Panic stalks the Square Mile

In the tumultuous first week of August, the international markets woke up to the reality that extrem

During the stock-market panic of autumn 2008, we lived for the weekends. We were renting a cottage near Banbury in Oxfordshire and we would blast up the M40 on Friday nights, wend through the misty streets of our nearest village and then down into a dell, where the house nestled. An hour later, with our little boy tucked away in bed, I'd sit at my computer and watch the US markets until they closed.

Even when I knew that the traders in New York were stumbling from their offices to the bars of Broadway, I couldn't relax. It had become common practice for bad news to be released after the closing bell on Wall Street. Friday-night press releases - whether they were gloomy updates from struggling banks, a grim report from the Federal Reserve or a surprise downgrade from rating agencies - gave traders a couple of days to digest information before getting back to their desks on Monday. Those weekends, while walking through the bright clouds of falling leaves, I would try to get some perspective on the latest financial catastrophe, try to see the markets with a clarity that I wasn't afforded in the white-knuckle working week.

I thought back to that time as I sat up late on Sunday 7 August, trying to make sense of the negative headlines that had caused the stock-market jitters of late July to turn into an early-August rout. The trader's job is one of pattern recognition: to sift through information and judge between the incidental and the meaningful. The best in the business seem to make these judgements at the level of instinct. No mantic powers were required in the first week of August to tell that the news was bad. What traders, analysts and economists are now trying to work out is if this crisis is merely a big bump on the road to recovery, or a sign that the much-feared double dip is finally here.

As recently as 7 July, the FTSE was edging towards 6,100. By the end of 5 August, it sat at under 5,250. We entered correction territory - a fall of over 10 per cent from recent highs - on most major exchanges and, despite some decent US employment data, declines rivalled those that followed the bankruptcy of Lehman Brothers. The Dow Jones index staged a brief rally late that afternoon as Silvio Berlusconi announced measures aimed at liberalising Italy's economy. With the echo of the closing bell still ringing on Wall Street, however, Standard & Poor's (S&P) dramatically stripped the US of its AAA rating for the first time in history.

As long as the US retains its AAA status at the two other big rating agencies (Moody's and Fitch), S&P's move is largely symbolic. Banks and insurers will still be able to treat US treasury bonds as AAA-rated for risk management purposes and the downgrade will have only a marginal effect on borrowing costs. That doesn't mean we should ignore it.

Many will question the validity of S&P's move, given the tarnished reputations of such agencies after their decision to give ridiculously inflated ratings to sub-prime securitisations in the run-up to the financial crisis. The US government has highlighted flaws in S&P's calculations, pointing to a $2.1trn mistake. Yet S&P has, for once, got things right. The drawn-out relief rally that has taken place since early 2009 reflects the concerted, unilateral action taken by governments across the world to address the credit crisis. The over-leveraged financial system was bailed out by politicians, who realised that the only way to keep banks alive was to assume the liabilities of those in the worst shape, while pumping enormous amounts of liquidity into the markets to resuscitate the rest. The plan worked and stock markets heaved a communal sigh of relief.

Fearful symmetry

The political decisiveness of those mid-crisis days was a canard. In the weeks leading up to the S&P downgrade, there was a ghastly trans­atlantic symmetry as US politicians indulged in shameful point-scoring over the (usually routine) raising of the debt ceiling and Europe shilly-shallied over its response to the seemingly endless problems in Greece. Only debt of the most robust credit quality should be rated AAA. The US came within days of defaulting on its bonds as Republicans and Democrats played games of economic brinkmanship. In downgrading the US rating, S&P merely acknowledged that an investment in the country's debt risks falling foul of political intransigence.

Meanwhile, José Manuel Barroso, president of the European Commission, was correct to question the "systemic capacity of the euro area to respond to the evolving crisis" but this was unhelpful. The European Financial Stabilisation Facility - set up to bail out struggling euro-area governments - needs to be bigger than the current €440bn (£385bn) but any major increase will be resisted strongly by Germany. Italian and Spanish bond yields rocketed, pushed higher by a lack of direction at the European Central Bank (ECB), which initially held back from including their debt in its asset purchase scheme.

