MONDAY 8 MAY 2023 EUROPE

Kosovo and the pursuit of Balkan stability Bluesky is Twitter but smaller and weirder
BIG READ, PAGE 17 ELAINE MOORE, PAGE 18

Royal appetite Briefing

Britons take i Slow China rebound drags
on western groups’ profits
to the streets US and European companies
including Starbucks and Estée
Lauder have blamed weak profits
US first lady Jill Biden enjoys tea and on a revival that has been slower
sandwiches with British prime minister than they were expecting.— PAGE 6
Rishi Sunak yesterday at a party in
Downing Street to celebrate the corona- i Ukraine nuclear fears rise
tion of King Charles III. Russia has started evacuating
More than 67,000 lunches were civilians from a town housing
organised around the UK over the week- workers at the Zaporizhzhia
end to mark the 74-year-old monarch’s nuclear plant, Europe’s largest,
coronation, which was attended by raising new safety fears.— PAGE 2
leaders from across the globe. Yesterday
evening Windsor Castle hosted a special i US states woo investors
concert to showcase Britain’s diverse The “arms race” of tax breaks
arts scene. and sweeteners has intensified as
Sunak called the events a “moment of states seek to attract projects
extraordinary national pride”. About drawn to the US by President Joe
20mn people — just under a third of the Biden’s subsidies schemes.— PAGE 4
country’s population — watched the cer-
emony on television on Saturday. i League boost for Assad
However, a number of anti-monarchy Member states have agreed to
protesters were arrested by police in readmit Syria to the Arab League,
London, prompting criticism that the 12 years after President Bashar
authorities had been heavy-handed. al-Assad’s crushing of a popular
Lex page 20 uprising led to its ejection.— PAGE 2
Andy Rain/Bloomberg

i Taliban talk to Beijing

Proposals have been discussed to
bring Afghanistan into China’s

US faces ‘constitutional crisis’ over Belt and Road infrastructure

project as the Taliban try to shore
up a crumbling economy.— PAGE 4

i Ermotti shortlists team

debt ceiling deadlock, Yellen warns UBS chief Sergio Ermotti has
drawn up a shortlist of the Credit
Suisse executives most likely to
survive the biggest bank takeover
since the financial crisis.— PAGE 8

3 Impasse on raising borrowing cap 3 Republicans seek trade-offs for consent 3 June 1 deadline looms
FELICIA SCHWARTZ AND
COLBY SMITH — WASHINGTON
CHRIS GILES — LONDON
US Treasury secretary Janet Yellen has
warned of a “constitutional crisis” that
risks economic and financial catastro-
phe if Congress does not raise the fed-
eral debt limit within weeks.
The White House and Republican
lawmakers are in stalemate over lifting
the debt ceiling, which Yellen has said
could be breached as early as June 1. The
US government is in danger of running
out of cash in the absence of new bor-
rowing capacity, Yellen said yesterday.
President Joe Biden will meet con-
gressional leaders from both the Repub-
lican and Democratic parties tomorrow
in an effort to resolve the fiscal impasse.
“If Congress fails to meet its responsi-
bility, there are simply no good options,”
Yellen said in an interview on television
network ABC’s This Week.
Unless the stand-off is resolved soon,
it could start to weigh on the economy,
economists have warned. A recent
report by the Brookings Institution, a
Washington think-tank, cautioned that
even a shortlived impasse would lead to
“sustained — and completely avoidable
— damage”.
Economists from Moody’s warn that
‘If they fail to [raise the
ceiling], we will have an
economic catastrophe that
will be of our own making’
2mn jobs could be lost in such a scenario.
If there is a protracted default, the
White House’s Council of Economic
Advisers forecasts an “immediate,
sharp recession” with the intensity of
the downturn during the global finan-
cial crisis more than a decade ago. That
“would likely lead to severe damage to
the economy, with job growth swinging
from its current pace of robust gains to
losses numbering in the millions”.
Late last month Republicans in the US
House of Representatives passed a bill
that would raise the $31.4tn debt limit
by $1.5tn and delay the risk of a default
until next year.
The legislation, which contained a
laundry list of Republican spending cuts
and policy priorities, is destined to fail
in the Democrat-controlled US Senate
but is seen as a starting point for talks.
“There are no red lines,” Patrick
McHenry, the Republican chair of the
House financial services committee,
told TV channel CBS.
“Everything is on the table at this
point. The key thing that has to be in this
equation is addressing our fiscal house,
short term and long term.”
Biden said on Friday that he was pre-
pared to “negotiate in detail” over a sep-
arate Republican budget proposal. But
he has called on Republicans to lift the
debt ceiling without conditions.
Biden administration officials have
considered whether to invoke the 14th
amendment of the US constitution in
order to continue issuing new debt with-
out legislative approval. That would
enable the government to pay social
Datawatch
security recipients, bondholders, Rich pickings
employees and others. Economists and % growth in real income for each UK
parliament, by income vigintile
constitutional experts are split over
whether that would be legal. Forecast
40
The US “should not get to the point Richest 5%
30
where we need to consider whether the
president can go on issuing debt. This 20
would be a constitutional crisis,” Yellen 10
said yesterday. Asked whether Biden 0
would invoke the 14th amendment, she
said she did not yet want to consider 1966- 79- 92- 2005- 19-
emergency options. 70 83 97 10 24
Raising the debt ceiling was Con- Source: Resolution Foundation
gress’s job, she added: “If they fail to do Only the richest 20th of the British
it, we will have an economic and finan- population are expected to experience
cial catastrophe that will be of our own a real increase in household income this
making, and there is no action that Pres- parliament. This is the first time that such
ident Biden and [the] US Treasury can a big share of the population has seen a
real decline in living standards since 1966
take to prevent that catastrophe.”
Debt ceiling diehard page 4

Deals between Europe’s private equity

firms halve as cost of borrowing rises
WILL LOUCH AND and sponsor-to-sponsor deals are the to a Ponzi scheme. Last year Mortier
IVAN LEVINGSTON — LONDON most acutely impacted,” Hugh warned that firms would face a reckon-
MacArthur, global chair of Bain & Co’s ing in the coming years.
Deals between private equity firms in private equity team said. “You have the With PE firms now balking at buying
Europe have more than halved year- macro uncertainty and, by the way, debt assets from each other, deals are at risk
Hackers revel in dark web on-year as the buyout game of pass- costs a lot more, so unless you are will- of falling apart as sellers are unwilling to
the-parcel is hit by rising debt costs and ing to ignore that then it is very difficult compromise on price.
marketplace of US secrets investors’ concerns over the economic to get these deals done.” “One of the biggest problems for
Analysis i PAGE 3 outlook. The practice of private equity firms sponsors now is the [leveraged buyout]
In the first three months of this year the selling assets to one another has math doesn’t work — valuations remain
value of deals struck between rival pri- boomed over the past decade as the era inflated and the cost of borrowing has
Austria €4.50 Morocco Dh50 vate equity firms in Europe fell to its of low interest rates let firms raise gone up,” said Saba Nazar, co-head of
Bahrain Din1.8 Netherlands €4.30 lowest point since the second quarter of record sums that they were under pres- global financial sponsors at Bank of
Belgium €4.50 Norway NKr45
Croatia Kn33.91/€4.50 Oman OR1.60
2020, according to data provider Pitch- sure to deploy. The peak came in 2021 America.
Cyprus €4.20 Pakistan Rupee350 Book, as buyout houses seeking to exit when, buoyed by the economic rebound In recent weeks, two prominent auc-
Czech Rep Kc125 Poland Zl 25 investments struggled to agree on of reopening after pandemic lockdowns, tion processes for private equity-owned
Denmark DKr46 Portugal €4.20
Egypt E£80 Russia €5.00
prices. €173bn of companies were traded companies — veterinary clinic chain
France €4.50 Serbia NewD530 Just €16.8bn worth of companies were between buyout firms. VetPartners and biometrics technology
Germany €4.50 Slovenia €4.20 traded between investment firms — less Some companies passed between PE company IDEMIA — attracted muted
Greece €4.20 Spain €4.20
Hungary Ft1450 Switzerland SFr6.70
than half the value of deals struck over hands four or five times at ever higher interest from rival firms, according to
India Rup220 Tunisia Din7.50 the same period last year. valuations. Vincent Mortier of asset people familiar with the matter. Both
Italy €4.20 Turkey TL80 “It’s a very tough time to exit anything manager Amundi likened the practice groups declined to comment.
Luxembourg €4.50 UAE Dh24
Malta €4.20

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2 ★ FINANCIAL TIMES Monday 8 May 2023

INTERNATIONAL

Ukraine war Regional bloc

Russia evacuates towns near nuclear plant
Civilians urged to move
from occupied south-east
after claims of fighting
POLINA IVANOVA — BERLIN
ROMAN OLEARCHYK — KYIV
Russia has started moving hundreds of
civilians from occupied areas in south-
eastern Ukraine, including families with
children from a town housing workers
at Europe’s largest nuclear power plant,
raising fresh concerns about its safety.
The evacuations, which started over
the weekend, come as Russian officials
accuse Ukraine of stepping up drone
strikes on its territory and in Russian-
occupied Crimea, moves seen by ana-
lysts as preparations for a spring coun-
teroffensive by Kyiv. Russia, in turn, has
in recent weeks increased its own drone
and missile attacks on Ukrainian cities.
The Russian-installed head of the
occupied part of the Zaporizhzhia
region, which includes the eponymous
nuclear power plant under Russian con-
trol since March last year, on Friday
announced a partial evacuation from 18
frontline settlements due, he claimed,
to increased fighting in the area.
Evgeniy Balitsky said yesterday 1,552
people, including 632 children, had so
far been relocated from two frontline
cities and five districts.
“People are also leaving dangerous
areas on their own in their private vehi-
cles,” he added.
In previous days, Balitsky said resi-
dents of these areas understood the
Middle East. Diplomatic change
need “to leave, today, to protect their
lives and get away from shelling, from
the line of combat”, adding that resi-
dents were being relocated further
south to places such as the Black Sea
port city of Berdiansk.
Yesterday, Balitsky appeared to visit
evacuees in Berdiansk, saying in a video
that the first 1,000 people to be evacu-
ated from the north had received hous-
ing there. He also addressed those peo-
ple who chose to stay in dangerous
areas, saying that doing so “is their
right” but adding that “time will be the
judge.”
The general staff of Ukraine’s armed
forces confirmed the evacuation in a
statement yesterday. “Russian occu-
pants are evacuating civilians . . . to
local recreation centres in the settle-
ments of Berdiansk and Prymors’k,” the
general staff said.
Evacuation orders also affect the
town of Enerhodar, which is close to the
northern frontline. It is also home to
many of the staff of the adjacent
Zaporizhzhia nuclear power plant,
Europe’s largest nuclear power plant
that was seized by Russia early in its full-
scale invasion.
The International Atomic Energy
Agency, which has experts present at
the plant, on Saturday said it had been
notified about the partial evacuation of
Enerhodar residents, though had not
witnessed it first-hand.
Operating staff remain on site at the
plant, the agency said, but it expressed
concern about the “recent increase in
military presence and activity” in the
area and resulting “tense, stressful and
challenging conditions for personnel —
and their families”.
“The general situation in the area
near the Zaporizhzhia nuclear power
plant is becoming increasingly unpre-
dictable and potentially dangerous,” the
agency’s director-general Rafael Grossi
said. “I’m extremely concerned about
the very real nuclear safety and security
risks facing the plant.”
The Russian-installed head of the
plant, Yuriy Chernichuk, on Saturday
denied there was cause for concern.
Ukraine’s state nuclear power com-
pany Energoatom also said on Saturday
that “there have been no changes in the
operation of the Zaporizhzhia nuclear
power plant”.
Martin Sandbu see Opinion
Arab League
nations agree
to readmit
Assad’s Syria
HEBA SALEH — CAIRO
ANDREW ENGLAND — LONDON
Arab states have agreed to allow Syria
back into the Arab League more than a
decade after its membership was sus-
pended following Bashar al-Assad’s
brutal crackdown against a popular
uprising.
Foreign ministers meeting in Cairo yes-
terday voted to readmit Syria after rela-
tions between Arab capitals and Damas-
cus thawed in recent months, with a
flurry of high-profile visits and Saudi-
led diplomacy focusing on how the
region should re-engage with the Assad
regime.
The readmittance — a symbolic boost
to Assad — comes after Saudi Arabia
agreed to restore diplomatic relations

Saudi Arabia reinvents itself on foreign stage with Iran, one of the Syrian regime’s big-
gest backers, in March. Diplomats said
some states — including Qatar, Kuwait,
Jordan and Egypt — had previously
opposed Syria rejoining when Riyadh
raised the issue last month.
Riyadh shifts from aggressive Those in opposition believe Assad has
approach to a strategy of done nothing to rehabilitate himself
since brutally crushing a rebellion with
easing regional tensions the military backing of Iran and Russia.
However, they agreed to the country’s
readmission after lobbying by Saudi
SAMER AL-ATRUSH — RIYADH
ANDREW ENGLAND — LONDON Arabia and the United Arab Emirates.

As Sudan descended into war last

month, Saudi Arabia sent navy ships to
evacuate thousands of people. When
one of the vessels returned home, a
female Saudi soldier was filmed carry-
ing a rescued baby ashore.
The images turned her into a celebrity
in the kingdom, as accolades for Riy-
adh’s rescue effort poured in from the
US and other countries. The Saudi for-
eign minister has also led efforts to
secure a ceasefire in Sudan, where Saudi
Arabia has influence with the military
factions fighting each other. It was the
latest moment in a seemingly redemp-
tive arc for Saudi Arabia, which in
recent years had earned itself a reputa-
tion as a regional pyromaniac.
Once a bastion of staid foreign policy,
Saudi Arabia had adopted a muscular
approach from 2015 under then defence
minister, and later Crown Prince
Mohammed bin Salman. It led to a
series of aggressive moves including a
military intervention in Yemen against
Houthi rebels, a regional embargo
against Qatar and the brief detention of
Lebanon’s then prime minister.
But Riyadh was forced to focus
inwards after the 2018 murder of Saudi
commentator Jamal Khashoggi by state
agents made Prince Mohammed persona
non grata in western capitals. An attack
on oil facilities a year later, blamed on
Iran, which backs the Houthis in
Yemen, underscored the assertive strat-
egy’s high stakes.
Now the kingdom is changing tack
again, buoyed by a petrodollar surplus,
a rapidly growing economy and an
increasing confidence. It has become
more active once more on the foreign
stage, while moving ahead with extrava-
gant mega-projects at home.
The kingdom surprised many by
announcing in March that it had agreed
to restore diplomatic relations with
Iran. Officials then visited Yemen as
part of a push to end the long-running
war against Iranian-backed rebels. After
calling for the overthrow of Syria’s Presi-
dent Bashar al-Assad, Riyadh has led a
New image: a successful push for Arab re-engagement
female Saudi with the regime.
soldier carries a A turning point for Saudi Arabia’s
baby ashore in shift away from the more aggressive for-
Jeddah after an eign policy came on September 14 2019,
evacuation from when a swarm of missiles and drones
Sudan. Below, evaded the kingdom’s American-made
Crown Prince air defences to strike vital oil infrastruc-
Mohammed ture.
bin Salman “The value of the American security
SPA/AFP/Getty Images
umbrella was punctured” by the attack,
said Ali Shihabi, a Saudi commentator
close to the royal court. “Saudi realised
that while it could not replace America
it can complement US ties with a strong
strategic relationship with a China that
has enormous leverage on Iran.”
A year after the attack, Prince
Mohammed lost a stalwart ally in the
White House, President Donald Trump.
He was replaced by Joe Biden, who came
into office vowing to turn the kingdom
into a pariah over Khashoggi’s murder.
Biden finally visited Saudi Arabia last
year to push for more oil production,
while pledging that the US would not
abandon the region to Russia, China and
Iran. But within months, he again
threatened to reassess Washington’s
relationship with Saudi Arabia after the
kingdom led an Opec+ production cut.
Tensions between Riyadh and Washing-
ton have since eased. But Riyadh has
doubled down on balancing its foreign
relations, particularly with China and
the kingdom’s Opec+ partner Russia,
hosting Chinese president Xi Jinping at
an Arab summit in December.
A few months after Xi’s visit, China,
the biggest buyer of Saudi oil, mediated
negotiations that led to the accord with
Iran, which also has ties to Beijing.
“Saudis have spoken openly about the
fact that you don’t wonder what Chinese
policy will be in three years, but you do
wonder what American policy will be,”
said Jon Alterman, director of the Mid-
dle East programme for the Center for
Security and International Studies.
Despite Biden’s vow to preserve
Washington’s standing in the region, the
perception in Gulf capitals has long been
that the US is disengaging as it shifts its
attention to Asia and Russia. “We are
feeling a lack of engagement [from the
west] in the region,” said a senior Saudi
‘The official. “It’s not so much there’s a prob-
lem [with the west] . . . nobody has the
history of time, bandwidth and the money to
the recent spend on the Middle East problems.”
Some question whether Prince
past Mohammed will continue to backtrack
when the on the robust foreign policy that charac-
terised his first years in office.
kingdom “For the global and regional interlocu-
deployed tors of Saudi Arabia, the history of the
recent past when the kingdom deployed
muscle and muscle remains fresh and serves as a
power plays reminder of what could happen,” said
Emile Hokayem, director of regional
remains security at the International Institute
fresh’ for Strategic Studies. “Ultimately it is
unclear how strategic Riyadh’s regional
approach is: can it stabilise countries in
the neighbourhood without giving up
the whole store to the Iranians?”
The senior Saudi official said that
while the kingdom would be more
“engaged” regionally, it would not be
activist. “Saudi Arabia’s great power is
political power, its economic power, its
convening power,” he said. “That’s
where our greatest tools are and those
are the ones we’ll use.”
‘Arab states have put their
own cynical realpolitik
and diplomatic agendas
above basic humanity’
“Over the past few weeks, the Saudis,
UAE and others have been persuading
the group to vote in favour of readmit-
ting Syria to the Arab League. Egypt,
Jordan and, eventually, Kuwait agreed,”
a regional diplomat said.
The Qataris, as the only ones still
resisting, eventually went with the con-
sensus, taking the view that Syria’s
readmission to the league did not alter
Syria’s standing in the region.
The diplomat said several countries
believed more concrete steps needed to
be taken before they could support a
normalisation in relations with Syria.
This — and not readmission to the Arab
League, set up in 1945 to promote
regional co-operation — was “the only
route” to ensure “concrete steps” were
taken by Assad.
The Syria Campaign, a human rights
group, said the decision to allow the
Assad regime to rejoin was “a devastat-
ing setback for justice and human rights
for Syria and for the whole region”.
“Today Arab states have put their
own cynical realpolitik and diplomatic
agendas above basic humanity,” said
Laila Kiki, executive director of The
Syria Campaign.
“By choosing to restore the Syrian
regime’s membership of the Arab
League, member states have cruelly
betrayed tens of thousands of victims of
the regime’s war crimes and granted
Assad a green light to continue commit-
ting horrific crimes with impunity.”
Ahead of the meeting in Cairo, Ayman
Safadi, Jordan’s foreign minister, said
readmission was “only the beginning
of” bringing a political end to the Syrian
crisis. He said “everybody” in the Arab
League was on board to end the crisis,
but there were differences on what was
the best approach.

