cre- As these efforts towards the foundations of philanthropists travel downWorld Trade Organisation is badly needed.” conspicuously silent on this ation of a trade deal regional trade integration that road with ease.”in Geneva to scale back Mr Lamy’s term at the – but so have the others,” ‘The last thing between the EU and the US, proceed, the WTO, trade success are changing For continental Europe,their forecasts. In 2012, WTO expires at the end of adds Mr Hufbauer. the world needs uniting the two economic officials and experts around where government welfaretrade would no longer August, and nine candi- Expectations have long powers in a way that has so the world, as well as busi- systems have traditionallyexpand at a rate of 3.7 per dates are lining up for his dwindled that the full Doha right now is the far been elusive, and setting ness groups, are closely The pressure for borne most responsibilitycent, as previously pre-dicted, but 2.5 per cent replacement – including three each from Asia and round could be resurrected, certainly not before trade threat of rising the standard on measures such as the protection of watching whether countries will tone down some of the philanthropy to make a bigger impact on the for delivering social services, cross-sectorinstead. For 2013, the prog- Latin America; two from ministers hold their next protectionism’ intellectual property rights. measures to protect domes- world’s problems has approaches are relativelynosis was also reduced – to Africa, and one from New major WTO summit in Bali A working group led by EU tic industries that have rarely been as intense. As new. However, in a fiscallyan expansion of 4.5 per cent Zealand. in December, but the more trade commissioner Karel flourished in recent years, government budgets constrained environment,from 5.6 per cent. But, regardless of Mr likely scenario is that cer- void and make some De Gucht and US trade rep- leading to charges of protec- contract, falling donations necessity will drive It was the latest sign that Lamy’s replacement, the tain elements of the global progress towards greater resentative Ron Kirk was tionism. Such policies have hit the global charity governments, investors andpersistent trouble in the new WTO head will be trade agenda – such as a market access. expected this month to sug- rankled trade relations and industry and demands for philanthropic institutionsglobal economy – from slow facing the same, daunting deal on an International For instance, countries gest the launch of formal led to increasing trade ten- the services of non-profits closer together.growth in developing coun- challenge of reinvigorating Services Agreement – could negotiating the formation of negotiations, though huge sions, including within the continue to rise, the “What foundations willtries to slowdowns in some efforts to craft a multilat- be addressed on a piecemeal a Trans-Pacific Partnership challenges remain in craft- WTO’s dispute settlement question for individual have to do, and areemerging economies – was eral trade deal from the basis. – including Australia, Bru- ing a deal and none will be mechanism. donors and grant-making starting to do, is to helplimiting the strength in the ashes of the decade-old “We think this is going to nei Darussalam, Chile, forthcoming soon, with “The last thing the world organisations is how to the welfare state evolverecovery of global trade Doha round, which ran out be a year with a lot of activ- Malaysia, New Zealand, many judging it virtually needs right now is the make philanthropic into a welfare society,”after the dip it took during of steam long ago. ity, but not necessarily a lot Peru, Singapore, Vietnam impossible this year. threat of rising protection- funding go much, much says Luc Tayart de Borms,the 2008/09 financial crisis. “I think the big question of conclusions,” says Bill and the US – cited progress Meanwhile, China, Japan, ism,” says Mr Lamy. further. managing director of the From a financial Belgium-based King standpoint, the immediate Baudouin Foundation. road ahead certainly looks “The state can no longerOptimists may bumpy. In the US, overall do it alone.” annual giving is still down But if partnership will be 11 per cent from pre-2008 the philanthropist’s mantra levels, according to Giving in the coming years, so USA, and shows few signs will accountability, as of recovery. pressure to measure thehope for a turn The news is little better impact being made by in the UK, where overall donor dollars increases. giving in 2011 dropped by Here, the sector has £2.3bn to £9.3bn. made advances since the Meanwhile, the combined days when, too often, grantof sentiment value of gifts of more than makers based measurement £1m fell from £1.3bn in of non-profits purely on 2010 to £1.2bn the following overhead levels – even year, according to an though investing in IT, annual study by Coutts, training or streamlinedafter hard year the private bank. procurement systems This increases the increases operational pressure on the sector to do more with less. And in the view of many philanthropic