LSE Research

Join the global debate at LSE ISSUE 2, AUTUMN 2010

POWER SHIFT

Myth and reality

EDITOR

T

he so-called special relationship between the United States and the United Kingdom has been in the news this year, and as a dual US-UK national who has lived in London since 1996, I take this personally. Fortunately, the special relationship has not been in the news for the usual (and, by me, dreaded) reasons: is it up or down; does Britain care too much; does America care at all? It has been in the news because the British political establishment finally seems to be taking a more sober and realistic view of it. It’s about time, if only to allow light to shine on a related but more important point: the world is changing and so must the special relationship; the dislocation in this one bilateral bond is just one of many aftershocks the world is experiencing as a consequence of a historic West-East power shift.

Two great tectonic plates are on the move – China and the US – and the rest of the world is having to adjust to new realities and new relationships. This historic power shift and its repercussions are the cover subjects of this issue of LSE Research. The London School of Economics and Political Science is fortunate to be home to some of the world’s pre-eminent thinkers on the evolving new world order as power shifts from West to East. A focal point of research in this area is LSE IDEAS, a highly respected centre for the study of international affairs, diplomacy and grand strategy, and I am very pleased to have the centre’s co-directors, Michael Cox and Arne Westad, writing in this issue.

In their articles, Westad and Cox come at the power-shift theme from different angles. Westad urges us to look beyond the shifting economic balance of power to the consequences, first, of China’s rise on its neighbours and, second, of America’s China fixation on its traditional transatlantic relationship with Europe, including Britain. Cox sounds a cautionary note: for all the focus on China and the rise of the East, don’t write off the US and the West just yet. Danny Quah, a senior fellow at LSE IDEAS and co-director of LSE Global Governance, has produced a fascinating map showing the eastward trajectory of what he calls the world’s economic centre of gravity, from where it was in 1980 to where it will be in 2049. Finally, the celebrated historian Niall Ferguson, who is this year’s Philippe Roman chair in history and international relations at LSE IDEAS, talks about China as ‘the eternal empire’.

This is the second issue of LSE Research. As a lifelong journalist, I continue to be impressed by the breadth, depth and currency of the work done at powerhouse research institutions like LSE. In separate articles, Mina Al-Lami, Kristian Coates Ulrichsen, and Justin Gest have written depressing dispatches from the front lines of what used to be known as the war on terror. Daniel Beunza brings the arbitrage business to life with an intriguing bit of financial theory derived in part from time spent on the floor with the traders. Elsewhere, Carolyn Côté-Lussier tells of how a research trip was enlivened, indeed enriched, by an earthquake in Chile, while closer to home Tony Travers explains that immigration has turned London into a metropolis that is in some ways more American than European.

I could go on… Let me just say that, as I hope you can tell, it has been a privilege to be able to draw on such a prodigious armoury of talent – of LSE students, faculty members, and alumni – to put together the first two issues of this magazine. As the enclosed letter says, I am looking forward to your feedback – you can email erd.researchmagazine@lse.ac.uk – to make sure issue number three lives up to expectations.

LSE RESEARCH LSE Research is published twice a year by the Press and Information Office at the London School of Economics and Political Science, Houghton Street, London WC2A 2AE. Tel: +44 (0)20 7955 7060.

Fax: +44 (0)20 7852 3658. erd.researchmagazine@ lse.ac.uk

EDITORIAL Managing editor Claire Sanders Editor Stryker McGuire

DESIGN Art director Claire Harrison Senior designer Ailsa Drake Printed by: Quadracolour Published by The London School of Economics and Political Science (‘LSE’), Houghton Street, London WC2A 2AE. LSE is a School of the University of London. It is a charity and is incorporated in England as a company limited by guarantee under the Companies Acts (Reg number 70527).

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2 LSE Research Magazine, Issue 2, Autumn 2010

CONTENTS EDITOR 2 FINDINGS 6 FOOTNOTES 46

BREAKING GROUND 10 The lobbyist merry-go-round

by Jordi Blanes i Vidal, Mirko Draca, and Christian Fons-Rosen 10

5

LSE Research reports on a first-of-its-kind study into the very profitable revolving-door transition from government work to lobbying.

EUROPE 12 Greece and the euro by Kevin Featherstone 12 Both crises were brought about by long-standing, and largely ignored, problems. Had the European Union not intervened, the cradle of democracy might have become the single currency’s grave. But there’s still work to be done.

That European feeling by Michael Bruter 14 Judging from the news, it’s been a bad stretch for EU bureaucracies and the people who run them. And yet an unprecedented survey based on 30,000 interviews across the 27 EU-member states establishes that European identity is on the rise.

FINANCE 16 Home truths from the trading floor by Daniel Beunza 16 When dissecting big merger deals that go badly wrong, sitting alongside the arbitrage traders themselves can help cut through the fog of ‘herding’ and ‘Black Swan’ theories to get at what really happens.

ECONOMICS 18 10

Flying lessons by Max Steuer 18 In 2001, the British government part-privatised the National Air Traffic Control Service, selling off 51 per cent to UK airlines, NATS employees, and BAA, the airports authority. This is the story of what happened next.

COVER STORY: INTERNATIONAL RELATIONS 20 The new New World Order by Arne Westad 21 Fasten your seatbelts. Asia is reassuming the position of global economic dominance it held for all of human history except for the last century. The United States, meanwhile, is looking east – and away from Europe.

Tracking the ECG by Danny Quah 23 It’s a bird… It’s a plane… No, it’s a series of dots showing how the world’s economic centre of gravity is moving – you guessed it – from West to East. It’s hard to imagine a more elegant depiction of geopolitical change.

14

The myth of a power shift by Michael Cox 24 America may be on the wane, Europe in decline, and China on the rise. But the Colossus of the East is still no match for the economic and military power of the West.

Imperial dreams, imperial nightmares by Niall Ferguson 24 After 500 years of Western ascendancy and then dominance, we are witnessing a great rebalancing, which really began a century ago.

18

Autumn 2010, Issue 2, LSE Research Magazine 3

20

40

44

LONDON 28 Greatness upon Thames by Tony Travers 28 Ten years after their first mayoral election, Londoners have got more than they bargained for: a richly diverse metropolis that is more like an American gateway city than a traditional European one, and a political system to match.

TECHNOLOGY 30 Everything old is new again by Robin Mansell 30 The media world, like life, is complicated. New and old media don’t always fight each other; they often work in parallel. Oh, and who says new media are an unequivocal blessing for developing societies?

SPECIAL REPORT: TERRORISM 32 Getting terrorism wrong by Justin Gest 32 An over-securitised society is not much of a society at all. And yet we’ve been fighting terror with the wrong tools, with fear-driven measures that push Muslims into alienation and vilification.

Losing the plot by Mina Al-Lami 34 In the global war on terror, the ‘battle for hearts and minds’ was a made-in-America strategy to win over Muslims. It hasn’t worked on the internet, where clumsy crackdowns have been heavyhanded and counter-productive.

Canary in the coal mine by Kristian Coates Ulrichsen 37 Gulf states, take note: Yemen, a terrorist breeding ground, is a sign of what can go wrong when a country fails to develop political legitimacy and build a sustainable, productive non-oil economy.

CLIMATE CHANGE 40 Time for action – again by Nicholas Stern 40 Battalions of academic researchers are laying the groundwork for policies that could lead to a safer and more prosperous world.

THE POLICY PERSPECTIVE 42 At the coal face by Dorothy Thompson 42 With help from policy makers, we can transform one of the biggest producers of CO2 in the country into one of the cleanest electricity generators.

THE ACADEMIC PERSPECTIVE 44 Research in a time of earthquakes by Carolyn Côté-Lussier 44 Not all research goes to plan – which is just as well. The February 2010 Chilean earthquake added a whole new dimension to an investigation into how events can change public attitudes toward crime and punishment.

LSE Research is available online at lse.ac.uk/LSEResearchMagazine COVER IMAGES: istockphoto

4 LSE Research Magazine, Issue 2, Autumn 2010

Friedrich August von Hayek (1899-1992) Economist, political philosopher, Nobel laureate.

LSE lecturer and professor. From The Fatal Conceit: ‘The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.’ LSE ARCHIVES

FINDINGS Brief summaries of recent research from LSE

A manifesto for the markets A radical programme to increase investment returns and save capitalism – from a former fund manager and IMF economist

• cap annual turnover of portfolios at 30 per cent • understand that all tools now used to manage risk and return are based on the discredited theory of efficient markets

24 May 2010 • adopt a stable benchmark such as growth of GDP plus a risk premium • not pay performance fees • not engage in alternative investments like hedge funds, private equity, and commodities • insist on total transparency of agents’ strategies • trade everything in their portfolios on public exchanges • secure full transparency of banking service costs incurred by companies they invest in • provide full disclosure of compliance with the manifesto

Investment funds should limit their annual turnover to 30 per cent and avoid any dealings with hedge funds or other forms of alternative investment, argues a radical new manifesto aimed at saving ‘dysfunctional’ markets from future crises. The proposals are part of a ten-point manifesto developed by Dr Paul Woolley, a former fund manager and IMF economist who founded the Paul Woolley Centre for the Study of Capital Market Dysfunctionality at LSE.

D

r Woolley says that if his policies are adopted by Giant Funds – his term for the world’s biggest public, pension and charitable funds – they would boost annual returns for a fund (after inflation) by 25 per cent. Once widely adopted, they would restore stability to the markets, giving funds another rise of similar size, for an overall gain in long-term returns of 50 per cent or more.

cent to six or seven per cent,’ says Dr Woolley.

‘But these measures would also deliver social gains by reducing the likelihood of bubbles and crashes, bringing faster growth, and making finance less bloated and exploitative. Economic theory and received wisdom have brainwashed everyone into believing that capital markets are efficient, that prices are always right, capital markets are self-stabilising and competition keeps banks and financial firms from earning abnormal profits.’

He argues that policy makers who see improved regulation as a means of preventing future crises are taking a negative approach based on restrictions that can be side-stepped by bankers. Instead, he argues for a positive approach, one that harnesses self interest by avoiding the causes of financial dysfunction.

‘The reality is very different,’ says Dr Woolley.