Currency chaos

Zimbabwe banks on gold-backed digital token to stem inflation

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JOSEPH COTTERILL — JOHANNESBURG
Zimbabwe is launching gold-backed
digital tokens as President Emmerson
Mnangagwa’s government struggles to
prop up the southern African nation’s
inflation-wracked currency months
before elections.
The Reserve Bank of Zimbabwe said the
tokens would “expand the value-
preserving instruments available in the
economy”, a reference to a sharp drop in
the value of the Zimbabwe dollar.
But the planned launch throws a spot-
light on another round of currency
chaos driven by the ruling Zanu-PF
party’s use of money printing ahead of
elections this summer.
The Zimbabwe dollar has lost more
than half its value since the end of last
year to reach about 2,200 against the US
dollar in the country’s parallel market,
compared with an official rate of about
Z$1,000 that is derived from foreign
exchange auctions to importers.
Now Harare is betting on the success
of the digital investment, hoping that its
backing with gold will damp price pres-
sures in a country that has suffered reg-
ular rounds of hyperinflation. The
launch today will follow the issuance
last July of physical gold coins as stores
of value.
Zimbabwe produced 35 tonnes of gold
last year and the central bank is a lead-
ing buyer via a gold-trading subsidiary.
Last week prices for gold futures
matched an all-time high of $2,072 a
troy ounce.
The central bank has said the digital
tokens will be backed by gold in its
reserves and will be redeemable at
international prices after 180 days. But
analysts have called the scheme a dis-
traction from the root causes of the cur-
rency crisis.
The token issue “has absolutely noth-
ing to do with what’s happening on the
ground — it is a sideshow”, said Tinashe
Murapata, an economist, who added
that the central bank had given few
additional details on the physical gold
backing for the token scheme, such as
storage or auditing.
Inflation has continued to run at tri-
ple digits when measured in Zimbabwe
dollars, though the central bank has
adopted a “blended” rate that includes
prices in both Zimbabwe and US dollars.
This rate is about 87 per cent. Zimba-
bwe’s main interest rate is 140 per cent,
having been as high as 200 per cent in
January.
The central bank said gold coin sales,
worth as much as Z$25bn up to the end
of March, had “aided the dissipation of
domestic inflationary pressures”.
But because the digital gold tokens
will be linked to the official currency
rate, analysts have said the bank is prop-
ping up demand for the Zimbabwe dol-
lar by, in effect, offering them at a dis-
count to the parallel rate.
“There is a very clear arbitrage oppor-
tunity through participating in the forex
Central bank chief John Mangudya
with a sample gold coin last year
auction or buying gold coins,” said Rich-
ard Honey of Harare-based Msasa Capi-
tal, an investment advisory firm.
Economists say the central bank is
also not tackling a root cause of the cur-
rency slide: the printing of money to
fund government spending, reflected in
a surge in money supply this year.
Harare is preparing for its second elec-
tion since the 2017 coup that toppled
Mugabe.
Zimbabwe has struggled with mone-
tary chaos ever since hyperinflation
under Mugabe obliterated the value of
an earlier form of the Zimbabwe dollar
in 2008-09.
Money-printing and foreign exchange
shortages before Mugabe’s downfall led
to the rise of an ersatz “bond note” cur-
rency that shadowed the US dollar and
which was reworked into a resurrected
Zimbabwe dollar by the post-coup gov-
ernment in 2019.
The new currency has haemorrhaged
value despite frequent attempts to
impose its use. The switch to a blended
inflation rate acknowledged the rise of
US dollar transactions but Zimbabwean
businesses said the move would damage
accounting standards.
Monday 8 May 2023
Hackers openly
trade US secrets
in dark corners
of the internet
FBI and military data among information
exchanged for cash and bragging rights
MEHUL SRIVASTAVA — LONDON
FELICIA SCHWARTZ — WASHINGTON
On a Telegram channel with a handful of
subscribers, a self-described hacker
boasts that they have something they
would like to show off.
Two messages later, they have posted
what they claim are a directory of thou-
sands of FBI employees, from intelli-
gence analysts to interns; classified
manuals for US warplanes; and data-
bases from police departments across
the US.
What’s next, asks one awed sub-
scriber. “The Feds,” jokes another, and
posts a training manual for the Drug
Enforcement Agency, saying: “Here’s
something from the collection.”
This forum is just one venue in a rau-
cous marketplace for America’s secrets,
traded by low-level hackers and con-
spiracy theorists for cash and bragging
rights. It is accessible without pass-
words, special software or knowledge of
the dark web.
Following leads from cyber security
researchers who study hacker forums
for a living, the Financial Times
observed over two weeks several chat
groups hosting tens of thousands of
pages of documents, sometimes freshly
harvested from recent security
breaches, sometimes repackaged nug-
gets from prior hacks.
They ranged from the classified mate-
rial US National Guardsman Jack Teix-
eira is alleged to have leaked, to the
recently extracted gigabytes of corpo-
rate secrets that unpaid ransomware
groups unceremoniously dump when
negotiations with their victims fail.
There were also private communica-
tions between US law enforcement and
tech companies.
Often on Telegram, but also on dark
web forums where hackers and ran-
somware criminals share tips and show
off their exploits, the anonymous par-
ticipants discuss world politics and give
dating advice in addition to trading
leaked data.
Recently the greatest prestige has
come from sharing as yet unreported
details from the Teixeira leaks.
Within seconds of one subscriber on a
Telegram channel asking for the docu-
ments, a link appears to several dozen of
the leaked slides, hosted on an open
directory on Dropbox.
When the FT saw them, several had
been unreported by the world’s media —
China building cyberweapons to take
over western satellites and Russian mer-
cenary group Wagner seeking weapons
around the world.
The caches pale in comparison to
what whistleblowers have described as
the “avalanche” of data from Russian
organisations exposed by pro-Ukrain-
ian hackers. But the variety of docu-
ments and the relative ease with which
such groups are accessed online sug-
gests “like you are [seeing] the tip of an
iceberg”, according to a US diplomat.
“Even old classified documents have
operational value — they show how we
approach problems, how we assess
threats, how we train people.”
Hackers’ boasts, albeit uncorrobo-
rated, appear to confirm this. “This is
★ FINANCIAL TIMES
INTERNATIONAL
Hacking target: not the best stuff,” said a member of a
a supposed group observed by the FT, referring to
directory of FBI documents on a Telegram channel. “You
employees was could spend years here [the dark web],
just one of the and never get invited to the right room.”
secrets made In the right rooms, the “best stuff” is
available online advertised as screenshots, and often
at forums such traded for stolen US or European com-
as the messaging mercial data — credit card information,
service emails, social security numbers.
Telegram That so many of the briefing slides
FT montage/Getty Images
Teixeira is alleged to have leaked to a
few video gamers have become cur-
rency in pro-Russian online forums
shows there is a lingering risk from the
disclosure. Analysts said there
remained a real possibility that some of
the documents had yet to surface, or
that new, doctored ones could appear in
Russian disinformation campaigns.
“Once this kind of data finds itself on
the highway of the internet, it doesn’t
take long for a small group of people to
stumble upon it — and once they do, it
spreads on the internet like an epi-
demic,” said Osher Assor, the head of the
cyber security department at Israel’s
Auren consultancy.
As new documents become public, US
officials have scrambled to assess the
depth of the disclosures, with some
releases catching them by surprise. Pen-
tagon press secretary Brigadier General
Pat Ryder said last week that the Penta-
gon was still assessing the scale and
impact of the Teixeira leaks.
The FBI declined to comment on the
scale and seriousness of the wider leaks.
The Pentagon declined to comment.
The wide variety of US government-
related material being shared under-
lines its value in the underground
information economy in which hackers
trade. Its relative scarcity compared
3
‘Even old documents have
value — they show how we
approach problems, assess
threats and train people’
with Russian data made fresh leaks
exceptionally valuable, said two people
involved in these rooms.
Of some comfort to US authorities is
that few of these hackers breach the
government’s most secure databases:
the most damaging leaks have come
from insiders — Chelsea Manning, con-
victed of leaking the Iraq war logs and
State Department cables; Joshua
Schulte, convicted of leaking the techni-
cal details of how the CIA hacks high-
value targets; and Edward Snowden,
who leaked highly classified National
Security Agency information.
“You get big ones, like [Schulte], once
in five years — here, you move fast, col-
lect everything, hide everything, sell
quickly,” said one broker of these data
sets. “But then you have little ones all
the time.”
He described selling to a French citi-
zen the details of a US eavesdropping
operation about which he had learned
by hacking the emails of a European
prosecutor who was being briefed on
possible criminal activity.
It was not possible for the FT to verify
the broker’s claims, which included a
screenshot of a $250,000 wire transfer
to an Albanian bank account — allegedly
the payment for the tipoff.
In many instances, the criminal
‘Once this groups have distant ties to the Russian
state, providing opportunities to dis-
kind of data seminate documents — doctored or
finds itself original — that helps with Russian prop-
aganda.
on the One hacker showed off sample source
highway code, settings and test data from an
industrial process that was described as
of the producing the alloy used to reinforce the
internet, armour on American-made infantry
fighting vehicles.
it spreads In another conversation observed by
like an the FT, an unidentified buyer asked if
anyone had for sale a more recent copy
epidemic’ of the US No-Fly List, the people banned
from travelling by aircraft into, out of or
within the country. (A 2019 copy of that
list had already leaked on to the internet
this year.) “Check DM [direct mes-
sages],” replied one user in the Telegram
group, promising that what he was shar-
ing was the “most recent”.
4 ★ FINANCIAL TIMES Monday 8 May 2023

INTERNATIONAL

Tax breaks Afghanistan

States rush to cash in on Biden’s subsidies
Overseas companies
courted in clean tech and
chipmaking ‘arms race’
AIME WILLIAMS AND AMANDA CHU
WASHINGTON
US states are accelerating an arms race
of tax breaks and deal sweeteners as
they aggressively court foreign inves-
tors drawn by President Joe Biden’s
clean energy and chips subsidies.
Representatives from more than 50
states and territories gathered in Wash-
ington last week to sell their corner of
the US to overseas companies at the
SelectUSA summit, run by the com-
merce department to promote foreign
investment. Organisers said the turnout
was a record, with the largest showing of
US governors to date.
The Biden administration’s Inflation
Reduction Act offers $369bn in green
subsidies, while the Chips Act offers
$52bn in funding for US chipmakers
along with manufacturing tax credits
worth about $24bn. The wave of poten-
tial clean energy money looking for a
home in the US has triggered a state-
level incentives war as governments
compete to win lucrative investments
that would bring jobs to their regions.
“It’s a bit like the nuclear arms race —
everyone is in the incentives game,” said
Pat Wilson, the commissioner for Geor-
gia’s department of economic develop-
ment. “Those jobs are going to be cre-
US politics. Borrowing stand-off
ated, but they may not be created in
Georgia — they’re going to go to the state
offering the most.”
Georgia offered a $358mn incentive
package to Norwegian battery company
Freyr in November for its $2.6bn bat-
tery gigafactory. The company had con-
sidered more than 25 states for its site.
Last year, Georgia offered $1.8bn for
Hyundai’s first US electric vehicle fac-
tory near Savannah, the largest automo-
tive incentive package to date.
While offering state and local incen-
tives is a longstanding practice, more
states, including Texas, New York,
Idaho and Pennsylvania, are rolling out
targeted industry incentives or expand-
ing their funding packages to land
projects that are looking for a home in
the US because of the IRA or Chips Act.
Texas lawmakers introduced their own
state version of the Chips Act backed by
governor Greg Abbott earlier this year,
while New York state’s Chips pro-
gramme includes $10bn in economic
incentives for environmentally friendly
semiconductor projects. Oregon, mean-
while, passed a package worth $210mn
aimed at luring semiconductor compa-
nies to the state.
Idaho launched a semiconductor pro-
gramme in July, contingent on the pas-
sage of the Chips Act, that would exempt
semiconductor companies from sales
and use tax for construction and build-
ing materials. Four months later, Penn-
sylvania rolled out a $50mn semicon-
ductor manufacturing tax credit for
companies investing at least $200mn
and promising to create at least 800 jobs.
The legislature of Illinois also voted to
expand tax credits to clean-tech manu-
facturers earlier this year and passed
semiconductor manufacturing tax
credits last year. In addition, South
Carolina is offering VW-backed Scout
Motors the largest incentive package in
the state’s history as it targets electric
vehicle manufacturers.
As of the end of March, the US had
received more than $200bn in clean
tech and semiconductor supply chain
investments since the IRA and Chips Act
were signed into law. Some of the largest
beneficiaries have been historically con-
servative states such as Georgia and
South Carolina.
Taliban in
talks to join
China’s Belt
and Road
project
BENJAMIN PARKIN — LONDON
FARHAN BOKHARI — ISLAMABAD
JOHN REED — NEW DELHI
China and the Taliban have discussed
plans to bring Afghanistan into the Belt
and Road infrastructure project as Bei-
jing looks to boost investment in the
crisis-hit country.
Qin Gang, China’s foreign minister, held
talks on Saturday in Pakistan with Amir
Khan Muttaqi, Afghanistan’s acting for-
eign minister, and Bilawal Bhutto Zard-
ari, his Pakistan counterpart, as part of
the China-Pakistan-Afghanistan trilat-
eral foreign ministers’ dialogue.
The trio discussed security and trade,

Debt ceiling diehard vows to call Democrats’ bluff
Rightwinger shrugs off fear
that deadlock with rivals
will lead to market turmoil
LAUREN FEDOR — ROSELAND, VIRGINIA
US Treasury secretary Janet Yellen sent
shockwaves through Washington last
week when she warned that the US gov-
ernment risked running out of money as
soon as June 1 if Congress did not raise
the debt ceiling. Yesterday, she doubled
down, saying the issue could create a
constitutional crisis.
But 150 miles south-west of the
nation’s capital, in his largely rural dis-
trict in the foothills of the Blue Ridge
Mountains, Republican congressman
Bob Good was not worried about hitting
the federal borrowing limit.
“I am not afraid of us reaching the
debt limit because there would not be a
default unless the Biden administration,
Secretary Yellen, caused a default,”
Good said after touring small businesses
including a honey farm, a grain mill and
a trout hatchery in his district, which
covers a vast area of southern Virginia.
First elected to the US House of Rep-
resentatives in 2020, Good, 57, is a self-
described “biblical conservative” and a
prominent member of the House Free-
dom Caucus, a group of rightwing
Republicans who have pushed for any
increase in the debt ceiling, via a Repub-
lican bill, to be tied to steep spending
cuts.
Good is a relatively unknown mem-
ber of Congress. But like others on the
right of the Republican party, he has
gained an outsized influence in the
House of Representatives, where the
party holds control of the chamber by a District tour:
razor-thin margin after last year’s mid- Republican
term elections. congressman
The congressman shrugged off sug- Bob Good, left,
gestions that a lengthy political battle visits a grain
over the debt ceiling could lead to mar- mill in Nelson
ket turmoil. In 2011, the last time the US county, Virginia
government careered towards a default, Lauren Fedor/FT
S&P downgraded America’s triple A
credit rating before an eleventh-hour
deal was reached.
“The markets will get jittery. Markets
don’t like uncertainty. But we have got
to be willing to stand under the pressure
and call the Democrats’ bluff,” Good
said. “[Democrats] will cave, and the
Senate and president will pass and sign
this bill, if we just stand our ground.”
Carlton Ballowe, a local builder and
chair of the Republican party in Nelson
county — where Donald Trump beat Joe
Biden by 5 percentage points in 2020 —
said the congressman was a “marvel-
lous” representative for the area. “Fed-
eral spending is out of control . . . the
number of programmes I think they
should stop spending money on is too
numerous and too varied to list,” said
Ballowe. “States have no rights at all,
people have no rights at all, the federal
government has expanded its power to
be in control of everything.”
Good is also one of the more than
dozen Republicans who withheld sup-
port for Kevin McCarthy in the Califor-
nia congressman’s protracted bid to
become Speaker of the House earlier
this year.
In the end, Good voted “present” in
the 15th round of voting that handed
McCarthy the Speaker’s gavel. McCa-
rthy’s speakership still depends on the
support of colleagues such as Good. He
has conceded to being subject to a no-
confidence vote if just one member of
Congress calls for it.
Now, Good is one of the loudest voices
on Capitol Hill pushing McCarthy to
“stand under pressure” and resist the
White House’s demands for the debt
ceiling to be raised from its current
$31.4tn without condition. The Biden
administration has warned that failing
to raise the debt ceiling could lead to an
unprecedented government default,
with “catastrophic” consequences for
the US and global economy.
McCarthy scored a big political vic-
tory recently when he secured the sup-
port of Good and others to pass a bill
that would raise the debt ceiling by
$1.5tn until March of next year.
But the bill — which passed the House
with no Democratic support — also
includes a lengthy list of steep spending
cuts and Republican policy priorities
that means it is dead on arrival in the
Democrat-controlled US Senate.
Democrats say the bill would result in
hundreds of thousands of lost jobs and
shrink the US economy by more than
$140bn.
President Biden has invited McCarthy
and other congressional leaders — Dem-
ocrats Chuck Schumer and Hakeem Jef-
fries, and Republican Senator Mitch
McConnell — to a meeting at the White
House tomorrow to discuss the matter.
But Democrats and the White House
continue to insist that the Republican
House bill is not the foundation for a
negotiation — and that Republicans
need to agree to a “clean” debt ceiling
rise and then have a separate conversa-
tion about budget cuts.
Good said that would not happen. “No
Republican wanted to raise the debt
limit, but this is what it took in order to
get an agreement,” he said of the House
bill. “The Senate needs to pass it, and
the president needs to sign it, because if
they don’t, then they are risking what-
ever consequence may come from not
doing so. There is more than enough
revenue coming in the Treasury to pay
our obligations on our debt.”
Analysts say Good faces few political
risks in taking a hardline position on the
debt ceiling or any other issue, given the
character of his district, where mobile
phone service is often hard to come by,
and Confederate flags are still draped on
the porches of many homes and family
farms.
In 2020 the staunch social conserva-
tive ousted an incumbent Republican
congressman by attacking him for offi-
ciating at a same-sex wedding. In 2022
he was re-elected with just shy of 58 per
cent of the vote.
“He can basically be as populist and as
much of a culture warrior as he wants,”
said J Miles Coleman of the non-partisan
‘The Senate University of Virginia Center for Poli-
tics. “He is still probably going to be
and pretty safe.”
president When asked about the looming debt
ceiling crisis, local Republican chair Bal-
will pass lowe said it was “just a game of brink-
and sign manship”. He added: “I don’t worry
about it because there’s enough revenue
this bill, if coming in to service our debts and cover
we just our hard expenses. “The only thing in
jeopardy is discretionary spending and
stand our that deserves a nice cut. So I don’t really
ground’ see a downside.”
Others are more wary. One public
Bob Good, employee in the county, who declined to
congressman give his name, noted with a wry smile
that Good “represents the conservative
folks real well”.
He said for all of the congressman’s
rhetoric, he hoped the two sides on the
debt ceiling debate in Washington could
“come to an agreement”, adding: “If
they don’t, it would be a calamity.”
while Afghanistan also said it “hopes to
strengthen co-operation with China
in . . . infrastructure development
within the framework of the Belt and
Road Initiative”, according to China’s
foreign ministry.
Since ousting the Nato-backed gov-
ernment in 2021 after two decades of
war, the Taliban have courted global
powers including China and Russia for
investment to shore up the crumbling
economy and ease the regime’s interna-
tional isolation.
This includes efforts to attract Chi-
nese infrastructure investment to con-
nect Afghanistan with neighbours, such
as Pakistan, through the BRI. Beijing
has invested billions in Pakistan
through the ambitious China-Pakistan
Economic Corridor network of roads,
trains and ports, which is under con-
struction but ultimately expected to be
worth up to $60bn.
“The idea is to engage Afghanistan in
economic activity that has already
linked China and Pakistan together,” a
Pakistani official told the Financial
Times.
China’s state-run Xinjiang Central
Asia Petroleum and Gas Company had
agreed a deal to drill for oil in Afghani-
stan, officials from both countries said
in January. The Taliban also last year
agreed a deal with Russia to source oil
and wheat.
But while Afghanistan’s rich, unex-
plored reserves of minerals such as lith-
ium and copper have long enticed
foreign nations, meaningful investment
in infrastructure or mining has so far
proved prohibitively difficult because of
the precarious security situation.
State-owned China Metallurgical
Group Corporation in 2007 secured the
rights to Mes Aynak, one of the world’s
largest known copper reserves, but did
not develop it.
Afghanistan has suffered an eco-
nomic catastrophe since the US and its
allies to cut off most financing in the
wake of the Taliban’s return.
António Guterres, UN secretary-gen-
eral, last week said the country was
trapped in “the largest humanitarian
crisis in the world today”. About 28mn
people, or two-thirds of its population,
require aid, with 6mn people at risk of
famine, according to the UN.
The Taliban have also imposed their
hardline ideology, banning girls and
women from education and work,
prompting many foreign governments
to break off engagement with the group.
China and Pakistan both consider
maintaining ties with the Taliban as
vital to their security.
Analysts say Afghanistan is a base for
several terrorist groups, including the
Tehreek-e-Taliban Pakistan, which
Pakistan blames for a surge of violence,
as well as Uyghur militant group the
East Turkestan Islamic Movement.