leaders, a ‘Philanthropy has priority is therefore to always been best ramp up the ability to collaborate with other when it takes thatBanking The twin issues of integrity and pay organisations, from government and first layer of risk’ multilateral agencies to Judith Rodin,are likely to dog the sector, in spite of signs that businesses and Rockefeller Foundation entrepreneurs.growth is returning, reports Patrick Jenkins “We can’t make a big dent in the challenges efficiency, leaving moreA without a far greater cash for programmes. s the great and the good of Underpinning the theory that banks ability to join forces,” says Ms Osberg believes that the worlds of politics, may be returning to something akin Sally Osberg, president and many philanthropists have economics and finance to normality, a clutch of big-name chief executive of the Skoll moved on from this gather at the Davos World bankers that have been absent in pre- Foundation, which was approach. “The sector is Economic Forum this week, vious years – from Goldman Sachs founded by eBay billionaire becoming morethe meeting’s theme of “resilient boss Lloyd Blankfein to Frédéric Jeff Skoll to invest in sophisticated anddynamism” might look hopelessly Oudéa from Société Générale – are set social entrepreneurs. understands thatoptimistic for the banks that are in to be at Davos this year. “That’s where I see all this accountability andattendance. Policy makers will want to capital- heading.” legitimacy is dependent on The past year has seen lenders in ise on any signs of an upbeat mood In places such as the US measurement and resultsmany western markets continue to and convert it into constructive think- and UK, governments have that add up,” she says.shrink their excessive pre-crisis ing about growth, experts believe. recognised the potential of And while measuring thebalance sheets as they are lambasted “The dominant theme is going to be: joining forces with the effectiveness ofall the while by the emergence of how do you reinvigorate European private sector to advance programmes tacklingscandals ranging from Libor rate- growth, and how do the banks fit into domestic and overseas everything from poverty torigging to Iran sanctions busting to that?” says Mr van Steenis. “Policy development agendas. Now, women’s rights isMexican money-laundering. makers are realising that without a some are also turning to notoriously difficult, new At the same time policy makers credit rebound, particularly for infra- be structural cuts in the banking markets; by capitalising on rivals’ Called to account: philanthropists. methodologies – such ashave continued to draft laws to make structure and small and medium-sized industry for years to come.” weaknesses,” says Mr Drzik. “And banks will be For example, a the Global Impactbanking structures more secure, add- enterprises, it’s tough to see economic Much to investment bankers’ there will also be opportunities for desperate to partnership was announced Investing Rating Systeming fresh regulations on capital and growth at an acceptable level.” chagrin, that is bound to extend non-bank financials that are strong, avoid a repeat of last year between the Skoll (GIIRS) – are emerging asliquidity for good measure. The net Many, however, still see early signs through to pay levels. “The industry such as the insurers.” the so-called Foundation and the US mainstream investors startresult is a banking system in much of of a rebound in European sentiment has never gone as far as it might to Conversely, the hangover of crisis- shareholder spring Agency for International to seek social andthe world that may be on its way to as vulnerable to further shocks, while align pay with underlying risks or the related issues for western banks will Getty Development (USAid). The environmental returns asbeing more resilient, but in the mean- the economic backdrop in the US, too, timeframe of realised returns,” Mr open up opportunities for emerging idea is to invest in well as profit.time is certainly not dynamic. is far from reassuring. Drzik says. market rivals, says Michael Andrew, development innovations Even so, Judith Rodin, All the same, the more optimistic With continued low interest rates, Underpinning that cost-based, pru- chairman of KPMG, the professional that have the potential for president of the RockefellerDavos delegates may choose to focus and the tougher capital requirements dential argument is a more pragmatic services firm. “This year will see the far-reaching impact at a Foundation, warns againston the nascent signs of a turn in sen- of incoming Basel III rules starting to one – banks will be desperate to avoid Asian banks – the Chinese, the Kore- fraction of the cost of such the dangers oftiment. Since the autumn, there has bite, there is a new reality that lend- a repeat of the so-called shareholder ans, the Japanese, the Singaporeans – interventions when philanthropists putting toobeen a strong bull run on bank equi- ers must confront, says John Drzik, spring, which saw investors lodge pro- much more active in the world,” he executed