In the first week of August, the markets woke up to the reality that the financial crisis, which they had thought was behind them, had merely been transferred from the private sector to public balance sheets. Where companies led by supposedly decisive CEOs used to be the big borrowers, the debt is now in the hands of governments run by infighting bureaucrats. In the wake of the S&P downgrade, China called for the US to get over its "debt addiction". As a holder of over $2trn of US debt, China, by far the country's largest creditor, has a right to make its voice heard. More worrying for the US was a suggestion at the end of the press release that China might stop or scale down its purchase of treasuries. The S&P downgrade is not world-changing in itself, but if China uses it as an excuse to alter its asset allocation or push for the replacement of the US dollar as the global reserve currency, China's reference to the US as "the world's sole superpower" would end up carrying some heavy irony.

The last time stocks hit the lows seen on the morning of 5 August was towards the end of August last year, when a combination of concerns over European peripherals (Ireland and Portugal specifically), Chinese inflation and poor US economic data hit investor confidence. The old trader adage "Sell in May and go away" (that is, hold only cash from May to October) would have been particularly useful this year. The rationale behind the maxim is sound: with investors on holiday, any moves in the market are affected by illiquidity. Where, in a fully functioning market, one would expect buyers and sellers to remain more or less balanced, in the summer months there is no one around to stand in the way of a rout. Last year's August slump was largely owing to this summer sluggishness.

The situation this time around is rather different. Because of the ongoing wrangle over the US debt ceiling, traders have been chained to their desks for the past few weeks. Many of those who did get away have been called back from their trips to the Côte d'Azur. Volumes have been heavy recently. On 5 August, US stocks experienced the highest levels of trading since the "flash crash" of May 2010, when computer-driven, high-frequency-trading hedge funds caused a correction of nearly 1,000 points in the Dow Jones index. Then, it was a technical fault in the market that caused the enormous trading volumes. This time, investors are scared and are selling out of all but the most defensive stocks.

Another sure sign of fear is the record volume of options trades that went through on 4 and 5 August as investors attempted to put in place hedges against further market turmoil. Panic once again stalks the Square Mile and traders are struggling to make sense of a complex picture. Usually, in times of market turmoil, gold rises in price; but when panic really sets in, the highest-quality assets suffer.

Some of the best trades of my career were made in the mad days between October 2008 and February 2009, when hedge funds were scrambling to raise money to meet margin calls (a requirement to post cash against the falling value of the fund's assets). Because it was impossible to sell anything but the most liquid assets (the "family silver", as it was described), those of us who did have cash to spend were able to pick up extraordinary bargains, with discounts of anywhere up to 70 per cent of face value. This time, gold is the "family silver". It is always useful to watch the gold price - it's a pretty good sign of where investors are on the greed/fear continuum - and falls in gold in times of panic suggest a capitulation of confidence. If you believe Warren Buffett's mantra of "Be fearful when others are greedy and be greedy when others are fearful", it's a good signal to start picking up bargains.

The big question for traders and portfolio managers is whether we have experienced a short, sharp shock and should be buying selectively or whether we are at the beginning of a new bear market, which would entail an overhauling of asset allocations. The picture looks bleak. If we are entering a double-dip recession, investment strategy will be a matter of quick thinking and guesswork - but there are obvious approaches traders could take and a few likely developments to keep in mind.

1 Equity exposures should be reduced for all but the most defensive stocks. Pharmaceutical companies, basic household and consumer goods should be held.
2 Currency investment will focus on a new breed of solvent nations with stable political and economic systems. The Singaporean dollar, the Norwegian krone and the Australian dollar will join the yen and the Swiss franc as the main safe-haven currencies.
3 We should not rule out dramatic inflation driven by governments attempting to inflate away the unsustainable levels of debt on their balance sheets. Already, there is talk of further quantitative easing in the US. Although everything points to a bubble in the gold price, it remains one of the few sure-fire ways of hedging against inflation.
4 Diversification is still key. A portfolio with a good spread of asset classes (including commodities, private equity and hedge funds) and geographies (with attention to Asia and South America) will - with luck - ride the storm.

Back to reality

As traders returned to their desks on Monday 8 August, it appeared that a weekend's contemplation had failed to lift the gloom. After following Asian stocks lower, the FTSE briefly rallied into positive territory. This window of optimism prompted Nick Clegg to claim that the ECB's buying of Italian and Spanish bonds was "calming the markets". He was wrong.

As Wall Street futures plunged, the FTSE gave up its modest gains and slumped towards the 5,000 level. Gold hit a record high. Crude oil dived. With unrest on the streets mirroring the turmoil in the markets, it is impossible to say how bad things will get from here.