South America

Brazil stirs investor fears as Lula moves to fulfil welfare pledge and scrap spending cap
MICHAEL POOLER AND BRYAN HARRIS
SÃO PAULO
President Luiz Inácio Lula da Silva
wants to ease constraints on govern-
ment spending in Brazil, expanding the
state’s role in Latin America’s largest
economy despite investors’ concerns.
Brasília is poised for a congressional
vote in the coming weeks on draft legis-
lation that will ensure real expenditure
rises every year. If passed, the changes
would enable the veteran leftwinger,
now in his third term as president, to
allocate extra funds for infrastructure
and welfare benefits, critical planks of
the his pledge to end hunger in the
nation of 208mn.
However, it would also mean breaking
with a cap limiting budget increases to
the rate of inflation. Introduced in 2017,
the spending ceiling has become a pillar
for the state’s fiscal credibility and has
helped stabilise the South American
nation’s level of indebtedness.
Of particular concern is the impact of
the extra spending on public borrowing,
which at 73 per cent of gross domestic
product is high for a developing econ-
omy. While the new rules stipulate
spending must grow annually by a mini-
mum of 0.6 per cent above inflation —
even when revenue collection falls — the
maximum threshold is 2.5 per cent.
Under the proposals, annual expendi-
ture is allowed to rise by up to 70 per
cent of the preceding year’s increase
in government income. This drops to
50 per cent if budget targets are missed.
To balance the books, finance minis-
ter Fernando Haddad intends to raise
R$150bn ($30bn) by clamping down on
tax evasion, closing loopholes and
imposing duties on online gambling.
Officials forecast total public revenues
of R$2.37tn this year.
However, investment bank BNP Pari-
bas said Haddad’s aims of eliminating
the budget deficit — not accounting for
debt interest payments — next year and
generating a surplus by 2025 was “only tavo Arruda. “The government is trigger mechanism that automatically
achievable with tax increases and very assuming much stronger growth than forces some kind of adjustment if you
optimistic assumptions”. we believe is Brazil’s potential.” don’t meet the targets.”
“When we play with the numbers we Alberto Ramos, head of Goldman The exemption from the rules of cer-
don’t get a primary surplus in two years, Sachs’ Latin American economics tain areas, such as spending on federal
or the debt stabilised in three,” said its research team, said the new fiscal universities and environmental projects
head of Latin America research, Gus- framework lacked teeth. “There is no — along with the creation of a floor for
public investments and promises of
higher minimum and public sector
wages — would make it hard to keep
expenditure in check, Ramos added.
Another worry is that Lula may
encounter political pressure from more
radical elements of his base not to
restrict public spending. Designed to
restore Brazil’s battered public finances
following the economically disastrous
presidency of Dilma Rousseff — Lula’s
handpicked successor in 2010, after his
second term in office — the 2017 cap has
long faced criticism from the left that it
squeezes funds for essential public serv-
ices and infrastructure.
However, the ceiling was legally
Political pressure: Luiz Inácio Lula da Silva this month — Andre Borges/EPA-EFE bypassed to allow for Covid-19 support
measures and again last year by Lula’s
predecessor, Jair Bolsonaro, to boost
handouts ahead of his failed re-election
bid. Lula also obtained a congressional
waiver before taking office to increase
the payments further.
More than 90 per cent of the country’s
budget consists of mandated spending,
mostly on pensions and public sector
salaries, which can be changed only with
congressional approval.
Lula’s task now is to guide the bill
through a fickle and fragmented Con-
gress, where his Workers’ party does not
command a majority.
Lucas de Aragão, partner at political
consultancy Arko Advice, said Congress
was unlikely to want big rises in spend-
ing. “Congress is more conservative and
right-leaning [than the president]. It
has become more fiscally responsi-
ble . . . This reduces the space for
adventurous spending.”
Additional reporting by Carolina Ingizza
and Michael Stott
Monday 8 May 2023 ★ FINANCIAL TIMES 5
6 ★ FINANCIAL TIMES Monday 8 May 2023

Crowning glories Britain’s corporate stalwarts that have stood the test of time from one coronation to the next y LEX

China’s slower Atlantic drift Investors bet on Fed and ECB

going their separate ways on interest rates
Air fares rise
well above
recovery hits inflation amid
travel rebound
profits in US PHILIP GEORGIADIS, PATRICK MATHURIN
AND CHRIS CAMPBELL — LONDON

Air fares are rising at more than twice

and Europe the rate of inflation as carriers cash in

on soaring demand for travel that has
defied broader economic headwinds.
Average ticket prices on more than 600
of the world’s most popular routes rose
at an annual rate of 27.4 per cent in Feb-
ruary, the latest month for which data is
available, marking the 15th consecutive
3 Growth ‘explosion’ fails to materialise month of double-digit growth, accord-
ing to a Financial Times analysis of data
3 Consumer groups cut sales forecasts from aviation company Cirium.
By contrast, US inflation, a proxy for
global inflation in developed econo-
NICHOLAS MEGAW AND Lauder — rely on travel spending. Chris- ECB president Christine Lagarde last week signalled more rate rises ahead for the EU — Thomas Lohnes/Getty Images mies, has grown at less than half that
ANDREW EDGECLIFFE-JOHNSON
NEW YORK
topher Nassetta, chief of hospitality over the same period. The data analysed
group Hilton, said: “China won’t con- Investor expectations for Fed and ECB diverge prices on popular routes flown across
US and European companies have tribute what I would have hoped it the world and used average one-way
Market-implied interest rate changes (% points)
blamed disappointing earnings on a would this year.” fares in economy, excluding taxes and
slower than expected economic Finnair noted that the recovery had 0.4 fees. It found significant price rises
rebound in China, after the country’s been “slower to start than many antici- ECB across many routes this year, compared
sudden reopening from pandemic pated”, while Colgate-Palmolive said: 0.2 with pre-pandemic levels.
restrictions prompted over-optimistic “We have not seen the travel retail busi- 0 The average one-way economy-class
growth forecasts. ness come back yet.” -0.2 transatlantic flight from London Heath-
Estée Lauder, the cosmetics group, Starbucks said it had seen a “robust -0.4 row to New York’s John F Kennedy air-
was the most high-profile example last recovery” in the first three months of port was $343 in February this year, 23
week, suffering its sharpest one-day the year, but added that growth had -0.6 per cent higher than in the same month
Fed
share price fall on record after it cut already started to slow and highlighted -0.8 in 2019. Fares between New York and
sales forecasts because of a “far more “uncertainty in the overall environ- -1.0 Singapore were 45 per cent higher at
volatile . . . and more gradual” recovery ment”, particularly in areas such as $887, while Dubai to Frankfurt tickets
in Asia than it had expected. international travel. May 2023 2024 Feb were 51 per cent up at $360.
The comments came despite official Source: Bloomberg Sixty routes with at least one leg in
figures showing a robust start to the year North America of a total of more than
‘The overall expectation for China’s economy, with gross domes- MARY MCDOUGALL — LONDON situation where the ECB is really fol- target and the labour market cools, or 300 routes have set new highs in the
was the China market was tic product on track to meet or exceed
The Federal Reserve and the Euro-
lowing its own path and will continue will be forced to cut quickly to support past 12 months, including seven setting
Beijing’s target of 5 per cent annual to hike.” bank balance sheets and curb deposit a new peak in February.
going to bounce back. We growth.
pean Central Bank both delivered
Nerves around the US banking sec- outflows if a crisis unfolds. Fares between Miami and Bridge-
interest rate rises last week but
have not seen [that] yet’ David Donabedian, chief investment
investors now expect rate setters in
tor have triggered bets on rate cuts “If they had to cut for that reason town, Barbados, rose 126 per cent in the
officer at CIBC Private Wealth, said the from a current benchmark rate of 5 to they would not do 25 basis points, year to February and ticket prices
the US and the eurozone to move in
It was one of a number of companies, divergence reflected the fact that some 5.25 per cent, despite annual wage they would have to do 50 or 75 basis between Los Angeles to Mexico City
opposite directions.
from consumer-focused chains such as observers had simply been too optimis- inflation of 4.4 per cent and a labour points and go ‘bam, bam, bam’,” said International almost doubled — the
Starbucks to big technology groups and tic in predicting “an explosion” in activ- Markets predict the Fed has finished market that, according to Fed chair Thanos Papasavvas, chief investment highest year-on-year changes in air
logistics businesses, to strike a note of ity, while some had also been hoping for its tightening cycle following 10 con- Jay Powell, remains “extraordinarily officer at ABP Invest. fares since at least 2014, the first year for
caution over the past two weeks. more accommodative monetary policy secutive rate rises and could start cut- tight”. Papasavvas and others say that if which data is available.
“The overall expectation was, follow- to turbocharge growth. ting rates as soon as July, shifting its But he also warned the recent bank- the US embarks on crisis-induced rate Passengers’ willingness to pay high
ing the reopening, the China market was “There was the expectation that it was focus from curbing high inflation to ing turmoil appeared to be “resulting slashing, the ECB would be forced to fares underlines the furious rebound in
going to bounce back,” Cristiano Renno going to be like a coiled spring. There soothing a slowing economy. The in even tighter credit conditions for follow suit. “Lagarde tried to push the demand for flying over the past year,
Amon, Qualcomm chief executive, told was a pick-up, but no explosion.” ECB, which started increasing rates households and businesses”, which view that the ECB can keep tightening and how airlines are enjoying a sharp
analysts on Wednesday. “We have not Some companies that had not set four months later, is expected to lift was likely to weigh on economic activ- independently of what the Fed does turnround in fortunes following the
seen those signs yet.” expectations too high were able to bene- borrowing costs at least once and ity and the labour market. yesterday but it is only credible if the pandemic.
NXP Semiconductors, Qualcomm’s fit. Adidas reported falling revenues and probably twice this year. Christine Lagarde, ECB president, US escapes a hard landing,” said Anto- “Airlines are running out of hyperbole
rival and onetime acquisition target, continued “uncertainty” in China, but “We are in for a great divergence in signalled more rate rises to come in a ine Bouvet, head of European rates to describe demand strength,” Bern-
provided a similar warning, noting that its shares jumped 8 per cent on Friday as monetary policy on both sides of the speech on Thursday. “We have more strategy at ING. stein analyst Alex Irving said.
“it is too early” to talk about a China it said it was seeing “a positive trend” Atlantic, which is something quite ground to cover and we are not paus- Others, including Kopf, are not con- American Airlines reported record
recovery. “We have seen a modest, grad- after several years of challenges. new,” said Christian Kopf, head of ing, that is extremely clear,” she said, vinced. “I think the European banks first-quarter revenue in its most recent
ual improvement . . . from a very slow The shift in growth expectations is fixed income at Union Investment. after announcing an increase of the are in much better shape than their results, while Lufthansa said it expects
start,” said Kurt Sievers, chief executive. taking place against a backdrop of wider “People in the markets have always benchmark eurozone interest rate to US counterparts,” he said, noting that, adjusted earnings to surpass 2019 levels
Several consumer-facing groups also concerns among business leaders about said it’s pointless to forecast the ECB 3.25 per cent. unlike in the US, all European banks this spring. British Airways owner IAG
warned about the pace of the recovery, Beijing’s scrutiny of US companies’ because it will always do Fed minus Investors say the Fed will either had to comply with the Basel rules on and Air France both also predicted
particularly those that — as with Estée operations in China. 200 basis points, but we are now in a hold rates until inflation falls closer to capital and liquidity. bumper summer seasons this week.

Contracts & Tenders Financial services. Due diligence

Beijing’s ‘men in black’ raid consultancies
A concerted crackdown on
overseas corporate sleuths
threatens foreign investment
FT REPORTERS
In China, foreign consultants are learn-
ing to expect a knock on the door.
First, police raided the Beijing office
of US due diligence group Mintz in
March. Weeks later, there was a similar
visit to the Shanghai premises of Bain,
the blue-chip US consultancy.
Police have also visited one of the
China offices of expert network Cap-
vision, according to at least four people
familiar with the matter, as part of an
emerging number of raids on interna-
tional consultancies operating in the
world’s second-largest economy.
Information on the raids is scant —
Bain and Mintz have provided few
details, while Capvision has not com-
mented, although one person familiar
with the matter said police visited its
Shanghai office.
While Bain is known for its manage-
ment consulting work, the incidents at
Mintz and Capvision — a network whose
members are available for chats with
Imagine your advert here clients about an industry in which they
have worked — have thrown the spot-
light on the world of corporate investi-
gations in China, which also includes
companies such as Control Risks, Kroll,
FTI and Blackpeak.
Business for Sale, Business Opportunities, Business Services, Even in ordinary times, due diligence
Business Wanted, Legal Notices, Company Notices, Public Notices, Floating Rates Notes, is inherently risky in China. The risk
Shareholder Messages, Property For Sale, Tender Notices assessments those groups conduct,
.........................................................................................................................................................................................................................................................................
Classified Business Advertising which are crucial for foreign investors,
Tel: +44 20 7873 4000 | Email: advertising@ft.com almost always involve research into
non-public information about compa-
nies and their key managers. But with
President Xi Jinping’s government fight-
ing a trade and technology war with the
US and facing pressure over issues such
as human rights in Xinjiang and Hong
Kong, due diligence work in the country
is becoming more vital — and more haz-
ardous.
Last week, the Communist party
broadened the scope of its expansive
espionage law to include “all docu-
ments, data, materials and articles con-
cerning national security and interests”.
For foreign companies, the raids
threaten their conduct of due diligence
through consultants or their own staff,
hampering their ability to invest just as
Beijing tries to woo them to revive an
economy hit by Covid-19 controls.
Among the worst hit of the consultan-
cies raided was Mintz, with police in
March detaining five local staff for
undisclosed reasons. When the Finan-
cial Times visited Mintz’s office in a Bei-
jing business park shortly after the raid,
there was no sign of activity and the
doors were locked with a heavy chain.
China’s security agencies, including
the feared Ministry of State Security,
have traditionally kept a close watch on
the companies and “are constantly in
touch with the industry”, said one exec-
utive. “We call them the ‘men in black’.”
Under Hu Jintao, Xi’s predecessor, the
due diligence groups felt they had ample
space to operate and that authorities
understood their importance to foreign
investors. “For the longest time, before
Xi came to power, there was a tacit
understanding that they knew what we
are doing, but they also knew that the
spy companies were the gatekeepers for
money,” the executive said.
That sense of a mutually beneficial
relationship is gone. People in investiga-
tion consultancies and some of their cli-
ents said stricter regulations regarding
information, such as the anti-espionage
legislation and rules barring the transfer
of personal data of Chinese citizens
abroad, were drastically narrowing
their space to operate in China.
A person familiar with the industry
said companies complying with instruc-
tions that they should no longer pull
personal information from hukou files —
China’s household registration system —
had been on safe ground. “Doing due
diligence on individuals has always been
a big no-no,” said Shaun Rein, founder of
China Market Research. “If a person is
being researched, they can make a com-
plaint.”
But another person familiar with the
due diligence groups said the govern-
ment had now gone further and “drawn
a whole web of bright red lines that you
can get very easily entangled in”. US
sanctions had created huge demand for
vetting of supply chains “but Beijing is
No sign of activity: Mintz’s closed
office in Beijing in late March
telling us to not touch that business”, the
person said.
Multiple sources said checking supply
chains to ensure they did not involve
forced labour from Xinjiang, a big sup-
plier of textiles, was one such problem-
atic area. Advice on how to restructure
technology supply chains to reduce
dependency on Chinese sources was
another.
One consultant working for an inter-
national group in China said police “vis-
its” and investigations were not uncom-
mon and were often related to specific
clients or projects. What was “a bit
scary” now, however, was the new coun-
ter-espionage law, with a broad scope
that would allow authorities to apply it
to almost any area, he said.
The revision to the law passed
recently prohibits “collaborating with
spy organisations and their agents” and
conducting cyber attacks against state
entities. Particularly troubling, accord-
ing to a note from the US-based Institute
for the Study of War, is its broad defini-
tion of “agents”.
Ultimately, if Beijing cracks down too
hard, there could be a chilling effect on
foreign investment. “It’s hard to attract
capital if you can’t get a report from a
global due diligence firm,” said one
international services executive.
That could run counter to the govern-
ment’s efforts to revive animal spirits in
China’s economy, said consultants and
investors. “Maybe this is the intention,”
said the head of one consultancy in Bei-
jing, “to choke off investment and get
the state to step back in, to stop the abil-
ity of investors to place bets.”
Reporting by Kathrin Hille, Joe Leahy,
Primrose Riordan, Eleanor Olcott,
Edward White and Demetri Sevastopulo
Monday 8 May 2023
Tesla’s price cuts force EV rivals to respond
Carmaker’s efforts to fill its order book prompt competitors to react while trying not to start a discounting war
PETER CAMPBELL — GLOBAL MOTOR
INDUSTRY CORRESPONDENT
Tesla sent ripples through car show-
rooms across the world when it started
cutting prices this year.
Rival manufacturers from Detroit to
Japan began seeing the second-hand
values of their own battery models fall,
while their share prices began slipping
amid expectations of an EV price war.
Tesla has now promised to go even
further. Elon Musk’s group is willing to
sacrifice profitability to spur demand
for its models as it tries to hit ambitious
sales goals that would make it the
world’s largest carmaker by the end of
the decade. But will the electric pio-
neer’s price cuts force others to follow
suit? And will it lead to faster EV
take-up among consumers?
Most carmakers have been at pains to
stress they will not cut prices. They
point out that, while Tesla has new fac-
tories to fill and a thinning order book,
most manufacturers cannot make bat-
tery models fast enough.
“Demand for our products is really
stable, surprisingly so given geopolitical
headwinds and tariffs,” said Jim Rowan,
chief executive of Volvo Cars, which has
had to stop taking orders for its new
EX90 electric sport utility vehicle after
filling a year’s production schedule in
weeks. “I think we would be doing a dis-
service to shareholders by doing any-
thing other than keeping price disci-
pline,” Rowan told the Financial Times.
Ford has been the exception, cutting
prices twice this year on its electric Mus-
tang Mach-E. Chief executive Jim Farley
said last week the company had reduced
costs in the vehicle by $5,000 over this
year, stressing: “We are not going to
price just to gain market share.” He also
said Ford had raised the price of its elec-
tric F-150 Lightning pick-up truck by
$11,000 since launching the model.
Behind the scenes, discounting by
stealth has already crept into the indus-
try. While Tesla sets prices centrally,
most carmakers allow their dealers to
offer reductions quietly, often using
money from the manufacturer’s mar-
keting budget. Dealers, analysts and
★ FINANCIAL TIMES
COMPANIES & MARKETS
Showroom lease providers all say under-the-radar
shine: a worker discounting is starting to happen in EVs
cleans a Tesla from mainstream brands, despite car-
sign at a Beijing makers still enjoying long order times
dealership for new battery vehicles.
Kuang Da/Jiemian News/
VCG/Getty Images
The power to prevent an EV price war
does not sit with the current manufac-
turers. More than a dozen Chinese
nameplates are targeting Europe, which
has become the western crucible of elec-
tric cars. This will drive down headline
prices and force established manufac-
turers, especially in Europe, to cut rates.
There is evidence the price cuts may
actually be making some electric vehi-
cles more expensive, or at least slowing
their journey towards affordability. This
is due to the residual value, or the sec-
ond-hand value, of a car.
Most new cars in developed markets
are bought on deals that finance the
amount of value a vehicle loses — its
depreciation — rather than the overall
sticker price. If cars have weaker
second-hand prices, more money needs
to be financed and the car becomes
more expensive to lease.
Michael Shu, European boss of
China’s BYD, told the FT: “The last
option is always to drop the price
because that will hurt the brand, the
residual values. The customer who
chooses thinks they are not so smart —
that is not good.”
The resale value of Tesla’s own models
has plummeted over the past year, in
part because of its price-cutting policy.
Senior figures in the leasing market
say several banks have already started
charging more for electric vehicles out
of concern — making falling residual
values across the sector a self-fulfilling
prophecy.
Data from UK leasing group Leas-
ing.com shows the average monthly
price of a Tesla is higher than it was in
January, while EV payments across all
brands have also risen fractionally.
But while falling residual values are
bad for new car buyers, they help make
EVs in the much larger second-hand car
market more affordable. “I’m excited
that this will unlock more affordable
EVs,” said one auto trader.
Carmakers with the largest margins
on their battery models can afford to
absorb more aggressive price cuts,
should they wish.
Volvo said last month that margins on
its electric models had reached 7 per
cent, and would climb higher this year
as the price of lithium, a crucial battery
metal, falls further.
Carmakers that can only just eke out a
margin on their EVs will struggle to cut,
potentially leaving them to sacrifice
sales instead, analysts say.
Similarly, the groups with the widest
spread of electric products will be able
to flex their line-up while still selling
some high-margin models.
“You still have to cover the market for
what people can afford,” General
Motors chief executive Mary Barra told
investors last month. “To get to a point
7
where there’s many EVs being sold in
the US, recognising competition as well,
you have to meet the customer where
they’re at from an affordability perspec-
tive.”
Behaviour will also vary in countries
and regions. Some large markets have
EV quotas, such as China, California
and, from next year, the UK. In these
places carmakers may decide the most
profitable route is to discount EVs to
lossmaking levels purely to avoid fines
for missing sales quotas, and to allow
them to continue selling larger numbers
of profitable petrol cars, according to
two senior industry executives.
Battery car sales are already moving
faster than most in the industry
expected. The International Energy
Agency last week raised its EV forecasts
for 2030 from 25 per cent of sales to 35
per cent, driven largely by the US Infla-
tion Reduction Act, as well as increased
European competition. Buying an elec-
tric car using a pay-monthly approach is
already cheaper than petrol models in
some segments, dealers say.
There is also evidence Tesla’s cuts
have already started to drive higher
interest in the brand relative to rivals
that have held prices steady.
‘Carmakers “Certainly, it has improved conver-
have to give sion of people who are looking into
Teslas,” said Fiona Howarth, chief exec-
up some utive of Octopus EV, a specialist electric
profits, then vehicle leasing group.
Philippe Houchois, analyst at Jeffer-
have to try ies, said: “There will almost certainly be
to see what better deals for you and me as custom-
ers. Carmakers have to give up some
they can do profits, then have to try to see what they
to reduce can do to reduce their costs.”
Several have already begun trimming
their costs’ costs to adapt. Volvo Cars is planning
cost cuts, while Jeep and Vauxhall
owner Stellantis is offering voluntary
redundancy to 33,000 US factory work-
ers because of costs in its EV pro-
gramme. “Some people say you can slow
the transition,” said Houchois. “I don’t
think carmakers will materially change
investment plans. It might happen in
five years or 10 years or 15, you might
gain a few years here or there, but the
direction of travel is pretty clear.”
8 ★ FINANCIAL TIMES Monday 8 May 2023