through much emphasis onties, particularly in Europe, as inves- chief executive of consultancy Oliver test votes against directors’ re-elec- predicts. “Asian and Latin American traditional aid models. measurement at thetors have taken heart at a calmer Wyman. tion to boards as a proxy for the frus- banks will take market share,” For grant makers – expense of innovation.eurozone crisis and some signs of a “I see banking going into a new tration many felt at the skewed distri- though he adds that established glo- particularly the next She believes that forpragmatic softening of tone by regula- phase of thinner margins and lower bution of the spoils between staff and bal banks “have a big head start”. generation of philanthropy to play ators. In particular, regulators have growth,” he says. “[As a result] there shareholders. Clouding that positive agenda, how- philanthropists, many of bigger role in findingbacked away from tough rules on will be a renewed focus on cost In the clutch of US bank results last ever, will be the continued need for whom have made their solutions to globalliquid asset buffers. and risk management. There will week, there were clear moves to cut banks to reinvent their reputations money in the private problems, the sector needs “European banks have been adrift investment banker pay. given the pasting that so many have sector – partnerships with to treat its funding as riskin a Bermuda triangle, buffeted by the Nonetheless, even pundits who taken over the past 12 months. government or the private capital, in a way thatsevere forces of sovereign stress, believe a major overhaul of the indus- “The key issue at Davos and for sector allow them to make governments anddeleveraging and financial repres- ‘The industry has never try’s structures is vital believe there 2013 will be how you achieve the res- their dollars go further. companies cannot.sion,” says Huw van Steenis, banks gone as far as it might will be opportunities to grow – even if, toration of ethical reputations within “You’re seeing a “Philanthropy has alwaysanalyst at Morgan Stanley. There are for the time being at least, they are the banking industry,” says Mr willingness to use all the been best when it takesstill “high seas”, he says: “But we see to align pay with few and far between in developed Andrew. “It’s about regulation, it’s tools available in terms of that first layer of risk,”the threat receding [and] global inves-tors are looking afresh at investing in underlying risks’ markets. “For good banks there will about governance, it’s about culture. This is particularly the challenge for privately financing social good,” says Jane Wales, she says. “If everything we do succeeds, we’re notEuropean banks.” be chances to grow – in emerging banks in London, the US and Europe.” president and chief taking enough risk.”Issues on Davos agenda simmer as growth prospects brightenContinued from Page 1 prefer anxiety to optimism end of February – is that Serious observers are Any such clash would prob- defence secretary will dangers of climate change politicians who must cut will still have plenty to get the Italian elections will see beginning to talk about the ably draw in the US, which strengthen the impression will make a major reappear- the deals and make thethat the last year has seen a their teeth into at this the end of a period of tech- real, (if still remote) risk has made it clear that the that the US has very little ance at this year’s Davos. In decisions to deal with thebull run for stocks. This year’s forum. The big ques- nocratic government in that that there will be armed islands are covered by the interest in further military the years before the finan- problem.month the S&P 500 hit a tion for all the participants country, which has helped conflict between China and US-Japan security treaty. interventions in the Middle cial crisis, concern about The milder critics of thefive-year high, and the is whether all these positive to restore the confidence of Japan over the disputed The stakes could hardly be East – since Mr Hagel has the environment and the World Economic ForumFTSE All-World index is developments are durable, the markets in the euro. A Senkaku-Diaoyu islands. higher. been scathing in his criti- climate had become a big have always argued that itat its highest level for or ephemeral. It will be return to political instabil- In the meantime, how- cism of both the Iraq and theme at the forum. But the is much better at describing18 months. Even the bank- easy to make the case that, ity and populist spending ever, the world has to deal Afghan wars, and was economic crisis shoved glo- and discussing problems,ers are liable to arrive in within weeks of the end of pledges in Italy could be the with real conflicts in the highly sceptical even of bal warming down the such as climate change,Davos with some of their Davos, the sense of crisis trigger for a renewal of the Middle East – in particular American involvement in agenda at Davos – and else- than dealing with them.old swagger restored. After will have returned. euro crisis. the