Following Lehman's collapse, it felt as if all of the certainties had been stripped from the markets, as if there was nothing between us and financial Armageddon. It feels like that again. Without bold intervention from the governments at the heart of this crisis, traders will be looking back on the weekends of the 2008 crash with misty-eyed nostalgia. Back then, it felt like the end; now, we know that it was just the beginning.

Alex Preston is the author of "This Bleeding City" (Faber & Faber, £7.99).

This article first appeared in the 15 August 2011 issue of the New Statesman, The coming anarchy

Stuart Ramson for Lumos
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“It’s probably the thing of which I am most proud”: J K Rowling in conversation with Eddie Redmayne

The Harry Potter creator talks to the star of Fantastic Beasts and Where to Find Them about her work with the Lumos charity and the urgent need to end the institutionalisation of children.

EDDIE REDMAYNE: Good evening, good evening ladies and gentlemen.

I am so excited that you are excited! Welcome to Carnegie Hall and – thank you! – Welcome to a very what I hope is a very special evening. More than 25 years ago, an author put pen to paper and created one of the most extraordinary stories that the world has ever seen. Her astounding imagination continues to thrill us, it captivates us, it enthrals us, it moves us, and it leaves us wanting more. And tonight ladies and gentlemen. . . there will be more.

But ten years ago, an unimaginable image and an unthinkable story propelled her down a very different path – where the lives of millions of voiceless children would need saving. The author is J K Rowling, and the path is Lumos.

Tonight, we will cast a light on eight million hidden children around the world who desperately need our help. 

FILM – NARRATED BY J K ROWLING: A child’s life is so much more than the sum of its parts ‐ and the love a family brings holds everything together. From the very beginning, a child thrives on individual care and attention. A baby quickly forges a bond with loving parents – and because of this bond the brain develops with remarkable speed and complexity. Within a safe, secure and stimulating environment a child gets the most out of life; in play, education and friendship their personalities develop freely within safe bounds. But this picture of childhood can be a fragile one. Conflict and disaster can destroy the foundations of family life. When countries suffer the effects of extreme poverty, the bond which holds families together can easily be broken apart. In these circumstances, families can feel they have no choice but to place their child into a so-called orphanage, especially if the child is disabled and needs care the family cannot afford. Community support alternatives may not even exist. That orphanages do exist locally may convince desperate parents that there is no alternative. But once a child enters an orphanage, a very different picture of childhood can emerge. A child must now compete for the unique attention they crave. A lack of individual care harms babies and affects their infant brains at a critical stage. Any schooling they receive is no compensation for the parental love they are denied, and children can become cut off from the world. Ill-prepared for life outside they have very poor life chances, and they are much more likely to fall victim to abuse and crime once they leave an orphanage. And we know there are at least 8 million of these children worldwide. But there is hope ‐ and it lies at the very heart of the problem. 80 per cent of children in orphanages are not in fact orphans but have parents or extended families who could care for them, given some support. And by better channelling of existing donations, we can support these vulnerable children at home. By directing funds away from so-called orphanages we can transform systems of care; we can establish community‐based services and prevent these places from ever taking root. Community‐based services are a better investment for donors: they are more cost efficient than residential care and reward children and communities in the long run. Placing children into orphanages is a choice and not a necessity; it is preventable and reversible. And by giving communities options in how they support families, we can change the lives of millions of children and give them strong beginnings ‐ and the futures they deserve.

ER: So now to hear more about Lumos and its life-changing work, please welcome to the stage its founder. Ladies and gentlemen, the extraordinary J K Rowling.

JKR: Thank you, thank you very much.

ER: So here we are!

JKR: Here we are!

ER: This is a big deal. We’re playing Carnegie Hall!

JKR: We are, yes. It’s actually my second time!

ER: Really? Alright, so in a short while we get to show these people our little movie.

JKR: Yeah, which is exciting and a little bit terrifying.

ER: And we will get onto talking about that in a little bit. But first, the reason we’re all here. So we’ve just seen this film – this is clearly a massive humanitarian issue, and a gigantic undertaking. I wondered: why this issue? Why is it so close to your heart?

JKR: Well, I think Eddie said it really well in his introduction – truth is that I saw a newspaper story about a very small boy, he was seven years old and he was effectively being kept in a cage. And I was pregnant at the time and I saw this image in the newspaper, and it was such a shocking image of this child – holding onto wire and screaming – that I went to turn the page. I went to turn the page because it was painful to look at, and I felt very ashamed. As I went to the page, I thought: No, no, you have to read the story, and if it’s as bad as it looks, you gotta do something about it. So I read the story, and it was even worse than it looked.

