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Mehdi Hasan: Time to downgrade the downgraders

Standard and Poor's decision to downgrade the United States's credit rating is outrageous and undemocratic.

Prior to September 2008 and the near-meltdown of the global financial system, who had ever heard of the credit rating agencies? Who could name the so-called big three (Standard and Poor's, Moody's and Fitch), which exerted such huge power and influence over the global economy?

That's all changed now. The decision by Standard and Poor's (S&P) to downgrade the United States's creditworthiness, from top-notch AAA status to AA+, dominates today's news headlines and may finally force ordinary people across the world -- and, in particular, in the US -- to sit up and take notice of these unelected, unregulated, politicised private firms, with horrific track records and excessive power over democratic governments.

As I wrote in today's Guardian (prior to the downgrade decision by S&P, I hasten to add!):

In recent weeks, we have witnessed elected leaders in the world's most powerful nation dancing to the tune of David Beers. He's the moustachioed, chain-smoking head of sovereign credit ratings for S&P, the largest and arguably most influential member of the big three.

"You may have never heard of David Beers but every finance minister in the world knows of him," noted Reuters in a recent - and rare - profile of the analyst, who doesn't even have a Wikipedia page. It is Beers who recently downgraded Greece's credit rating to near-junk status, thereby making the EU's proposed rescue plan much more difficult. And it is Beers who now demands the US reduce its long-term budget deficit by $4tn - rather than the congressionally approved $2.4tn - and threatens to impose the first-ever US government downgrade, from AAA to AA. It isn't just the Tea Party holding the US to ransom.

Three questions come to mind. First, who elected David Beers or his Moody's and Fitch counterparts? By what right do they decide on the fate of governments, economies, debts and peoples?

Second, why should we care what Beers thinks? What credibility do he and his ilk have? The bipartisan Financial Crisis Inquiry Commission in the US has described the big three as "key enablers of the financial meltdown". The commission's January 2011 report concluded: "The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly ... Their ratings helped the market soar and their downgrades through 2007 and 2008 wreaked havoc across markets and firms."

Third, would a downgrade in the US's credit rating really be that apocalyptic? Or could the world's biggest economy survive such a blow? Politicians and, in particular, finance ministers have fetishised the triple-A rating, and conventional wisdom says that a country's interest rates will rise sharply on a downgrade. But a study by JPMorgan Chase last week showed only a slight increase in lending rates for countries that lost their AAA rating. In May 1998, S&P marked down Belgium, Italy and Spain from AAA to AA, but 10-year rates barely moved in response. In some cases, rates fall. In Ireland, for instance, 10-year rates fell 0.18 percentage points a week after S&P took away the republic's triple-A rating in March 2009.

You can read the whole piece here.

You can read Reuter's fascinating profile of David Beers here.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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Calum Kerr on Governing the Digital Economy

With the publication of the UK Digital Strategy we’ve seen another instalment in the UK Government’s ongoing effort to emphasise its digital credentials.

As the SNP’s Digital Spokesperson, there are moves here that are clearly welcome, especially in the area of skills and a recognition of the need for large scale investment in fibre infrastructure.

But for a government that wants Britain to become the “leading country for people to use digital” it should be doing far more to lead on the field that underpins so much of a prosperous digital economy: personal data.

If you want a picture of how government should not approach personal data, just look at the Concentrix scandal.

Last year my constituency office, like countless others across the country, was inundated by cases from distressed Tax Credit claimants, who found their payments had been stopped for spurious reasons.

This scandal had its roots in the UK’s current patchwork approach to personal data. As a private contractor, Concentrix had bought data on a commercial basis and then used it to try and find undeclared partners living with claimants.

In one particularly absurd case, a woman who lived in housing provided by the Joseph Rowntree Foundation had to resort to using a foodbank during the appeals process in order to prove that she did not live with Joseph Rowntree: the Quaker philanthropist who died in 1925.

In total some 45,000 claimants were affected and 86 per cent of the resulting appeals saw the initial decision overturned.

This shows just how badly things can go wrong if the right regulatory regimes are not in place.

In part this problem is a structural one. Just as the corporate world has elevated IT to board level and is beginning to re-configure the interface between digital skills and the wider workforce, government needs to emulate practices that put technology and innovation right at the heart of the operation.

To fully leverage the benefits of tech in government and to get a world-class data regime in place, we need to establish a set of foundational values about data rights and citizenship.

Sitting on the committee of the Digital Economy Bill, I couldn’t help but notice how the elements relating to data sharing, including with private companies, were rushed through.

The lack of informed consent within the Bill will almost certainly have to be looked at again as the Government moves towards implementing the EU’s General Data Protection Regulation.

This is an example of why we need democratic oversight and an open conversation, starting from first principles, about how a citizen’s data can be accessed.

Personally, I’d like Scotland and the UK to follow the example of the Republic of Estonia, by placing transparency and the rights of the citizen at the heart of the matter, so that anyone can access the data the government holds on them with ease.

This contrasts with the mentality exposed by the Concentrix scandal: all too often people who come into contact with the state are treated as service users or customers, rather than as citizens.

This paternalistic approach needs to change.  As we begin to move towards the transformative implementation of the internet of things and 5G, trust will be paramount.

Once we have that foundation, we can start to grapple with some of the most pressing and fascinating questions that the information age presents.

We’ll need that trust if we want smart cities that make urban living sustainable using big data, if the potential of AI is to be truly tapped into and if the benefits of digital healthcare are really going to be maximised.

Clearly getting accepted ethical codes of practice in place is of immense significance, but there’s a whole lot more that government could be doing to be proactive in this space.

Last month Denmark appointed the world’s first Digital Ambassador and I think there is a compelling case for an independent Department of Technology working across all government departments.

This kind of levelling-up really needs to be seen as a necessity, because one thing that we can all agree on is that that we’ve only just scratched the surface when it comes to developing the link between government and the data driven digital economy. 

In January, Hewlett Packard Enterprise and the New Statesman convened a discussion on this topic with parliamentarians from each of the three main political parties and other experts.  This article is one of a series from three of the MPs who took part, with an  introduction from James Johns of HPE, Labour MP, Angela Eagle’s view and Conservative MP, Matt Warman’s view

Calum Kerr is SNP Westminster Spokesperson for Digital