On transparency, sex education, Latvia, California, needles, Kenya, manufacturing

Mar 12th 2009
From The Economist print edition

Shining some light

SIR – Certain assertions in your article on transparency in financial markets deserve to be reconsidered (Economics focus, February 21st). You describe transparency as amorphous, criticise it as costly and say it takes second place to trust in the money markets. It is hardly surprising that shortcomings may arise from inaccurate, immaterial and incomparable publicly available information, but transparency as a principle cannot be blamed. A hefty prospectus veiled in legal jargon should not be considered a transparent tool of disclosure; it is a means of obfuscation. The sheer complexity of repackaging subprime loans to achieve AAA credit-ratings is indicative of efforts to deceive through disguise.

Trust in financial markets vanished when the lack of transparency became apparent; it is only through transparency that investor confidence and public trust can be won back. As for “symmetry”, some investors will always be able to use information better than others, but this information should be available to all. Transparency leads to a level playing field.

The failure of the markets has resulted in massive bail-outs. By comparison, the costs of disclosure in well-regulated markets are borne by all those who promote a risk, or transfer it to others. From preventing excessive short-term risk-taking to exposing potential conflicts of interest, transparency is key to ensuring that confidence is restored.

Huguette Labelle
Chair Transparency International
Berlin

We are all only human

SIR – I read the comment in your article on sex education in America that “abstinence-only education programmes have been controversial ever since they were introduced under Ronald Reagan in 1981” (“Just say no”, February 14th). It is about time that Reagan’s sex-education policies were reversed. They have been a disaster, responsible for both the spread of disease and an increase in unwanted pregnancies and abortions in America, even more so in Africa. However, you should have pointed out that Reagan himself wasn’t maybe the best exemplar of his policy, having got Nancy pregnant before he married her.

Robert Sarver
Northville, Michigan

Latvia’s economy

SIR – Your briefing on eastern Europe’s economies mentioned that Latvia’s IMF-supported programme entails large cuts to social spending (“The whiff of contagion”, February 28th). That is inaccurate. Although it is true that the fiscal consolidation planned by the Latvian government is indeed large, at around 7% of GDP, social spending, as well as capital spending co-financed by the European Union, is explicitly protected. In fact, according to data provided to the IMF, spending on social support programmes is planned to increase between 2008 and 2009 in absolute terms, as a percentage of GDP, and as a share of total outlays.

Pensions will not be changed this year and will be indexed to inflation next year, at the same time as public-sector employees are set to see substantial reductions in their nominal salaries. Under the programme the Latvian authorities will also improve the targeting of spending to develop social safety nets. This is consistent with the objective of increasing competitiveness under Latvia’s fixed exchange-rate regime, while also protecting those who are most vulnerable.

Christoph Rosenberg
Mission chief for Latvia International Monetary Fund
Washington, DC

SIR – You say that Latvia has enjoyed a colossal boom “fuelled by reckless bank lending, particularly in construction and consumer loans”. You then state that “conventional wisdom would have suggested applying the brakes hard, by tightening the budget and curbing borrowing. But the country’s rulers, a lightweight lot with close ties to business, rejected that.”

Hang on a minute. That sounds remarkably like the ten years leading up to the recession in Britain. I’m no expert on Latvian economic history but it seems rather harsh to blame Latvia’s rulers, who were probably doing no more, in their new-found freedom, than emulating what they doubtless perceived as the conventional wisdom of Western capitalist policies.

Gina Antczak
Lymington, Hampshire

A city on a hill

SIR – If I were to catalogue all the falsities in Lexington’s column (February 28th) excoriating California and San Francisco my letter would be far too long for publication, so I’ll stick to what I know from personal experience. First, it is not congressional Democrats who have given our state “the most dysfunctional politics in the country”, it’s our muscle-headed Republican governor, and a cabal of dogma-clinging Republican legislators.

Next, as a middle-class San Franciscan—I am a high-school instructor and my wife is a librarian—happily raising children here, surrounded by other middle-class folks doing the same, I can assure you that my city is not “a playground for the ultra-rich and a sewer for the poor”. Finally, it is absurd to suggest that Nancy Pelosi, the speaker of the House of Representatives, is more isolated from the “real” America than the Texan suburbanites she replaced just because she has a house in Pacific Heights. For one thing, it is about a ten-minute walk from her house to my daughter’s school, which is 50% African-American.

Anyway, if I have to choose between “Californication” and whatever it was that those Texans were doing to us for the past eight years (I don’t even want to try to think of a word for it) I’ll take our way a dozen times over.

Erik Honda
San Francisco

SIR – I am a politically moderate homeowner in San Francisco, married with children. Property prices here are mind-bendingly expensive, but the vast majority of people are middle class. Besides, if California is such an undesirable place then why have business giants such as Apple, Gap, Genentech, Google, Intel and Oracle, to name just a few, started here?

Shannon Holloway
San Francisco

SIR – I must protest at the photograph of California’s governor in your article on the state’s fiscal crisis (“The ungovernable state”, February 21st). The laws of physics will simply not permit Arnold Schwarzenegger, even as the Terminator, to carry a coffin, empty or otherwise, on one shoulder while the position of his body is, as shown, vertical. He would simply fall over to his left, unless his body curved rightward to ensure his combined centre of gravity remained within the area defined by his feet.