So to cut a very long story short, I pulled out the news story – which was all about an institution in the Czech Republic where very young children were being kept in appalling conditions. I went home the next day, Monday, [and] I started to write letters to anyone I could think of – MPs, and MEPs, and the president of the Czech Republic. I wrote to everyone I could think of, and that led me to connecting with experts in this field, and the creation of Lumos.

ER: And so there are eight million children living in orphanages worldwide –

JKR: That we know that we know of! See, I think what’s staggering with. . . what was amazing to me when I first began finding out about this these issues, you think how could eight million children be going through this and we don’t know? But a very small amount of thought shows you they are – as you just said – so voiceless. They are literally hidden from sight. So in fact eight million may be a conservative estimate – there may be more children who have been taken from families that we don’t know about, because record-keeping tends to be poor, which is one of the problems.

ER: And they are institutions that we are saying are harmful to children – I suppose, I imagine, not everyone agrees?

JKR: Absolutely so it is completely understandable that we – and by ‘we’ I mean wealthy Westerners – we may have an idea that institutions are kind. Kind in that otherwise perhaps the child will be on the street, or the child is alone. That’s completely understandable. We tend to have that image in our minds from movies, like Annie, that orphanages can be kind of fun! Actually, that’s not true – even the well-run ones are proven, as we saw in that short film, to do often irreparable harm. You will know, because he has – you have a baby now, who is five months old?

ER: Yup.

JKR: And you will know, as I know as all of us who have anything to do with small children know: that they are hard-wired to demand love. They just come out looking for it, because that’s what they need for brain development. And as was shown in this movie, we know that children who are raised in institutions suffer developmental delays, they tend to be physically stunted, they normally have psychological trauma… it is just not what nature intended for children to be herded together, and not given individual love and care.

ER: And are there sort of studies and statistics which support [this]?

JKR: Absolutely, so I’m not just saying this – plucking this out of the air to tell you. We have 80 years of research now that shows very, very clearly – all the research agrees – that this is very harmful. And in fact Lumos works with scientists in the field who can show you brain scans, showing the difference between a child that’s come from an institution and a child has been raised in a family.

As the movie showed, one large recent study shows that children who come out of institutions were six times more likely to have been abused;

10 times more likely to enter prostitution; 40 times more likely to have a criminal record.

And they were 500 times more likely to kill themselves. So you see we do have this enormous bank of research telling us that we are allowing or even inadvertently causing children to be harmed.

ER: For me, one of the complicated things get my head round – and, I suppose, for people in developed countries like the US or the UK in which institutionalisation is a thing of the past – one of the things we struggle with is there’s this sort of disconnect in terms of how we view orphanages.

JKR: I completely agree. I think a small amount of thought shows us if you imagine what would happen – God forbid – were a terrible natural disaster to hit New York tonight, everyone I think would immediately think “Well, the important thing is I keep my loved ones close to me, we stay together and we get the support we need to rebuild our business, find ourselves a home”… When we put ourselves and our families in that in that mentally in that position we understand. However, what’s happening across the developed world is disaster hits and families are immediately pulled apart: “we’ll take those children from you.” Now, imagine that, in the wake of the disaster, people come to you and say: “that child will get fed only if you give me that child.” And we keep propping up the system, and it’s causing a huge amount of damage.

ER: And so is that why families are being torn apart? Why do parents give them up?

JKR: Right, exactly – for many people, that’s the key question. So when I tell people [that] 80 per cent of these children have parents, then an understandable reaction is “what loving parent could give up their child to one of these places?” But we know that there are three main drivers into institutions. The biggest one, the overwhelming one, is poverty.

So parents who make themselves literally be starving are told “if you want to feed that child, we will take it to the institution – the child will get food in the institution.” So they literally believe “that’s how my child will be fed and survive – I’ll have to give the child.” The other one is disability. We find in the developed world, and certainly this was the case in Eastern Europe, where we’re doing a lot of work, children with disabilities were not integrated. And so parents again were told “if you want medical assistance for a disabled child, or if you want that child educated they have to go into the institution.”

And then the third driver is natural disaster, and this is where a very nasty aspect of institutionalisation comes in. It is often the case in the developed world, the so-called orphanages are run as businesses, and that effectively children are trafficked for profit because we Westerners are generous and we can we give a lot of money to these orphanages. And unfortunately there are very unscrupulous people, who in the wake of disasters use it as an opportunity to get children and corral children as a magnet for foreign money, rather than putting the money into systems of care that would keep families together. So since 2010, there has been a 700 per cent increase in children in institutions in Haiti. 