‘The finance industry is performing its utilitarian task of channelling savings into real investment badly and at punitive cost. And as soon as profits disappear, bail-outs are needed.’

‘Wide-scale adoption of these measures would secure private gains by increasing the profits of funds from an annual return of four or five per

• adopt a long-term investment approach (with an eye towards future dividend flows), rather than momentum (for short-term price change)

6 LSE Research Magazine, Issue 2, Autumn 2010

The manifesto says investment funds should:

Dr Woolley argues that failures in the finance industry have their origin in ‘principal-agent problems’: agents (banks, investment managers, brokers and other financial middlemen) have better information than principals (the Giant Funds), and the interests of the two groups are misaligned. As a result, first of all, the delegation of investment decisions to agents leads to momentum investing and short-termism, which are the root cause of mispricing, bubbles and crashes. Secondly, agents are able to capture excess profits through constant innovation of complex products, lack of transparency and fee structures that encourage what amounts to gambling. The best remedy, he says, is for principals to change the way they contract with, and instruct, agents.

To address this market disfunctionality, Dr Woolley says public investment funds should adopt his manifesto. If they don’t, he says, they should be stripped of their tax-exemption rights.

Furthermore, they should issue so-called GDP bonds that offer growth, inflation protection, and relative price stability.

And if the funds don’t do this? ‘Unless action is taken quickly along these lines,’ says Dr Woolley, ‘the next crisis will spell the end of capitalism as we know it.’

Homeowners make better neighbours than renters 28 May 2010 Homeowners living in city centres and the suburbs make better neighbours than those who live in less built up areas, according to research from LSE’s Dr Christian Hilber. Writing in the Journal of Urban Economics, he suggests that a lack of available land for new housing developments in urban and suburban residential areas helps create more stable communities. Better able to reap the rewards of being good neighbours, these homeowners are more willing to invest in these relationships in the first place.

In ‘New housing supply and the dilution of social capital’, the urban economist argues that in built-up neighbourhoods with high levels of homeownership – like the suburbs that surround larger cities – the restricted housing supply prevents major influxes of new residents who may well undermine established social networks.

Homeowners in more densely populated areas are more willing to invest in their neighbourhoods than private renters, according to Dr Hilber. By contrast, homeowners in less built up areas are no more willing to invest than private renters in such areas. ‘This is pretty counterintuitive,’ says Dr Hilber, ‘because we usually think of rural rather than city communities as being close-knit.’

Disparate housewives: helping husbands, fewer divorces 14 May 2010 Divorce rates are lower in families where husbands help more with housework, shopping and childcare, according to a study of 3,500 British married couples after the birth of their first child. The report, ‘Men’s unpaid work and divorce: reassessing specialisation and trade,’

by Dr Wendy Sigle-Rushton, a senior lecturer in Social Policy, found that the more husbands helped, the lower the incidence of divorce.

Dr Sigle-Rushton points out that some economists have long argued that rising divorce rates, which began in the early 1960s, are linked with steady increases in the numbers of married women working, arguably on the ground that marriages in which men take responsibility for paid work and women remain in the home make both spouses better off.

But those economists, says Dr Sigle-Rushton, ‘have paid very little attention to the behaviour of men. This research addresses that oversight and suggests that fathers’ contribution to unpaid work at home stabilises marriage regardless of mothers’ employment status.’

Don’t look too powerful 3 August 2010 Powerful leaders make worse decisions by dominating their colleagues into silence, a study from LSE’s Department of Management finds.

According to The downside of looking like a leader, strong leaders may also be worse managers because they give off such an impression of power that their colleagues’ opinions are stifled.

Competition is good for your health 21 June 2010 Competition in the English NHS improves hospital efficiency and can save the health service significant amounts of money, according to a study by LSE’s Centre for Economic Performance.

The study finds that hospitals located in areas where patients have a great deal of choice improve their efficiency more quickly than hospitals located in less competitive markets. What’s more, the hospitals in competitive markets are able to improve efficiency and save money without any negative impact on patient outcomes.

These findings suggest that as the NHS faces significant pressure to slow spending, patient choice and hospital competition can be a powerful tool to save money. One of the study’s authors, Zack Cooper, says: ‘Competition creates very clear incentives for hospitals to become more efficient.

‘As George Osborne prepares the country for a period of financial austerity,’ Cooper says, ‘this research helps illustrate how policy-makers get more value for money from the health service instead of having to ration care for cancer, increase waiting times or cut hospital staff.’

Exuding authority and competence is one thing, says the report, but a manager’s domineering attitude will inhibit team members from expressing an opinion. This harms the ability to make good decisions by excluding arguments and evidence that might have enriched the decisionmaking process.

‘Even when a leader invites his or her team to speak up they may still hesitate,’ says study co-author Dr Connson Locke, ‘because they react to non-verbal expressions of power such as posture, frequent eye-contact and a louder voice – behaviours which leaders are encouraged to use because they contribute to an image of competence and confidence.’

Divorce rates are lower in families where husbands help more with housework, shopping and childcare Autumn 2010, Issue 2, LSE Research Magazine 7

Learning from Britain’s war on child poverty 24 March 2010

Banking on your erotic capital 22 March 2010 Don’t underestimate the very real value of what Dr Catherine Hakim, a senior research fellow in LSE’s Department of Sociology, calls ‘erotic capital.’ It can count just as much as educational qualifications in the labour market, politics, media or the arts, she says in a report.

‘Beauty and sex appeal have become more important personal assets in the sexualised cultures of our liberal, modern societies, often just as important as educational qualifications,’ says Dr Hakim. She coined the term ‘erotic capital’ to refer to this difficult-to-define but crucial combination of physical and social attractiveness which makes some men and women agreeable company and colleagues, attractive to all members of their society, and especially to the opposite sex.

‘People who possess an above average amount of erotic capital are more persuasive, and are more often perceived as honest and competent,’ says Dr Hakim. ‘They find it easier to make friends, get jobs, get married, and tend to earn 15 per cent more on average as well.’

Restructuring Whitehall: haste makes waste

The decline of Cabinet government

12 May 2010

14 April 2010

Reorganisations of civil service departments in the UK are often announced at short notice, usually poorly managed, and always costly. Such is the dismal conclusion of LSE research conducted jointly by LSE Public Policy Group and the Institute for Government. In ‘Making and breaking Whitehall departments: a guide to machinery of government changes’, research assistant Anne White and Professor Patrick Dunleavy say that, among other things, departmental overhauls should be more thought through and less politically driven.

The rising power of the prime minister’s office has seriously compromised collective Cabinet government in Britain in recent years, according to Premiership: the Development, Nature and Power of the Office of the British Prime Minister, a book

by Dr Andrew Blick, senior research fellow of the independent research organisation Democratic Audit, and Emeritus Professor George Jones of LSE’s Department of Government.

Based on interviews with 34 top civil servants, private sector experts, and leading academics, the report says decisions made in haste about the shape of Whitehall can lead to up to two years of disruption. ‘Current practices are short-termist, secretive, and amateurish,’ says Professor Dunleavy, chair of the Public Policy Group. ‘We urgently need a more professional, well-studied and carefully evaluated approach – with much better parliamentary scrutiny.’

8 LSE Research Magazine, Issue 2, Autumn 2010

While claims that successive prime ministers have turned the 10 Downing Street operation into an American-style presidential office are off the mark, power has been increasingly concentrated in the prime minister’s office in recent decades, the authors say. They demonstrate that the number of Cabinet meetings per year has fallen markedly – from an average of 87.1 during the 1950s to the high 30s and low 40s in recent years.

Reducing child poverty may turn out to be one of the landmark accomplishments of the Labour governments of British prime ministers Tony Blair and Gordon Brown from 1997 to 2010.

In 1999, according to Jane Waldfogel in her book Britain’s War on Poverty, one in four British children lived in poverty – the third highest child poverty rate among industrialised countries. Five years later, the child poverty rate in Britain had fallen by more than half in absolute terms.

The visiting professor at LSE’s Centre for Analysis of Social Exclusion says the United States can learn from the British experience. She says notable differences distinguish the British and US models, but asserts that a future US poverty agenda must specifically address child poverty and the income inequality that helps create it.

A silver lining in the collapse of Copenhagen 4 May 2010 The global climate policy crash 2009 in Copenhagen is an opportunity not be wasted, say the authors of The Hartwell Paper, a new international report co-ordinated by Professor Gwyn Prins, director of the LSE Mackinder Programme for the Study of Long Wave Events. Spurning the pessimism of post-Copenhagen climate change hand-wringers, the paper says the ‘crash of 2009 presents an immense opportunity to set climate policy free to fly at last’.

After the failure of the international climate policy meeting in Denmark, an international consortium of funders commissioned LSE Mackinder and the Institute for Science, Innovation and Society, University of Oxford, to chart a new way forward.

The Hartwell Paper argues that the KyotoCopenhagen model was ‘structurally flawed and doomed to fail’ because it systematically misunderstood the nature of climate change as a policy issue between 1985 and 2009.

‘It is now plain that it is not possible to have a “climate policy” that has emissions reductions as the all encompassing goal,’ says the report.

‘However, there are many other reasons why the decarbonisation of the global economy is highly desirable.’ The paper calls for ‘a radical reframing – an inverting – of approach: accepting that decarbonisation will only be achieved successfully as a benefit contingent upon other goals which are politically attractive and relentlessly pragmatic.’

RESEARCH HIGHLIGHTS

Debasing the law Kristen Rundle believes that Nazi-era diaries and other personal accounts can help us analyse moral and immoral uses of the law, writes senior press officer Sue Windebank.

W

hat can the Nazis’ legal persecution of the Jews tell us about the morality of the law?

The celebrated diaries of Victor Klemperer, a professor of Jewish descent working at the Technical University of Dresden, are a chronicle of daily life under the Nazis. They chart the shift from a kind of normality – albeit one lived under the lengthening shadow of a racist dictatorship – to terror and lawlessness.

Early on, Klemperer was partly protected from the Nazi legal programme against the Jews by having served in the German army in the First World War, by his conversion to Protestantism, and by being married to an ‘Aryan’. However, as antiJewish measures became increasingly oppressive Klemperer was soon being subjected to the same unpredictable treatment experienced by all those not deemed to be of ‘German blood’.

