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Catastrophe averted?

The leaders of the rich countries went to Washington to save the world from sliding into deep recess

Vincent Cable

Shadow chancellor, Liberal Democrats

By the low standards of economic summitry, the G20 meeting rated quite high. There was a predictable, no doubt pre-written, communiqué, full of the usual banalities. And the meeting suffered from the absence of the world's most important politician, who hasn't yet taken up office. But, these necessary caveats aside, there were important achievements.

The first is that the meeting took place at all. The ludicrous pretence of the G8 (or G7) that the old western powers should set the global economic agenda has been punctured for good. On a purchasing power parity basis, China has the second-biggest economy in the world and India the fourth. It has been clear for some time that China is lender of last resort to the global system (by, in effect, underwriting US government paper) and the main source of global incremental demand (and commodity price inflation). The Chinese self-parody as the pupil sitting meekly at the feet of a dominant, but erring, master defies belief. It is obviously right that China, India and the other main non-G7 countries should be at the top table.

The second achievement was the clear realisation that unless governments hang together they will hang separately. Enough has been learned from interwar history for us to understand the follies of beggar-my-neighbour economics. Perhaps a warning shock was being sent across the bows of the incoming Obama administration not to reinvent the protectionist tariffs of the 1930s in a new guise, directed at China or Mexico in particular, or aiming to salvage the US auto industry through public subsidy. But this new-found concern for open markets has not yet communicated itself to EU or Indian or Chinese trade negotiators, who show no enthusiasm for lifting the block on trade liberalisation under the Doha round.

While trade policy is on the back burner, macroeconomic policy co-ordination is not. With a few exceptions - Germany notably - there is recognition of the need for aggressive monetary and fiscal policy and for large-scale intervention to recapitalise banks. These interventions can be and are being undertaken nationally. But governments acting in isolation attract critical attention from capital markets and currency speculators, as Gordon Brown is discovering. Structures like the G20 are the best safeguard against chaotic, unilateral action.

Will Hutton

Economic commentator

It was remarkable to gather so much economic and political power in one room to address a common agenda. That was the good news - along with commitments to co-ordinate fiscal expansion, to expand the lending power of the IMF and World Bank (Japan's $100bn loan to the IMF will increase the Fund's lending capacity by 40 per cent), to boost cross-border supervision, to tackle credit rating agencies, to reassess mad accounting rules and require member countries to attack the bonus culture in the financial services industry. A year ago such an agreement would have been inconceivable.

The bad news is that much of this is shutting the stable door after the horse has bolted. Four things have to be recognised: that the world has profound imbalances between high-saving, high-surplus areas in Asia and the Gulf and low-saving, structural deficit countries in the transatlantic economy (Germany excepted); that a system of floating exchange rates and private banks can no longer take the weight of recycling those savings; that unless the system is de-risked and the burden of adjustment is placed on deficit and surplus countries alike, the global system faces breakdown; and finally, that the business model used by the banks to recycle surpluses - securitisation and hedging in the $360trn global derivatives market - is broken.

In plain English, China must accept that its currency must appreciate; Britain and America, that they cannot run their economies on foreign savings; and all players that there has to be a system of semi-fixed exchange rates between the yen, the euro and the dollar.

One tough reality is that, for all their new economic weight, China, Brazil, Russia and India do not have fully convertible currencies - nor do they want to accept the discipline involved in having convertible currencies.

Ann Pettifor

Fellow, New Economics Foundation

Over the past decade, the Group of Eight leaders turned their exclusive annual meetings into jamborees. Rock concerts, protesters and celebrities added populist glitz. However, the real purpose of the meetings - international co-operation and co-ordination - was ducked. At last year's G8 Summit in Heiligendamm, Germany, George W Bush and Gordon Brown vetoed Angela Merkel's agenda item for co-operation over tighter international regulation and financial oversight of capital markets. That task, they argued then, could safely be delegated to "the invisible hand". Now that the fantastic, self-regulating machinery of free markets has proved grossly malfunctional, it is good to hear talk of enhanced co-operation and regulation.

But, in places, the joint statement issued by the 20 world leaders borders on the delusional. The phrase "We must . . . ensure . . . that a global crisis, such as this one, does not happen again" implies that they are avoiding the next war when they are still losing this one.