increasingly brutal civil Libya. where. More radical critics argueall, there have been no In the west, there are two In recent years, Asian war in Syria, which has However, just days before However, the waning of that the forum is part of themajor scandals, collapses or obvious potential triggers – participants at Davos have now claimed some 60,000 the delegates gathered in economic anxieties over the problem because it shapesarrests for months. both of which are bound to sometimes given Americans lives. The plight of Syrian Davos, France staged an past few months has com- and re-enforces an elite con- All these factors are be discussed in Davos. The and Europeans pious lec- refugees, as winter draws intervention in Mali – bined with a rise in fears sensus that has led, directlylikely to mean that this first is the threat that Con- tures on the dysfunctional in, is certain to be high- bombing Islamist rebels. about the climate – as or indirectly, to globalyear’s Davos will see the gress might refuse to raise politics of the west. This lighted, since the relevant Leading members of the extreme weather has financial crises, wideningforum once again focusing America’s debt ceiling at year, however, they will UN agencies are always French government always afflicted New York, Aus- income inequality and envi-as much on opportunities the end of February, raising have their own difficult present at Davos. What is come to the World Eco- tralia and elsewhere. ronmental degradation.as on threats. (The ostensi- fresh questions in the mar- questions to answer. The much less clear is whether nomic Forum, in neighbour- The WEF is actually an It is part of the genius ofble theme for the forum is kets about America’s credit- past 12 months have seen a the assembled world leaders ing Switzerland, and they excellent forum to have a Davos, however, that such“Resilient Dynamism” worthiness – and also sharp rise in tensions will have any fresh ideas will be questioned closely rounded discussion about critics are often invited intowhich – in the way of Davos endangering the operations between China and its about how to handle the about the risks and strategy the climate, since it brings the warmth of the Congressslogans – is earnest, but of the US government. neighbours – and, in partic- Syrian conflict. behind the Mali interven- together many of the lead- hall to make their case.uninformative.) The second risk – which ular, between China and The nomination of Chuck tion. ing scientific authorities on They are not ignored – they Nonetheless, those who also comes to a head at the Japan. Nominated: Chuck Hagel Hagel to be the next US It is also likely that the the subject, alongside the are simply marginalised.
FINANCIAL TIMES WEDNESDAY JANUARY 23 2013 ★ 5 The World 2013Global warming: this month’s searing record heat in Australia has already produced 2013’s first severe weather extreme. The heatwave caused a number of fires across the country AAPProgress at glacial pace in UN talks on emissionsClimate With the economic superpowers deadlocked, some are looking to the private sector and individual countries for action, writes Pilita ClarkA few days after Typhoon tic sea ice melting; the hottest year on imagine the UN climate negotiations But some of the most crucial discus- will remain the world’s only binding it is supposed to cover all countries, Bopha tore through the Phil- record in the 48 contiguous US states speeding up substantially in 2013, and sions at UN talks often do involve a agreement to address climate change. including China, India and the other ippines in December, leav- and the shocking spectacle of New some fear they never will. relatively small number of countries, This treaty obliges a dwindling big emerging powers. ing hundreds dead and thou- York City being devastated by super- US academic David Victor, author or small numbers of representatives number of wealthy countries whose Still, given the past record of these sands homeless, a represent- storm Sandy. of the 2011 book, Global Warming speaking for much larger groups, such emissions now account for just 15 per vast and unwieldy talks, it is easy toative from the battered country began As it turned out, however, the Doha Gridlock, has repeatedly said part of as the least developed countries, or cent of the global total to reduce their see why some expect more actionto speak at the UN climate talks in conference did what almost every UN the problem is the sheer size of the small island states, says Mr Grant. greenhouse gas pollution. from the private sector, or individualthe Qatari capital of Doha. climate conference has done since mammoth negotiations, which mean And even then they fail. The world’s largest emitter, China, countries. Naderev Saño, the Philippine cli- these events started nearly 20 years small countries with relatively few “So I think this is a bit of wishful did not have to make any Kyoto com- Google, for instance, has investedmate change commissioner, broke ago. It attracted thousands of people emissions sit at the same table as the thinking,” he says. “The