COMPANIES & MARKETS

Banks Financials

UBS picks Credit Suisse chiefs for new team Berkshire

dumps stock
Ermotti selects shortlist
of executives likely to
survive takeover
OWEN WALKER
EUROPEAN BANKING CORRESPONDENT
UBS chief executive Sergio Ermotti has
shortlisted the Credit Suisse executives
he plans to make part of his manage-
ment team, betting they can help make
a success of the most significant banking
deal since the financial crisis.
Among the Credit Suisse executives
most likely to survive the takeover are
Dixit Joshi, chief financial officer, Franc-
esca McDonagh, chief operating officer,
and André Helfenstein, head of the
Swiss business, according to several
people familiar with the plans.
Ermotti, who returned to run UBS in
March after the bank agreed to rescue
its Zurich rival in a $3.25bn deal orches-
trated by Swiss authorities, is planning
to unveil his new top team in the next
week, with the takeover due to be com-
pleted early next month.
UBS is preparing for a costly and risky
integration process as it attempts to
combine two global systemically impor-
tant financial institutions.
Colm Kelleher, the bank’s chair, has
said the integration could take up to
four years, while elements of the deal —
including the decision by Finma, the
Swiss banking regulator, to wipe out
bonds worth $17bn — are being chal-
Market questions. Week ahead
lenged in the courts. The completion of
the deal hinges on receiving regulatory
approval and sign-off from competition
authorities. While most main regulators
have given their approval, the European
Commission said the EU’s antitrust bod-
ies would make a decision by June 7.
Joshi and McDonagh joined Credit
Suisse late last year, leaving them
untainted by the bank’s recent scandals.
Joshi started as chief financial officer
on October 1 and was immediately
thrust into the bank’s efforts to hold on
to fleeing customers following a damag-
ing weekend of social media rumours
about its financial health.
He was heavily involved in the bank’s
$4.3bn capital raise in his first few
weeks in the job. His brief stint in the
role has also been marked by Credit
Suisse delaying the release of its annual
report in March after the US Securities
and Exchange Commission made some
last-minute requests for additional
information over its internal controls
dating back to 2019.
McDonagh, who left her role as chief
executive of Bank of Ireland to join
Credit Suisse, was hired to be head of the
Emea region. But before she started, she
was given the role of chief operating
officer and instructed to oversee a huge
restructuring of the business.
As part of cutting $2.8bn in costs over
three years, she had begun to reassess
Credit Suisse’s global office footprint —
including its underused 21-storey Lon-
don headquarters in Canary Wharf,
which it leases from the Qatar Invest-
ment Authority. But that review was put
on hold when the deal with UBS was
struck.
Helfenstein has run Credit Suisse’s
domestic bank for the past three years
and is the longest-serving executive
board member, having joined when
Thomas Gottstein became chief execu-
tive in 2020.
UBS executives see Credit Suisse’s
domestic business as its “jewel in the
crown” and would prefer to keep it
intact. But combining it with UBS’s own
Swiss business has proved unpopular
domestically and executives have said
all options are on the table for the unit.
UBS declined to comment on plans for
the new executive team.
but ramps
up buybacks
ERIC PLATT — OMAHA
Warren Buffett’s Berkshire Hathaway
sold billions of dollars worth of stock
and invested little money in the US
equity market in the first three months
of the year, a signal the famed investor
saw little appeal in a volatile market.
Berkshire disclosed on Saturday that it
had sold shares worth $13.3bn in the
first quarter and bought stocks for a
fraction of that figure. Instead, it put
$4.4bn towards repurchasing its own
stock, as well as $2.9bn on the shares of
other publicly traded businesses.
The figures underscore the struggle
Berkshire faces in putting its mountain
of cash to work at a time when Buffett
and his longtime right-hand man

Economists predict falling US inflation will stall
Will inflation continue to fall?
Headline US inflation has been falling
consistently since last summer, but
economists and analysts believe that
progress may have stalled in April, as
higher prices for core goods counter-
acted cooling costs elsewhere.
On Wednesday, the Bureau of Labor
Statistics will release its latest US con-
sumer price index report, which is
expected to show headline consumer
price inflation at an annual rate of 5 per
cent in April, the same as in March,
according to economists surveyed by
Bloomberg.
The rate has been on the way down
every month since hitting 9.1 per cent in
June last year. From the previous
month, prices are expected to have risen
0.4 per cent. Core CPI, which strips out
the volatile food and energy sectors, is
expected to be 5.4 per cent year on year
in April, down slightly from the prior
month’s rate of 5.6 per cent.
While price rises in core services — a
category that includes costs related to
rent and transportation — are expected
to slow, pushing down the overall core
figure, analysts at Barclays argue that
core goods inflation is expected to be
higher, driven especially by the rising
price of used cars.
The figures come after the Federal
Reserve raised interest rates last week
to a range of 5-5.25 per cent, its tenth
increase in 14 months.
Kate Duguid
How much further will the Bank of
England need to raise rates?
Since the Bank of England’s last rate-
setting meeting in March, wage, house
price and headline inflation data have
all come in stronger than economists
expected. With the UK trailing other
major economies in its attempt to curb
the pace of price rises, traders have
upped their expectations of more rate
increases to come.
Markets are now pricing in a near cer-
tainty of a 0.25 percentage point rate
rise this week to 4.5 per cent, echoing
recent increases by the Federal Reserve
and European Central Bank. Traders
expect rates to peak at 4.75 per cent in
September, having priced in only one
more rise a month ago.
But the bank’s own messaging has
been more prudent. In a speech in early
March, governor Andrew Bailey sig-
nalled he thought financial markets
were wrong to assume the bank would
increase rates further.
Huw Pill, the bank’s chief economist,
Shopping has said the BoE needs to exercise
around: US “judgment” and should not consider
consumer price stronger activity to be necessarily infla-
inflation for tionary because of the impact from fall-
April is ing gas prices.
predicted to Annual consumer price rises in the
remain at an UK stayed in double digits in March at
annual rate of 10.1 per cent, the latest month for which
5%, the same data is available, while average earnings
as in March excluding bonuses rose 6.6 per cent year
Elijah Nouvelage/AFP/Getty on year, according to the Office for
National Statistics.
Craig Inches, a bond fund manager at
Royal London Asset Management, said
he would be “surprised” if the BoE did
not lift rates by a quarter point, given
policymakers’ previous insistence that
its moves would be “data dependent”.
Mary McDougall
Is German manufacturing still
growing?
Germany’s manufacturing sector is
likely to have suffered a downturn in
March, industrial production figures are
expected to show today, following a run
of more positive news.
Economists polled by Reuters fore-
cast output to have shrunk by 1 per cent
between February and March, partially
reversing expansion in the previous
month. In February, output in the euro-
zone’s manufacturing powerhouse rose
to the highest level in more than two
years, approaching its pre-pandemic
figures. But in March, industrial orders
collapsed 10.7 per cent, driven by a
sharp drop in motor vehicles.
The figures indicated that the
rebound in German auto production “is
now reversing”, said Claus Vistesen,
chief eurozone economist at Pantheon.
He expects a sharp downturn in Ger-
man manufacturing in the second quar-
ter after the upturn in the first quarter,
weighing on investment and inventory
German accumulation. “This will hold down
GDP growth close to zero, even as con-
industrial sumers’ spending begins a gradual
production rebound,” he added.
Holger Schmieding, economist at Ber-
is forecast enberg, also expects a fall in March pro-
to have duction data. But he thinks that would
be just a normal correction in volatile
shrunk by monthly data, while production will
1 per cent continue to be sustained by a record
backlog of orders accumulated due to
supply chain disruptions. “Although
they have started to reduce the backlog,
the cushion remains comfortable.”
French industrial production has
already suffered a larger than expected
1.1 per cent fall between February and
March, which reversed the 1.2 per cent
rise in the previous month. Italy’s num-
bers will be published on Wednesday,
with the eurozone industrial output fig-
ures out on May 15.
Valentina Romei
Charlie Munger regard valuations as
unappetising. The company’s cash pile
has risen by $2bn since the start of this
year to $130.6bn, its highest level since
the end of 2021.
Munger last month told the Financial
Times that investors should reduce
their expectations for stock market
returns as the Federal Reserve raises
interest rates and the economy slows.
The pair were joined on stage in
downtown Omaha by Gregory Abel and
Ajit Jain, two Berkshire vice-chairs,
for the company’s much anticipated
annual meeting.
Tens of thousands of shareholders
descended on the Midwest city to hear
from Buffett and the Berkshire team
this weekend, where they discussed
‘It isn’t that employment
has fallen off a cliff . . . but
it is a different climate
than it was six months ago’
artificial intelligence and its effects on
the investment world, their views on
Tesla chief executive Elon Musk — Musk
overestimated himself, Buffett said — as
well as succession at the company.
Buffett was relatively sanguine about
the prospects for the company he has
led for the past 58 years, as well as the
broader economy, which has powered
through aggressive rate rises from the
Fed and a series of bank failures
that have rattled confidence in the
financial system.
He noted that the effects of the slow-
ing economy were only just beginning to
be felt by Berkshire, although he did not
paint a dour picture of the economy.
Buffett said he expected earnings to
decline at the majority of its businesses
this year. “It isn’t that employment has
fallen off a cliff or anything but it is a dif-
ferent climate than it was six months
ago,” he said. “A number of our manag-
ers were surprised. Some had too much
inventory on order.”
Higher interest rates, however, have
also been a boon to Berkshire. The com-
pany invests the vast majority of its
$130.6bn of cash in short-term Treasury
bills and bank deposits. Income on
those short-term bills and cash-like
deposits surged to $1.1bn, up from
$164mn a year before.
Berkshire reported a profit of $35.5bn
in the first quarter, or $24,377 per class
A share, driven largely by a rally in
stocks that lifted the value of its $328bn
portfolio of shares. Profit was up from
$5.6bn a year before. Operating earn-
ings — Buffett’s preferred performance
measure for Berkshire’s diverse group of
businesses — rose 12.6 per cent from the
year before to $8.1bn.
Monday 8 May 2023 ★ 9
10 ★ FINANCIAL TIMES Monday 8 May 2023

MARKET DATA

WORLD MARKETS AT A GLANCE FT.COM/MARKETSDATA

Change during previous day’s trading (%)
S&P 500 Nasdaq Composite Dow Jones Ind FTSE 100 FTSE Eurofirst 300 Nikkei Hang Seng FTSE All World $ $ per € $ per £ ¥ per $ £ per € Oil Brent $ Sep Gold $

-0.343%
1.46% 1.75% 1.22% 0.98% 1.03% 0.12% 0.50% 1.18% 0.091% 0.398% 0.747% 2.99% 1.51%
Stock Market movements over last 30 days, with the FTSE All-World in the same currency as a comparison
AMERICAS EUROPE ASIA
Apr 06 - - Index All World Apr 06 - May 05 Index All World Apr 06 - May 05 Index All World Apr 06 - May 05 Index All World Apr 06 - May 02 Index All World Apr 06 - May 05 Index All World

S&P 500 New York S&P/TSX COMP Toronto FTSE 100 London Xetra Dax Frankfurt Nikkei 225 Tokyo Kospi Seoul
15,961.02 29,157.95
4,120.38 20,390.88 7,778.38 28,188.15 2,500.94
4,105.02 15,580.92
20,159.55 7,673.00 2,388.35
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Nasdaq Composite New York IPC Mexico City FTSE Eurofirst 300 Europe Ibex 35 Madrid Hang Seng Hong Kong FTSE Straits Times Singapore
12,176.16 54,945.84 1,840.46
20,331.20 3,311.12
11,996.86 20,049.31
1,808.76 9,157.40 9,147.30
53,498.39 3,266.63
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61,054.29
7,432.93 27,348.57 3,334.50
33,482.72 33,531.11 102,880.24 27,179.37
100,977.85 7,345.96 3,272.86 58,991.52
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14 ★ FINANCIAL TIMES Monday 8 May 2023

WORK & CAREERS

Negotiation in
‘
To mark the recent centenary of the former executive at retailer Gap, and communicate effectively with a partner about.” Davisson added: “We see birth
Harvard Business Review, editor-in- now a consultant. (or potential partner); to consider a rates falling, people not wanting to

the age of the chief Adi Ignatius dipped into the

archive and found, among other things,
an article from 1956 titled “Successful
dual-career Wives of Successful Executives”.
“It is the task of the wife to co-operate
couple in working towards the goals set by her
husband,” the article stated. “This
means accepting — or perhaps
encouraging — the business trips, the
long hours at the office, and household
moves dictated by his business career.”
It got worse. The husband, the piece
continued, “may meet someone who
conforms more closely to the new
social standards he has acquired while
moving socially upward; he may
discard his wife either by taking a new
The book takes a both/and rather
than an either/or approach to the
issues surrounding professional and
domestic life. The authors reject an
artificial notion of “balance”. Instead
there are necessary, hard-headed but
human trade-offs. “If you want lives
that are not just two individuals
pursuing career aspirations separately,
then it takes a lot of negotiation and a
lot of discussion, and compromise,”
Davisson explained when I met the
authors in London.
Strober led a course called “work and
family” at Stanford’s graduate school of
business (SGSB) until her retirement in
2018. She was one of the first female
broad range of choices, avoiding crude
either/or decisions; to check-in with a
sounding board of friends and family;
and to explore the likely short-term
and long-term consequences of any big
decisions.
Actions will count as much as the
thought processes that precede them.
Davisson said: “The mental models
that we have, particularly from our
parents, are incredibly powerful.” If you
don’t see what an equal partnership
looks like in your home, she added, it
might be hard to imagine one.
“I have two boys,” she said, “and they
see my husband as the head chef. They
think it’s funny when I cook . . . They
fund the cost, and then we wonder why
people are not having more children.”
Although Strober’s course was
greatly valued by students — with men,
incidentally, making up 40 per cent of
Davisson participants — SGSB chose not to
continue it after her retirement.
explained That risks the business school
there are reverting to a too narrow focus on
money and how to make it — without
hard-headed thinking about the human factor.
but human Strober is all too familiar with that
split. She cites the 18th-century
trade-offs: “It philosopher Adam Smith’s two books:
takes a lot of The Wealth of Nations, which covers free
markets and the workings of the
discussion and economy; and The Theory of Moral

wife or by concentrating all his
attention on his business.” Yuk.
The rise of the dual-career couple
has transformed the politics of
marriage since the 1950s but some
tensions remain. A recently published
book declares: “The most important
career decision you’ll make is about
whom to marry and what kind of
relationship you will have.”
The words appear in “Money and
Stefan Stern Love: an Intelligent Road Map for Life’s
Biggest Decisions”, written by Myra
Management Strober, professor emerita at Stanford
University, and Abby Davisson, a
faculty members there on her
appointment in the early 1970s.
“If I had proposed my course at the
business school would be called
‘money and love’ instead of ‘work and
family’ I would have had some
pushback,” she told me. But wasn’t this
in California in the days following the
“summer of love”? “The business
school was not buying that then
either!” she noted.
There is a checklist or framework to
help the reader make better life
decisions. These are the five Cs: to
clarify what is important; to
will have this model of us sharing the
workload. All the home responsibilities
do not fall on one person.”
During the Covid pandemic,
employees, parents and carers had their
roles blended as they worked from
home and tried to keep family life going.
For some that has been an opportunity
to more equally share the domestic
workload, for others it has made the
work/life balance harder to achieve.
The authors say more is needed. “We
need to invest in excellent childcare,”
Strober said. “This is something
business leaders need to be thinking
’
compromise” Sentiments, which focuses on social
cohesion and relationships.
“Most people only know about The
Wealth of Nations,” said Strober. “It’s too
bad that he separated out those two
books. Had he blended the discussion
of wealth with the discussion of
altruism we might not be quite so
separated on them.”
We need money and love. “Having
money isn’t worth it unless you also
have love,” Davisson said. And Strober’s
final piece of advice? “The trick is to find
someone to be your life partner who
has the same philosophy as you do.”

Women in business Business books

Innovation without the
Only connect: hybrid work fuels disruption and how to
supercharge your work life

demand for female networks This month’s recommended titles from FT journalists

‘Spark: 24 Concepts
to Ignite, Unstick or
Supercharge Your
Work Life’, by Chris
Mettler and Jon
Yarian
Groups solely for women
offer support to senior
professionals but some
face claims of elitism,
writes Emma Jacobs Think about a book where
‘Beyond Disruption:
Innovate and
Achieve Growth
without Displacing
Industries,
Companies or Jobs’,
by W Chan Kim and
Renée Mauborgne
In their new book, the
authors of bestseller Blue
Ocean Strategy link two
management obsessions:
the “fourth industrial
revolution” and
stakeholder capitalism.