Even more questionable is the call for continued "economic growth". In a world of finite resources on a planet with limited capacity to absorb toxic emissions, and with bushfires encircling Los Angeles, we would have hoped that world leaders had some awareness of the threat of climate change and of the limits to economic growth. But no. The gravest threat to global security - our rapacious attitude to the earth's resources - is once again whipped up with talk of "market principles, open trade and economic growth".

Jesse Norman

Senior fellow at Policy Exchange

One might have thought the G20 summit a good moment for some straight talk from the Prime Minister. Instead, the political wind machine was cranked up to full blast. The summit would be a second Bretton Woods. Gordon Brown would forge a new global consensus on co-ordinated intervention to stimulate growth (while, of course, leading reforms to prevent the banking crisis from ever recurring). Luckily virtually none of this was true, or the summit would have been a hopeless failure. With fiscal measures already widely adopted, the G20 hardly needed Brown's leadership. No surprise that he returned empty-handed.

Labour has moved from despondency to a manic desperation to remain in office. The result is that the ever-fragile concept of truth in politics has wholly been cast aside. Thus the humiliating bank nationalisation has been dressed up as an act of far-seeing economic statesmanship. And a sensible warning from the shadow chancellor that current economic policy puts sterling at risk has been condemned for breaching an irrelevant semi-convention dating from the time of fixed exchange rates.

Alex Brummer

City editor, Daily Mail

There is a golden rule of international financial meetings. The larger the "G" number, in other words the more countries involved, the less likely it is that any worthwhile or binding decisions will be taken. So while it was wholly encouraging that the G20 summit brought a number of emerging market leaders to the top table of finance, including China, Brazil and Russia, there was never any real prospect of the event becoming the new Bretton Woods.

Furthermore, the summit took place in the final days of the lame duck administration of George Bush. Once it became clear Barack Obama was going nowhere near the confab, the event became even more of an irrelevance.

European leaders may like to blame Wall Street and Anglo-Saxon capitalism for the credit crunch and the recession now spreading through the Group of Seven like wildfire, but there is no hope of concerted international action without the new White House and Federal Reserve on board.

Almost all that was agreed could have been decided before the leaders left home. The commitment to reviving the Doha trade round is pure motherhood and apple pie. The prairie populists on Capitol Hill are unlikely to be enthusiastic.

At the core of the proposals was the commitment to use fiscal measures, tax cuts and public spending to kick-start global economies. But despite Gordon Brown's enthusiastic embrace of a new Keynesian big-spending approach - as advocated by Nobel prize-winner Paul Krugman - he neatly forgot to mention that such big-spending ways were only for those countries with a "policy framework conducive to fiscal sustainability". The UK with its ballooning budget deficit, which could hit £100bn or more next year, is clearly in no such position.

It is hard to fathom in what way the G20 was "historic", as the Prime Minister claimed in the Commons. There is little original in a bunch of old ideas designed to remove risk from the financial system and control executive pay. That is what regulators should have done before the banks ploughed into the iceberg.

James Buchan

Author and financial commentator

What is the Financial Stability Forum? What is "mitigating against pro-cyclicality in regulatory policy"? What, if anything, has the G20 summit in Washington on the weekend of the 15 November achieved?

Nothing very much, is the answer to all three questions. In the twilight of a discredited US administration, and with President-elect Barack Obama absent, the meeting was never likely to achieve a great deal or generate excitement in the US. Yet the final declaration, drafted with suspicious ease by the delegations on Saturday night, has something for everybody but not enough of anything to scare the financial horses.

Nicolas Sarkozy, the French president whose idea the whole thing was, gained some support for more institutional government of trade and finance, but no super-gendarme international of the type that has been directing financial traffic in the French imagination since the 17th century. As Jean-Pierre Robin wrote in the Figaro: "Those with fantasies of supranational supervision will need to change therapist." The US, jealous of its commercial sovereignty even when it is going about without its shirt, put paid to those Gallic dreams and also gained some platitudes about free trade.

The new commercial powers, not only Brazil, Russia, India and mainland China but also rich oil producers such as Saudi Arabia, received diplomatic recognition of their deep pockets. "The world's geopolitical structure has a new dimension," the Brazilian president, Luiz Inácio Lula da Silva, said. "There is no logic to making any political and economic decisions without the G20 members - developing countries must be part of the solution to the global financial crisis."