reason why mitments because the pact obliges nearly $1bn in renewable projects.down as he made a plea to his fellow from nearly 200 countries to spend world’s biggest emitters. there is no progress is the issues only what were deemed wealthy And a report this month from Globe,delegates, in what turned into one of two weeks talking about how to stem It would be smarter, he says, to get involved are so intractable. They developing countries in 1997 to reduce the international legislators group,the conference’s most riveting the greenhouse gas emissions that the relatively small number of coun- don’t get any easier if you have just their emissions. shows that 33 of the world’s leadingmoments. scientists say are threatening to warm tries responsible for the lion’s share of 30 countries in the room.” China has become the world’s sec- economies have now passed 286 pieces “I am making an urgent appeal, not the world by a potentially dangerous emissions to negotiate a deal. The difficulty of the UN process was ond-largest economy since then, infu- of climate legislation, and 31 of themas a negotiator, not as a leader of my 2C above pre-industrial levels. But could even this work with such more than evident in Doha, which riating the US, which never ratified have “flagship” climate laws, that candelegation, but as a Filipino,” he said. And though it made progress by UN a complex and multifaceted problem was billed as a “housekeeping” meet- Kyoto in part because of a belief it act as a platform for climate action. “I appeal to the leaders from all standards, it did little to swiftly curb as climate change? ing. Its main aim was to tidy up sev- was unfair for Americans to risk their As Globe admits, these laws, andover the world to open our eyes to the the relentless rise in emissions that “I’m sympathetic to the view that eral strands of older negotiations from economic growth when their rising private sector initiatives, are notstark reality that we face,” he added. some experts say are on track to the UN climate process is not up to past talks so delegates could start con- rivals in China did not have to. enough alone to address the chal-“Please, no more delays, no more warm the globe by as much as 4C in the job and we would get a better centrating on something they agreed That stand-off between the two eco- lenges of climate change. But as UNexcuses. Please, let Doha be remem- coming decades. outcome, or could manage the negoti- to do at the 2011 climate talks in Dur- nomic superpowers is one reason the climate chief, Christiana Figueres,bered as the place where we found the This month’s searing record heat in ations better, if we had a smaller ban: forge a legally binding global UN climate talks have proceeded at told a Globe meeting in London ear-political will to turn things around.” Australia has already produced 2013’s number of countries involved,” says pact to tackle climate change by 2015 such a glacial pace. lier this month, “nothing is going to It was a call climate activists wel- first severe weather extreme. But Jonathan Grant, director of sustaina- that would enter force from 2020. The 2015 deal agreed at Durban is be agreed internationally untilcomed in a year that saw record Arc- even if more follow, it is difficult to bility and climate change at PwC. Until then, the 1997 Kyoto protocol meant to break the deadlock because enough is legislated domestically”.Beyond the big bang, Martianmanoeuvres and decoding DNA Large Hadron Collider run microwave background or fewer big set-piece eventsScience by Cern, the European CMB, also known as “the than physics and space but physics research centre out- afterglow of the big bang”. there are bound to be someClive Cookson looks side Geneva. Although the CMB was important advances here,at discoveries on Cern will shut down the generated some 300,000 too. LHC next month for a two- years after the big bang in Cancer research is mov-the wish lists of year upgrade to enable the which the universe was cre- ing very fast. We can expectresearchers for 2013 collider to operate at even higher energies. Although ated 13.7bn years ago, the distribution of energy progress, for example, in ways to prime the immune this will not give the LHC within the radiation pro- system to fight tumours –Ask a scientist what discov- time to generate much vides clues to a much ear- an avenue being pursued byery he or she would most more data in 2013, research- lier time – perhaps to several academic groupslike to see this year – and ers have already stored up a within a tiny fraction of a and biotechnology compa-the answer is likely to be vast amount that they will second of its birth. nies. And the continuing“something completely be analysing over this year. Planck will build on maps rapid fall in the cost ofunpredictable”. For a start, physicists from Nasa’s earlier micro- DNA sequencing will ena- It could be the unambigu- want to know whether the wave observatories, which ble researchers to track bet-ous detection of a radio sig- Higgs boson is a single par- reinforced the idea that a ter the