Wednesday Night #848 - "Cool Brittania"

A last-minute call from Gerald Ratzer announcing that he would bring his brother, Peter and sister-in-law, Diana ensured that the material for the discussion was re-shaped. Both are MBAs (he from Harvard, she from LBS) and, in the tradition of the Ratzer family, both are exceptionally intelligent, educated and informed individuals. Peter, a former senior executive with Esso/Exxon later was involved in putting together the financing of the Chunnel.

Editor's Note: [Seen in The Economist :

+ The British government rescued the CHANNEL TUNNEL RAIL LINK with a subsidy of more than 2 billion pounds ($3.3 billion), and awarded the franchise to run the Eurostar high-speed rail service to a consortium headed by British Airways and National Express, a coach operator. Richard Branson's losing Virgin Group objected.]

The host enquired about the current controversy over fox hunting, to which Diana Ratzer replied that there is a lot of irrational behavior over blood sports in England. Peter Ratzer also pointed out that the population of foxes needs to be controled - they are as prevalent as raccoons in this part of the world.

Richard Branson and the Virgin Group were the next topic. He is very popular in Britain, much admired, although his financial structures are, in the words of one banker, "byzantine". His latest venture, the West Coast Line, requires substantial refurbishing and additional investment. This private ownership is the result of Thatcher government policies which sought to establish competition for rail services. Market pressures are expected to provide performance incentives, including the up-grading of infrastructure.

What about Blair? It was understood that there would be a change in government; the Thatcherites had simply been around too long. The Labour Government has done a remarkable job in the year. The revitalization of the Private Finance Initiative has been tackled with vigor; promises to cut public spending have been kept, tax increases - if any - are minimal. Tony Blair is also playing a highly visible role on the international scene. There have been a few mishaps, i.e. Robin Cook, but generally the British image internationally is enhanced. Investment in cultural activities is active. This government cultivates the "cool" image and is much criticized for its lack of support for the traditional arts in favour of the pop arts. Theatre and ballet have traditionally supported Labour and Labour has not returned the favour. Although one guest suggests that the British Film Industry is starving, however the Ratzers argue that the government has actually given the industry new tax breaks.

The European monetary union. The establishment of the Euro is essentially a political move and is being pushed ahead too quickly. Too many questions are not yet resolved. This is a temperamental and emotional issue. There will be regional imbalances and democratic imbalances leading to the formation of a "Europe of Regions".

Reflecting the division in thought in Britain, one of the Ratzers is pro common currency and the other admits to "an temperamental bias towards England's remaining independent".

Another voice opines that the monetary union is "not a stupid idea", but its benefits are not enormous relative to all the fuss. It is really part of a much bigger process, towards political integration and Britain will most likely join.

In any event, Britain will continue to enjoy the option of joining further down the road and may, under those circumstances, enjoy more favorable conditions.

However, suggests another, the populations of the member countries are becoming increasingly wary of the proposed union.

Indeed, agrees the previous speaker, but who ever said that this was a democratic process? Is it inevitable that Germany will dominate the new Europe economically? Not in the opinion of our British guests, who point to the outcome of the recent squabble over the post of Central Banker.

With reference to the proposal advanced by Newt Gingrich that the U.S. and Canada invite Britain to be a privileged partner in the Free Trade area of the Americas, Peter Ratzer replies that Britain's interests are more closely allied with those of Europe. It is unlikely that the Americas would be able to compensate for the traditional patterns.

The India/Pakistan nuclear developments of the past days indicate that sanctions don't work. But the sanctions are aimed more at other countries as a warning.

China, which has always wanted a gateway to the Indian sub-continent, appears to be financing Pakistan. Meanwhile the concern is the integration of smaller nuclear weapons with conventional weapons.

Mention of China led to a discussion of charges that the Chinese are selling organs of executed prisoners for transplants. Does it matter that the prisoners are executed after questionable judicial proceedings? Or is the morality of state-sponsored sale of organs the issue? Many poor people in other parts of the world sell organs. People die in accidents all the time, how many of their organs are available for transplant? There are both religious and philosophical objections to organ donation. But there are equally strong arguments for. Is our society becoming self-indulgent in its preoccupation with breeding, replacing, reproducing body parts? Why are we so preoccupied with prolonging life (140 years is possible, but desirable?) and still ignoring the importance of improving quality of life? Alzheimer's, other forms of dementia and cerebral deterioration are greater enemies than old age and gradual physical weakening.

This issue is one of rich versus poor (individuals and nations). Wealthy, industrialized nations with advanced bio-medical research facilities can afford to discuss the ethics of the new technologies. In the poor nations, it would be nice if someone could provide uncontaminated water and more reliable, healthier food supplies.

A change of pace: how do our guests - and their compatriots - view the current controversy over MAI (Multilateral Agreement on Investments)?

Given the amount of attention paid to MAI here in recent months, it was a great surprise to learn that one faithful reader of the Financial Times and another faithful reader of the London Times were completely unaware of the battles being fought over MAI.

The process within the OECD has been quite secretive and highly exclusionary. Only OECD member-nations were included or even taken into consideration in the deliberations, yet the countries with the most to lose are the resource-rich, exploited or exploitable third world nations. MAI purports to establish rules whereby international investors are protected against the whims of local governments and are subject to local laws (environmental and other) only under certain conditions. In this manner, says OECD, the multinationals will in effect have to adhere to some form of global ethic.

In fairness it should be pointed out that Donald Johnston, Executive Director of the OECD gave a speech at the Canadian Club very recently in which he extolled the advantages to small and medium-size businesses of the guidelines supplied by MAI, but he did not make the case for "small and medium size countries"!

Our banker suggests that this is an old debate. The multinationals are always the villains, but they are the only organizations which bring capital into some of the developing nations.

Our European diplomat and economist suggests that MAI seeks a solution whereby an agreement among sovereign nations is designed to control the transnational and ungovernable multinationals.

(Editor's Note: on reflection one wonders if it is all that surprising that our guests from the UK were not aware of the lobbying efforts against MAI. [but then they do not have a Maude Barlow] Up until very recently, most of the information available on this issue was through the Internet and not through the established print or electronic media. This should be explored at another time; the Internet has become the weapon of choice of the NGOs and it has been the NGOs who have led the fight against MAI).

A Letter from Kuala Lumpur: A former Wednesday Night "Regular", a European diplomat, born in Indonesia and now serving in Malaysia, has recently sent a long analysis of the current events in Indonesia, paying particular attention to the historical context. This letter is now on the westweb site and all are encouraged to read it and comment on it.

Maintaining the tradition, a brief discussion of the market stemming from the annual Analysts Forecast Dinner at which one guest had been present. According to him, there were 4 analysts with 4 different views. No surprise.

The Wednesday Night view is that bonds are a better investment than stocks; the stock market is expensive and offers high risks. Baby boomers are driving prices up. Companies cannot deliver equivalency of equity costs. Is the equity market the only place for returns? Earnings are beyond deliverables. The bubble may burst, but when? Templeton has suggested there will be a 40% correction….

In closing, the Montreal Press Club extended an invitation to all for the following (Thursday) evening to hear Jacques Duchesneau, candidate for the mayoralty of Montreal.

Reported by Michael Judson
Edited by Diana Thébaud Nicholson