I suspect the winner is Gordon Brown. The next meeting will be held under his presidency in London in April. The Washington ragbag of proposals to reform or tinker with the current system, such as reminding us about the Financial Stability Form and mitigating against that regrettable pro-cyclicality in regulatory policy, appeals to his technical vanity and plays to his technical strengths.

Paul Mason

Economics editor, Newsnight

There was a sense in Washington, despite the throbbing engines and bulletproof glass, of powerlessness. The communiqué was stronger on the causes of the crisis than on co-ordinated solutions. Policymakers are right to stay focused on the near-term dangers: these are country-level debt default, the rising cost of borrowing for non-financial companies, rapid job losses and - via feedback - further destabilisation of the banking system. We are moving into the phase of fiscal stimulus but there are powerful technical arguments that say without "quantitative easing" - that is, printing money to stimulate demand - it doesn't work. The same people who told me it would come to recapitalisation, that the TARP (troubled assets relief programme) would not work, are now saying: nationalise the banks and print money.

Despite the urgency of the focus on near-term dangers, what was obvious at G20 was the lack of vision as to the future growth model of capitalism. The problem was seen as a failure of regulation; the solution a pretty weak brew of re-regulation that will get diluted even more as the lobbyists begin to have influence. But the problem is more fundamental: the growth model based on high debt instead of high wages has failed and will be hard to revive.

Peter Mandelson

Secretary of State for Business

We have been caught in a global whirlwind of extraordinary force.

It has brought with it a fear that has gripped the world economy and taken hold here at home. We are seeing it every day, with fear among consumers that is depressing demand; fear among banks that is inhibiting them from lending; fear among small- and medium-sized businesses that banks are just about to cut off their credit lines. The choice facing us and governments around the world is this: do we act decisively to counter and overcome this fear, or do we become paralysed by it and fail to act?

The government has already shown its willingness to take the bolder course as the first mover in setting about stabilising the banks. What is needed now is action to stimulate the demand essential for recovery. The UK economy, like economies in the rest of the world, needs a shot of adrenalin.

The Bank of England has already made a significant cut to interest rates. This monetary stimulus now needs to be matched by a fiscal stimulus. And because this is a global crisis this is best done if the benefit of the measures taken nationally is maximised by the same measures being taken around the world. That was the message from the international conference in Washington, as governments recognised the need to take the action necessary to stimulate their economies.

People will say, "But you are resorting to borrowing in order to deliver the stimulus that's needed." My answer to that is, what is the alternative? We certainly haven't heard one from the Conservatives.

David Cameron and George Osborne, trapped by their desire to oppose everything the government does, refuse to accept the scale of the challenge the world's economies now face and the prescribed international action. Their stance appears to be, if the rest of the world disagrees with us, it is because the rest of the world is wrong. The result is incoherence and an Opposition at sixes and sevens. One minute this is "do all it takes" and the next it is - as we heard this week - leave the recession to "take its course".

Sitting on our hands watching houses repossessed and businesses go to the wall is certainly not the approach being urged on me by people I have been speaking to up and down the country. They want their government to act to stimulate demand in the economy here and now. With all due prudence, that is what we are going to do.

Diane Coyle

Author and economist

The G20 meeting confirmed a robust and rapid response (by past standards) to recession, even in the US operating under a rump free-market administration. Policymakers around the world have been shaken to see the financial system at the brink of collapse - on their watch.

Yet it is difficult to predict how severe the recession will be. Bank lending to businesses and individuals is virtually frozen. In many (but not all) areas of the economy, activity has come to a halt. The last financial boom and bust, ending in 2001, had surprisingly little impact on jobs and growth, as the financial bubble had become increasingly untethered from anything real. Today's vicious circle of evaporating liquidity is much more serious, but lower interest rates and bigger government deficits will help. The underlying trends are easier to outline. Some challenges are clearly unaltered, such as climate change and our ageing society.

The technological opportunities are still there, too, in communications, the internet and biotechnology. Globalisation will be less driven by finance in future, but it will not be unwound. It would take a generation to turn back the clock on economic linkages, and the cultural impacts are permanent. In fact, the crisis has underlined our interdependence across national borders.