For Dr Kristen Rundle, a lecturer in the Department of Law who specialises in legal philosophy, Klemperer’s personal record provides important insights into how law affects those who are subject to it. ‘Studies of the legal persecution of the Jews mainly focus on the “top end” – what [laws were] enacted, how law was used as an instrument of persecution, how courts made decisions and so on,’ says Dr Rundle. ‘Being persecuted by the content of the law is one thing, but I am also interested in what it meant to be persecuted through law, and how that was experienced.’

Dr Rundle believes that personal accounts such as Klemperer’s help cast light on the legal philosophical debate concerning the morality of law and its connection to the quality of orderliness that we associate with the ‘rule of law’. Is law inherently moral, or does the Nazi legislative programme against the Jews provide tragic proof that law has no intrinsic moral worth?

Klemperer’s diaries suggest that this is indeed a complex question. The law initially seems to have provided him with some degree of security.

On 10 April 1933, he expresses relief in his diary on the enactment of the Law for the Restoration of the Professional Civil Service, which forcibly ousted many Jews from their public sector positions: ‘The awful feeling of “Thank God, I’m alive.” The new Civil Service “law” leaves me, as a front-line veteran in my post – at least for the time being… But all around rabble-rousing, misery, fear and trembling.’

While Klemperer’s use of inverted commas around the term ‘law’ is subversive, his diary nonetheless suggests that – despite the overtly discriminatory content of the laws – he anticipated that their application to various aspects of his life would bring a degree of stability.

This, Dr Rundle says, is a pattern that runs through many Jewish testimonies of the period.

Those subject to the laws expected that as long as the Nazis used law as their primary means of persecution, their actions were limited to some extent by the defining features of legality – publicity, consistency between the law as announced and its administration, and so on.

This began to change incrementally, and then dramatically after the Kristallnacht pogrom in 1938. With the armed wing of the Nazi Party, the SS, assuming jurisdiction over many aspects of Jewish life, Jews increasingly did not expect to be treated in a predictable way. For them, whatever protection the law had afforded them was running out.

Klemperer’s palpable loss of ‘agency’ is key for Dr Rundle. She explains: ‘Legal systems don’t work unless they retain a notion of the legal subject as an agent – a person of capacity. So the question is, if we want to oppress or eliminate this capacity for agency, is law the wrong tool to use?‘ Ultimately it was not the law that saved Victor Klemperer but the Allied bombing of Dresden.

Fearing deportation to the concentration camps, he used the chaos of the bombings to escape into American-controlled territory.

Klemperer’s diaries were published in 1995, 35 years after his death. Dr Rundle is working with the Wiener Library in London to analyse additional personal accounts of Jewish experiences of the law in Nazi Germany – accounts that she says help us ‘gain a clearer sense of how we understand the presence and absence of law.’ n

© Bettman/CORBIS

For more Research highlights, see: lse.ac.uk/researchhighlights

Autumn 2010, Issue 2, LSE Research Magazine 9

BREAKING GROUND

The lobbyist

merry-go-round

The revolving door through which departing government officials enter the world of lobbying has long raised concerns. In the first major number crunching study of its type, Jordi Blanes i Vidal, Mirko Draca, and Christian Fons-Rosen discovered just how profitable the transition from government to the private sector can be. LSE Research editor Stryker McGuire reports.

L

obbying is as old as government.

Indeed, in the United States, lobbying is protected under the right of petition in the First Amendment of the Constitution.

Though the term itself can be traced to Britain, where it was used to describe the cajoling of MPs in the lobbies of the House of Commons, nowhere have lobbyists reached a more evolved state than in the corridors of power in Washington, DC.

In recent years, lobbying has attracted a great deal of attention – and money. Between 1998 and 2009, lobbying expenditure approximately doubled, reaching $4 billion a year. That seems certain to continue. The burgeoning railroad industry in the United States fed a lobbying boom in the 19th century; similarly, President Barack Obama’s attempts to reform America’s largest industry, health care, and its most beleaguered one, financial services, has generated a lobbying bonanza.

With the surge has come a new wave of concern about lobbying, particularly about the fastspinning revolving door between government and Washington’s lobbying business. This syndrome

The connection to political power is what made ex-staffers particularly sought-after as lobbyists 10 LSE Research Magazine, Issue 2, Autumn 2010

– what amounts to a lobbyist merry-go-round – is the subject of a new study from LSE’s Centre for Economic Performance. The work by researchers Jordi Blanes i Vidal, Mirko Draca, and Christian Fons-Rosen is the first major quantitative study of its type into the symbiotic relationship between lobbying and political connections.

The groundbreaking research establishes a clear link between revolving door lobbyists and the elected officials they once worked for. Take the case of a lobbyist who previously worked in the House of Representatives or the Senate. If the congressperson or senator is no longer in office for whatever reason, the earnings of the lobbyist in question drop on average by 20 per cent. The decline is significant. According to the study, it represents on average a revenue fall-off of approximately $155,000 per year for the lobbying firm, and the loss persists for three years after the politician exits.

‘Clearly, the connection to political power is what made ex-staffers particularly sought-after as lobbyists,’ says Mr Draca. ‘When the politician leaves, the lobbyist relationship becomes obsolete.’

The study focuses only on connections to the congressperson or senator in whose office the lobbyist worked; thus, it is safe to assume that the total value of connections – with colleagues in other offices or government departments, for example – is probably much larger, as Draca explains: ‘We would expect staffers to develop many other relationships during their time in Congress, so we are undercounting the value of the revolving door.’

Lobbyists who used to work in government dispute the notion that their new roles allow them to ‘cash in,’ as Dr Blanes i Vidal puts it, on their connections. They claim that their earnings reflect expertise on policy issues and on the inner workings of government. ‘In other words,’ says Dr Blanes i Vidal, ‘they argue that it is “what you know” not “who you know” that matters.’

Using data from the Center for Responsive Politics in Washington, LegiStorm.com and Lobbyists.info, the LSE research team analysed the employment histories and revenues of 1,500 ex-staffers turned federal lobbyists. The conclusion the researchers reached is inescapable, says Mr Draca: ‘Access or influence can be systematically bought and sold.

This means that if you have the money, you can buy the political connections and improve your chances of affecting policy.’

The study points the way to a new wave of research using data released under publicdisclosure laws. ‘The basic data we use [in the study] was made available as part of the Lobbying and Disclosure Act of 1995,’ says Dr Fons-Rosen.

‘Since then, non-partisan organisations like the Center for Responsive Politics and LegiStorm have done important work in improving access and promoting the usage of the data.’

Mr Draca, for one, is sceptical. ‘There are a lot of vested interests intent on keeping lobbying activity unreported. I suspect that the new politics are going to be a lot like the old politics.” n

Jordi Blanes i Vidal

If you lose your government contact, you lose money

is a lecturer in the Managerial Economics and Strategy Group of LSE’s Department of Management. Previously, Dr Blanes i Vidal was a Prize Research Fellow at Nuffield College, Oxford.

Mirko Draca

is a research economist at the Centre for Economic performance at LSE. His main research area is the empirics of innovation and growth, analysing issues such as spillovers, productivity differences, and induced technical change.

Christian Fons-Rosen

completed his PhD in Economics at LSE. His research interests are in economics, and in particular, innovation, international economics, and political economy.

The CEP team took the analysis a step further.

‘We are now in the position to combine datasets across a number of sources in an attempt to find statistical patterns such as those we found in relation to politically connected lobbyists,’ says Dr Fons-Rosen. ‘As a result, this takes public scrutiny to a new level. We can try to find information and behaviours hidden in the data.’

Although its focus is on Washington, the LSE study will undoubtedly be of interest to policy makers and regulators in the UK. ‘Our research would not be possible in the UK,’ says Mr Draca.

‘The government simply does not demand the registration and reporting of lobbying activity in the same way as in the US. This has allowed lobbying in the UK to take place as a sort of shadow economy, as the recent “cab-for-hire” scandal showed.’ (Earlier this year, former Labour cabinet minister Stephen Byers was secretly recorded offering himself to potential employers outside of government ‘like a sort of cab for hire’ for up to £5,000 a day.)

There are some signs of change in Britain.

The Conservative-Liberal Democrat coalition’s ‘Programme for Government’ pledges to reform current practices: ‘We will regulate lobbying through introducing a statutory register of lobbyists and ensuring greater transparency.’

Autumn 2010, Issue 2, LSE Research Magazine 11

EUROPE

Twin tragedies: Greece and the euro A dysfunctional political system and a non-existent fiscal regime pushed Europe to the brink. Kevin Featherstone explains how the cradle of democracy nearly became the single currency’s grave.

T

he euro and Greece are both facing their biggest crisis since the inception of the single European currency in 1999.

The two predicaments are closely related. The problems encountered by the Greek government in servicing its burgeoning debt amid a global credit squeeze pose fundamental challenges not only to the ability of its domestic political system to reform itself, but also to the resilience and adaptability of the governance of the eurozone at large. The two crises, prompted by unresolved problems, constitute a defining juncture: if Greece cannot bring forward and implement structural reforms that have been debated for many years, what does that say about the capability of the eurozone (and the European Union) to manage the economic bloc it designed for itself?

The Greek crisis has exposed important fault lines between competing philosophies of how the eurozone should be managed. In 1999, in The Road to Maastricht: negotiating economic and monetary union, Kenneth Dyson and I highlighted the long-term influence of ordoliberalism in German thinking. This offshoot of liberalism argues, among other things, that a stability culture in fiscal policy cannot be imposed from outside; rather, it must be home grown and managed by the state. This argument goes against the French notion of ‘gouvernement économique’, which posits that monetary integration has to be matched by a shared management of broader economic policy.

12 LSE Research Magazine, Issue 2, Autumn 2010

At German insistence, the Maastricht Treaty that set up the euro legally barred a member state in fiscal difficulty from obtaining a ‘bail out’ from the European Central Bank (Article 125). (The more limited provision for emergency assistance, Article 122, has been all but ignored in this context.)

In her response to Greece’s overtures for help, Angela Merkel, the German chancellor, displayed the instincts of the ordoliberal tradition. Though she later softened her stance against helping, Merkel’s initial reaction was paradoxical given her country’s long-standing commitment to European unity.