J
oanne Webb thought The Girls
Club virtual network she set up
for senior women looking to
let off steam during Covid lock-
downs would “fizzle out” once
restrictions had lifted.
In fact it has “taken off [over WhatsApp,
Zoom and LinkedIn]. Over the last couple
of months, we’ve had two or three
hundred join,” the management consult-
ant said.
Entrepreneur Sharmadean Reid
launched The Stack World in 2021, with
investment from Tetra Pak heir Magnus
Rausing and former Monzo Bank head
Tom Blomfield, in response to “women
feeling neglected, stuck at home”. Its
free and paid-for premium membership
has grown to 14,000.
Other female members’ clubs are
experiencing a similar trend: remote
work patterns that have come into force
during the pandemic have encouraged
women to network outside of the office,
often as a way to increase their visibility.
“As you build your career . . . you need
visibility and to be strategic. That needs
networks,” said Nicola Grant, founder
of SHe2 Leadership, a group aimed at
senior women wanting to develop skills
and contacts to get C-suite jobs.
She added that women’s desire to con-
nect is also partly driven by frustration
with employers’ ineffective diversity ini-
tiatives. Grant criticised some compa-
nies’ “inauthentic or unsustainable”
female leadership programmes “that fail
to deliver long-term support to them and
critical changes to the company culture.”
Female networking groups typically
offer in-person or virtual meetups for
professional women looking to advance
their careers. Some, such as The Girls
Club, offer free, virtual events covering
topics such as how to become a non-
executive director and masterclasses on
public speaking and ESG. Others, such
as AllBright and Chief, charge member-
ship fees.
Many of the people who set up the
groups said the pandemic had fuelled
demand — and changed how women
wanted to use their time.
“Hybrid work models [mean women]
crave a network more than ever . . .
whether it’s bouncing ideas or [curbing
their] isolation,” said Viviane Paxinos,
chief executive of AllBright.
Florence Villesèche, associate profes-
sor of Copenhagen Business School, who
has researched female networks, said
some women felt they needed to justify
“spending their time out of the home”,
which men often did not. “If you’re
going to take time out to go to some-
thing, you need to make it impactful
post-pandemic,” added Grant.
The opening at the start of this year of
a new clubhouse in central London by
Chief, the US members’ group that
charges up to $7,900 (and £7,900 in
Many of the the UK) and bills itself as a club for
people who set “C-suite, senior executives, and accom-
up the groups plished VPs”, is the latest sign of confi-
said the dence. Chief said its membership dou-
pandemic bled last year to 20,000, with the major-
had increased ity of fees paid by employers.
demand — and Its high price tags and focus on senior
changed how women have sparked charges of elitism
women wanted — although Chief said there was a niche
to use their time for senior executives who were over-
FT montage/Getty/Unsplash whelmed by the demand to mentor
junior female workers, run the home and
provide care.
Céline Crawford, head of operations
and people at Fertifa, a women’s health
business, said joining Chief’s London
club alleviated her isolation. In finance
and technology, “you’re often the only
woman in a leadership team”, and need
support rather than only advice.
There are more virtual events now,
which some group founders said had
proved popular during the pandemic.
Claire Davenport, former chief execu-
tive of Not On the High street, who runs
Women In Tech — Execs and Non-exec
Directors (Wits end), with eight female
CEOs (including from Channel 4 and
BorrowMyDoggy), said that while
women wanted to attend in-person
events, they were much more amenable
to Zoom than in the past. “Women
couldn’t always manage networking as
easily as men [usually due to childcare
issues], and now we have found formats
that genuinely work to build networks
remotely.” Despite the clubhouses, Chief
also said virtual sessions were popular.
Working It Some networks have themselves suf-
newsletter fered from claims of exclusivity.
Want to get In March, a member highlighted this
ahead at work?
Sign up for all issue when she resigned her membership
the latest from Chief after three years. Denise Con-
insights, roy published her reasons on LinkedIn,
delivered to which she said included Chief’s ghosting
your inbox every of candidates who were women of colour,
Wednesday a lack of assistance for under-repre-
sented groups and posturing rather than
ft.com/
newsletters political campaigning on issues that
affect women.
“I’m quitting because I had bigger
hopes for this organisation. Bringing
20k accomplished women together has
the potential to change the world. Yet,
mobilisation doesn’t seemto be on the
agenda . . . This is white feminism at
its core.”
Her criticisms echoed those levelled
in the past to former Meta executive
Sheryl Sandberg’s Lean In groups, which
encouraged women to fit into — rather
than challenge — corporate structures.
One media executive who decided
against joining Chief pointed out there
was an inherent tension in high-end net-
works espousing inclusivity. “How do
you square the circle of elite and diver-
sity?” Frenchie Ferenczi, the former
director of community at The Wing, the
women’s co-working space that itself
‘As you build your career
. . . you need visibility
and to be strategic.
That needs networks’
faced discrimination claims before it
closed in 2022, said: “The difficulty is if
people say the message is inclusivity,
but the reality isn’t.”
Chief pointed to data showing 33 per
cent of its members in the US identified as
a person of colour and said it provided
$5mn in grants to members needing
financial assistance last year. Supporters
highlight that private women’s clubs are
held to different standards than those for
men; women’s clubs are expected to be
more inclusive whereas their male coun-
terparts are fine to be elitist.
Rebekah Bostan, director of research
and operations at InsTech, a commu-
nity of insurance tech innovators,
warned there was also a danger of
“groupthink”. “It’s really easy to get
your views reinforced, as women
[members] have probably had similar
experiences.”
chapters are like songs on
a playlist: organised in a
way that readers can
rearrange them, mark their
favourites or recommend
to others in whatever
order they prefer.
“Don’t think of it as a
book,” say authors Chris
Mettler and Jon Yarian
“Think of it as a
conversation.”
Although the concepts
covered in Spark relate to
and depend on each other,
the usual linear narrative is
not important in this
unconventional manual —
you go through them in
almost any order, letting
the ideas bounce around.
The aim is to spark
people into action and
Villesèche added: “Being with other productivity, not to dictate
women may help members understand rules or presume that
that barriers are not necessarily per- others would share the
sonal but more systemic.” authors’ perspective on
Bostan believed diverse networks what should or should not
could be more productive. “If you’re in be done. It is a guide to
a senior position, you’re managing inspire and to provoke
people. The more different people you achievement and
can meet, the better you can manage. innovation at your own
It’s a bit like reverse mentoring. We give pace.
managers so little support and struc- The 24 topics
ture. Getting someone to talk about approached are organised
their experience means I can get some- in three main sections.
thing out of it and apply it to my team.” Section one includes
While the pandemic may have concepts you can work on
boosted demand for women networks, without other people, such
some are still failing to reap financial as integrity. The second is
benefits. focused on partnerships
AllBright, for example, has more and ideas you can work on
than doubled its membership from with someone else. The
around 1,400 in December 2020, to third is dedicated to
more than 3,000 last year, but it is yet concepts shared across
to be profitable. The pandemic forced entire organisations, for
temporary closures of its clubs and example, agile operations.
then later permanently closed its Los
Angeles club. Losses in the last financial
The final part of the
book presents
year were £6mn, down from £13.7mn in combinations and
the previous year ending March 2021. sequences for the terms
Since Paxinos became CEO last August, examined and how they
her focus has been to stabilise the busi- lend themselves to each
ness, which is now trading at pre-Covid other. Curiosity, for
levels. example, is the necessary
“Communities don’t grow on venture precondition for creativity.
capital timelines,” said Ferenczi. While It is possible to produce
the former Wing employee believed action without curiosity,
there was nothing “inherently problem- but it is difficult to be
atic about paying” to join a community creative without the desire
— a fitness club, for example, might for something truly new.
have a thriving social life but “the value While Spark is far from a
proposition is clearer. If you’re just pay- step-by-step handbook, it
ing for community it creates differing is written in everyday
expectations.” language, offers examples
Reid said: “If you want to build some- that people can relate to
thing with longevity, it might be slower than and clearly identifies
you expected. If you want to build trust and important concepts that
community, you have to be slow.” drive success across
Some remain sceptical of the promise individuals, teams and
of formal commercial networks. Bostan whole organisations.
said: “Lean in, lean out. I haven’t seen (Leo Cremonezi)
many make a substantial difference.”
As well as creative
destruction, and the use of
their own theory, which
urged businesses to
redefine an industry
problem and cross
industry boundaries to
solve it, there is a third
option: “non-disruptive
creation” of new markets
outside the boundaries of
existing industries.
Historic examples include
sanitary towels or
microfinance. These were
innovations where “social
good and economic good
went hand in hand”
without upsetting
established industries.
Pursued at scale, their
ideas could help
entrepreneurs and
governments by “creating
new jobs with little
displacement of existing
ones”, even as automation
advances, they maintain.
It is an enticing vision,
which could in theory
minimise the backlash that
disruptive innovations
have triggered throughout
history.
In practice, some of the
methods they propose for
achieving such
breakthroughs are less
novel. “Enablers” for non-
disruptive growth include
old favourites such as
resourcefulness and a
“‘could’ not ‘should’”
mindset. The idea of
non-destructive creation
has also been around for
a while.
Disruptive innovation is
so embedded that it is
hard to see why an
ambitious entrepreneur
with a brilliant idea would
step away from a golden
long-term opportunity just
because it might have a
short-term impact on
incumbent industries.
Still, Beyond Disruption
is a high-profile
contribution to the
running debate about how
to shift such thinking.
(Andrew Hill)
Monday 8 May 2023
The
Henry Mance
Interview
‘We should have
the freedom to
choose how we die’
LU DW I G M I N E L L I
The 90-year-old Dignitas founder
and Swiss lawyer says assisted dying
should be available to almost everyone
I
f you travel to Dignitas in earnest,
you need various things: medical
records, money, courage. Before I
made the trip, I was given just one
condition: do not reveal the
address. Desperate people sometimes
turn up at the offices unannounced.
Dignitas seems worried Financial Times
readers might head to Zurich, demand-
ing immediate discharge. It prefers that
those interested phone up — which
they do, especially after weekends and
holidays and, I’m told, full moons.
To many people in Britain and
beyond, Dignitas is synonymous with
assisted dying. This month marks
25 years since it opened its doors in
Switzerland, the only country in the
world that allows non-residents to seek
help with suicide. It has facilitated the
death of more than 3,700 people. On
average, one Briton makes their final
journey there every fortnight.
But Dignitas doesn’t measure itself
solely, or even mainly, by those deaths.
At its heart it is a campaign group,
which wants worldwide recognition of
what its founder, Ludwig Minelli, has
previously described as “the last human
right”. In its quarter century, its idea
has spread: assisted dying is now legal
in 10 countries, as well as several US
states. French president Emmanuel
Macron has promised to present a draft
law by the autumn. Britain has lagged
behind, even though three-quarters
of the public support legalisation, but
the authorities in Scotland and Jersey
have pledged change.
Minelli, though, is more controversial
than his cause. He calls suicide “a mar-
vellous possibility”. He says assisted
‘Children who are very
sick have the capacity
of decision from about
nine or 10 years old’
dying should be available to almost
everyone, and so should euthanasia,
where a doctor administers the poison.
Five years ago, he was prosecuted for
pushing Switzerland’s liberal suicide
laws too far. He was acquitted but
foreign campaigners often keep their
distance, emphasising that they seek
much narrower provision.
There is also an irony. Unlike those
he helps, Minelli keeps going. He is 90.
When I walk into Dignitas’s nondescript
offices in Zurich’s outskirts, he walks
over to meet me — an orange-and-blue
tie round his neck, a day’s stubble round
his chin. He is focused, cheerful, active.
“Three times a week, I have two hours
of training!” he tells me, gleefully
showing he can still touch each elbow
on the opposite knee. “I’m working all
day and half the night.” Here, I realise,
is a poster boy both for early death and
for long life.
Originally a journalist, Minelli quali-
fied as a lawyer in his fifties and was
captivated by the potential of the
European Convention on Human
Rights. Switzerland had never criminal-
ised assisting suicide, and in the 1980s
groups had emerged to advise people
about end-of-life options.
Minelli, a lawyer at one group, wanted
to go further and facilitate deaths.
He was thwarted at an internal meeting
on a Saturday, and drew up the paper-
work for a breakaway organisation
called Dignitas the next day. “On Mon-
day, we were operational.”
What does he see as a good death?
He cites his paternal grandmother:
“She was in her garden, looking at
her flowers, then she fell down
dead. No pain, no fear, just life
then death. My other grandmother
had big difficulties when she was dying.
I heard what she said to her doctor,
‘Couldn’t you do something so that
it goes faster?’ The doctor said, ‘Oh no,
we are not allowed. But I will not do
something that makes it longer.’” Digni-
tas is “the second best form of death.
The garden is best!” — at least for the
person involved.
The Swiss model allows doctors to
prescribe life-ending drugs to an adult
with the capacity to make the decision,
as long as they are not acting out of
selfish motives. Minelli would go
much further. He would allow children
as young as nine to choose death. He
has two daughters — a marriage coun-
sellor and a writer — and four grandchil-
dren. “I know that children who are very
sick have the capacity of decision from
about nine or 10 years old.” He would
also allow people to order their death
in advance in case they lose their
decision-making capacity: those with
Alzheimer’s should be able to say, “if I
am no longer able to know my wife or
my children, I want that the doctor gives
me my death”.
In such a world, how many people
would choose an assisted death? Five
per cent? “Lower.” Dignitas’s analysis
shows that less than 2 per cent of deaths
are assisted. In the Netherlands, which
has more liberal laws, it is 4 per cent.
Change in some countries has come
via the courts, with judges ruling that
bans on assisted dying breach human
rights. “The situation in Germany just
now actually is even better [than
Switzerland], because in Germany you
may also act out of selfish motives!”
laughs Minelli, his sense of humour
verging on the macabre not for the
last time. “This is not our idea,” he
adds hastily.
In Britain, judges have ruled that
parliament must decide, while the
government has declined to give the
issue parliamentary time. Since a 2009
decision by then director of public
prosecutions Keir Starmer, people who
accompany their sick loved ones to
Dignitas are unlikely to be prosecuted.
But some still face police investigation.
Critics say vulnerable people can be
pressured into choosing suicide, and
that legalising assisted dying removes
the incentive for better palliative care.
Nonsense, says Minelli. “A lot of people
choose assisted dying after a long period
of palliative care.” In Oregon, which
restricts assisted deaths to those
with less than six months to live,
89 per cent of patients cited quality of
life as a concern, while only 6 per cent
mentioned the cost of continued
treatment. Dignitas’s patients tend to
be well educated, having been used to
independent lives.
One 2008 study found that a signifi-
cant minority of those choosing assisted
suicide were not terminally ill,
and may have been simply weary of
life. That does not bother Minelli.
“I respect their freedom, and I respect
★ FINANCIAL TIMES 15
FEATURES
Charlie Bibby/FT
they have other ideas than mine.” members, who pay a one-off joining of vulnerability. “I would try to buy a sia . . . Yesterday I learnt that the
He is driven by an “outrage” at restric- fee of about SFr220 and an annual house earlier. I rented for many years.” [Supreme] Court of India has said there
tions on suicide, religious in origin, subscription of at least SFr80, although After two hours, his hearing aids is a right to die!”
which prolong suffering and make peo- most of them will probably never take are faltering; he finds it easier to I leave Zurich, having seen how mak-
ple “neurotic” not “happy”. To him, up the option. speak in German. But his determination ing change is not always a popularity
assisted death is the logical corollary of Minelli is a jovial person to talk to, but is undimmed. “I’m convinced that all contest. In a world of grey, Minelli
medical advances that allow people to not an emotional one. “If I would have over Europe, even beyond, the majority knows the value of finding something
be kept alive. “We should have the free- my life once again—” he begins. I hold of people are ready and want it that you see as black and white — and
dom to choose at the end of life how we my breath expecting, finally, a moment — assisted dying and euthana- clinging on to it for dear life.
should die — where, with whom.”
Voters have agreed. In 2011, 78 per
cent of Zurich voters opposed outlawing
assisted suicide for foreigners. Last year,
76 per cent of voters in the canton of
Valais voted to allow assisted suicide
in hospitals and care homes.
Minelli is less popular, but he claims
not to care. The 2018 court case against
him centred on whether he had had
selfish motives in arranging the death of
a woman who was proposing to leave
Dignitas SFr100,000 (about $112,000)
in her will. Three doctors declined to
help her die, but Dignitas found a fourth
who would. Questionable, but legal.
“I know the limits,” says Minelli.
But does he? A decade ago, he was
accused of loading his car full of urns
of ashes of Dignitas members, and
dumping them unceremoniously in
Lake Zurich; he was reported to have
‘Death is a part of life,
and I think it’s essential
everybody should think
that they will die one day’
admitted it. At this point, Minelli’s
colleague Silvan Luley interjects: “First
of all, he didn’t — it’s not him.” Minelli’s
denial is less conclusive. “We are just
following their wishes.” So he dumped
the urns? “I don’t answer those ques-
tions,” he chuckles.
How has thinking about death
affected Minelli’s life? “Death is a part of
life, and I think it’s essential that
everybody should think that they will
die one day.” People need to organise
their affairs.
Does he want to live to 100? “If I’m
in the condition I’m in now, I would like
to have my 100, my 110. I’m working,
I’m interested in what is happening in
the world, I’m interested in what is
happening at Dignitas. I see every email
coming in and going out. I’m still
laughing about parliaments making
laws [limiting assisted dying to those
whose life expectancy is] only six
months: what a stupidity. I know my
Mark Twain: prognoses are difficult,
especially about the future.”
I ask if he has ever had a moment
where he wanted to die. “No, never.” He
would like to die like his grandmother,
collapsing in the garden. Has he had all
the conversations that he wants? “I’m
prepared, I know that every day I can
die.” But when I press him, his view is
starkly practical. He tells me the
previous night, after midnight, he
checked his bank statements and
updated his records. The next day
his younger daughter is due to spend
the whole day getting to grips with his
computer and book-keeping.
On the day we meet, a man is due
to die in Dignitas who first contacted
him in 2011. The organisation, with
its 30-odd part-time staff, will outlive
Minelli. Nearly 12,000 people are
16
‘I don’t need 150 galleries to sustain this model’
Nazy Vassegh, founder of the
London mini-fair Eye of the
Collector, aims to sidestep
obstacles by being nimble.
She talks to Melanie Gerlis
L
ondon’s art-fair scene has suf-
fered some high-profile casu-
alties this year, but Nazy
Vassegh, founder of the up-
and-coming Eye of the Collec-
tor event, believes she has a recipe for
reinvention. While the fallout from
Brexit and reduced global travel during
the pandemic prompted both Master-
piece and the summer Olympia Art &
Antiques Fair to call it a day, Vassegh, a
former chief executive of Masterpiece,
believes there is still plenty of appetite
for a more intimate event in the city.
“I started with the concept of enjoy-
ment, discovery and rediscovery, but it
was time to move away from aisles,
booths and tents,” she says. Her event —
which she has never called a fair but
seems comfortable that everyone else
does — instead puts the art directly on
the wood-panelled walls and floors of
the 19th-century Two Temple Place in
central London.
“It is an imagined collector’s house.
Art collectors don’t have an Old Masters
room and a contemporary room. They
mix it up. They have some serious works
and they have some eclectic pieces,” she
says. Among the established and emerg-
ing artists on view in this year’s Eye of
the Collector, whose third edition runs
May 18-20, are Barbara Hepworth (Alan
Wheatley Art), Henri Cartier-Bresson
(Peter Fetterman Gallery) and Antony
Micallef (Dellasposa Gallery).
Vassegh works with a relatively small
number of galleries who supply art for
her to hang — just 21 bringing about 160
works this year. The smaller size pro-
tects Vassegh from some of the variables
that the larger fairs face, especially now
that exhibitors are less committed to
doing the same events every year.
“Brexit is a problem for all of us involved
★ FINANCIAL TIMES
ARTS
Clockwise, from above: in art,” she says. “There’s more red tape,
Nazy Vassegh; her Eye it’s complicated and costly to ship
of the Collector event, things. We have fewer international gal-
which takes place in a leries this year, but we have a waiting list
19th-century neo-gothic because we’re small. We are very nim-
mansion in London; Pippa ble. I don’t need 150 galleries to sustain
Young’s ‘Dancing on the this model.”
Brim of Chaos’ (2022), The size of the event makes choosing
among the works this year its works more manageable for Vassegh,
Alex Board
an experienced adviser who personally
picks each artist, supported by a curato-
rial committee. When it comes to vet-
ting works for authenticity and origin,
“We work closely with our select galler-
ies to ensure all works are accompanied
with full provenance and cataloguing
from an early stage.”
A determined self-starter, Tehran-
born Vassegh attributes her focus and
adaptability to her upbringing. “I left
Iran when I was nine, the year before
the [1979] revolution. My father could
see that the country was changing and
also thought I should have more expo-
sure than just him and my grandmother
[she lived with them]. So he took me to
Los Angeles — we called it Tehrangeles
— to live with my uncle and his family
for a year.”
Vassegh then went to boarding school
in the UK, at which point her father gave
her the choice of going back to Iran or
moving to London to live with her
mother. “Not many 10-year old girls
with Iranian fathers get to make that
sort of decision. And once I did decide to
stay in the UK, I was 100 per cent into it
because it was my choice. That taught
me a lot.”
Before setting up as an art adviser in
2010, Vassegh was at Sotheby’s for 19
years, latterly as managing director of
its Impressionist and Modern art
department. The idea for Eye of the Col-
lector came to her when visiting the
Venice Biennale in 2019, she says. “I
Jazz, Star Trek and the power of memory
PODCASTS
Fiona
Sturges
P
eter Pallai was seven years
old and living in hiding in
Hungary when the second
world war ended. He and his
family were Jewish; three of
his grandparents, four uncles, three
aunts and four cousins died in the
Holocaust. His mother had been taken
away to be transported to a death camp,
and his father conscripted to a
Hungarian labour battalion to serve on
the eastern front, though both escaped
and were reunited with their son. Peter
had been kept hidden from the Nazis by
a series of “courageous gentiles”; among
his earliest memories are “bombs
exploding and the terrifying whine of
the Soviet rocket launchers known as
‘Stalin’s organs’”.
Pallai’s recollections feature in
Promenade, an independent podcast
about memory which is back for a
second season. Elegantly produced and
curated by Andy Gaffney, it comprises a
series of beguiling self-portraits from all
over the world in which individuals
reflect on the sounds, sights and smells
that transport them to different times.
The episodes are short — between
three and 15 minutes — but rich in detail
and atmosphere.
Pallai describes hearing Debussy’s
Clair de Lune being played through a
knew that collectors were suffering
from fair fatigue and had been thinking
about how to do something different.
Then I went into a palazzo and realised,
‘I want this.’”
The gallerist Tanya Baxter says
Vassegh has hit the spot. “Some art fairs
can be too overwhelming to focus, but I
saw some serious collectors there last
year, with the intention of buying some-
thing extraordinary. Nazy’s curation
allows them to have a closer relation-
ship with the art.”
Baxter brings work by several estab-
lished artists, including Bridget Riley,
William Scott and Antony Gormley, to
Eye of the Collector this year.
window of his apartment building at the
end of the war. “I had never heard
anything that beautiful before. It gave
me a powerful feeling of peace having
broken out. There would be no more
killing, no more danger, no more
hiding.” Later, aged 13, he heard Louis
Armstrong singing Fats Waller’s “Ain’t
Misbehavin’” on a German radio station
and felt an “elation I had never
experienced before”. Jazz was banned
by Stalin, but for Pallai a life-long love
affair was sparked.
He isn’t the only one for whom music
is a portal to the past. We meet Sasha,
who grew up in Queens, New York, and
would sit in the back of the family’s
cobalt-blue Subaru and observe her
mother singing along to “I Want to
Break Free” by Queen. Sasha says: “It
was the first time I knew she was
trapped . . . by the constraints of
domesticity, her physical body and her
Peter Pallai as a child and an adult; aged seven he was hidden from the Nazis
Monday 8 May 2023
The event has faced some criticism —
that it is too light, too easy on the eye for
the high-minded art crowd. Vassegh’s
marketing style, which makes good use
of Instagram and her own glamorous
appearance, adds to a sense of superfici-
ality among some.
She counters with conviction. “I don’t
need to apologise for presenting art in a
beautiful setting,” she says. “It’s not
fluff. There is still connoisseurship. Col-
lectors and art lovers enjoy Eye and the
most important thing is that it is a com-
mercial success [for the galleries].”
Another measure of success, she says,
is that about 60 works are being made
especially for the fair this year, includ-
ing by the textile artist Anya Paintsil (Ed
Cross gallery), the painter Pippa Young
(Arusha Gallery) and several pieces of
contemporary design through Sarah
Myerscough Gallery.
Gallerist Kristin Hjellegjerde joins the
fair for the first time this year with work
by six artists, including rising stars Sara
Berman and Richard Stone. She says, “It
was Nazy who won me over.” Vassegh’s
‘Brexit is a problem for
all of us involved in art.
There’s more red tape,
it’s complicated and
costly to ship things’
event has also won praise for being an
enjoyable experience. “It’s not a circus,
like so many other fairs. I find it a
refreshingly gentle way to see works,”
says art adviser Helen Macintyre, who
recently joined the fair’s 18-person
strong advisory council.
Having the fair in London is, Vassegh
says, a no-brainer: “It had to be here, my
whole career has been in London.” The
city, she says, “is core to the concept”,
though she hints that Eye of the Collec-
tor could have a future elsewhere too. “I
wouldn’t have dared to say so before
now, but the platform could go any-
where.” Mindful of her forthcoming fair,
though, she quickly stops this line of
questioning and instead delivers a char-
acteristically determined imperative:
“Let’s make this edition as successful as
possible first.”
May 18-20, eyeofthecollector.com
Patrick Heron’s
‘3 Reds’ (1967),
exhibited by
Alan Wheatley
Art, is among
the works at Eye
of the Collector
desires, and I wondered if it was my
fault.” For Philippa, it is a TV show that
sends her spinning back to childhood,
specifically Star Trek, which helped her
come to terms with her identity as a
trans woman.
Each of these stories is lodged in
individual experience, though nearly
all are underscored by a sense of
longing. It’s there in Kevin’s
recollections of moving in with his
grandmother in Cork, Ireland. Her little
terraced house was so overcrowded that
the only place he could find to do his
homework was the stairs. Kevin hated
that he had nowhere else to go, though
when he visited the house recently, he
found himself perched on the stairs,
fondly recalling the simplicity of
childhood. Promenade shows how the
past is never far away and how, for
better or worse, our memories are the
making of us.
Monday 8 May 2023 ★ FINANCIAL TIMES 17