genetic evolution ofnal from an extraterrestrial ticle, as the standard model period of unimaginably cancer within individualcivilisation. Or, if that is proposes in its simplest rapid expansion just after patients.asking too much, perhaps a form, or a group of parti- New technology for DNAnew wonder material (such cles, as more complex theo- sequencing is also playing aas graphene in 2004) or a ries suggest. The answer key role in understandingpowerful biological tech- will be important in the Physicists want to human origins. Last yearnique (such as the creation search for a broader under- know whether scientists at the Max Planckof human embryonic stem standing of how the uni- Institute for Evolutionarycells in 1998). verse works. the Higgs boson Anthropology in Leipzig, While scientists love dis-coveries that are not on Physicists are hoping, too, that LHC data will provide is a single Germany, announced an astonishing feat of geneticpundits’ prediction lists, the the first signs of “supersym- particle or a group sleuthing when theycontinuity of research metry”, the idea that the decoded the genome of ameans that most advances fundamental particles speci- previously unknown humanare well signalled ahead of fied by the standard model species from DNA survivingtheir official announce- also have heavier partner the big bang, known as cos- in a 50,000-year-old frag-ment. That was certainly particles. If so, one or more mic inflation, can account ment of finger bone foundthe case for what the jour- of these super-particles or for many features of the in the Denisova cave innal Science chose as 2012 “sparticles” may account universe today. Siberia.Breakthrough of the Year: for the mysterious “dark A very different space This year they maythe discovery of the Higgs matter” that is believed to mission sure to produce fas- obtain an equally completeboson. pervade the universe but is cinating observations this genome for Neanderthals, This elusive subatomic undetectable with conven- year is Nasa’s Curiosity which are far better knownparticle put the finishing tional instruments. rover, which made a spec- because so many Neander-touch to the “standard When it comes to observa- tacular descent on to Mars thal fossils survive butmodel” of physics, which tions of the universe itself from a “sky crane” in which have not yet yieldedexplains some but not all of from telescopes and other August. After more prelimi- such well preserved DNA.the interactions between instruments, most eagerly nary exploration, the car- A three-way comparisonparticles and forces. The awaited in 2013 is a map of sized rover will trundle for of Denisovan, NeanderthalHiggs boson – a manifesta- the very early universe pro- many miles across Gale and modern humantion of the “Higgs field” vided by the European Crater, stopping from time genomes would bethat fills empty space and Space Agency’s Planck sat- to time to dig, scrape and immensely revealing for sci-gives other particles their ellite. drill samples of soil and entists seeking to under-mass – was created in high- This will give cosmolo- rock, which it will analyse stand the complex relation-energy smashes between gists the most precise in its robotic laboratory. ships between differentatomic nuclei at the $8bn details so far of the cosmic The life sciences have hominid groups.Contributors »Gideon Rachman Patrick Jenkins James Politi Steve BirdChief Foreign Affairs Banking Editor US Economic and Trade DesignColumnist Roula Khalaf Correspondent Andy MearsJamil Anderlini Middle East Editor Michael Steen PictureBeijing Bureau Chief Victor Mallet Frankfurt Bureau ChiefRoger Blitz South Asia Bureau Chief William Wallis For advertising details,Leisure Industries Editor Richard McGregor Africa Editor contact: Robert Grange, telPilita Clark Washington Bureau Chief Sarah Murray +44 (0)20 7873 4418, emailEnvironment Correspondent Chris Nuttall FT Contributor firstname.lastname@example.org or yourClive Cookson San Francisco Technology Andrew Baxter usual Financial TimesScience Editor Correspondent Commissioning Editor representative.
6 ★ FINANCIAL TIMES WEDNESDAY JANUARY 23 2013 The World 2013Unplugged erachanges theway we interactwith gadgetsTechnology Hardware is losing its primacy tosoftware and services as consumers engagewith the user experience, writes Chris NuttallS kimming down the ski slopes to smaller, smart objects, we are see- of Davos this year, wearing ing the beginning of consumer elec- the latest gadgets from this tronics becoming electronics made or month’s Consumer Electron- financed by consumers themselves, ics Show in Las Vegas, diger- rather than the usual manufacturingati will be able to register their speed, giants.altitude, position, distance, tempera- A number of devices at CES, fromture, heart rate and even brain activ- smart watches to game consoles, wereity at any given second. crowdfunded on sites such as Kick- With point-of-view action cams starter, with users financing produc-attached to ski poles and helmets, the tion runs of drawing-board designwhole experience could be captured in