ER: So, for me. . . what’s the solution? How does one go about it?

JKR: Obviously this is this is a massive issue, a massive issue. And, as you would imagine, the solution is complex but – I bring you hope! This is an entirely solvable issue. This is entirely solvable, and we know how to do it. Doesn’t mean it’s easy – but we know how to do it. So it’s a two-part problem: first of all we have these children, some of them living in truly appalling conditions, whom we need to rescue.

The other part of the issue is we need to stop children going into those institutions in the first place, ever again. Lumos’ ambition – and we believe it’s achievable – is that by 2050 we will have ended institutionalisation globally. Now, that’s going to be a huge amount of work, clearly, but a lot of us are really up for that. So, first thing is we need to put into place different systems of care, and some very good news is institutions are very, very, expensive to run. And if we just redirected the funds that are being pumped into institutions, that alone would enable better systems of care to be set up.

But you also need a lot of expertise, and what we do with Lumos is, we work with people in country who are already trying to change these systems. So that’s the point I always really like to get across, we are not moving into countries and saying: “let us show you how it’s done.” We are walking into countries because in all of these countries there are experts, who know the system’s wrong, but they don’t have the money and they don’t have the clout, and they aren’t connected with the kind of people who can help them change systems. We can go in and help them do, that so that’s what we do. We go in and we try and affect the change.

We also do things like – I mean, we’ve provided urgent medical assistance to children we’ve found in very, very bad situations and so on. So it’s multi-layered, and then the other thing we do is advocacy, so we work with places like the UN and the EU to change policy, to stop this being the default position when disasters happen.

ER: I think I read that every year, particularly in this country [the US], millions of dollars are being given to orphanages.

JKR: That’s right. I have these notes because I want to get the figures right – because normally I just make it up out of my head, like people say “how many house elves are in the Hogwarts kitchen?” and I just [gestures]. But this is really important – I’m not saying house elves aren’t important, they clearly have been massive in my life, they mean a lot to a lot of people. . .

But I want to get this right because this is this important. So, this is an incredible figure: this is how much Americans give to charity annually – how awesome are Americans? – The answer is $375bn. So I mean that is phenomenal, that’s phenomenal and just warms ones heart to think about the generosity. Now, that money was given with the absolute best possible intentions. There’s not one person here tonight, I know, of any age, that does not want to help a child in trouble. It’s a human instinct that we all have.

We know that that money drove a lot of children into orphanages who probably didn’t need to be – well, no child needs to be in an orphanage. But we know that it created a drive-in. And, so what I would like, even if you never give us another penny – I’m so grateful for what you have given us tonight, we will always be able to use money very effectively because these children have very complex needs.

But even if you never give us another penny, if you just walk out of here tonight and explain to people that donating to orphanages or volunteering and orphanages is sometimes propping up some very corrupt people making a lot of money, and if you give your money to community-based services you can actually help ten times as many children. Just checking my notes – ten times as many children.

ER: You mentioned Haiti – that is somewhere that is obviously in our minds of the moment.

JKR: It is, hugely in our minds. In my mind a lot at the moment because, we know and I have more figures here – these are new figures to me, because obviously there’s recently been an absolute catastrophe there. So we now know that there are 30,000 children institutionalised, and the same statistic I keep quoting still applies: the overwhelming majority of those children have at least one parent, and these are families whose livelihoods have been swept away, these are families who were so desperate that they thought that was the only way they were going to keep that child alive. Which is an absolutely heart-breaking thing to me and I know it will be to you also.

There is a lot of corruption in Haiti, and we know that there are people who are called child finders – not childminders – these child finders are out there persuading parents to give up their children to orphanages, and making lots of promises to them about what they can do for that child in terms of protection and care. And those children are not receiving protection and care – rather the reverse.

We know that a lot of child trafficking is going on, and we also know that for each child in an orphanage in Haiti, currently each child is attracting six thousand dollars’ worth of foreign aid, and that’s why it is becoming a business. So people with the best possible intentions are giving money, and I think they might be horrified to see what’s going on. So what I’m saying to you is, for God’s sake don’t stop giving money, but give it right. Give it to NGOs that are working to give people back livelihoods and to support communities, not to institutions.