FT BIG READ. BALKAN PENINSULA

The war in Ukraine prompted the US and EU to renew efforts to stabilise the western Balkans and drain
influence from Russia. But negotiators have run into one of Europe’s most intractable disputes.
By Marton Dunai in Pristina

V
eteran Balkan politicians
know better than to be
enthusiastic about deals
made under pressure in
diplomatic back rooms. But
the events of March 18 gave Visar Ymeri,
a former leader of Kosovo’s ruling party,
reason to be optimistic.
“We have a deal,” the EU’s foreign
affairs chief, Josep Borrell, said as he
wrapped up a marathon summit in
Ohrid, North Macedonia. “Kosovo and
Serbia have agreed on the . . . normali-
sation of relations.”
Ymeri was overjoyed, he recalls over
coffee in a swanky new shopping mall
in Pristina. Such a deal had been
decades in the making, and might result
in Serbia finally recognising his home-
land as a sovereign nation — a goal
Kosovo had sought since its ethnic
Albanian leaders declared it a republic
more than three decades ago, sparking
years of conflict and tensions.
That recognition would open the
floodgates of investment, sorely needed
in one of Europe’s poorest corners. But
more importantly, it would pave the
way for Kosovo, Serbia, and the rest of
50 km
A

SERBIA

Mitro
trovica
ro
MONTENEGRO

KOSOVO

ALBANIA
Majority
ethnic
Serbian
Tira
rana
ra Majority
ethnic
Albanian

the western Balkans to join Euro-Atlan-

tic alliances such as the EU and Nato,
stabilising the entire volatile region at
a crucial moment.
The Russian invasion of Ukraine cast
a new light on the western Balkans,
where Serbia dominates. Belgrade has
refused to join European sanctions
against Russia, its traditional Slavic ally,
and a vocal Serb minority has openly
sympathised with Moscow’s war. The
US fears that Serbia’s regional influence
could cause instability to metastasise.
So western diplomats have attempted
to steer Serbia away from the gravita-
tional pull of Vladimir Putin, promising
money and a quicker EU membership in
return for compliance, and threatening
isolation and divestment otherwise.
France, once reluctant about EU
enlargement in the western Balkans,
switched gears and teamed up with
Germany for a powerful diplomatic
tandem that would drive the process
alongside the rest of the EU and the US.
Serbia began to move, expanding ties
to non-Russian energy sources which
could potentially deprive Moscow of its
most important channel of influence.
The pivotal issue of Kosovo, however,
remains. Russia has won Serbia over in
part by backing Belgrade over Pristina
in international forums like the UN. If
the west can help defuse those tensions,
it will remove leverage from Moscow.
German chancellor Olaf Scholz told
Kosovo premier Albin Kurti and Serbian
president Aleksandar Vučić “this is the
moment when you have to show leader-
ship”, a German diplomat says.
The Ohrid summit suggested that
moment had come — to Ymeri, at least.
“I was one of the few enthusiasts in
Pristina,” he says. “Everybody was very
cynical about the agreement, but I was
really hoping the interest from the EU
and the US had really come back to the
region because of security issues, and
we’d see [an] improvement.”
Yet within a month, Ymeri had joined
the cynics. A key election in Kosovo’s
Serb-majority north, seen as the first
test of the agreement, had gone awry.
Instead of making peace with its former
province, Serbia would shackle Kosovo
for as long as it could, he was convinced.
Equally disturbing to him, Kosovo was
also unwilling to compromise.
“After Ohrid everything went quiet,”
he says, drawing sharply on an e-ciga-
rette. “It gave me the impression that
the idea was to have an agreement
on paper, not to implement it. Which
means nothing.”
The next time Vučić and Kurti met, at
a summit in Brussels on May 2, the deal
looked all but dead. Kosovo’s Kurti
tore up the resolution proposal and put
forward an alternative vision with
ethnic Serb representation defined as
non-territorial, and under the strict
financial oversight of Pristina. Vučić
said he could not proceed like this.
A day later, the chief US negotiator in
the region, deputy assistant secretary of
state Gabriel Escobar, urged patience in
a reply to Financial Times questions.
“It’s only been a month and we are
now discussing the implementation,” he
In search of a solution for Kosovo
‘The said. “We had a small level of progress
. . . the EU needs to continue . . . to
internationals bring the two parties together to start
bit off more looking for compromise solutions.”
than they Escobar insists the Ohrid agreement
is legally binding for both sides, and says
could the US, along with the EU, is fully com-
chew. The mitted to hammer out a compromise.
relationship EU foreign affairs spokesman Peter
Stano told reporters Brussels would
is so complex keep working towards a deal, adding
you cannot that Kurti had “violated the letter and
make a spirit of the dialogue agreement”.
This was little surprise to Jovana
clean cut’ Radosavljevic, executive director of
New Social Initiative, a rights group in
northern Kosovo. The deterioration of
relations between Serbia and Kosovo
has a long and tortuous history that
defies easy breakthroughs, no matter
the amount of pressure from the west.
“The internationals bit off more
than they could chew,” she says. “The
relationship is so complex you cannot
make a clean cut.”
Vučić had foreseen this might be the
case. Speaking in January during the
most intense period of talks, he told the
FT that the sides were so far apart on
Kosovo that a mutually agreeable
compromise was impossible. “[Both
sides] will be equally satisfied if they are
equally dissatisfied,” he said.
The deal that wasn’t
Kosovo had never been a sovereign
nation before declaring independence.
The former province is the cradle of
Serb culture, important for national and
religious sentiment.
Ethnically it has always been mixed,
with Albanians forming the largest
group in the area for over a century.
Kosovo fought a war of independence in
the late 1990s against what was by then
a diminished Yugoslavia and eventually
broke away from Serbia in 2008.
Serbs today comprise just 5 per cent of
Kosovo’s population, about half of them
occupying four districts in the country’s
north where they are a big majority.
Most consider themselves Serb citizens
and resist Pristina’s efforts to issue Kos-
ovo IDs or car licence plates; attempts to
enforce those led to strong and some-
times violent resistance last year.
The solution proposed in Ohrid in
March was a quid pro quo. Kosovo
would allow the formation of an associa-
tion of Serb-majority municipalities
(ASMM), which would have certain
local executive powers and be allowed
to maintain ties to Serbia. Belgrade,
meanwhile, would not object to Kosovo
joining international organisations.
It was a difficult proposition. Pristina
feared that the ASMM might become an
uncontrollable platform, a state within
a state advancing Belgrade’s interests.
And Serbia was asked, essentially, to
pave the way to recognise Kosovo as
a sovereign state — the ultimate political
sacrifice for Belgrade.
From last August to January, “we put
pressure on both sides equally, measure
by measure, point by point”, a European
official says. “Each side got a little and
gave a little. We were trying to satisfy
each side.
“At one point, [French president]
Macron delivered a hard message to
Kurti: you need to make this a priority if
you want things to advance,” the official
adds. “He also told him that Kosovo
could not keep coming back on or
changing its positions.”
In the end, the Ohrid agreement
contained both elements, each watered
down a little. Kosovo was ready to sign
it, but Serbia was not, with Vučić citing
red lines like the recognition of Kosovo
and its UN membership.
Signed or not, the deal had the tenta-
tive backing of both sides and should be
the basis for future negotiations, the EU
and the US insisted. Yet within weeks,
the Ohrid agreement began to unravel.
The first test came on April 23, when
Kosovo’s four Serb-majority districts
held elections to restaff much of the
public sector; thousands quit last year in
protest against Pristina’s rule.
The situation was desperate: mayor-
ships, city councils and about 5,000
public jobs were vacant in an area of just
40,000 inhabitants.
But local Serbs demanded the
increased municipal autonomy laid out
by the Ohrid agreement as a precondi-
tion of participation in the vote. Kurti
countered by insisting on recognition of
Kosovo and saying the Ohrid deal “must
now be implemented — fully and imme-
diately”. The Serbs announced they
would boycott the vote.
The atmosphere was tense on election
day. At voting precinct 2806B, a crew of
special forces arrived shortly after the
station opened at 7.30am, holding long-
barrel automatic rifles. Local Serbs
detest them, seeing them as a tool of
oppression by Pristina. “This is going to
be a long day,” said the election monitor,
a woman in her thirties from the nearby
town of Leposavic.
But little oppression would happen
that day, perceived or otherwise. The
armed officials soon left, and the
precinct recorded zero votes.
Similar scenes played out across the
northern districts. By the end of the day,
barely a few dozen Serbs and a few
hundred Albanians had voted in all four
counties. With no participation thresh-
old, the counties all elected Albanian
mayors and assemblies.
With a deadlock all but certain as
Serbs rejected the results of the vote, the
European Commission issued a terse
statement the next day. The election
process was legal, it said, but “is not and
cannot be considered business as usual”.
The Ohrid deal was the “right plat-
form” to find solutions, the commission
added. “There is an urgent need for
a serious dialogue between the govern-
ment of Kosovo and Kosovo Serbs in the
north to this end. So far little progress
has been made.”
‘Stabilocracy replaced democracy’
Serbs in Kosovo say they are willing to
talk — but feel as if both Pristina and
Belgrade exclude them from discussions
about their future.
Nenad Rašić, an ethnic Serb who
serves as minister for communities in
Kurti’s government, says he has asked in
vain for years to be included. “You want
to integrate the Serb community, and
you don’t involve us in the negotiation
process? That is bizarre,” he says.
Rašić thinks that the international
community wants to sweep the region’s
disagreements under the rug. “Stabiloc-
racy replaced democracy,” he says.
“With the war in Ukraine, the west just
wants stability, and Vučić will keep
placating them for years if that’s how he
hangs on to power.”
Younger people are angry at the west-
ern powers, says Aleksandar Arseni-
jević, a local politician in the ethnically
divided city of Mitrovica. “They don’t
listen to the needs of the Serbs,” he says.
Marko Jakšić, who once worked as
Nationalist a lawyer at the local courthouse but quit
murals in last year, goes further. “Give me some-
Mitrovica, thing to show that Kosovo is my future!
Kosovo, above, We can only bend so far before we snap,
where Serbs and either leave or take up fighting, for
boycotted real, with weapons,” he says.
municipal These undercurrents of anger against
elections in the west risk feeding local support for
April, below left. Russia, already highly visible on the
Local politician streets of Mitrovica. Murals adorning
Aleksandar the city’s walls equate Serbian claims on
Arsenijević, Kosovo with Russian claims on Crimea,
below, says the and giant posters call Putin an honorary
west needs to citizen of the nearby town of Zvečan.
listen to the This kind of imagery is often used to
views of portray the region as being in Putin’s
Kosovan Serbs pocket, says Jakšić, but it’s not the case.
Laszlo Balogh/FT
“I support Ukraine. We know Russia is
dangerous if it’s too close. We don’t want
to be a Russian colony either. But the
international community is nervous
because of Ukraine and they are rushing
the Kosovo deal. Well, as in every job,
a rush job is a bad job.”
The west has hardened its resolve,
according to European and American
diplomats. They want both sides to stick
by the Ohrid deal, and are unafraid to
apply pressure.
Brussels is seeking to bind Vučić’s
hands in particular by adding the Ohrid
promises to the long list of EU accession
milestones. Without normalising ties
with Kosovo, Serbia will probably
never gain membership of the bloc. “It’s
everything or nothing,” says one official
involved in the negotiations.
For Kosovo, the EU is more blunt
about its leverage. “They have no other
options but us,” says another official.
In the long term, both Belgrade and
Pristina may see the logic in softening
their positions. Vučić has no choice but
to move west, says Milos Damnjanovic,
an analyst at the BIRN consultancy in
Belgrade, but political expediency
means he must do so slowly.
“He keeps up his balancing charade
but behind the scenes he anchors
himself in the western camp,” he says.
“Russia is far away and weak while the
west is omnipresent and can inflict pain,
so to save political points domestically
he does nothing publicly against Russia,
but appeases US demands by baby steps
towards the west.”
Pristina may also do well to play a long
game and grant Serbs more rights, says
Ymeri, the former ruling party leader in
‘The Kosovo. If it can help turn Serbia away
international from Russia, that in turn will make it
easier to get the liberties it seeks.
community “Kurti has to be more strategic in
[is] rushing understanding the benefits of this huge
geopolitical turn,” he said. “We cannot
the Kosovo help that process but we should not
deal. Well, as prevent it . . . If it doesn’t happen, we go
in every job, back to square one.”
Additional reporting by Henry Foy in
a rush job Brussels, Guy Chazan in Berlin and Leila
is a bad job’ Abboud in Paris
18 ★ FINANCIAL TIMES Monday 8 May 2023

The FT View
AI needs superintelligent regulation
Effective brakes can help
the transformative
industry move faster
Powerful artificial intelligence systems
can be of enormous benefit to society
and help us tackle some of the world’s
biggest problems. Machine learning
models are already playing a significant
role in diagnosing diseases, accelerating
scientific research, boosting economic
productivity and cutting energy usage
by optimising electricity flows on power
grids, for example.
It would be a tragedy if such gains
were jeopardised as a result of a back-
lash against the technology. But that
danger is growing as abuses of AI tech-
nology multiply, in areas such as unfair
discrimination, disinformation and
fraud, as Geoffrey Hinton, one of the
“godfathers of AI”, warned last month
on resigning from Google. That makes it
ft.com/opinion imperative that governments move fast
to regulate the technology appropri-
ately and proportionately.
How to do so will be one of the greatest
governance challenges of our age.
Machine learning systems, which can be
deployed across millions of use cases,
defy easy categorisation and can throw
up numerous problems for regulators.
This fast-evolving technology can also
be used in diffuse, invisible and ubiqui-
tous ways, at massive scale. But, encour-
agingly, regulators around the world are
finally starting to tackle the issues.
Last week, the White House sum-
moned the bosses of the biggest AI com-
panies to explore the benefits and perils
of the technology before outlining
future guidelines. The EU and China are
already well advanced in drawing up
rules and regulations to govern AI. And
the UK’s competition authority is to
conduct a review of the AI market.
The first step is for the tech industry
itself to agree and implement some
common principles on transparency,
accountability and fairness. Companies
should never try to pass off chatbots as
humans, for example. The second step
would be for all regulators, in areas such
as employment law, financial and con-
sumer markets, competition policy,
data protection, privacy and human
rights, to modify existing rules to take
account of specific risks raised by AI.
The third is for government agencies
and universities to deepen their own
technological expertise to reduce the
risk of industrial capture.
Beyond that, two overarching regula-
tory regimes should be considered
for AI, even if neither alone is adequate
for the size of the challenge. One
regime, based on the precautionary
principle, would mean that algorithms
used in a few critical, life-and-death
areas, such as healthcare, the judicial
system and the military, would need
preapproval before use. This could
operate in much the same way as the
US Food and Drug Administration,
which screens pharmaceutical drugs
before release and has a broader remit
Danger of a to protect and promote public health.
backlash is The second, more flexible, model
could be based on “governance by acci-
growing as
dent”, as operates in the airline industry.
abuses Alarming though this sounds, it has
multiply, in worked extremely effectively in raising
areas such air safety standards over the past few
as unfair decades. International aviation authori-
discrimination, ties have the power to mandate changes
for all aeroplane manufacturers and
disinformation airlines once a fault is detected. Some-
and fraud thing similar could be used when harm-
ful flaws are found in consumer-facing
AI models, such as self-driving cars.
Several leading industry researchers
have called for a moratorium in devel-
oping leading-edge generative AI
models. But pauses are pointless unless
clearer governance regimes can be put
in place. Even the tech industry accepts
that it now needs clearer rules of the
road and must work constructively with
governments and civil rights organisa-
tions to help write them. After all, cars
can drive faster around corners when
fitted with effective brakes.