The issues raised by the Greek crisis were foreseen to some extent at Maastricht. What Maastricht created was something unique in modern history: a single currency, but a currency without the underpinning of a sizeable central public budget to manage fiscal transfers and help withstand asymmetric shocks. The ‘E’ in EMU was a hangover from the failed attempt to establish a different kind of project in the 1980s, and at Maastricht the economic dimension was underplayed.

The Greek crisis has now moved the EU debate on, to considering the utility and format of establishing a European Monetary Fund (EMF) that would provide liquidity to those governments in need of it. Again, however, the terms under which an EMF might be established tend to be defined very differently by German leaders and economists than by most of their French or Italian counterparts. The old fault lines are still evident and with them an uncertainty of

purpose at the heart of the European venture as it stands today.

The corollary of the Greek and euro crises is the question of whether the EU is able to manage a broad economic policy covering its member states, given the significant differences between them. The EU’s role has been complicated by suspicions that Greek economic data have been unreliable over the years, and by revelations that previous Greek governments broke EU criteria and rules. More generally, the crisis in Athens has exposed problem areas within Greece’s political economy that have endured beyond the reach of EU-inspired regulation and competition.

In The Limits of Europeanization: reform capacity and policy conflict in Greece (2008), Dimitris Papadimitriou and I explored the limited leverage that the EU has had on three of the country’s most intractable problems: pension reform, labour market flexibility, and privatisation.

The first of these is responsible for a significant part of Greece’s bloated state expenditures, and is projected to be the highest in the EU (as a percentage of GDP) in coming years. The trade union voice is strongest in the Greek public sector – precisely the area in which often low paid workers cling to their seemingly excessive pension entitlements. Moreover, the absence of a full-blown welfare state in Greece curtails labour mobility: very limited unemployment benefits prompt workers to prioritise secure job contracts over flexible working arrangements. In sum, the relevant actors in this Greek tragedy pursue interests that are rational within the distortions and inadequacies of the system, but create limited scope for agreement on reform.

Greece also faces a paradox of governance. At the top, government is normally very strong politically and constitutionally, yet it lacks the strength to carry out its programmes. Business and union representation is distorted, giving voice to particular anti-competitive interests. A social dialogue among employers, employees and the government has proved elusive and has

a country that receives some of the highest levels of support in the EU to analysing the institutional weaknesses at the very heart of government and, now, to offering some advice on reform.

When both dimensions of the current Greek fiscal crisis are taken into account – the external management of the eurozone and the internal capacity of Greek government to reform itself – the questions that emerge are fundamental.

Can Europe manage the Greek crisis? Can Greece continue to live at the heart of Europe?

If the crisis blows the euro off course, how does the EU have the cohesion and will to coordinate and implement a future joint programme of economic recovery across the Continent?

maximised conflict. An embedded culture of clientelism and corruption has sustained what economists term ‘rent-seeking’ behaviour from the state’s resources, with no sizeable domestic social constituency against statism. Finally, the public administration is beset by a low skilled, ill-coordinated and obese bureaucracy that is barely fit for purpose.

The new government in Athens, under prime minister George Papandreou, seeks to confront many of these problems, but it faces a Herculean task. Growing interest in the ability of the Greek political system to reform itself has led Papadimitriou and me to examine more closely the inner workings of government in Athens.

In our present research project, we chart the problems of prime ministerial leadership and inter-ministerial coordination. We have had extensive interviews with living former prime ministers, senior ministers, and key aides of each government since 1974.

We have found revealing contradictions. The position of PM is near-presidential, for example, but the lack of resources at the centre leaves the PM as an emperor with no clothes. The PM lacks information and expert advice. Though Greece’s population is nearly twice the size of Ireland’s, the office of the Greek PM is about a third the size of the Taoiseach’s in Dublin. Because individual ministries are powerful and possess considerable operational autonomy, there is ample latitude for both inefficiencies and corruption. At the centre, moreover, the Cabinet system is weak

and underdeveloped. Meetings of the full Cabinet are rare and perfunctory. To take one small example: in modern times, no minutes have been taken at Cabinet meetings, which means that communication between government departments is poor.

There is little continuity between outgoing and incoming governments. On first arriving at Maximou, the PM’s headquarters, not long ago, one new prime minister found just one typist and a gardener left from the previous regime. Another found that the previous lot had ripped all the hard drives from the computers. More generally, while Greece is under pressure from outside to rein in public expenditure, the traditional system of spending allocations across separate budget ‘lines’ (there were 14,000 in the 2009 budget) makes it difficult to assess whether the public is getting good value for money or not. This partially explains why successive governments have often found it easier to raise taxes than to cut state spending: precise information and effective coordination within the bureaucracy are at a premium.

Since I began writing about the systemic problems within Greek government, Papandreou, an LSE alumnus, invited me to join his Advisory Committee for the Modernisation of the Operation of the Government, which is tasked with helping to improve coordination, advice, and efficiency.

Puzzling through the impediments to reform in Greece has led me on something of a journey: from examining the limits to Europeanisation in

The Greek crisis is teaching us that the ability of the centre – of the EU’s own institutions – to delve into what’s going on in each national capital is limited. It is becoming clear that the EU pushed ahead with its major economic project – the euro – while providing itself with surprisingly little capacity to check and guard against failure. At the same time, the underlying political factors that may encourage fiscal indiscipline from state to member state – the ‘moral hazard’ of some not playing by the rules – are beyond the EU’s reach.

There is no modern precedent for the kind of journey the EU has embarked upon. The crisis in the world’s oldest democracy is a wake-up call to the risks involved, and if anything is clear it is that the edifice built at Maastricht faces a design check. n

Kevin Featherstone

is Eleftherios Venizelos Professor of Contemporary Greek Studies and director of the Hellenic Observatory within LSE’s European Institute. Professor Featherstone’s research interests range from contemporary Greek politics to the politics of the European integration process, as covered in two of his several books, The Road to Maastricht: negotiating EMU (Oxford University Press,1999) and The Limits of Europeanization: reform capacity and policy conflict in Greece (Palgrave, 2008).

He is a member of Greek prime minister George Papandreou’s Advisory Committee for the Modernisation of the Operation of the Government.

Autumn 2010, Issue 2, LSE Research Magazine 13

EUROPE

Getting that European feeling The bureaucrats and bureaucracies of the European Union may struggle to gain popular appeal. Never mind. Michael Bruter says that citizens of EU member states, if only because they are coming in more contact with one another more often, are feeling more European all the time.

D

o you remember May 2005?

Within a week, French and Dutch citizens voted against the ratification of the treaty which was supposed to ‘establish a Constitution for the European Union’. The interpretations in the press (and particularly the British press) were remarkably severe: the citizenry wanted to divorce Europe; Europeans wanted less Europe, not more; people simply did not feel European.

The reactions of politicians – including Eurocrats – followed the same logic. European Commission president José Manuel Barroso suggested that citizens wanted a more ‘technical’ Europe, one that would deal with the economy and not with politics. He suggested further that we should get rid of the symbols of the EU because citizens did not identify with them any longer. Barroso’s was a curious interpretation of the spring 2005 democratic earthquake, but it was not one that relied on any serious empirical assessment of European identity whatsoever.

Together with Sarah Harrison, an LSE doctoral student, I have tried to make just such an assessment – systematically and academically studying and mapping European identity. In the days that followed the 2009 European Parliament elections, we ran the largest ever mass survey specifically designed to understand whether citizens feel European, what Europe means to them, and what their attitudes are towards citizenship in the EU as it is today and as it might evolve in the future.

14 LSE Research Magazine, Issue 2, Autumn 2010

The survey, conducted by Opinium Ltd, was a massive enterprise, comprising more than 30,000 interviews across the 27 EU member states.

Funded by the UK Economic and Social Research Council, the project carried on into 2010 in eight states. We will be releasing the first results of our study over the course of this year. For now, I propose to highlight seven of the many paradoxical conclusions that our findings reveal: Paradox 1: European identity is much stronger than many people think, and it is strengthening, not weakening.

Commentators and academics alike have often been quick to jump to the conclusion that if an increasing proportion of Europeans are critical of the current form and shape of European integration, then European identity must be weak and weakening further. Nothing could be further from the truth, according to our survey.

Levels of European identity are high, and they are strengthening. Indeed, our research shows that on a 10-point scale, the level of self-perceived general European identity of the average EU citizen is 7.09. Even in the Europe’s most Eurosceptic countries, a majority of citizens feel European.

For instance, in the UK, 55.2 per cent of Britons have an identity score of 5 or higher out of 10; in Northern Ireland, the figure is 68 per cent.

Paradox 2: Identity is not the same as support for European integration or EU policies.

Our findings show that feeling European is completely different from making judgements

about various EU policies, institutions, or even the perceived benefits of European integration in general. Using statistical instruments and recreating time series data, we can see that, increasingly, a large proportion of citizens feels European without having the impression that European integration is beneficial to themselves or to their countries. These citizens tend to support European integration despite not perceiving it as beneficial, precisely because they identify with ‘Europe’ as a political and human community.

At a time when the limits of European identity have been tested by the need for the EU to prove its solidarity with near-bankrupt Greece, this finding is especially significant. Indeed, it may well explain why citizens across the Eurozone are in no way rebelling against the financial solidarity that countries in economic difficulty have shown towards each other.

Paradox 3: European identity can mean two very different things to different people.

Our findings show that there are essentially two separate and distinct dimensions to European identity – a civic dimension (in which individuals feel politically like citizens of the EU) and a cultural dimension (in which individuals feel part of a European human and cultural community).

While cultural identity would seem to be tied to European integration, it does not translate into support for European institutions. By contrast, civic identity can breed good will and lead to support for policies, even ones that citizens might find less than perfect. On the whole, a majority of citizens tend to feel more civically than culturally European; the average civic score is 7.15 on a 10-point scale, while the average cultural score is 6.05.

I should point out that these scores do conceal some important differences across EU member states. In general terms, European civic identity tends to be higher in Western Europe and cultural identity higher in Central and Eastern Europe.

Even in Eurosceptic countries, a majority of people feel European

Paradox 4: The more citizens criticise the EU, the more they favour further increased EU citizenship rights.