ER: And Hurricane Matthew has exacerbated that…

JKR: Hurricane Matthew was, as we all know, an absolute nightmare: half a million people lost their livelihoods, we have 900 dead, and it will – unless we intervene in the correct way – continue to prop up this very damaging system. And I will say this because I would like you all to know, that I put my money where my mouth is: I gave a million pounds last week to Haiti to support community-based services. And I’m not saying it for that reason – I kind of cringe slightly as I even say that – because I’m not saying it for that reason. I’m saying that I’m not asking anyone to give where I’m not already giving, but Haiti is a particular catastrophe and I wanted to give extra funds to Haiti right now through Lumos, because Lumos is on the ground right now affecting this kind of change, and really looking out for those children in those institutions.

ER: And recently Bonnie Wright and Evanna Lynch – so Ginny Weasley and Luna Lovegood from the Potter films – who we love! And I think Bonnie is here this evening – but they are two incredibly dedicated Lumos ambassadors, who visited Haiti, and they not only saw the horrific conditions but also they saw the solution that you’ve been talking about Jo and we actually have some footage from the trip here:

FILM – NARRATED BY BONNIE WRIGHT AND EVANNA LYNCH: “Hi, my name is Bonnie Wright and I’m an actress and director. You may know may know me as Ginny Weasley from the Harry Potter films. But today I am here in Haiti with Evanna Lynch, who you may know as Luna Lovegood. We decided to come to Haiti because we’re concerned about the 30 thousand children living here in orphanages instead of at home with their families. 80 percent of these children have families who would care for them but cannot. I was incredibly shocked and upset to find the conditions at the first orphanage we visited. I’ve heard so much about the work that Lumos was doing and from some of the workers here about what these institutions were like, but I think out of this first visit just highlighted how incredibly important Lumos’ work is here in Haiti. The most important thing that I took away from today is that children really need to grow up in families.”

“Without family and without love, children can’t be children. The most important thing as a child is to be with your family, and you have to do everything you can to keep that family unit in place.”

ER: Those are pretty profoundly powerful images.

JKR: They are, they are but you know… we’re obviously doing a lot of work in Latin America now, it’s an area that does have a problem with institutionalisation. But we are very hopeful at Lumos that we could reach a tipping point in five years or so, where we can we can change policy. We are very hopeful that by 2035 – if we can get the funds – we will be able to stop institutionalisation in Latin America. We believe that.

ER: So it’s solvable?

JKR: It is solvable. It sounds overwhelming when you think of that number of children, and the complexity – I’m not denying the solutions are complex. But Lumos is working with absolute experts in this field. They know what they’re doing, they know how to make it work, and what they need are the funds and the support. And the last thing I would say – particularly to young people in the audience today – I would reiterate: we need to change minds.

We need to change minds, because while people are putting money into these orphanages and while people are volunteering in orphanages, a lot of corruption flourishes around those institutions. There is a sense that we are, as ever with the best intentions, propping up something that’s very damaging. Those children should be with their families, and if they can’t be with families, foster care, or adoption, or supported living in small family-style units are all proven to be the best possible alternatives.

ER: What can we do? Tell us what we can do!

JKR: I think its two-part as I say so number one, I am going to firstly say I could not be more grateful all of you being here tonight. You’ve already done the most enormous amount for us to raise money for us and thank you, thank you. So fifty percent of what you can do: if you want to fundraise for us, I will be forever in your debt.

The other half though as I say is, if everyone who is here tonight walked out of here and said: “I get the issue! I know that institutionalisation is wrong, and in future when I donate, when I hear a friend donating, and saying they want to give some money away at Christmas, I will say “not the orphanages.”” But look, if you want to give it to a child in the developing world, look at community-based services. We’re not the only NGO working in the field, we are one of several, so do a little bit of research and make sure that you are supporting families to stay together.

ER: We will spread the word, we will spread the word. That is our job, to spread the word. And I’ve got to say, having known so little about it before, it’s an extraordinary thing and it’s a complicated thing, but as you say solvable. And you must be incredibly proud of the work that Lumos are doing.

JKR: I am – it’s probably the thing of which I am most proud.

This conversation took place on 12 November 2016 at Carnegie Hall, New York City.

This December, the New Statesman is joining with Lumos to raise money to help institutionalised children in Haiti return to family life. In the wake of Hurricane Matthew, funds are needed to help those who have become separated from their families. Please consider pledging your support at bit.ly/lumosns

Thanks to Lumos’s 100 per cent pledge, every penny of your donation goes straight to the programme. For more information, see: wearelumos.org