On the City, productivity, sin taxes, Bolivia, nuclear power, Kolkata, euphemisms

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Balancing the ledger

SIR – Your leader on how to “Save the City” (January 7th) as the world’s premier centre for global finance mentioned the potential for damage from political attacks, and you drove home your argument by pointing out that “California doesn’t talk down Silicon Valley”. Maybe so, but then Google, Facebook and Twitter have not plunged the world into the biggest recession since the Depression, demanded taxpayer bail-outs and then used the money to pay executives exorbitant bonuses. The St Paul’s Institute shows that now even bankers themselves think they are paid too much.

The City’s size crowds out other industries and draws talent into investment banking. We are far too dependent on the City, and the financialisation of the economy has brought us inequality and fragility. It is financiers who remind us so persuasively that we must diversify our portfolios. Doing so could save Britain.

Ravin Thambapillai
for Occupy London (Economics Working Group)
St Paul’s Churchyard
London  

SIR – The real impetus that spurred London to international financial supremacy was the introduction of an interest equalisation tax in America in 1963 alongside the long-standing Regulation Q, which limited interest rates paid on American onshore deposits. Furthermore, the Soviet Union was unwilling to keep its dollar deposits in the United States, which had a long history of freezing the bank accounts of unfriendly countries in times of international crisis.

Thus American regulatory and market-restrictive measures drove US deposits offshore. The first port of call was London. Once London had built up an international expertise in dollar bond issuance, distribution and underwriting, it became easy to transfer these skills to other currencies. The long history of unintended consequences should warn regulators against trying to fix prices or rates in markets that generally function efficiently.

Michael Stern
Director Investment Education PLC
Manchester  

SIR – After years of hand-wringing The Economist seems finally to have reached the panic stage in recognising the multitude of threats levelled against the City of London. Was it the Epiphany, or is this another example of Lord D’Abernon’s observation that the English mind works best when it is almost too late?

Atilla Ilkson
Naples, Florida  

SIR – Schumpeter missed the point about the “demonology” of finance (January 7th). The money is ours; it belongs to the taxpayer. The banking industry has been socialised by the Republicans, of all people. Schumpeter cited Karl Marx. He should have referred to the Marx Brothers.

Imagine that each brother runs a bank and invests in bonds. To cover themselves they buy default insurance. Groucho knows he is covered as he bought insurance from Chico, who’s done the same from Harpo, and Harpo being no fool has got cover from Groucho. At the end of the movie they all need a shave and are begging on the street.

Fred Elliott
Milford, Massachusetts

Liberating work

SIR – Contrary to what you suggest, America’s productivity gains are not being “squeezed” out of workers (“Hard times, lean firms”, December 31st). Nor are the gains the result of automation or computers, per se. Instead, the root of the improvement is coming from changes in the way work is performed, changes that simplify work. These include the elimination of layers of supervision and the empowerment of workers to make decisions that were previously reserved for the now-vanished higher-ups.

Flexible hours, cross-training in a variety of skills and diversity in daily assignments make workers happier and more productive. All of this benefits employees and adds to, rather than detracts from, job satisfaction. Those who believe workers are being put upon need to visit some factory floors to see what is really being done out there.

Alexander Blanton
Senior analyst
Clear Harbor Asset Management
New York

The smoking gun

SIR – Your article on sin taxes in Britain (“The high cost of virtue”, December 31st) took at face value claims by the Tobacco Manufacturers’ Association that cigarette smuggling in Britain peaked in 2000 as a result of high taxes and a weak euro. In fact, the affordability of tobacco has not changed greatly in the past ten years, while cigarette smuggling has halved. Tobacco smuggling is weakly affected by price.

Evidence shows that smuggling has decreased through better law enforcement and by curbing the tobacco industry’s own activities. Questionable claims about smuggling are a standard tobacco-industry tactic to resist effective policies to cut smoking, a tactic we expect it will employ when the government consults people on the plain packaging of tobacco later this year.

Jean King
Director of tobacco control
Cancer Research UK

Betty McBride
Director of policy
British Heart Foundation
London  

SIR – If the government legalised prostitution it could have a new “sin tax” that would not diminish. Properly regulated brothels (women’s needs should be catered for, too) would bring in income tax, national insurance, even value-added tax. Commercial arrangements ought to discourage the drunken encounters that lead to sexually transmitted infections and unwanted pregnancies, saving money on both counts.

And this would also lead to the partial replacement of emotionally charged marital affairs by the objective logic of the market, thus saving much misery and reducing the huge costs of family breakdown.

Cecil Sanderson
Cheltenham, Gloucestershire

The justice system in Bolivia

* SIR – The description of Bolivian community justice in your article is inaccurate (“Rough justice”, January 7th). The characterisation of “justice dispensed by village elders” takes no account of the internal structures in Bolivian indigenous communities, where leaders are elected on a rotational basis. This means that those who adjudicate in cases of community justice are democratically accountable to their peers.

Although lynching does take place in Bolivia, it is wrong to equate this to traditional community justice, which forbids such practices. Furthermore, the law which sets out the jurisdiction of community justice expressly prohibits lynching, a human-rights violation which must be punished by the state, and capital punishment.

You are right to highlight the fact that rural populations often have limited access to the ordinary justice system in Bolivia. The institutionalisation of traditional justice is a step forward which will help to reduce abuses such as lynching and place all Bolivians on a more equal footing.

Alex Tilley
Bolivia Information Forum
London

Nuclear power

* SIR – Banyan’s column about the lessons from Japan’s nuclear disaster (January 7th) was right in saying that it has become axiomatic since Three Mile Island to assume that complex systems fail in complex ways. Faced as we are with hard energy choices, the risks that come with nuclear energy had come to be seen as less daunting than the risks associated with burning fossil fuels.

But Fukushima is also a reminder that the danger from nuclear energy is inversely proportional to transparency. It is perhaps a cautionary tale for those advocating nuclear power: argue for and sell nuclear energy in transparent democracies only.

Phil Vernon
Tunbridge Wells, Kent

City living

SIR – Regarding attempts to revive Kolkata, an intriguing question is whether Mumbai will suffer the same fate (“The city that got left behind”, January 7th). Deteriorating infrastructure, cratered roads, worsening traffic, crumbling buildings, filthy beaches, ever-expanding slums, sky-high rents and property prices, refugees pouring in daily, inadequate schooling, fractious politics, corruption and so on. It is a long list.

Tarun Kataria
Chief executive, India
Religare Capital Markets
Mumbai

Delicately expressed

SIR – Your article on euphemisms (“Making murder respectable”, December 17th) brought to mind the following crime report:
      She was decapitated and disembowelled. She was however not interfered with.

Russell Denoon Duncan
Thames Ditton, Surrey

* SIR – It was interesting to see London’s rich bankers referred to as “high net-worth individuals” just three weeks after your feature on euphemisms. If teamed with the popularity among American politicians of “job creators” as the new term for rich businessmen whose tax privileges are under question, you could whitewash a good deal of government-backed enterprise as “capitalism”, if Occupy protesters hadn’t already done so.

Clifford Zeyl
Pfafftown, North Carolina 

SIR – Football managers are no longer sacked. They “part company” with their club, for business reasons or to spend more time with their family. When one manager was found to be “seeing” the same blonde as his chairman, he was told his contract would not be renewed as he had “taken the club as far as he could”.

Mike Pavasovic
Ashton-under-Lyne

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