We know how critical citizens are of certain EU policies. Yet our findings show that there is overwhelming support for all current aspects of EU citizenship, and equally high demand for a furthering of EU citizens’ rights – even when doing so would mean granting additional rights to temporary European residents from other countries (Poles in Britain, for example).

The statistics bear this out: 89 per cent of citizens approve the right of all Europeans to live anywhere they want in the EU; 85.6 per cent are happy for EU citizens from another country to vote in local elections, and 87.8 per cent are happy with the borderless environment created by the Schengen agreements.

Paradox 5: The more you experience Europe, the more European you feel.

The level of ‘European experience’ that citizens have is one of the best predictors of their European identity. Our research shows that as increasing proportions of younger (and not so young) Europeans get a chance to travel, speak foreign languages, and live or study in other European countries, that direct experience of ‘Europeanness’ has a major impact on citizens’ identity.

Paradox 6: European identity varies from country to country, and from men to women.

Not everyone feels equally European. For instance, Britain has the largest proportion of citizens who do not feel European at all, but also one of the largest proportions of people who feel very European: there are proportionally more people in Northern Ireland who feel very strongly European than in Belgium, France or Germany.

Of course, this begs the question of what sort of social and demographic characteristics are most highly related to levels of European identity. A survey of the impact of social and demographic variables is telling. For instance, education is strongly correlated with European identity, but wealth is not. Younger citizens feel significantly more civically European than older ones, but cultural identity is not related to age. Similarly, while centre-left voters are more civically European than centre-right ones, and more supportive of EU citizenship rights, cultural identity is not strongly linked to ideological preferences.

Women, furthermore, tend to feel more European than men in general terms and in terms of support for EU citizenship rights, while men have higher levels of civic identity. What’s more, the impact of gender on European identity is not uniform across all countries. For instance, women tend to feel more European than men in Austria, Germany and the UK, but the opposite is true in France, Spain, and the Czech Republic.

Paradox 7: Even those who feel the least European tend to think that their children and grandchildren will feel more European.

At a time when many Europeans believe the EU is facing an existential crisis, well over 90 per cent of Europeans remain persuaded that their children and grandchildren will feel more European than they do. Even in a relatively Eurosceptic country such as the UK, the figure is over 80 per cent.

Our research suggests that we should all be wary of the conventional wisdom when it comes to European identity. Whatever their individual predilections, our study shows that Europeans accept that integration remains a process – a pioneering adventure that will win more and more hearts and minds, not fewer, as time passes.

At the same time, while we have established that citizens feel far more European on average than many would expect, it would be wrong to assume that European leaders have a blank cheque to take the European project to new levels. As cynicism deepens toward politicians and elites in general, Europeans are no longer willing to accept that politicians know best, whether those politicians are in national capitals or in Brussels. n

Michael Bruter

iSTOCK

is a lecturer in political science and European politics within the LSE’s Department of Government. Dr Bruter’s research interests include the European Union, elections, institutions, public opinion, the extreme right, and voting behaviour. He has published widely in these areas, and is directing four major research projects as sole principal investigator. His most recent book, with Sarah Harrison, is The Future of our Democracies: Young Party Members in Europe (Palgrave Macmillan, 2009). Dr Bruter has held guest professor positions in six universities in recent years.

Autumn 2010, Issue 2, LSE Research Magazine 15

FINANCE

When models collide with the real world When looking at how arbitrage bets on big merger deals can go wrong, Daniel Beunza found he had to cut through the fog of ‘herding’ and ‘Black Swan’ theories – and sit alongside the traders themselves.

I

n the past ten years, and particularly in the wake of last year’s credit crisis, the field of behavioural finance has become increasingly influential. Behavioural finance, or the study of finance through a psychological lens, is not new. Academics such as Robert Shiller or Richard Thaler have been insisting since the mid 1980s that individual biases lead to market failures. But just as behavioural finance is reaching dominance in policy making and the popular press, novel research conducted at LSE is now challenging the psychological view with an alternative, sociological perspective on finance.

The question has been explored in depth in behavioural literature. Behavioural accounts of systemic risk centre on two versions. The social account blames systemic risk on herding and information cascades: if an investor makes the wrong decisions and others imitate her, the risk spreads. The alternative account is Nassim Taleb’s theory of the ‘Black Swan’, which postulates the disproportionate role of high impact, hard to predict, and rare events that are beyond the realm of normal expectations. This theory explains why financial models based on past events may not take into sufficient account the impact that infrequent but disastrous events can have.

What, then, is the sociology of finance?

Relying on tools like fieldwork and participant observation – the same approach that one would use to study urban gangs or the islanders of the South Pacific – sociologists have pioneered the study of how quantitative finance works in the real world. This means understanding how models are actually used, as opposed to how they are intended to be used.

Both of these approaches are conceptually unsatisfying, however. Straight imitation, as the concept of herding would have it, is simply impossible in modern, computer-driven markets.

Plus, it is unlikely that the brainy eggheads who trade derivatives would do it. As for the Black Swan, how irresponsible does a trader need to be to just follow a financial model blindly?

Professionals are more careful than that.

The field is new, but for a taste of its potential, consider the research that my colleague David Stark and I have done on one of the key questions of our time: how has the introduction of financial models impacted systemic risk in financial markets?

The bottom line is that one cannot blame technology without taking into account the social context. Behavioural economists offer only a limited view of systemic risk that does not explore how models and social interaction come together. Stripped from their models

You cannot divorce technology from its social context 16 LSE Research Magazine, Issue 2, Autumn 2010

and their desks, traders naturally come across as helplessly limited. As a result, behavioural economists mistakenly attribute market crises to individual biases – herding, the Black Swan – that only take place in the lab, as it were, and not the real world.

The sociology of finance offers an alternative perspective. Stark and I spent three years visiting the derivatives trading room of a large Wall Street bank. We would visit every two weeks, interviewing and observing the traders, sitting on different desks, in between traders, taking notes.

Our observations on the merger arbitrage desk revealed what prudent traders do to challenge their own fallibility. We call it ‘reflexive modelling’ – improving your model by comparing it to yet another model that conveys what your competitors are doing. But reflexive modelling is not fail-safe.

Our historical analysis of one arbitrage crisis in particular suggests, paradoxically, that while reflexive modelling may make an individual arbitrageur’s trading safer, it can pose risks to trading systems.

Take what we saw on the morning of 27 May, 2003. That day, two companies had announced their intention to merge. (These were two forprofit education firms, Whitman and Career Education, but this detail is beside the point.)

Merger arbitrageurs bet on the likelihood that two companies, once they have announced a merger, will complete it. In this case, the traders used their judgment and models to come up with an estimate for this merger probability. As soon as the market opened, they looked at the prices and decided to take a small position – to put money where their models were.

It was the next step that really piqued our curiosity.

Two hours after market opening, the traders saw that the spread, the difference in stock prices between the two companies, was the same as in the early morning. This worried them. Are we missing something, they wondered – and started searching for missing information.

The use of models, even for the most prudent of reasons, can lead to systemic risk

Arbitrageurs consider the spread to be a measure of the confidence that the market has in the successful completion of the merger.

Traders use the spread to see the probability that other traders assign to the merger. The spread has a magical quality to it: it can tell you what your competitors think, without any need for explicit communication. Hence the arbitrageurs’ concern that morning. Upon observing the spread had not moved for two hours, they thought they might be missing something. To find out, they checked a proprietary database.

They called up a broker who handled the stock.

And – having confirmed that there was no additional danger ahead; having confirmed, in other words, their original instinct – they increased their position.

What we had seen was new to us. In their use of the spread, the arbitrageurs were combining financial models with social cues to check the accuracy of their estimates. They were being both social and calculating. That’s what we mean by ‘reflexive modelling.’ Traders refine their positions in terms of dissonance: if their estimations mirror the market’s, stay on course; if they don’t, find out why not.

But this kind of double-checking may not be enough. There is a dark side to reflexive modelling, which we only discovered by analysing the history

of crises in merger arbitrage. Having seen how traders used the spread, we turned to the work of financial economists such as Micah Officer on arbitrage disasters.

move. ‘Everyone’s database lacked a field, and the field was “European regulatory denial”’, the manager added.

But it takes more than missing a risk factor to cause a disaster. The arbitrageurs’ initial lapse was made worse by the very tool they used to stay safe – reflexive modelling. Convinced their original bet was the right one, they raised it. Our analysis confirms the breakdown of reflexive modelling in the GE-Honeywell disaster. Arbitrageurs initially assigned a very large implied probability to the completion of the merger. Reports from the financial press pointed in the same direction.

Consider the failed merger between General Electric and Honeywell in 2001, one of the worst arbitrage disasters to date. In June 2001, European Competition Commissioner Mario Monti decided to block the merger because of anti-trust concerns. This decision was not what the merger arbitrage desks at hedge funds and investment banks had expected. After all, the merger had already been approved in the United States, where competition issues might have been more pronounced since both companies are American. Monti was expected to follow suit. When he didn’t, estimated collective losses rose to $2.8 billion – large enough to push most merger desks into the red for the year.

The banks and funds that were active on the deal decided to ignore the danger of Monti stopping the merger. This can be deduced from a comparison between how the markets (through the spread) and the media (through news articles) responded to what the Commission was up to (see line on chart below). The bar chart shows the number of articles published in the major business press each week that included the words ‘Honeywell’ and ‘Monti.’ The spike in the number of articles on 27 February 2001 shows that the press had picked up signs of Commission opposition to the merger.

But even as the media voiced these concerns, the narrow spread between the merging companies barely moved. In short, unlike the media, the traders’ models did not pick up the danger.

Our analysis of the disaster suggests it was caused by a flaw in reflexive modelling. Admittedly, we were not in the trading room on that day. But the very same traders we visited in 2003 had been active on GE-Honeywell in 2001, and we interviewed them about it. The traders’ comments support our view. ‘Max traded it,’ said the manager of the trading room, confirming that his senior merger trader was active in the deal.