concepts. We are also seeing morewide-angle Ultra HD quality and affordable 3D printers, costing as littlestreamed to a smartphone screen or as $500, that allow consumers to cre-out to watching friends on Facebook. ate their own objects, built up layer From internal body readings to by layer in plastic and other materi-external telemetry and the sharing of als, in a method similar to inkjetthis to an outside world, technology is printers. counters provide wireless power to them online, computers will be able to perspiration, skin temperature and Brainwave: theturning personal experiences into uni- In the near term, though, individu- compatible devices such as a lamp- see an area of diseased tissue in an heart-rate patterns, as well as motion. Muse brain-sensingversal ones. als and small companies are more stand or a food mixer. Wireless charg- MRI and hear sound frequencies that It is only a matter of time before headband in action Beyond the social aspects, a prolifer- likely to outsource their needs to 3D ing is also becoming available for elec- detect a weakness in a bridge before it this kind of monitoring is generally at this month’sation of networked sensors attached print shops such as Sculpteo, running tric vehicles – just drive your car on collapses. available inside the body. Qualcomm, CES in Las Vegasto ourselves, our cars and the sur- more sophisticated machines. to a special mat to have it begin pow- Taste comes with computing perfect the leading wireless chip company, is EPArounding environment is producing Hardware is losing its primacy, any- ering up. meals by using an algorithmic recipe working with researchers on technol-huge amounts of data to be crunched way, to software and services. Apple Making the technology invisible and of favourite flavours and optimal ogy placed in the bloodstream thatand interpreted to predict traffic pat- announced this month the accelera- drawing us into what is displayed on nutrition. Sensors will soon be able to will send an alert to a smartphoneterns, retail intentions, the likelihood tion of the app economy – 40bn down- a screen encourages natural interac- “smell” and distinguish odours, ena- giving a two-week warning of a heartof flu outbreaks and 1,001 other sce- loads from its App Store in its four- tions. Voice commands and gestures Wearable bling analysis of soil conditions or attack.narios. They can also identify and year history, but with nearly 20bn are becoming more sophisticated and and sanitation systems. Qualcomm has also set a futuristiclead you to that one bay still vacant coming in just the last year. webcams offer facial recognition and But don’t write off the power of the $10m challenge to revolutionisein a parking lot. Hardware melts away if consumers authentication. Leap Motion will embedded human brain. Wearing a Muse head- healthcare, inviting teams of engi- This “Internet of Things” – tiny,web-connected sensors communicat- are engaged by the user experience and with ever thinner smartphones, launch a motion sensor the size of a pack of chewing gum early this year tech is seen band at CES that read my brain- waves, I was able to control a video neers to create the tricorder, the diag- nostic sensor-laden health tool in Staring with one another – has been long tablets and TVs stripping away that can track finger movements with by analysts game by concentrating on the screen. Trek.talked about, but the network is frames and edges to just show a unprecedented precision, enabling This was just one example in the “I totally believe this is possible andexpected to reach a new level of matu- screen, the disappearing act is almost users to mould virtual clay on screen as the next growing category of wearable and I believe this is going to revolutioniserity this year with improved NFC,Bluetooth and Wi-Fi wireless technol- complete. Samsung and LG have pro- duced vibrant, curved OLED big- or play “air” piano. In its annual forecast, IBM pre- wave of embedded tech, which analysts see as the next wave of personal computing. healthcare,” says Paul Jacobs, Qual- comm chief executive. He is attendingogies and more than 1bn smartphones screen TVs that are less than 5mm dicted computing will soon be able to personal Others include Google Glass, the forum in Davos, where he alsoexpected to be sold, according to thick. replicate the five senses – touch- intelligent eyewear coming from the plans to ski, check his sensors and hisDeloitte research. Wires are disappearing too. Mag- screens will allow you to feel the silki- computing search company, and the Basis wrist- smartphone; probably all at the same As well as this devolution of tasks netic coils under carpeting and ness of bed sheets before you order band, with sensors that can measure time.Armstrong revelations refocusattention on playing the game the present scourge and According to Sean Hamil several decades, and for tooSport feels somehow bigger than of Birkbeck College’s sport long ignored in some quar- those of the past. Certainly business centre in London, ters.Roger Blitz looks at the scandal is remarkable ethics