What has changed is the political economy of globalisation. In the triad of efficiency, fairness and freedom which dominates political choice in democracies, fairness will take priority in the years ahead, and the drive for ever greater productivity gains will retreat. The semi-nationalisation of the banks has started to shift the boundary between public and private domains; we will have to think more carefully about how to govern private choices that have big social spillovers. The G20 did not touch on this profound question of governance.

Iain Macwhirter

Political commentator

The G20 was largely a throat-clearing session and was never going to put in place the foundations of a new international financial system. Progress on the stalled Doha trade talks is encouraging but provides no guarantee that protectionism will not raise its head in the coming economic slump.

It is inevitable that countries faced with financial collapse will try to defend their economies by any means possible. Britain is already far down the road of "beggar my neighbour" economics by the "managed" devaluation of the pound, a crude attempt to boost UK industry by lowering the prices of British exports and creating a de facto tariff wall around imports from abroad. It won't work because Britain does not make much of anything any more except debt, and the world has plenty of that already.

But the collapse of the pound will seriously damage what is left of UK financial services. No one in their right minds would put money into the UK economy now, with the property market collapsing, UK banks insolvent and government borrowing likely to reach £100bn in the next 18 months.

Gordon Brown seems to believe that sterling is like the dollar, and that people will buy our dud pounds whatever the likely losses. However, as we are discovering, sterling is not a reserve currency and unlike the US we cannot force other countries to pay our debts. The future for our battered island is likely to be hyperinflation punctuated by appeals to the International Monetary Fund for emergency aid. Forget about spending our way out of recession - the UK government simply lacks the resources to fund the huge borrowing that would be required. Something will have to give. Brown will have cause to regret being so beastly to the Icelanders.

Richard Reeves

Director of Demos

James Carville, the hardened political aide to Bill Clinton, said that if he was reincarnated he'd want to come back as the bond market: "You can intimidate anybody." Right now it seems odd to think of any financial markets threatening anybody. But it is one of the ironies of the current economic situation that the capital markets still have some serious muscle.

Western governments, faced with recession, need to throw a lot of money at their ailing financial institutions - money that can be raised only by selling Treasury debt, mostly to the capital-rich investors of the Far East. For Gordon Brown, this is likely to become a more difficult sell, as Prudence is given the push and the pound takes a nosedive. Even national exchequers invite sceptical scrutiny in this new, nervous world.

The financial crisis is at heart a loss of faith. The word credit derives from the Latin credo - "I believe". When the Titanic of the financial world - in the shape of Lehman Brothers - was allowed to sink, the bonds of trust stretching around the world were snapped. In an instant, everyone stopped believing in each other.

A number of sensible measures should be on the agenda when the G20 reconvenes next year, including legislation to ensure bonuses in financial services are paid on the basis of five-year performance; new "pro-cyclical" provisioning rules requiring finance houses to increase their store of capital in economic upturns; and tougher, independent regulation of the rating agencies whose doe-eyed assessments of banks built on a mountain of paper helped get us in this mess.

There is, however, no quick technical fix for such a dramatic loss of confidence. Trust can be lost in the blink of a market-trader's eye - but it will take years to rebuild.

TEN THINGS THEY ACHIEVED

  • 1 Created a road map aimed at stabilising the world economy and overhauling the banking system with targets for the end of March 2009
  • 2 Advocated Keynesian big-spending
    “fiscal stimulus”
  • 3 Expanded from a small club making world decisions to recognise the importance of the economies of Brazil, Russia, India and China
  • 4 Agreed to reform international finance institutions, including better transparency and supervision of credit ratings agencies
  • 5 Agreed that the Financial Stability Forum should include emerging economies
  • 6 Banks and hedge funds to hold increased levels of capital and cash
  • 7 Recommended “supervisory colleges” for all major cross-border financial institutions
  • 8 Return to the Doha round – trade ministers to meet in Geneva next month
  • 9 Instructed G20 finance ministers to draw up plans and timeline
  • 10 Agreed to meet again, in London next April

. . . AND FIVE THEY DIDN’T

  • 1 Agree a future growth model for capitalism. Instead they reconfirmed their “shared belief in market principles”
  • 2 Agree detailed plans for regulatory reforms of banking
  • 3 Establish a plan of action for achieving the already endangered Millennium Development Goals
  • 4 Set up an international supervisory body with sufficient power to control global markets
  • 5 Halt the run on sterling, which fell sharply against the euro and dollar

Alyssa McDonald

This article first appeared in the 24 November 2008 issue of the New Statesman, How to get us out of this mess

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“I felt so frantic I couldn’t see my screen”: why aren’t we taking mental health sick days?