Clearly, the trader had not anticipated Monti’s

The media saw dangers the arbitrageurs missed Stock-price spread (line, left axis) with news references (columns by week, right axis) $25

250

$20

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$15

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$10

100 27/2/2010

$5

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$ 10/23/00

0 11/23/00

12/23/00

1/23/01

2/23/01

3/23/01

4/23/01

5/23/01

6/23/01

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8/23/01

9/23/01

Our takeaway from this event is that the use of models, even for the most prudent of reasons, can lead to systemic risk. The same form of modelling put in place by traders to avoid mistakes can lead to their undoing.

For even though reflexive modelling improves trading by detecting dissonance, it can lead to financial disaster when combined with what we call ‘resonance’. In financial terms, resonance takes place when models and stock prices, used together, give traders misplaced confidence as to the outcome of an event like a merger.

Our analysis provides a contrasting narrative to the behavioural theories of herding and the Black Swan. Neither theory can explain the disaster of GE-Honeywell.

The crisis was caused by the failure of reflexive modelling. And the only way you would know this is by being in the room at

Autumn 2010, Issue 2, LSE Research Magazine 17

FINANCE

ECONOMICS

the time. Hence, the importance we ascribe to sociological finance.

Implicit in the behavioural account of crises is the psychological view: trouble happens because of essential flaws in the character of individuals; investors behaving as either mindless lemmings or reckless users of models create their own downfall.

Our study offers a very different view. In our sociological conception of markets, technology and the way work is organised combine to create deeper forms of collaboration than behavioural finance suggests. Traders use teams and models because they make them smarter, not foolish. But this strategy does not eliminate the possibility of failure. Indeed, using models and paying attention to what the market ‘thinks’ can come together fatally to produce disasters, even when arbitrageurs are resourceful and take into account their own limitations.

Arbitrage disasters are not caused by a character fault; they are the unintended consequences of an imperfect system. Fixing the system will require a better understanding of how the problems actually happen – through the lens of sociological finance – rather than by simply blaming the traders. n

Daniel Beunza

is a lecturer in the Department of Management at LSE. Dr Beunza’s research in sociology explores the ways in which social relations and technology interact to shape financial value. Along with the work of other sociologists, Dr Beunza’s research has led to the development of an emerging discipline, the social studies of finance, that challenges economic and behavioural understandings of finance by incorporating the role of social relations and technology.

Dr Beunza edits a blog on the social studies of finance at http://socfinance.wordpress. com. His current research centres on financial exchanges and socially responsible investment.

SXC

Flying lessons In the Journal of Air Transport Management earlier this year, Max Steuer analysed the state of Britain’s National Air Traffic Control Service nine years after its partial privatisation in 2001. Here, he discusses the NATS story – and privatisation generally – with LSE Research editor Stryker McGuire.

SM: Who owns NATS? MS: The government – the taxpayer – has 49 per cent. The employees have five per cent. The Airline Group – which is to say, the airlines based in the UK – is the largest private owner, with 42 per cent. BAA – the airports authority – has four per cent.

SM: I read in your journal article that between 1990 and 2009 the number of total NATS staff has gone down but the number of air traffic controllers has gone up. Is NATS run more efficiently now than it used to be?

MS: It certainly is very suggestive in that direction. However, what we have to take

18 LSE Research Magazine, Issue 2, Autumn 2010

into account, and this was a major reason for forming the public-private partnership, was a massive change in the capital structure of this industry. It meant, among other things, that NATS moved over into a much more computerised system. The need to raise funds was largely to facilitate the computerisation.

So I do attempt in my paper to take account of this. The bottom line is that I think one can say that the case for strong efficiencies is very hard to establish.

SM: What about safety issues before and after privatisation?

MS: Partial privatisation doesn’t seem to have any adverse effect on safety.

When it comes to privatisation, it’s often difficult to separate political motives from economic ones

SM: What is the evidence for that?

MS: There are several overlapping systems that monitor safety. The issue of airplanes getting too close together in the sky – ‘airproxes’, as they are called – is carefully monitored. In the event, it turns out that you can’t find any significant trend. It’s only been eight or nine years of experience. Nevertheless, it’s quite revealing that the safety record over that period has remained essentially unchanged. It’s important to note that the Air Group – which is to say, the airlines – are part-owners of NATS, and they of course have an interest in safety. The airlines are not like arms-length commercial owners of this activity; they have a direct interest in it.

They’re consumers of this service as well as the owners of this service, and have every incentive to maintain the safety record.

SM: As you describe it, the partial privatisation of NATS looks very much like a metaphor for other public-private partnerships in Britain.

Is it possible to say that the principal motive behind privatisation is economic or political, or can you not separate the two?

MS: I think that’s a fascinating question. One problem is, if an activity is a profitable and efficient enterprise, why shouldn’t the private sector run it, period. Why do we need this public-private partnership? What is the role of the public sector if the business is going to be a successful commercial venture? I think, in all honesty, an important role of the public sector is insurance [for the other investors]. If the activity was really going to be successful as a commercial venture, the private sector would like to have all of it. What does the government bring?

when the American government was involved in putting money into the banks. Congressmen were literally weeping at the thought of the government having to do this, so strong are the feelings in some sectors against government involvement in banking or commerce.

SM: The debate is playing out in other ways in the United States, isn’t it?

MS: I was struck by the viciousness of some of the criticism of the British National Health Service. The criticism that was coming from America was so unjustified and completely ideologically driven. In contrast to this hostile view of the NHS, a number of supporters of privatisation in the United States look to the experience of UK air traffic control as an example to copy.

SM: Have the Americans pushed for air traffic control privatisation?

MS: Interestingly enough, Senator John McCain wrote a piece several years before he ran for president in 2008 favouring privatisation of the American air traffic control system. He definitely saw the UK system through rose coloured glasses.

It is true that the current funding of US air traffic control makes little sense. The system does need reform, but that does not mean that privatisation is the answer.

SM: People have very strong views about privatisation, don’t they?

What has happened is that the Americans have looked at the UK air traffic control system and attributed things to it that I find are inappropriately favourable. There is also irrational opposition to privatisation. For example, there is a feeling in America that if you privatise air traffic control, you’ll cut corners and you’ll compromise on safety.

The effort to privatise air traffic control in America was defeated in the US Congress because of the safety issue. That turns out not to be the case in the UK.

MS: Economic science aims to understand what is happening, not to defend particular institutions. A lot of people have a very ideological view of these matters. An extreme case was in 2008 and 2009

SM: Did you draw any lessons from your NATS research that might be applied to events that are in the news today, like the regulation of banks that are supposedly too big to fail?

MS: Of course regulation plays a big role in the air traffic control story because we have to monitor it in the correct way. But we have to be wary of the idea that regulation is going to be successful in solving the problems of financial meltdown. If an economic activity is too big to fail, then it’s too big. You’re not going to prevent failure through regulation, in my view.

Regulation ducks the major issue, which is the size of the business.

There is an interesting parallel between the push for regulation and the concept of publicprivate partnership. As in the case of air traffic control, the major question is, who is going to put up the capital? The idea of a partnership is, well, we’ll both put in a bit; the government will put up a bit and we’ll put up a bit. We don’t bite the bullet and say: ‘What is the correct way of funding this activity?’ Why should it have the mix of dual investment other than a kind of expediency: it gets past the immediate problem. We don’t want to go to the public purse. On the other hand, we don’t want the business to be private so we take a kind of short cut out of the problem.

Regulating the financial sector is analogous to this. Rather than bite the bullet and say these institutions are too big, we simply say, well, they may be too big, but what we’re going to do is we’re going to solve the problem through regulation. I, for one, am sceptical.

SM: And the alternative to regulation is restructuring, is that right?

MS: Absolutely. With giant financial institutions, we simply feel – with some justification, although we haven’t had a lot of experience – that allowing them to fail will somehow shake up the whole market to such an extent that we’ll suffer a general crisis. If there are a lot of competitive banks and one goes down, it doesn’t shake up the whole system. That being the case, what we have to do is break up these big institutions into smaller ones. n

Max Steuer

is a research associate at LSE’s Centre for Philosophy of Natural and Social Science.

At LSE, he has taught International Trade, Methods of Economic Investigation and the PhD Seminar in Research Strategy. Mr Steuer is the author of The Scientific Study of Society (Kluwer, 2003); a co-author of The Impact of Foreign Direct Investment on the United Kingdom (Her Majesty’s Stationery Office, 1973); and co-author, with Janet Holland, of Mathematical Sociology (Weidenfeld & Nicholson, 1969).

Autumn 2010, Issue 2, LSE Research Magazine 19

COVER STORY: INTERNATIONAL RELATIONS

POWER AND MYTH The first great power shift in modern history – the rise of the Western world – came during the Renaissance. The second – the rise of the United States – came at the end of the 19th Century. The post-war generation could hardly have foreseen that many of them would live to see the third – the shift in power from West to East. This is especially true of baby-boom Americans who lived through the halcyon days of US power in the 1950s. The first obvious sign of things to come was the economic rise, in the 1970s and 1980s, of Japan, which despite its ‘Lost Decade’ (or two) is still the world’s no. 4 economic power after the European Union, the US, and, now, China.

The US and China are the big players in this historic shift, but of course not the only ones. For a remarkable depiction of how the economic balance of power has shifted since 1980 and what the future holds, take a look at Danny Quah’s map on page 23. Still, we should not be carried away by the economic dimension of the power shift. Arne Westad, in his article, raises a crucial question: will the surge in trade and commerce between East and West lead to more cooperation, or more conflict? Nor should we write off the West, says Michael Cox in his piece. After all, the great power shift, as Niall Ferguson says in an interview with LSE Research, is really a ‘great rebalancing’ – history re-setting the top table, as it were.

IMAGES: SXC

20 LSE Research Magazine, Issue 2, Autumn 2010

COVER STORY: INTERNATIONAL RELATIONS

Orient Express:

USA

CHINA

the Pacific conundrum GUAM

MARSHALL ISLANDS

There is a great deal of certainty about the growth and importance of the United StatesPALAU China economic relationship. According to MICRONESIA Arne Westad, the same cannot be said about KIRIBATI the future of trans-Pacific political arrangements and their impact on, among others, Europe and China’s neighbours.