Opinion Technology
Letters
Email: letters.editor@ft.com
Include daytime telephone number and full address
Corrections: corrections@ft.com

Bluesky tries a new answer

If you are not satisfied with the FT’s response to your complaint, you can appeal
to the FT Editorial Complaints Commissioner: complaints.commissioner@ft.com

to social network question Brexiters’ dream of divergence from EU laws risks backfiring
The British government’s plans to scale
María Hergueta
back the retained EU law bill have been
met with fury by many Brexit
supporters (“Tories to strike ‘sunset
clause’ from bill to scrap EU law”,
Report, April 28).
There is understandable concern
that the government is squandering
Brexit regulatory reform opportunities.
Indeed, with notable exceptions like
new rules for precision gene editing,
the UK has largely left EU rules
unchanged.
But the story may not be so simple,
even for advocates of regulatory
reform. The current “sunset clause”,
which the government is expected to
remove, means EU laws are set to
automatically expire if they have not
been revised or retained. In practice,
the provision to “sunset” by the end of
the year is backfiring. In response,
departments have lined up to demand
most laws are exempted to avoid a
regulatory cliff edge. They are busily
drafting hundreds of statutory
instruments to maintain the status
quo. This timely process has paralysed
civil servants. The government cannot
realistically — from the perspective of
good policymaking, regulatory
certainty for businesses and honouring
international commitments — simply
get rid of all retained EU law overnight.
They need to be analysed, reformed
and replaced. But that isn’t happening.
Just take the case of novel food
regulation. The UK has retained the
EU’s process for deciding what new
foods are allowed. But these rules risk
being excessively slow, cumbersome
and costly for innovative technologies.
Ivy Farm Technologies is a British
start-up developing cultivated meat, a
lab-grown product that alleviates the
environmental and ethical issues
associated with meat. Its chief
executive, Richard Dillon, has warned
that if the UK does not reform the
novel food regulations the company
could be “forced to up and move to
another market”.
These EU-derived rules, among
many others, are in dire need of review.
Rushed sunsetting will just mean most
laws being retained and never looked
at again.
Matthew Lesh
Institute of Economic Affairs
London SW1, UK

But Bluesky’s team, including chief
Elaine executive Jay Graber, are doing a good
job of responding to questions. The
Moore reaction from users is more forgiving
than anything shown towards Musk
Chile-US tax treaty could The Big Pharma template Tibet is right to challenge
boost key lithium projects for artificial intelligence China’s sovereignty claim
Several pieces have been published
about the consequences of Chile’s plans
The debate about regulating artificial
intelligence seems to focus on technical
Tibet’s government in exile has every
right to step up its “challenges to
to take state control of important
lithium projects (“Chile’s push to
solutions and minutiae. At its heart,
though, it is much more about whether
China’s claim of sovereignty” over its
territory (Interview, May 3). After all,

I
nstagram is for posers, Twitter is
full of trolls and Facebook is old.
Surely no one has room in their
lives for more social media? Yet
here comes Bluesky, a shiny new
Twitter-lookalike so popular that invi-
tations to join are in high demand.
For those of us who spend too much
time online, Bluesky invite codes
carry bragging rights. Like a private
party, the strict guest list has created a
queue of people who want to get in. On
eBay, Bluesky invitations are on sale
for hundreds of dollars.
Save your money. If you want to
know what the app is like, imagine
Twitter but smaller, weirder and
without Elon Musk’s shenanigans.
Chatter about work, politics and news
is limited. There are cat pictures, Star
Wars jokes and semi-serious discus-
sions on whether or not to moderate
nudity. It’s like walking into an unruly
classroom that has been put in deten-
tion. Look at the way users decided
If you want to know what
it is like, imagine Twitter
but weirder and without
Musk’s shenanigans
posts should be called “skeets” (sky +
tweets) despite opposition from
Bluesky’s team.
The set-up is soothingly familiar.
You create a profile and choose
whether to look at posts from people
you follow or a curated What’s Hot list.
This seems to be 90 per cent tech
workers and tech journalists with a
few celebrities sprinkled in. Twitter’s
favourite grouch @dril has a Bluesky
account, though he has only posted
once. Shaun of the Dead director Edgar
Wright has one too. So does Grimes,
Musk’s former partner. Or at least, she
appears to. Bluesky has no means of
user verification.
Exclusivity plus high-profile users
explain why Bluesky has received so
much attention despite a tiny 50,000-
plus user count — equal to just 0.02 per
cent of Twitter’s. Because it is small,
posts that might be retweeted thou-
sands of times elsewhere get a handful
of likes. Happily, that also means there
are no bots spamming replies. It is in a
sweet spot: big enough to be interest-
ing but small enough to dissuade
fights. That will probably change as it
expands. Moderation is already caus-
ing disagreements.
The app is still under construction.
This is why invites are limited. You
cannot yet post videos, for example.
and his experiments on Twitter.
There are some drawbacks. The
lack of an obvious business model is
one. Clubhouse should serve as a
warning. By inviting a few loudmouth
users early on, the live audio chat-
room garnered lots of attention. But
growth stalled before it managed to
generate revenue.
There is also nothing revolutionary
about the app. Similarity to Twitter is
intentional. It was seed-funded by
Twitter when Jack Dorsey was chief
executive. He sits on the board.
What makes Bluesky’s success even
more unusual is that it is far from the
only new social network hoping to lure
disgruntled Twitter users. All have
strikingly similar interfaces, with
short posts arranged into vertical
feeds. None has managed to gain
much traction.
Perhaps rivals have boxed them-
selves in by targeting particular
groups. Post, backed by venture capi-
tal firm Andreessen Horowitz, focuses
on news. That means it lacks the snark
that made Twitter popular. Newslet-
ter company Substack’s Notes, which
launched last month, is designed to be
used by existing Substack readers.
Spill is targeting people who want to
post about culture. Former president
Donald Trump’s social network Truth
Social is aimed at those on the right
(and Trump fans).
For a while it seemed as if Mastodon
might emerge as the winning alterna-
tive. Decentralisation means that,
unlike Twitter, it cannot be changed
by a new owner. But for those of us
who are used to being spoon-fed social
network set-ups, Mastodon is baffling.
Picking a server and choosing an app
sounds too much like hard work.
Bluesky is decentralised too, though
it has opted not to put this front and
centre. The first phase is controlled by
the Bluesky team. But the app is not
the real goal. Bluesky’s more ambi-
tious plan is to create a framework on
which multiple social networks can be
built with no central figure in control.
Moderation can be customised, poten-
tially putting an end to the impossible
attempt to balance free speech and
online harassment. Portability is key.
Users will be able to take their account
from one network to another.
Clearly there is appetite for new
social networks. The problem for
Bluesky is that users seem to like it
because it reminds them of Twitter,
not because they want to upend cen-
tralised social media. To scale up and
keep the good vibes going, it will have
to find a way to explain its mission
without scaring newcomers off.
elaine.moore@ft.com
control production of lithium prompts
alarm throughout industry”, Report,
May 4).
According to the government’s
strategy, state control would be
required for almost every lithium
venture, making it extremely difficult
to attract the entrepreneurial efforts
of private explorers and exploiters. In
this sense, should the strategy make
progress, it is likely that Chinese state-
controlled companies would be among
the few interested in participating in
the Chilean lithium market.
This may pose challenges
for the geopolitical stability of our
Latin-American region, which requires
a balanced pool of foreign investors
rather than single-focused Chinese
investments.
Luckily, Chile’s plan is set to be
debated in the Chilean parliament,
where the government does not have a
majority. Therefore, it is highly likely
that several amendments will be made
that in the end may limit the above-
mentioned risks.
Nevertheless, at this stage of the
discussion, it is crucial that the US
accelerates the Chile-US tax treaty
approval. Such a treaty is of the utmost
importance for US companies wanting
to make lithium investments in Chile,
so it is urgent to have it approved soon.
Jointly with the battery tax credits
set forth in last year’s US Inflation
Reduction Act, the approval of the
Chile-US tax treaty may have the
combined effect of ramping up
American investments in the Chilean
lithium scene. The ball is in the US
Congress’ court.
Juan Ignacio Lagos
Tax Lawyer, Santiago, Chile
No ‘one-size-fits-all’ to EV
charging point rollout
Pilita Clark’s article “Greenwashing?
It’s all about green-botching now”
(Opinion, April 12) is a wake-up call for
the electric vehicle charging industry,
highlighting some of the potential
issues of green-botching in the market.
As head of EV strategy for a leading
smart energy infrastructure business,
I’d argue that green-botching is not
simply down to a lack of infrastructure
and planning on the government’s
part, it’s also being driven by the fact
that the historic rollout has simply
failed to factor in EV driver — or
customer — experience.
The blame for this lies firmly with
those businesses that, to date, have
been responsible for installing EV
charge points across the UK. For
a start, in the race to capture their
slice of the EV charging market pie,
companies are often installing the
Lhasa’s temples: for Tibet Buddhists,
they’re like the Vatican for Catholics
wrong type of chargers, in the wrong
location. This is leading to customer
dissatisfaction and frustration.
There isn’t a “one-size-fits-all”
approach to EV charging
implementation. Quite simply, not all
EV chargers are the same, and the
infrastructure of EV charge points
needs to be planned with three Rs in
mind: right time, right location and
right charge.
For example, in locations where
overnight charging is most appropriate
such as residential streets or some
hotels, slower charging stations must
be installed; while at shopping centres
and other destinations, when motorists
will be after a speedy charge, we need
to see rapid charging points.
Added to this, a fit-for-purpose EV
charge point solution prioritises the
payment needs of the customer
options. They should be designed to
accept multiple payment options
including contactless and app
payments. Many are, but we’re also
seeing certain EV businesses trying to
monopolise the market by creating
their own fuel cards, which can only be
used with their specific chargers. This
is wrong. EV may be a nascent market,
but this doesn’t mean there is any
excuse for providing the public with
a substandard solution.
Mark Winn
Head of EV Strategy, SMS
Cardiff, UK
German immigration
move is encouraging sign
At last, encouraging signs that
politicians are waking up to the threat
of dwindling human resources facing
most European countries (“Germany
opens gates to tackle skills shortage”,
Report, May 3). Let’s hope other
countries have the political courage to
follow suit before it’s too late and we
start running out of everything.
Julian Carroll
Brussels, Belgium
and to what extent a liberal democratic
society is willing to sacrifice individual
and corporate empowerment for the
common good. If we are willing to
make sacrifices, then two obvious steps
could be taken (Opinion, May 3).
First, as hard evidence as opposed to
anecdote emerges of the damagingly
addictive impacts of social media
(Opinion, March 10), it could be made
mandatory for the use of personalised
content, for there to be an opt-in
feature, perhaps requiring monthly
confirmation. This would prevent
algorithms from automatically
reinforcing damaging behaviour with
targeted material. And second, we
could establish an Office of Algorithm
Regulation, analogous to the UK’s
Medicines and Healthcare products
Regulatory Agency or the US Food
and Drug Administration, tasked
with licensing social media and
generative AI algorithms before
they can be incorporated into
commercial products.
Libertarians and those with
commercial interests would initially be
outraged. But no one today thinks that
pharmaceutical companies should be
allowed to market unlicensed drugs
because we all accept that the potential
damage far outweighs the restrictions
and bureaucracy.
Robin Cooke-Hurle
London SW11, UK
OK for Zuckerberg, but
not, apparently, for Brazil
You quote a Brazilian representative of
Google as objecting to the Brazilian
government’s proposals to curb the
spread of “fake news” based on the
reasoning that “hasty legislation can
make the internet work worse”
(Report, May 1).
It appears that it is OK for tech
companies to “move fast and break
things” — to quote the phrase Mark
Zuckerberg once said was a Facebook
motto — but it’s not OK for
governments to do so.
Martin Allen
London N1, UK
We never see Tesla chief as
an industrial entrepreneur
Gillian Tett (FT Magazine, April 29)
mentions that “most people would be
stumped if you asked them to name an
industrial entrepreneur”. What about
Elon Musk, the subject of Tett’s
column? He actually designs and
manufactures rockets and cars, as well
as the technology that supports them.
We just don’t imagine him as such.
David Spirakis
Venice, CA, US
Tibet, except for brief periods in the
13th and 18th centuries, has never
been a part of imperial China. More
importantly, when China annexed
Tibet in 1951, it was an independent
country, not ruled by any foreign
power.
But it seems China draws its
territorial claim to Tibet purely from
history: Tibet is Chinese because Tibet
was once a part of imperial China.
China’s first constitution, drafted in
1911, defined its territories to be “the
same as the domain of its former
empire”. This included Tibet as well
as Taiwan.
Since 1951, not only has China
remained entrenched in Tibet; it has
also felt no compunction about using
its illegal occupation of Tibet to
threaten countries bordering Tibet,
although these countries have no
boundary disputes with Tibet.
Simren Kaur
Jalandhar City, Punjab, India
Follow il Duce’s example
With regard to your interview with
Penpa Tsering, leader of the exiled
Central Tibetan Administration (May
3), there are two ways in which the
west could assist. The first is to satisfy
its historical claim on Tibet. It should
press China to agree to an independent
chair to examine the evidence. We
already know the answer but it is still
worth pursuing. The second is to press
the Chinese government to examine
the then Pope’s resolution with Benito
Mussolini, which brought forward the
current independent Vatican City. The
two extraordinary, important and
magnificent temples in Lhasa deserve
the same treatment: a spiritual capital
for all Buddhists.
China wants this to be their century.
Now they must start to understand
how this could unfold in their favour.
Derek Wyatt
Former MP, Aldeburgh, Suffolk, UK
Call it what it is — greed
London Stock Exchange chief
executive Julia Hoggett’s solution for
retaining highly talented executives in
the UK is: pay them more (“LSE chief
seeks higher pay for bosses to stem
listings exodus”, Report, May 4).
Thus, we see “the crooked timber of
humanity” — in Immanuel Kant’s
phrase. For the appeal is to greed, to
the greed of already exceptionally
well-paid individuals. Why not come
clean? Call it “greed” and maybe, just
maybe, the UK can get by with
executives who are not so motivated?
Peter Cave
London W1, UK
Monday 8 May 2023
ASIA
Ruchir
Sharma
I
n 30 road trips over 25 years,
following elections in India with
a band of writers, I’ve seen endless
surprises, none more encouraging
than the story we found last month
in the southern state of Karnataka. It’s
a new economic miracle, unfolding in
a vibrant local democracy that defies
widespread worries about one-party
rule in India.
With a population of some 70mn,
Karnataka is larger than most coun-
tries. As the state heads to the polls on
May 10, its story matters not just for
India but also for the world — both
economically and politically.
On our last election trip to Karnataka
five years ago, signs of underdevelop-
ment — thatched roofs, rotting store-
fronts — were still visible. Now they are
The problem
of concentrated
power
business
Rana
Foroohar
L
ast week, I quoted a recent
speech by US national secu-
rity adviser Jake Sullivan, in
which he asked, “How does
trade fit into our interna-
tional economic policy, and what prob-
lems is it seeking to solve?” As I’ll argue
here, we should start by seeking to solve
the problem of concentration and com-
petition.
Leaving aside the question of whether
Beijing invades Taiwan (an enormous
question, of course, but stick with me),
many of the current US and European
concerns with China are about the way
in which the country’s state-run system
encourages economic concentration,
and the fact that this concentration is
then deployed in mercantilist ways.
China has for years been able to flood
global markets with everything from
cheap steel to underpriced PPE to
higher end goods, thanks to its ability to
artificially depress wages as well as
ignore environmental concerns and
(all too often) WTO rules. Thanks to its
singular economies of scale, China is on
track to become the world’s biggest EV
exporter, which will inevitably lead to a
spate of new trade disputes.
China also has monopoly power in
Ukraine’s friends should wake up to its progress in fighting corruption
EUROPE
Martin
Sandbu
A
spectre haunts every dis-
cussion of Ukraine’s future
among its partners: the
spectre of corruption. They
see it — sotto voce, for now —
as an obstacle to granting Kyiv EU mem-
bership any time soon and providing
serious amounts of reconstruction
funding without onerous red tape.
The concerns do not come out of
nowhere. Transparency International’s
Corruption Perceptions Index reliably
places Ukraine far down its rankings.
In 2022, it came 116th. But the clue is
in the name. TI measures perceptions
that have not kept up with Ukraine’s
change since its “Revolution of Dignity”
deposed Vladimir Putin’s stooge-presi-
dent Viktor Yanukovych in 2014.
In Kyiv last month, Oleksandr
An economic miracle in India
overshadowed by symbols of progress:
red tiled roofs and gaily painted con-
crete walls. In a rural village where pre-
viously we would have expected to see
packs of stray dogs, we met a breeder
selling Rottweilers for $500 a pup.
Over the past decade, a longstanding
boom in Karnataka’s capital city of
Bengaluru, driven by global tech giants,
began spreading to farm country.
Agriculture and related services joined
tech in driving growth. Karnataka grew
much faster than the rest of India, rising
from 16th to become India’s third rich-
est state by per capita income, behind
only tiny Goa and Sikkim. Since India’s
post-independence records began in
1960, no other major state has ever risen
so fast. Karnataka’s average income
doubled in the 2010s to $3,800.
We started our latest trip in
Bengaluru, which was its dynamic old
self, only with traffic worse than ever.
Infosys chair Nandan Nilekani told us
that people kept coming anyway, drawn
by the pull of a tech ecosystem that
attracted 45 per cent of all start-up
investment in India.
From Bengaluru we headed south-
many crucial supply chains including
pharmaceutical inputs and rare earth
minerals. According to a 2022 US-China
Economic and Security Commission
review, 41.6 per cent of US penicillin
imports came from the country, which
also has 76 per cent of global battery cell
manufacturing capacity within its bor-
ders, 73.6 per cent of permanent mag-
nets (a critical component of electric
vehicles), and from 2017 to 2020,
supplied 78 per cent of US imports of
rare earth compounds. The US has its
own supply of certain minerals but,
thanks to Chinese subsidies, some
domestic American businesses have
ceased production.
This kind of monopoly power poses
both a security threat and a competi-
tiveness one. China has made numerous
clear statements about wanting to
ringfence some crucial global supply
chains while reducing its dependence
on foreign countries in others. No coun-
try wants to worry about having crucial
drugs or commodities cut off.
Let’s be clear — Beijing didn’t reach
over and “steal” production, invest-
ments and jobs from elsewhere. Instead
Chinese central and local government
simply deployed subsidies for decades,
offered discounted land and gave major
tax breaks to producers in order to
entice localisation within China. West-
ern companies naturally followed, given
that shareholder capitalism requires
business leaders to chase the highest
share price and the lowest consumer
costs (and, crucially, doesn’t account for
the resulting negative externalities in
Novikov told me surveys show many
more people think corruption is preva-
lent than report experiencing it, and the
willingness to break with a culture of
graft is improving. Novikov directs the
National Agency on Corruption Preven-
tion, one of several recently created
bodies which include a specialised pros-
ecutor, court and investigative bureau.
The broader judicial sector still has to
be cleaned up, but anti-corruption cam-
paigner Daria Kaleniuk told me it is
going in the right direction. “There’s
a lot of corruption in Ukraine, but we
admit this is a problem and we are
working on solving it.” The very fact
that it’s being talked about, even in war-
time, is a sign of health. “Nobody speaks
of corruption in Belarus — or Russia.”
Nor are Ukraine’s partners entirely
spotless. As one policy thinker in Kyiv
told me, corruption is a woolly concept
ranging from state capture to “giving
your doctor a box of chocolates”. (In the
NACP surveys, a sixth of respondents
reported encountering corruption in
the past year — but the definition
spans both bribery and vaguely “using
connections” to secure a public service.)
★ FINANCIAL TIMES
Opinion
west on a smooth new highway to the
city of Mysuru, then turned north into
the back-country. In Varuna, the kind of
farm town where one often sees water
buffaloes sipping at the edge of a muddy
pond, we came upon a lake with jet skis
slicing across the surface. This image
of leisure struck us as oddly out of
place until we found more of the same:
a wedding with guests in knock-off
Where we would once have
seen packs of stray dogs,
we met a breeder selling
Rottweilers for $500 a pup
Dolce & Gabbana, a barber charging
nearly $5 to dye hair, an impossible sum
in poorer states in India. The realisation
that Karnataka is different now struck
us on day three of our week-long jour-
ney, when we came upon an apartment
building rising up in a rural village.
Karnataka grew nearly 8 per cent a
year in the last decade, a full two points
above the national average, and its
labour, climate or security). But monop-
oly power is by no means just a China
problem — or indeed solely an interna-
tional one. Deregulation and weaker
enforcement of antitrust laws in the US
since the 1980s has led to extreme cor-
porate concentration. Walmart sells
more than half of all groceries in some
areas of the country, Amazon domi-
nates ecommerce, a handful of compa-
nies control food supply, a single rail-
road (BNSF) ships 47 per cent of all grain.
The existing giants grow ever bigger
and more powerful. JPMorgan acquires
yet another failed bank. Food inflation
is rising, as insurance Allianz calculates
that about 10 per cent of the jump in
Europe reflects the search for higher
profits. This is made possible by the fact
that key parts of the food supply chain
Total decoupling between
the west and China is not
what anyone wants. So,
how to square the circle?
In economic terms, using public power
for private gain is like rent extraction or
barring competitors from entering
a lucrative trade. And entry barriers,
rent extraction and private capture of
state powers exist everywhere.
Just observe US politicians’ abject
dependence on donations from Ameri-
can oligarchs, the funding scandals of
one French president after another,
Italy’s dysfunctional judicial system,
Suspicions about Kyiv’s
bad legacy must not
slow its transformation
by foot-dragging on aid
Britain’s egregious Covid procurement
practices and House of Lords seats for
party donors, and Germany’s decades-
long subordination of geopolitical
policy to corporate profit opportunities
in dictatorships.
I was told of Ukrainian companies
trying to enter large EU countries’ mar-
kets, only to be given an unofficial list of
economic boom is funding new welfare
spending, which nearly tripled in the
2010s. Welfare funds now flow directly
to beneficiaries through India’s national
digital transfer system, helping Ben-
galuru’s boom spread into rural areas.
Agriculture grew 7 per cent a year
here in the 2010s, well above the
national average. The state government
has promoted more profitable farm
technology and crops, such as areca nuts
and mangoes. More than eight out of
10 residents of rural Karnataka have
a smartphone, double the number just
five years ago, and new mobile services
are giving farmers fresh access to credit.
Near the city of Hubli, we met a tractor
parts dealer who said that, thanks to
online credit, his sales were thriving.
No miracle is perfect. Voters in
Karnataka say their grievances now
include joblessness and residual pov-
erty — which grew more visible the
farther north we travelled — and official
corruption. Polls show the incumbent
Bharatiya Janata party is headed for
defeat, which is not surprising. In India’s
first-past-the-post system, small swings
can topple governments. Voters across
are dominated by a handful of players.
Chinese mercantilism, European and
US corporate price gouging, American
Big Tech and Too Big To Fail banks are
really all disparate parts of one problem
— too much concentration of power in
one place. This leads to market fragility,
less innovation (which tends to come
from smaller companies and more,
rather than less, competition), security
concerns and defensiveness on the part
of states that worry they could be cut off
from crucial supplies.
China, of course, has been subject to
US export bans and is understandably
anxious about it. While it is legitimate
for any country to limit the export of
technology that could be used for
defence purposes by an adversary, it’s
also true that teasing out dual-use
technologies is a tricky business. Total
decoupling between the west and China
is not what anyone wants. So, how to
square the circle?
I’m beginning to think that we should
institute a new market principle that
Barry Lynn, the head of the Open
Markets Institute, an antimonopoly
local companies to partner with or the
name of a specific law firm to retain
before the bureaucratic obstacles to
doing business would clear.
These practices are no excuse, but
would hardly even register as corrupt
among those who wring their hands
over Ukraine. Yet they are as pernicious
to a liberal market democracy as many
of the challenges that Ukrainians, to
their credit, are trying hard to address.
Before the full-scale invasion,
Ukraine introduced public asset decla-
rations for high public officials and their
families. They are also vetted by
Novikov’s agency for unexplained
wealth; he said he can look into individ-
ual incomes back to 1998. Public
procurement and property sales were
thrown open to public scrutiny through
the digital Prozorro platform.
These mechanisms were suspended
last year, ostensibly for security reasons.
But after investigative journalists
discovered overpayments for military
rations, Prozorro is back online for
non-lethal procurement. Experts told
me it showed the defence department
pays much more than the border agency
the country have a long record of tossing
out incumbent governments, even
when the local economy is growing fast,
and Karnataka has not returned an
incumbent to power in decades.
Defeat would leave the BJP and its
allies in power in only 14 states nation-
wide, representing less than half of
India’s national population. Democracy
is thus as competitive as ever in Karna-
taka, which may provide an alternative
window on India for the many commen-
tators who fear that Prime Minister
Narendra Modi is pushing the country
towards authoritarianism and Hindu
chauvinism.
India is best understood as many
countries, not one, too complex to
be dominated by a single party or
leader. Though my optimism always
grows the farther I get from the
toxic national politics of Delhi, I have
rarely come away from a trip here
more upbeat. In Karnataka, capitalism
and democracy are working well, and
these days that counts as a genuine
miracle — anywhere.
The writer is chair of Rockefeller International
Matt Kenyon
think-tank in Washington DC, calls
“a rule of four”. In crucial areas, from
food to fuel to consumer electronics,
critical minerals, pharmaceutical prod-
ucts and so on, no country or individual
company should make up more than
25 per cent of the market. What’s more,
countries should apply this rule both
locally and globally.
This would be a way for nations to
support free trade, while also being able
to build up resilient and redundant sup-
ply chains. It would buffer the global
race to the bottom in which cheap capi-
tal is forever flowing to places with the
cheapest labour and lowest environ-
mental standards. It would, of course,
require a total revamp of the WTO. But
that wouldn’t be a bad thing, since many
countries feel it is not functional
anyway.
This isn’t a perfect solution. But it’s a
way to start shifting focus from trade
wars, cold wars and class wars to the
main culprit in all of those things — too
much power in too few hands.
rana.foroohar@ft.com
for many goods, creating pressure
against impropriety or incompetence.
Huge popular support for EU and Nato
integration helps those who want to clean
things up. “The stricter and tougher are
the conditions” for EU entry, says Kale-
niuk, “the lesser the risk” of letting
Ukraine in early. She wants outside
pressure to restore as many of the pre-
2022 transparency rules as possible.
Novikov, too, wants his agency’s vetting
to restart — he says police chiefs tell him
they want this now to root out recruits
who would take payments from Russia.
The worst that partners could do is to
let suspicions about Ukraine’s bad legacy
— and Kremlin narratives of a dysfunc-
tional state — slow its transformation by
foot-dragging on aid and accession. As
Kaleniuk told me: “If Ukraine hadn’t
changed since 2013, Russia wouldn’t
have needed the full-scale invasion but
would have taken over from the inside
like in Belarus.” The war is proof that
Putin knows the Ukrainian state cannot
be bought like before. Ukraine’s friends
should understand the same.
martin.sandbu@ft.com
19
It is time
Ofgem rose to
the challenge
of net zero
Chris
Skidmore
O
ur energy regulator Ofgem
should be playing a crucial
role in climate policy if we
are to reach net zero, but in
its current shape, it is not
fit for purpose.
Despite government departments
being aligned with the 2008 Climate
Change Act, the regulator’s remit has
not substantially changed since its
establishment in 2000. This means it
fails to prioritise electricity decarboni-
sation as set out in the UK’s net zero
legislation. As a former energy minister
and author of the government’s net zero
review, I believe Ofgem needs reform
to help electrify the economy and bring
down bills.
The organisation’s legal duty is to
protect the interests of existing
and future consumers. While this
does include the reduction of green-
house gases, the mandate has never
been explicit enough, and Ofgem’s role
has traditionally been more of an
economic regulator than anything else.
This has led to a focus on prices and
competition that leads to short-term
considerations with negative longer-
term impacts.
We need to take a more strategic view.
A net zero energy system is predicted to
be billions cheaper than the system we
have. But to get there will require
upfront investment and planning.
My net zero review, published this
year, heard from hundreds of innova-
tive companies eager to bring new
technologies to market. But these are
all being hampered by slow, ponderous
bureaucracy, and an antiquated
Britain is being hampered
by bureaucracy and
an antiquated approach
to grid connections
approach to grid connections which is
not suitable for a 21st-century electri-
fied economy. It’s why the first of my
10 missions, set out in the review, was
to reform “grid and infrastructure”, and
why a key recommendation was to give
Ofgem a net zero duty.
At present, grid connections are being
built on a just-in-time or retroactive
basis, rather than proactively planned
in areas where we know renewable
energy will be built. Some onshore
renewables have been quoted dates
for connection as late as 2036, and
in some cases, connecting offshore
wind to the grid can take three to five
times longer than the delivery of the
project itself.
Delays have become the new normal:
hundreds of renewable energy projects
are being held up either in planning,
or in a queue for a grid connection. The
National Grid estimates that about 600
projects with a combined capacity of
176GW (our current capacity is just
64GW) are backed up in a sclerotic
deployment system for future renewa-
ble power. During an energy price crisis,
we can’t afford to wait.
The madness doesn’t stop there. The
current system overseen by Ofgem
favours electricity coming from Europe,
rather than wind farms built in the UK’s
windiest areas. Due to a lack of invest-
ment in transmission networks,
Scottish generators are at a significant
disadvantage compared with sites
in France, Netherlands, Belgium,
Germany, Denmark or Norway.
Ofgem can and must help sort out
this mess if it’s given the powers. As
the chief executive of Energy UK said
last month, Ofgem is fast becoming
“the de facto UK regulator for net zero”.
This follows similar calls by expert
bodies such as the Climate Change
Committee, the National Infrastructure
Commission and the House of Lords
industry and regulators committee.
Tim Pick, the government’s first
“offshore wind champion”, has already
concluded that Ofgem’s powers should
be changed to “give proper weight” to
the 2050 target.
Ofgem’s own chief executive,
Jonathan Brearley, has said that he
can see benefits in defining a net zero
duty for Ofgem in statute. But the
clock is ticking. In the interest of
both present and future consumers,
we need an empowered regulator with
a clear duty to secure the net zero
energy system.
The writer is chair of the UK’s net zero
review and a former UK energy minister
20 ★ FINANCIAL TIMES Monday 8 May 2023

