Thursday 7 July 2016

Does technology only have to serve the rich?

The divisions in this country have been bought into sharp focus since the recent referendum. Some people in the winning side are behaving as if they have been given a mandate to take us back to the days of the black shirts.

There is less goodwill towards people who have settled here despite their contribution to the economy. Has compassion for the third world poor diminished too?

And yet the advances in science and technology means that much more can be done to help.

Apparently, the Earth is hit by 430 quintillion Joules of energy from the Sun every single hour: That’s enough to meet the World’s energy needs for a year. Furthermore solar energy has never been cheaper at thirty cents per watt. Installations of solar panels are growing exponentially and battery technology has improved dramatically too.

That is why countries like China and India are investing so heavily as are companies like Tesla, Apple and Google. Low-level technology such as spray-on can transform windows and glass in buildings into solar panels. In Britain, schemes already exist to convert pedestrian footfalls into energy to light up buildings.

Sustainable energy that doesn’t need huge infrastructures and national grids can transform poor people’s lives. Better standards of living in their own Countries can mean fewer migrants, less carbon emissions and global warming.

Schumacher was right when he wrote about how low level technology could help the disadvantaged in his book: ‘Small Is Beautiful’ forty years ago.

Ultimately, Helping the poor in the third world, helps us too. 

Monday 4 April 2016

The law of unintended consequences

In China and India there are more young men than young women. The problem in China was exacerbated by the one child policy, but in both countries was created by a cultural preference for baby boys. The technological advances that allowed the gender of the unborn baby to be determined and the availability of surgery for abortion did the rest.

The cultural norm had been early marriage. Now with a gender gap, young women could exercise choice. So goodbye to dowries and being second-class citizens. Now better educated, women had real power. The drift towards automation left many young men unemployed echoing Mahatma Gandhi’s warning: “What we need is not mass production, but manufacturing by the masses”.

The surplus to requirement young men drifted, joined gangs, formed bad habits and sometimes turned criminal. A few became the prey of recruiters to terrorist groups where the incentives were money, pornography and drugs.

Their salvation will only come if they are given opportunities to educate themselves possibly through the internet. In rural areas, Satellite TV and mobile phones leap-frogged the traditional route of terrestrial television and landlines. Now the concept of a linked world as imagined by the communication theorist Marshall McLuhan could do the same for education. Online schools and Universities will emerge to teach basic education and higher knowledge.

Technology can also create jobs. Electricity can be made available without a national grid through solar panels and improved storage batteries. Graphene can be extracted from the methane created by cow dung and fabricated into suitable material forms. 3D printing may also be possible, reducing the need for long journeys to an industrial hub.

Others may become economic migrants and in addition to a better life, they will have a better chance of finding a partner. Many societal thinkers believe that migration is not only inevitable but could be a force for good in an ageing Western world. Educated or self-taught, they will find opportunities in the new digital world as explored in Professor Douglas McWilliams new book: The flat white economy.  Immigrants, particularly the skilled ones add to the store of capital and even the others take jobs that the native population don’t want. Imagine the NHS without Doctors and Nurses from abroad.  The digital explosion in London depends on the importation of skills from abroad.

Immigration could actually be beneficial for the ageing West and not the bogey it’s currently depicted to be. In fact it might be a case when ‘the law of unintended consequences’ could be a force for good.

Tuesday 29 March 2016

What is the incentive for saving?

People appear to have gone off the habit of saving. For years wiser folk have recommended putting aside one-seventh of income for the proverbial rainy day.
The average savings ratio is now a meagre 5%, so why are we ignoring this advice?

Some are too poor. Day to day survival is a battle for many. They are targets for the payday loan crooks, some of who charge 1200% interest.

The fear of debt that kept our Grandparents cautious appears to have evaporated. Indeed the economy is largely based on borrowing. Get a car on the never-never. Use your credit card to fund a holiday. Furnish your home with the notional zero percent interest.

For the few thrifty folk, there seems little incentive to save. Conventional saving accounts are not being encouraged by Banks and Building Societies. Current interest rates are as low as 0.6% and that scant return is liable to tax. George Osborne’s plan to have Banks not deduct 20% of interest paid will only help the less well-off wage earners on the lower tax threshold. They will welcome this change, but they will account for a tiny proportion of savers.

ISA’s were popular when the tax free interest they generated was worthwhile. Today the rates for Cash ISA’s are at best 1.41%. A poor return for an Economy purporting to be growing by 2.5%. So the drift to Share ISA’s should grow, if and it is a big if, they generate a better return. Here the fine print becomes a warning.

Share prices can go down and in the volatile climate, careful savers may consider that now is the time to indulge and spend.

Then there is the Pension savers, an incentive tax scheme, whereby tax is deferred until the rainy days your savings can be retrieved. The Chancellor would like to collect these taxes when he’s still in charge, but fears a political backlash.

So it’s up to the Business in the wealth management sector to offer benefits that encourage people to save.

But what can they say?

Some try to demonstrate trustworthiness in a generic sense but without a proposition most are not credible. Hiscox did this well and Lloyds have the most beautifully shot series of films with memorable sound tracks. Others talk about longevity which in the light of recent failures elicits little positive response. Without upward trending performance graphs some can try calling on the reputations of wizards like Warren Buffet, Anthony Bolton and Neil Woodford, but it’s still a difficult sell. 

Advertising needs to have a credible and persuasive sales proposition in the way Rosser Reeves meant.

And that depends both on the financial service companies and talented creative people in advertising.