SOLOMON ISLANDS EAST TIMOR

SAMOA ISLANDS VANUATU

O

TONGA

ver the course of the last decade, trans-Pacific trade and capital flows have caught up with and then surpassed those that cross the Atlantic. As China has grown into the world’s third largest and by far most dynamic economy, the Americas (and not just the United States) have become oriented towards Asia in ways unknown for the whole duration of the European settlement of the ‘New World’. There is very little doubt that this is a trend that will continue as Asia moves back into its position of global dominance in terms of production – a position it has held, after all, for all of human history except for the last hundred years or so. In an economic sense, therefore, Asia’s importance for the Americas has already surpassed that of Europe. The question is what will happen as the US, as it were, re-Orients its foreign policy: will increased interaction lead to more cooperation or more conflict?

We should not underestimate the durability of Atlanticism. The relationship between Europe and the US, as it has developed since 1900 and especially since 1945, has been based on the political and economic Americanisation

Asia’s economic clout is obvious. What will happen if the US ‘re-Orients’ its foreign policy?

of Europe and, through that process, the perception of common interest. The end of the Cold War marked the completion of this process, and reaffirmed and expanded the strong institutions for cooperation that had been created for government and business.

From security cooperation through NATO to banks and investment companies that have transatlantic boards, the relationship has a fundamental institutional framework that is FRENCH set to last. Even the European Union is to POLYNESIA some extent a transatlantic institution: similar in values to the US – democratic governments, free speech, capitalist markets, free trade – the EU has become an anchor for American influence in Europe. In ways often overlooked during George W Bush’s tenure in the White House, the EU is part of the glue that links Europe and the US. Similarly, we should not overestimate the ties that bind Asia and America. From one side of the Pacific to the other, there are no significant common institutions and only very limited similarities in terms of values. The Japanese-American security alliance has been a success for both parties since 1952, but it has not spawned a regional institutional security framework. It has in fact stood in the way of such frameworks developing, because of the dislike and distrust of Japan that is prevalent among its neighbours. There have undoubtedly been major developments over the last generation in the direction of the adoption of democratic and market values. The lively democracies in South Korea and Taiwan are examples of that, as is the sensational breakthrough of the market in China. But there are no systemic and transnational institutional frameworks that link the US to those developments, and there is little evidence that either democratisation or market revolution by themselves have made these countries more amenable to US foreign policy aims.

Thus, while there is a great deal of certainty about the growth and importance of the transPacific economic relationship, the same cannot be said about the future of trans-Pacific political

Autumn 2010, Issue 2, LSE Research Magazine 21

Led by a weak dictatorship, the Beijing elite is uncertain about what it wants to achieve in the world over the long haul arrangements. The uncertainty stems first and foremost from the rise of China’s economic power. There is little doubt that China has been taking steps to match its military and diplomatic power to its economic significance, although it is very far from matching US influence in the region in these fields (and probably will be for another generation). Also, nobody who has been watching the recent US debate on China policy will fail to notice that Americans are increasingly jittery, even negative about China, which they see as their country’s most important competitor today, and as its most dangerous potential enemy in the future.

But it would be wrong to focus entirely on China. In economic terms, Japan’s fall has been almost as spectacular as China’s rise. Today, Tokyo’s combination of economic stagnation and rising public debt is clearly unsustainable, and unless dramatic policy changes are undertaken soon, Japan faces a breakdown in its public finances. Whether an acute crisis in Japan would lead to more or less regional cooperation is difficult to say. Japan will need access to China’s markets if its economic woes are to be resolved over the long term. But there is also the possibility that Japan’s present inability to solve its own problems could lead to a more nationalist foreign policy and more conflict with China. What is clear is that China’s position within the wider region is now getting stronger because Japan’s economic power is weakening in relative terms.

While there are many reasons for concern in the international affairs of the Pacific region as this power shift plays itself out, there are also some reasons to be hopeful. So far, China’s willingness to be incorporated into the existing general economic mechanisms created by the West has been almost as spectacular as its economic rise in itself has been. China is now not just a member of the World Trade Organisation; it is a member that in many ways is more eager to conform to its norms and regulations than other states have been in the past. While it is clear that its leaders conform out of necessity and economic selfinterest, such socialisation tends to stick, and it will influence how China sees its interests, economic and political, in the future.

China’s handling of the global economic crisis so far is cause for optimism. The measures it took against the crisis at home have shown some success, while Beijing – at least to some extent – has also been willing to cooperate internationally on financial matters. The big question is what China will do when its leaders determine that

22 LSE Research Magazine, Issue 2, Autumn 2010

the worst part of the slump is over. China is determined to use its own economic strength to help it achieve a stronger international position, in terms of finance, export markets, and raw materials. Its leaders are aware that the way this crisis ends will determine China’s international economic position for some time to come, and some of them are eager to move back to an export-led development model as quickly as possible, with all the dangers that will imply for global recovery.

Which strategy it chooses – and not narrow currency issues – will demonstrate China’s willingness to cooperate more long-term. As Stephen Roach, the chairman of Morgan Stanley Asia, said at LSE’s Asia Forum in Beijing earlier this year, the US has a trade deficit with 93 countries.

How a Chinese revaluation of its currency would help the US get out of that hole is somewhat hard to understand.

The potential for serious political and military conflict in the region is another matter altogether.

China’s rise has, for the time being, helped ease cross-strait relations with Taiwan, which Beijing still sees as a renegade province temporarily dominated by the US. As the Taiwanese economy becomes more dependent on the mainland, Beijing’s leverage vis-à-vis the island will increase. Economic interdependence may improve relations overall, even though there is no doubt that the wish for reunification, shared by most Chinese, will not go away. All will depend on how China handles such a unification process, were it to start, since relations with Taiwan send strong signals not only to the Southeast Asian countries and other of China’s neighbours, but also to the US. The most dangerous conflict in the region – between North and South Korea – has not been made easier to handle by having a more powerful China in the equation. On the contrary, China’s uncertain handling of its North Korean ally has sent signals both to the Americans and to the region that Beijing is unable to make the long-term equations and compromises that great powers depend upon. The People’s Republic remains North Korea’s only ally. In spite of China’s repeated assurances that any attempt at putting pressure on Pyongyang will only make matters worse, Beijing’s stock as a responsible great power will decline in tandem with North Korea’s flaunting of international standards of behaviour.

The North Korean sinking of a South Korean warship in March 2010 shows China’s dilemmas and its relative powerlessness: while Chinese leaders are happy to question North Korean motives in private, in public their posture seems

entirely wooden and beholden to Kim Jongil’s regime. A number of commentators in the region have recently been asking themselves what kind of superpower China will become in the future if it cannot even manage relations with an impoverished ally on its own border. Even within China itself, the leaders’ underlining of their longstanding commitment to North Korea is sounding increasingly empty since Pyongyang has taken to lambasting many Chinese initiatives in public.

The biggest part of the Pacific conundrum is China itself. Led by a weak dictatorship, the Beijing elite is uncertain what it wants to achieve in the world over the long haul. China does not have a grand strategy for a new world order. It is, as Martin Jacques, a senior fellow in LSE IDEAS, has observed, in a position not dissimilar to that of the US in the early 20th century: it is rapidly becoming the key state in the international system, but it has neither the will nor the imagination to take responsibility for international affairs. Instead it concentrates on its own narrow interests without much concern for the future.

Trans-Pacific international affairs will in the future be of greater importance than Trans-Atlantic relations, whatever happens in China. What we do not know is whether the ties across the Pacific will be peaceful or conflict-ridden. Will economic interdependence between the two great powers – what Niall Ferguson, this year’s holder of the Philippe Roman Chair at LSE IDEAS, refers to as ‘Chimerica’ – trump political conflict?

The answer to that question matters to all of us – not least Europe: the very uncertainties of the trans-Pacific relationship in an ironic way make it more important for the US to keep a stable and cooperative relationship with Europe and avoid the kind of ruckus caused by the expansive interventionism of the George W Bush administration. What Europe cannot do is live in the past. The more the US turns towards the Pacific, the more Europeans will have to define, and re-define, the nature of their historical relationship with America. n

Arne Westad

is a professor of International History at LSE and co-director of LSE IDEAS, a centre for the study of international affairs, diplomacy and strategy. An expert on the history of the Cold War era, Professor Westad is an editor of the journal Cold War History and a general editor of the three-volume Cambridge History of the Cold War (Cambridge University Press, 2010). His book The Global Cold War: third world interventions and the making of our times (CUP, 2010) received the Bancroft Prize, the Michael Harrington Award, and the Akira Iriye International History Book Award. He is working on a history of Chinese foreign affairs since 1750.

West to East Danny Quah writes: This map depicts the dynamics of the global economy’s centre of gravity, the average location of economic activity across geographies on Earth. My calculations take into account all the GDP produced on this planet. I found in my research that in 1980 the global economy’s centre of gravity was in the mid-Atlantic. By 2008, as a result of the continuing rise of China and the rest of East Asia, the economic centre of gravity (ECG) had drifted to a location east of Helsinki and Bucharest. Extrapolating growth data in almost 700 locations across Earth, I have projected that by 2050 the world’s ECG will have shifted east 9,300 kilometres from its 1980 location – landing, appropriately enough, at a point between India and China.

1980

2050

Danny Quah

is a professor of economics at LSE and co-director of LSE Global Governance. He is also a senior fellow at LSE IDEAS, and a senior research associate at LSE’s Centre for the Study of Human Rights. His chief research interests are economic growth, income distribution and inequality, the global economy, and technology. He is a member of Malaysia’s National Economic Advisory Council, serves on the steering committee of the Abu Dhabi Economics Research Agency, and sits on the editorial board of the journal Global Policy.

Autumn 2010, Issue 2, LSE Research Magazine 23

COVER STORY: INTERNATIONAL RELATIONS

Don’t count the West out yet course, is terrorism; the really complicated one is what many view as the tectonic shift now taking place in the plates of international politics. This, it is argued, is leading to an irreversible geographical rebalancing – from something we call the West to something defined as the East – and, within

this wider shift, to a clear and irreversible power transition that will over time see the ascent of China to a position of dominance now occupied by the United States. This movement may or may not be peaceful; indeed, according to more pessimistic analysts, it could very easily lead to increased tensions and dangers. This, though, is a second-order problem. The fundamental facts are clear. The international order is tilting away from a world that has shaped world politics for the better part of 400 years to another world where Americans and Europeans will soon be having their agendas set for them by those they once deemed to be their inferiors.