is central to sport “Part of the problem waspast scandals and given his huge importance because of the conse- that American football and to cycling’s profile in the quences for its financial baseball were very slow towhy morality and previous decade, and the health. the table to engage on thecheating must be now better understood way in which he manipulated doping issue,” he says. Fifa, football’s governingconfronted now the sport to his own ruth- ‘Sports bodies have body, for years brushed off less ends over many years. allegations of corruption, Cycling will continue to to recognise the and may have carried onWhatever one makes of his hog the limelight in 2013 for doing so but for the growthconfession to doping the wrong reasons. Truth interconnection in the amount of money itthroughout his career,former cyclist Lance Arm- and reconciliation hearings will reveal more about how between integrity generated and the increas- ing scrutiny that thisstrong has set the stage for not just Mr Armstrong, but and economics’ attracted.morality and cheating to others too, took to drugs to Fifa will continue to edgebecome the key issues sport fuel their win-at-all-costs slowly along the path ofmust confront in 2013. habit. reform laid out by Sepp Sport has been down this There are two other rea- “Sports governing bodies Blatter, its president. Itsroute many times. The cen- sons why this scandal poses have to recognise the inter- attention may well thistral tenet of sport is the a greater risk to sport than connection between integ- year be swallowed up inuncertainty of outcome, the those previous ones. For rity and economics in preparations for the 2014sporting event shrouded in one thing, so much more sport,” he says. World Cup in Brazil.doubt until its end. money is at stake today, as For another, while sports But sooner or later, some Depressingly, the 41-year- the growth in the value of governing bodies will take of the big awkward ques-old Texan destroyed this live sports rights shows. comfort in the growing tions about Fifa, particu-romantic ideal in his inter- appetite for sport, it must larly the awarding of theview with Oprah Winfrey. compete for attention like 2018 and 2022 World Cups, Was there happiness in never before with other will have to be tackled.winning when you knew leisure activities in an eco- The Olympic movementyou were taking these nomic downturn. has pressing issues otherbanned substances, the chat For the consumer, sport than sporting integrity toshow host asked him. comes under that very large grapple with in 2013. A new“There was more happiness discretionary spending president must be elected toin the process, in the build, umbrella, and in many succeed Jacques Rogge andin the preparation,” he geographical markets a decision made on wherereplied. “The winning was such spending is to hold the 2020 summeralmost phoned in.” under intense pres- Olympics. Doping is just one of sure. The movement can reflectthe diseases that attack Such a backdrop on a successful Londonthe uncertainty principle. would be awkward Olympics, which did moreMatch fixing, spot fixing, enough for any than most recent sportingbribery and corruption are product. But for events to rekindle the sport-also part of the lexicon of one whose integ- ing spirit of fair competi-sport that cannot and never rity is under scru- tion, fan engagement andwill be eradicated. tiny that is especially prob- support and high-class The throwing of base- lematic. Cycling has achievement on the field ofball’s 1919 World Series, become the case study of a play.Canadian sprinter Ben sport in peril, an example But because the Interna-Johnson doping to win the of the disastrous conse- tional Olympic Committee100m at the 1988 Seoul quences of ignoring a per- likes to portray itself as theOlympics, serial doping sistent sore. embodiment of sportingorganised by East Ger- But cycling is not alone values, it will be expectedmany’s sports administra- in failing to tackle the to be at the forefront oftors in the 1970s and 1980s, problems of unethical integrity issues such asSouth African cricket tar- behaviour among the bribery and doping.nished in the 1990s by cap- ranks of its participants. Mr Rogge said last yeartain and match-fixer Hansie Michael Payne, former he wanted sport to wake upCronje – these are but a few marketing director at the to the threat from theof the notable blemishes International Olympic growth of gambling, whichthat stained each affected Committee, says doping cricket has found to its costsport. It can take years to had been on with match-fixing scandals.recover the sport’s reputa- s p o r t ’ s The need to combattion. agenda for match fixing is the biggest The question for all threat to sport, says Mrsports administrators is Hamil. “It is an absolutelyhow to manage the prob- Coming clean: fundamental issue – it islem. The public will expect Lance not going to go away,” heto see evidence of this in Armstrong says. Nor will any of the2013 and beyond. wanted to win other threats to the integ- The Armstrong scandal is at all costs AP rity of sport.