Monday 14 March 2016

Reasons to holiday in St Kitts and Nevis

I knew very little about these islands. Like most of you, I had known they were in the Caribbean and guessed their economy was largely based on Sugar and tourism.
What I didn’t know was their differences with other islands in the West Indies. Was the scenery more stunning than that of St Lucia? Were the locals friendlier? Was it easier to get to than Barbados?

It is likely that this holiday hot spot is desirable but is it sufficiently different from its promoted sister nations to merit consideration? What it needs is uniqueness and reasons to go now. Non deferability in fact.

Selling Travel provided both factors in their March issue in an article headlined “Celebrating in St Kitts“. It listed six things to do in the islands at different times of the year.

On the 27th of March, the fifteenth annual ocean swim between Nevis and St Kitts is open to all. Two and a half miles of excitement and fun.
In June St Kitts will host a tri-nation cricket tournament featuring the West Indies, South Africa and Australia.
Other events include a music festival, Restaurant week, Latin fiesta and at year end Carnival.

As Selling Travel says: “One of the best ways to experience the colour, personality and culture of St Kitts is to visit the island when a major event or festival is taking place”.

I was sufficiently intrigued to investigate further. Flights from London are regular. Next a call to a travel counsellor and a visit to the website provided the reassurance that the islands were attractive, sufficiently unique and offered things to do for people who wanted more to do than fly and flop.

However these reasons need to be promoted , perhaps by working with British Airways and relevant tour operators initially and if possible by mounting an effective advertising campaign.

Tell prospects about St Kitts and Nevis and they will come.

Thursday 3 March 2016

Pensionable age extension - An election loser

Politicians are talking about the necessity of raising the age when people can collect their state pension. The current expectation is that people born after 1978 would be able to collect their state pension when they reached 68 years.

George Osborne thought the pensionable age should rise to 70, but other people think it would have to be much higher. Some think that our increasing longevity warrants a pensionable age of 82.

This will be increased gradually, but people now aged 30 will be expected to work until they stumble into retirement at 82. They will already have worked for 12 years and the prospect of another 52 of servitude is bound to be unwelcome.

A man aged 30 today is expected to live for another 51 years, so the average man will not live long enough to collect his pension. The average woman of 30 has a life expectancy of 85, so her longevity will cost the State three year’s pension. Hardly fair for sixty years of contribution. We think of these contributions as savings for old age, but the Government has used these payments to pay for existing pensions. So there’s nothing in the pot for future generations.

Will people accept these changes?

The large number of people likely to be affected makes this move a vote loser for the political party responsible for its initiation. In the end, this may only be a red herring to introduce a new retirement age of 70.

And there’s another reason for watering down these proposals. Employers may baulk at the retention of so many elderly staff who may earn more than young entrants and who are less able to cope with technological developments. What if unemployment amongst the elderly rises and unemployment payments fill the space intended for by wages?  

Also increased longevity doesn’t necessarily imply good health. Many chronically ill individuals will have to be paid sickness benefits.

It may be that the very prospect of a delayed start to retirement will spur the growth of private pension provisions. We currently save less than 5% of income for our old age. Financial experts think the ratio should be more like 15%. But the Chancellor is sending the wrong signals with tax caps on pension pots over £1.25 million. Pensioners also pay tax on the residue of their funds after the tax free portion is deducted. 

Mr. Osborne and his successors must devise better incentives for people to save because the State cannot provide in the way William Beveridge anticipated all those glorious years ago.

Perhaps Neil Kinnock was right when, on the eve of the 1983 general election, he warned us ‘not to get old’.

Tuesday 19 January 2016

Tourism: Hazards and opportunities

Tourism is leading the world out of recession. According to the United Nations World Tourism Organisation, international tourist arrivals grew by 4.4% in 2015 to 1,184 million. An increase of 50 million tourists compared to 2014 figures.

Tourism currently creates 9% of the world’s gross domestic product and also accounts for 9% of total employment. As a sector it grew faster than the conventional economic power houses such as Finance, Retailing and Manufacturing.

In Britain, the International passenger survey suggests that overseas trips by UK residents have reached 63 million, a significant improvement from the numbers generated in 2010. However not everyone has benefited.

Countries with a warm climate and attractive scenery rely on tourism for a major proportion of their annual revenue. They need a regular supply of tourists from wealthier nations with cold and uncertain weather. These affluent tourists have an abundance of choice. Discerning tourists select from a shortlist of countries based on factors such as type of holiday desired, price, distance, convenience of airport and flight times. Then they consider whether the destination is desirable and unique rather than merely acceptable and ubiquitous.

Overseas tourist boards must communicate their advantages. However pressure on the domestic front has led to dramatic falls in advertising in the countries who supply these visitors. Advertising spends have dropped from £45 million in Britain to £16 million, when a longer term view suggests a greater effort should be made to retain and even grow the number of guests.

Then there is the safety issue. The world appears a more dangerous place as terror attacks in Indonesia, Egypt and France indicate. The complexity of the reasoning and randomness of the attacks make prevention difficult particularly in countries with porous borders, high unemployment and disaffection amongst the young.
Tunisia has suffered particularly. The UK foreign office warns: 

“Further terrorist attacks remain highly likely including against foreigners”.

Tour operators have been diverting their customers away from Egypt towards Spain, Florida and Mexico.

For countries in the risk zone, greater security, surveillance, rapid response units and the active co-operation of its citizens is essential. These days with mobile phones, everyone has the opportunity to record suspicious behaviour.

Other countries need also exercise caution, but must make a strong case to attract tourists. Otherwise they will not benefit from the growth in worldwide tourism.