Some employees with mental health problems fake reasons for taking days off, or struggle in regardless. What should companies be doing differently?

“I would go to the loo and just cry my eyes out. And sometimes colleagues could hear me. Then I would just go back to my desk as if nothing had happened. And, of course, no one would say anything because I would hide it as well as I could.”

How many times have you heard sobbing through a work toilet door – or been the person in the cubicle?

Jaabir Ramlugon is a 31-year-old living in north London. He worked in IT for four years, and began having to take time off for depressive episodes after starting at his company in 2012. He was eventually diagnosed with borderline personality disorder last January.

At first, he would not tell his employers or colleagues why he was taking time off.

“I was at the point where I was in tears going to work on the train, and in tears coming back,” he recalls. “Some days, I just felt such a feeling of dread about going into work that I just physically couldn’t get up ... I wouldn’t mention my mental health; I would just say that my asthma was flaring up initially.”

It wasn’t until Ramlugon was signed off for a couple of months after a suicide attempt that he told his company what he was going through. Before that, a “culture of presenteeism” at his work – and his feeling that he was “bunking off” because there was “nothing physically wrong” – made him reluctant to tell the truth about his condition.

“I already felt pretty low in my self-esteem; the way they treated me amplified that”

Eventually, he was dismissed by his company via a letter describing him as a “huge burden” and accusing him of “affecting” its business. He was given a dismissal package, but feels an alternative role or working hours – a plan for a gradual return to work – would have been more supportive.

“I already felt pretty low in my self-esteem. The way they treated me definitely amplified that, especially with the language that they used. The letter was quite nasty because it talked about me being a huge burden to the company.”

Ramlugon is not alone. Over three in ten employees say they have experienced mental health problems while in employment, according to the Chartered Institute of Personnel and Development. Under half (43 per cent) disclose their problem to their employer, and under half (46 per cent) say their organisation supports staff with mental health problems well.

I’ve spoken to a number of employees in different workplaces who have had varying experiences of suffering from mental ill health at work.

***

Taking mental health days off sick hit the headlines after an encouraging message from a CEO to his employee went viral. Madalyn Parker, a web developer, informed her colleagues in an out-of-office message that she would be taking “today and tomorrow to focus on my mental health – hopefully I’ll be back next week refreshed and back to 100 per cent”.

Her boss Ben Congleton’s reply, which was shared tens of thousands of times, personally thanked her – saying it’s “an example to us all” to “cut through the stigma so we can bring our whole selves to work”.

“Thank you for sending emails like this,” he wrote. “Every time you do, I use it as a reminder of the importance of using sick days for mental health – I can’t believe this is not standard practice at all organisations.”


Congleton went on to to write an article entitled “It’s 2017 and Mental Health is still an issue in the workplace”, arguing that organisations need to catch up:

“It’s 2017. We are in a knowledge economy. Our jobs require us to execute at peak mental performance. When an athlete is injured they sit on the bench and recover. Let’s get rid of the idea that somehow the brain is different.”

But not all companies are as understanding.

In an investigation published last week, Channel 5 News found that the number of police officers taking sick days for poor mental health has doubled in six years. “When I did disclose that I was unwell, I had some dreadful experiences,” one retired detective constable said in the report. “On one occasion, I was told, ‘When you’re feeling down, just think of your daughters’. My colleagues were brilliant; the force was not.”

“One day I felt so frantic I couldn’t see my screen”

One twenty-something who works at a newspaper echoes this frustration at the lack of support from the top. “There is absolutely no mental health provision here,” they tell me. “HR are worse than useless. It all depends on your personal relationships with colleagues.”

“I was friends with my boss so I felt I could tell him,” they add. “I took a day off because of anxiety and explained what it was to my boss afterwards. But that wouldn’t be my blanket approach to it – I don’t think I’d tell my new boss [at the same company], for instance. I have definitely been to work feeling awful because if I didn’t, it wouldn’t get done.”