Ludwig Minelli, Dignitas founder

‘We should have the freedom
to choose how we die’
Z HENRY MANCE INTERVIEW

Push-buttons
are coming
back, hurrah!
{ UK equities:
an enduring dynasty }
Some FTSE companies have held their position
Top 10 equities in 1953 Top 10 equities in 2023
£mn £bn
Shell AstraZeneca
Woolworth Shell
Imperial Tobacco HSBC
ICI Unilever
BAT BP
Anglo-Iranian Oil (BP) Rio Tinto
Distillers Co Diageo
Royal Insurance BAT
Marks & Spencer GSK
Burmah Oil Glencore
By market capitalisation 0 50 100 150 200 0 50 100 150 200
Equities have trounced bonds and cash since 1953
Between May 30 1953 and April 30 2023 (annualised return %)*
Nominal Real
12 12
10 10
8 8
6 6
4 4
2 2
Pilita Clark 0
Equities Gilts Treasury bills (cash)
0

Business Life
*Return figures include reinvested dividends for equities and reinvested coupons for gilts
Sources: Dimson-Marsh-Staunton database; Cambridge university and London Business School; Bloomberg

T
he last time a British
monarch was crowned, in
1953, much of UK life was
far worse than it is today.
The food was awful.
Everyone smoked. The smog was thick
and lethal.
But one thing they did have in the
1950s was knobs, by which I mean
buttons, dials and other physical
protuberances that one could twist or
prod to control anything from a
television to a car radio.
I remembered this the other week
when I rented a car in which nearly
every button had been replaced by a
touchscreen so baffling I nearly ran off
the road trying to change the radio
station.
The good news is that, in some parts
of the car industry, buttons are coming
back. Physical switches will reportedly
return in new Porsche Cayenne SUVs
and Volkswagens. Hyundai and other
button-friendly carmakers meanwhile
say they will keep steering clear of what
critics have called “horrific”, “stupid”
and “horrendous” touchscreens.
The less good news is that the forces
that needlessly wiped out so many
knobs are still very much alive, not
least a slavish belief in the supremacy
of new technology. The question is,
why? Why persist with devices that no
one asked for and many drivers
actively loathe, especially if they might
be less safe?
One man who knows is Ian Callum,
the award-winning British car designer
who was Jaguar’s director of design for
20 years until 2019.
Callum, who also designed for Ford
and Aston Martin, told me last week
the touchscreen’s advance began with
satnav screens more than 15 years ago.
Tesla magnified the trend by selling
cars with not much more than a giant
tablet on the dashboard in a move that
captivated many of his colleagues.
“A lot of the marketing guys thought
‘This is a great thing, this is modern
technology and therefore we should
follow suit’.”
Callum admires the simplicity and
minimalism of Tesla’s design and is by
no means a technophobe. But he spent
“ The touchscreen has
its place of course, but that
place is not necessarily
on a chunk of heavy metal
moving at speed ”
a lot of time fighting what he says was
“a huge amount of pressure” to put
most functions on to touchscreens,
including heating, air conditioning,
ventilation and more. “I resisted to the
moment I retired.”
Cost explained part of the pressure
he faced. Experts say screens can be
much cheaper than lots of physical
buttons. But Callum says this was not
the main driving factor.
“The real motivation was this visible
technology that the marketing people
really liked,” he says, adding he was
constantly told to design for bigger and
bigger screens. His wariness about a
touchscreen takeover stemmed from
an understanding that the tactile
nature of physical switches is
instinctively appealing and you can use
a button easily without taking your
eyes off the road.
This is the crucial point. It’s one
thing if it takes a while to work out how
to navigate a touchscreen on a washing
machine, but quite another if you are
on a busy motorway.
Tests last year by a Swedish car
magazine showed why. They revealed
the driver of a 17-year-old Volvo with
physical buttons doing 68mph took
just 10 seconds to complete a series of
Kenneth Andersson
tasks: turn on the radio, set it to a
certain station, switch on the defroster
and so on.
It took 23.5 seconds in a Tesla Model
3 and even longer in a BMW iX and
other modern cars that have lost
buttons to touchscreens.
An electric MG Marvel R driver took
almost 45 seconds, by which time the
car had gone 1,372 metres — more than
four times the distance of the older
Volvo. (All drivers had time to get to
know the cars.)
The touchscreen has its place of
course. No smartphone could work
without it. But that place is not
necessarily on a chunk of heavy metal
moving at speed. Ask the US Navy. In
2019 it said it was going back to
physical throttles on its destroyers
after investigators found a complex
touchscreen system had contributed to
a fatal collision off Singapore.
Humans are hard-wired to value
novelty, but we can also understand its
risks. Social media networks have
already shown us what generative AI
now threatens to confirm: new
technology is not always helpful or even
neutral. It isn’t even always our friend.
pilita.clark@ft.com
Pomp and ceremony events such as
Saturday’s coronation of Britain’s King
Charles invite comparison between the
eras. Lex wondered what had happened
to the City’s markets during the 70
intervening years between the
investiture of the late Queen Elizabeth
in 1953 and that of her son. But also
what the London equity market could
look like around the time of future
coronations, perhaps of the current
Prince George.
One indication of where investors’
hearts lay can be found in the 1953
coronation issue of the Financial Times.
Lex then wrote about whether bonds
(gilts and the interwar perpetual
Consols) looked attractive against
purchasing power over a century.
Similarities to today abound. Bonds
then yielded just over 4 per cent, not
much more than the longest-dated gilts
today. Then, as now, price inflation had
been at a rate of about 10 per cent in
1952 but would slow to 3 per cent by the
end of 1953.
There was no mention in Lex of
equities. Discussion of stock
investments themselves languished in a
different section, on page six of a
10-page edition that included
classifieds and price data. The cult of
equity that began in the mid-1950s in
the UK had not yet kicked off. Equity
returns since the 1953 coronation have
trounced gilts and cash, both before
and after inflation.
Equity dividend yields then were
running at about 5 per cent, according
to Mike Staunton of the London
Business School. Today they are just
over 4 per cent. If you expected an
alien-sounding group of top 10
companies by market valuation, you
would be surprised. Shell, BP
(Anglo-Iranian Oil) and British
American Tobacco were on the list.
But whether those three British
stalwarts will still top the rankings of
stocks in the future is not a given.
Climate change and health issues
around smoking could feasibly wipe out
their main sources of income. Unless
there is a radical change in business
models, climate change could damage
the prospects of the 23 per cent of the
FTSE 100 that is accounted for by
commodity companies.
There are signs of change. Shell, BP
and BAT may still rank highly but
already they have shrunk when
measured as a percentage of FTSE 100
capitalisation over the past two
decades. A King George VII would
preside over a very different UK.
Investors would as well.

CROSSWORD
No 17,409 Set by MOO
        ACROSS
1 Laugh about Charlie encountering
 moose heading west (6)
4 Shop in communist hands is given
  back (8)
10 Express Robespierre’s objections to
taking power (3-4)
11 Happiness of aunt perhaps when
  going topless (7)
12 I run backwards in space (4)
 13 Ceasefire broken by mutinous uncle’s
aggression (10)
   15 Mistakes in Pliny the Elder’s writings?
(6)
  16 Pursue troubled king, one with
illegitimate claim (7)
  20 Rebellious US agent backing island
colonist (7)
  21 Transfer Chinese academic (4,2)
24 Such music disturbing Eton cleric (10)
   26 Spirit of writer taking one to a
different place (4)
 28 Report of a republican imprisoned by
northern judge (7)
  29 Fish eaten by harbour (7)
30 East End institution reportedly
allowed to serve food (8)
31 Disheartened student becoming
  increasingly thin (6)

DOWN

1 Calls about article on American islands

(8)
JOTTER PAD 2 Hall providing training for Tories? (9)
3 Female abandoning one instrument
for another (4)
Solution 17,406 5 Charles’s mum in tax trouble (8)
6 One focused on net profit? (10)
& + $ , 5 6 0 , / & + & 2 :
7 Announced downfall of the monarchy
$ 1 ( 5 8 5 ,
(5)
5 ( $ / 0 6 0 , / / , 2 1 6
8 Jenny’s an idiot (6)
$ / , ( 6 / : (
9 Have mercy on redundant royal (5)
% / ( 6 6 , 1 * / , * 1 8 0 14 Perverted priests at English night club
$ 3 6 ' 6 1 $ act (10)
2 $ 7 + & 2 5 2 1 $ 7 , 2 1 17 I wondered about getting a winter
, 2 5 5 1 1 warmer (9)
$ 5 & + % , 6 + 2 3 $ 9 ( 6 18 Free from sin, as many popes were (8)
& 6 ( 5 + ( 8 19 Observer in toilet with royal couple (8)
& + $ 3 ( / & $ 5 2 8 6 ( 5 22 Go slowly round a hut (4-2)
/ / 5 % / 0 7 & 23 Sunak seduced by Paris Hilton (5)
$ / / 8 9 , $ / & $ 6 , 1 2 You can now solve our crosswords 25 Dictator’s sinister observation post (5)
, ( ( 7 * 1 $ in the new FT crossword app at 27 Steal heroin from fence (4)
0 2 1 $ 5 & + < : ( , * + 7 ft.com/crosswordapp*