Perhaps the photo was used to illustrate that he is, indeed, falling to his left under the burden of unsustainable social and pork-barrel spending. Alternatively, the “coffin” is no more than an empty polystyrene box designed to deceive Californians into believing he has got firm control of the dead weight the state imposes on its beleaguered taxpayers, and that the budget is as firmly balanced as he is. Either way, it augurs ill for Californians.

Tony Allwright
Killiney, Ireland

The following letters appear online only

Needle point

SIR - Regarding your article on needle-exchange programmes in Britain, we believe that you made an unreasonable comparison between services for people who inject illicit drugs and people who are living with diabetes (“Yes to heroin, insulin no”, February 28th). First, those who need to inject often do not routinely use normal needles and syringes. The 5-15% who are type-one and need to inject often do not routinely use “normal” needles and syringes. The tendency is to use a NovoPen or similar device and the needle is usually disposed of by clipping (a device something like a cigar-cutter snips the needle off). People with diabetes therefore do not require regular access to a source of sterile injecting equipment and sharps disposal as, for example, a speedball user who may be injecting 20 times a day or more.

Second, from a public-health perspective, people who inject insulin are a far lower risk group for blood-borne viruses such as HIV and hepatitis, particularly hepatitis C. Estimates indicate that approximately 85-90% of those with hepatitis C in Britain acquired the virus through injecting illicit drugs. Although the prevalence of HIV among injecting drug users in Britain is low compared to many other European countries there are concerns that it may be rising. In addition to the concerns about rising rates of blood-borne viruses among illicit-drug users, there is a strong correlation between illicit-drug use and crime, homelessness, health inequality, isolation from health services and chaotic lifestyles.

Needle and syringe programmes represent an important way to try to engage this disenfranchised group. People who inject insulin, on the other hand, tend to be in close contact with health services. The requirement to obtain insulin via prescription ensures at least some engagement with health professionals, and in fact the majority of people living with type-one diabetes have access to a wide range of specialist service provision.

Third, it is important to note the context in which NICE produces its guidance. The piece of guidance in question was produced in response to a specific referral from the Department of Health and it sets out to provide specific guidance on this topic. People living with diabetes who inject insulin are not covered by the recommendations in this guidance. To date, NICE has not been asked to produce guidance on the provision of injecting equipment and sharps disposal to people living with diabetes.

Professor Mike Kelly
Director
Centre for Public Health Excellence

Chris Carmona
Public-health analyst
National Institute for Health and Clinical Excellence (NICE)
London

Corruption in Kenya

SIR - I would like to respond to your review of a book by Michela Wrong on Kenya (“How to ruin a country”, February 28th). Despite Ms Wrong’s charges to the contrary, Britain’s Department for International Development (DFID) has zero tolerance for corruption in Kenya and globally. Corruption hits poor people hardest, and undermines development, the rule of law and investor confidence. The best checks on corruption are strengthening governance and supporting citizens to speak out against it.

DFID’s programme in Kenya does just this, including assisting groups that investigate the way Kenyan taxpayers’ money is spent, such as the National Taxpayers’ Association and Transparency International (previously headed by John Githongo, with whom we still work closely).

During the period highlighted in Ms Wrong’s book, DFID officials worked with the British high commission in Nairobi on the aid programme, British law-enforcement efforts and British visa exclusions for suspect Kenyan politicians. The notion that DFID officials sought to undermine anti-corruption efforts is nonsense.

More needs to be done. Ordinary Kenyans are increasingly vocal in demanding high-level prosecutions and an end to the culture of impunity in their country. The British government remains fully committed to supporting them to tackle the misuse of public money. I would challenge your reviewer, and Michela Wrong, to suggest constructive alternatives to the policies we are currently pursuing to combat corruption in Kenya.

Ivan Lewis, MP
Department for International Development
London

What to make of it all

SIR - As the boss of a British manufacturing company, you may be surprised that I support your leader warning against government intervention in manufacturing (“The collapse of manufacturing”, February 21st). Our company has grown over the years but now, like so many others, is being affected by the global slowdown.

However, I will not join the clamour for sectoral state aid or add to the nationalistic drum beat from some in the media and industry for increased economic protectionism. My experience is that specialism, innovation, long-term investment and bright ideas will win through where protectionism and navel gazing will fail.

There is one area where government support is welcome however. I would appeal to the government to use this opportunity, and any future proposed stimulus packages, to boost investment in R&D, apprenticeships, training and other measures that will allow British manufacturers to gain their own competitive advantage by competing on “value creation” rather than “low cost” and avoiding commoditised product/market sectors, which will help shield them and us from future economic woes.

Keith Attwood
Chief executive
e2v
Chelmsford, Essex

SIR - You stated that “half-empty freighters are just one sign of a worldwide collapse in manufacturing”. Could you not have said instead that the freighters were half full? A little bit of optimism from your newspaper might be just what our consumer confidence needs.

Ana Correa
London

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