Presenteeism is a rising problem in the UK. Last year, British workers took an average of 4.3 days off work due to illness – the lowest number since records began. I hear from many interviewees that they feel guilty taking a day off for a physical illness, which makes it much harder to take a mental health day off.

“I felt a definite pressure to be always keen as a young high-flyer and there were a lot of big personalities and a lot of bitchiness about colleagues,” one woman in her twenties who works in media tells me. “We were only a small team and my colleague was always being reprimanded for being workshy and late, so I didn’t want to drag the side down.”

Diagnosed with borderline personality disorder, which was then changed to anxiety and depression, she didn’t tell her work about her illness. “Sometimes I struggled to go to work when I was really sick. And my performance was fine. I remember constantly sitting there sort of eyeballing everyone in mild amusement that I was hiding in plain sight. This was, at the time, vaguely funny for me. Not much else was.

“One day I just felt so frantic I couldn’t see my screen so I locked myself in the bathroom for a bit then went home, telling everyone I had a stomach bug so had to miss half the day,” she tells me. “I didn’t go in the next day either and concocted some elaborate story when I came back.”

Although she has had treatment and moved jobs successfully since, she has never told her work the real reason for her time off.

“In a small company you don’t have a confidential person to turn to; everyone knows everyone”

“We want employers to treat physical and mental health problems as equally valid reasons for time off sick,” says Emma Mamo, head of workplace wellbeing at the mental health charity Mind. “Staff who need to take time off work because of stress and depression should be treated the same as those who take days off for physical health problems, such as back or neck pain.”

She says that categorising a day off as a “mental health sick day” is unhelpful, because it could “undermine the severity and impact a mental health problem can have on someone’s day-to-day activities, and creates an artificial separation between mental and physical health.”

Instead, employers should take advice from charities like Mind on how to make the mental health of their employees an organisational priority. They can offer workplace initiatives like Employee Assistance Programmes (which help staff with personal and work-related problems affecting their wellbeing), flexible working hours, and clear and supportive line management.

“I returned to work gradually, under the guidance of my head of department, doctors and HR,” one journalist from Hertfordshire, who had to take three months off for her second anorexia inpatient admission, tells me. “I was immensely lucky in that my line manager, head of department and HR department were extremely understanding and told me to take as much time as I needed.”

“They didnt make me feel embarrassed or ashamed – such feelings came from myself”

“They knew that mental health – along with my anorexia I had severe depression – was the real reason I was off work ... I felt that my workplace handled my case in an exemplary manner. It was organised and professional and I wasn’t made to feel embarrassed or ashamed from them – such feelings came from myself.”

But she still at times felt “flaky”, “pathetic” and “inefficient”, despite her organisation’s good attitude. Indeed, many I speak to say general attitudes have to change in order for people to feel comfortable about disclosing conditions to even the closest friends and family, let alone a boss.

“There are levels of pride,” says one man in his thirties who hid his addiction while at work. “You know you’re a mess, but society dictates you should be functioning.” He says this makes it hard to have “the mental courage” to broach this with your employer. “Especially in a small company – you don’t have a confidential person to turn to. Everyone knows everyone.”

“But you can’t expect companies to deal with it properly when it’s dealt with so poorly in society as it is,” he adds. “It’s massively stigmatised, so of course it’s going to be within companies as well. I think there has to be a lot more done generally to make it not seem like it’s such a big personal failing to become mentally ill. Companies need direction; it’s not an easy thing to deal with.”

Until we live in a society where it feels as natural taking a day off for feeling mentally unwell as it does for the flu, companies will have to step up. It is, after all, in their interest to have their staff performing well. When around one in four people in Britain experience mental ill health each year, it’s not a problem they can afford to ignore.

If your manager doesn’t create the space for you to be able to talk about wellbeing, it can be more difficult to start this dialogue. It depends on the relationship you have with your manager, but if you have a good relationship and trust them, then you could meet them one-to-one to discuss what’s going on.

Having someone from HR present will make the meeting more formal, and normally wouldn’t be necessary in the first instance. But if you didn’t get anywhere with the first meeting then it might be a sensible next step.

If you still feel as though you’re not getting the support you need, contact Acas or Mind's legal line on 0300 466 6463.

Anoosh Chakelian is senior writer at the New Statesman.

This article first appeared in the 24 November 2008 issue of the New Statesman, How to get us out of this mess