Five of the Best

The top five comment pieces from today's papers

In the Washington Post, Fareed Zakaria says that Obama should reject General McChrystal's demand for a troop surge in Afghanistan:

Why has security gotten worse? Largely because Hamid Karzai's government is ineffective and corrupt and has alienated large numbers of Pashtuns, who have migrated to the Taliban. It is not clear that this problem can be solved by force, even using a smart counterinsurgency strategy. In fact, more troops injected into the current climate could provoke an anti-government or nationalist backlash.

On the day the London Evening Standard goes free, the Times's Libby Purves argues that the days of free online content are over:

It's been fun: like a jammed fruit machine spewing free tokens or a whisky-galore shipwreck. But it's got to stop. Content -- whether music, films, pictures, news or prose -- can't be free and flourish. The music and movie industries are fighting: journalism, after the ego trip of gaining millions of online readers, is following. It has to. There is no alternative.

The Guardian's Jackie Ashley writes that the quality of prospective MPs gives cause for optimism as the expenses scandal returns:

[T]his is the good news: that parliamentary politics really is being cleaned up. If MPs behave badly, out they will go. Most ordinary parliamentarians work very hard, and for less money than they could get elsewhere. There are rotten apples and overripe plums; but there are some good ones too. You can't improve parliament without encouraging a fresh wave of keen, principled and determined outsiders to breach its walls. Now this is going to happen.

The New York Times's Paul Krugman warns that an obsessive fear of inflation threatens to prevent a full economic recovery:

What's even more extraordinary, however, is the idea that raising rates would make sense any time soon. After all, the unemployment rate is a horrifying 9.8 per cent and still rising, while inflation is running well below the Fed's long-term target. This suggests that the Fed should be in no hurry to tighten -- in fact, standard policy rules of thumb suggest that interest rates should be left on hold for the next two years or more, or until the unemployment rate has fallen to around 7 per cent.

In the Independent, Paul Collier says that the economic crisis has led to a damaging flight of finance from Africa:

Why does this matter? It matters because Africa desperately needs more investment. For decades Africa has been investing only around 20 per cent of national income, whereas Asia is investing around 40 per cent. At these rates, almost regardless of returns, Africa will continue to fall further behind the emerging-market economies. Yet Africa simply cannot afford to finance a substantial increase in investment from its internal resources. A domestically financed increase in investment could only come at the expense of consumption.

 

George Eaton is political editor of the New Statesman.

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.