Who spotted the trend first and why does not matter much. But it was impossible not to be aware that something serious was up when only a few years into the Bush administration, that most esteemed of journals, Foreign Affairs, fired a warning shot across western bows: its editor, James Hoge, wrote tellingly of a ‘global power shift in the making’ which, if not handled properly by the West, could very easily lead to a major conflict.

CHINA: ‘the eternal empire’

SM: Do you think there will ever be a Chinese empire in the sense that there was a British empire or even an American one?

In a friendly riposte to the preceding article by his colleague Arne Westad, Michael Cox cautions that we should not be spooked by China’s rise. Not only does the West have plenty of life left, but it would be counter-productive for China to even try to match the power of the United States.

T

he last ten years have been defined by two big questions in world politics: one deadly and dangerous, the other potentially beneficial but problematic. The deadly and dangerous one, of

Niall Ferguson is the author of several acclaimed books on economic history and imperial ambition, among other works. In an interview with LSE Research editor Stryker McGuire, Ferguson discusses the ‘handle with care’ relationship between the United States and China.

SM: There is a lot of talk about China overtaking the United States, about the decline of the West and the rise of the rest, as they say. In terms of the global balance of power, where would you place the great shift from West to East today?

NF: After 500 years of Western ascendancy and then dominance, we are witnessing a great rebalancing, which really began a century ago when Japan adopted western economic and political institutions, but gathered momentum with the reforms first in China and then in India.

So although one can’t be absolutely certain about projections of the sort that Goldman Sachs have made that China’s GDP will equal that of the US in 2027, it’s a probable outcome. And when I look at the way the financial crisis has impacted on the US compared with China, I think that outcome is increasingly likely.

SM. But there’s a difference between economic power and geopolitical power. Do you think people sometimes confuse the two?

24 LSE Research Magazine, Issue 2, Autumn 2010

NF: Yes, they often do, and of course, gross domestic product isn’t power; power takes many forms. In terms of hard military power, the US is far ahead of any competitor including China, and is likely to remain so for quite some time.

In terms of soft power – the power to make people do what you want them to do – China’s probably behind the US, too. But there are ways in which economic growth can propel a military catch-up and cultural catch-up. I’ll give two examples. One: catch-up doesn’t necessarily take place in the dimension in which the ruling power is used to dominating. The US is very dominant in naval terms and in terms of air power, but it’s vulnerable in cyberspace and it’s very vulnerable in that many of the microchips that operate sophisticated American military hardware are made in China. The second point is that soft power is often enhanced if you are a big investor and trader abroad. Right now China is investing in sub-Saharan Africa and parts of Latin America. I think that many people in Washington are a bit complacent about the supposed superiority of American soft power.

NF: I think that in some ways China is the eternal empire, and I’m sure any Tibetan would agree.

China’s western expansion is one of the long-run stories that gets underreported in the West. But there’s also a new kind of empire developing, which the Chinese certainly wouldn’t call an empire, but which is a lot like an empire nonetheless. This is their empire of commodity extractions and infrastructure investments in sub-Saharan Africa and parts of Latin America.

Although this is not officially an empire, speaking as a historian, it looks a lot like the way empires begin. Empires usually begin when people think there are better ways of getting their hands on commodities than buying them on the world market, with all the vagaries of world market prices.

SM: There’s a lot of talk in Europe about Barack Obama being the first ‘Asian president’ and about how Europe could lose out in this power shift and the Atlanticism that dominated the second half of the 20th century could fade into irrelevance. Do you think all of that is overstated?

NF: I think it’s rather a simplistic way of thinking about the world because in many ways, on this

Four years on, in the wake of the financial crisis, China-watcher Martin Jacques, a visiting senior fellow at LSE IDEAS, repeated a similar point but in even more dramatic fashion. America, he opined, was now self-evidently in decline. China was most obviously rising. And because of the 2008 meltdown, the liberal economic ship was sinking fast. There was only one conclusion to be drawn: the biggest geopolitical shift since the dawn of the industrial era was under way, one that in a bizarre role-reversal would have us all learning a new language and economic management from the Chinese. Goldman Sachs not only seemed to agree with Jacques, but supported his thesis with possibly the most cited table of the last few years, ‘The predicted shift in the economic balance of power’. This made what looked like an iron-clad statistical case for a massive transition. In 2015, it posited, the American economy would still be significantly larger than China’s; by 2050 (and possibly much earlier), however, it would be at least 10 per cent smaller.

Not only that, four other economies – India, Brazil, Japan, and Russia – when taken together with

complex three-dimensional chess board, the interactions between Europe and Asia are just as important as the interactions between the US and Asia. There have certainly been plenty of efforts by European leaders to get their heads around the China phenomenon. One thing that is true is that President Obama is not an instinctive Atlanticist.

He’s especially not an instinctive Anglophile. In that respect, the destinations where he’s made his biggest foreign speeches tell a story of their own: Istanbul, Cairo, Tokyo – I’m looking in vain for a big speech [by Obama] in London… I think he’s somebody who sees himself far more attuned to the new global balance than to the old post-war global balance in which there really was an Atlantic relationship and a ‘special relationship’ [between the US and Britain].

DREAMSTIME

China would by mid-century be out-producing, and presumably outplaying, the West as a whole.

A new age was in the making.

This is also the view of the economic historian Niall Ferguson who joined LSE this year as the Philippe Roman Chair in history and International Affairs. Indeed, his conversion to the camp of western and American decline is perhaps the most remarkable. After all, only a few years back he was talking in neo-con terms of a new American empire (albeit one in denial, as he said). Now he

and hoped that it would be possible for the US to create a new, pro-Western democracy in the Middle East, this has been quite a disillusioning experience. I’ve always said that this would take much longer than American politics is ready for.

You need at least 40 years, not six or seven, to turn Iraq around. And I’m afraid it just feels like the time frame has always been unrealistic. The costs at this point have outweighed the benefits.

SM: In the past, you have suggested that a sequel to the great wars of the 20th century could be waged in the Middle East. Are you any less pessimistic today?

SM: Shifting the scene just a little bit, do you think the war in Iraq will ultimately be seen as an effective or ineffective use of imperial power by the US?

NF: Not really, because I think all the ingredients that I described in The War of the World – which came out in 2006, before the financial crisis – are still there. I remember saying then that we’ve got ethnic disintegration, we’ve got an empire in retreat – we just don’t have the economic volatility that blew Central Europe up in the late 1930s.

NF: Well, right now of course it would take a very foolish man to say ‘effective’. It’s been very expensive, probably more expensive than containing Saddam [Hussein] would have been – not only in terms of lives, especially Iraqi lives, but also in terms of treasure. And you can’t really say with any degree of confidence that this new democracy will be a stable one, especially if American troops are scaled back. So for those of us who were proponents of Saddam’s overthrow

Well, now we’ve got the economic volatility. You have to be really uneasy about the state of play as Iran inches down the nuclear path and Israel feels more and more estranged from the [US] administration. There are a lot of parts moving, and not many of them are moving in the direction of peace. Meanwhile, it’s notable that Turkey has moved quite markedly away from being a reliable ally of the West in the region. That’s really a big blow for our grand strategy in that region.

believes that Washington is going the way of Rome and that sooner rather than later the West will have to get used to a world where most of the key decisions will be taken elsewhere. We are, in effect, at one of those great turning-points in world history and there is little, it seems, that any of us in the West can do about it.

Let us be clear. The last few years have been traumatic ones for the West and the United States. The 9/11 attacks and their aftermath, America’s failed imperial adventure in the Middle

SM: Will future wars arise out of East/West tensions during this power shift?

NF: Well, I heard an eminent Singaporean say that his big worry was the geopolitics, not the economics. His fear was that conflict will ultimately come from this [power shift]. The lesson of history is: handle with care. With China and America, there is a chance of a shift from a real partnership to something that looks much like a rivalry. n

Niall Ferguson

is one of the world’s most widely known and influential historians. Professor Ferguson holds the rotating Philippe Roman Chair in History and International Affairs at LSE IDEAS during the academic year 2010-11.

He is the best-selling author of numerous books, including Colossus: The Rise and Fall of the American Empire (Allen Lane, 2008), and most recently, High Financier: the lives and time of Siegmund Warburg (Allen Lane, 2010). Through his writing in the press and his television work, Professor Ferguson has reached even broader audiences.

Autumn 2010, Issue 2, LSE Research Magazine 25

The majority of China’s citizens remain extraordinarily poor by western standards

East, the great crash of 2008, the storm now battering the walls of the European project – taken together, these events have done a great deal to sap western confidence.

the brute fact remains that in 2010 the US spent nearly $700 billion on national security, ten times more than the UK and France together, and seven times more than China.

And while all this was happening, other nations seemed to be doing rather well. Gone is the unipolar world captained by a lone superpower, the US. By 2010, as British foreign secretary William Hague acknowledged in a major speech on foreign policy, we are living in an ‘increasingly multipolar world’.

Just five years ago, Tony Blair and those around him would have denied this emphatically.

This asymmetry is not about to change any time soon. All future projections show that the US will be the only actor in the world capable of global projection for several decades to come.

Iraq might have cost the US dear. But how did it respond? Answer: by escalating the war next door in Afghanistan and turning the operation there into an almost entirely American operation involving 80,000 US troops (and 40,000 from 45 other nations). But what about soft power? Isn’t the West, after Iraq and war-on-terror excesses, among other things, losing out here? And isn’t China acquiring more and more influence? To a degree, yes. But President Barack Obama, for all his failings, has done wonders for American standing in the world.

But it is one thing to talk about change and where it is taking us over the longer term. It is quite another to lose one’s bearings completely.

A sharp headline and dramatic assertions are no substitute for the facts, and the fact remains that the western powers overall still retain some big structural advantages, none more so than its supposedly beleaguered leader, the US. Is the US star on the wane? To some degree. And, yes, others are clamouring to get a seat around the high table. But they still have a very long way to go to catch up with a country whose GDP in 2009 was still light years ahead of the rest ($14 trillion compared to China’s $8.8 trillion) and whose nearest economic ‘competitor’ (also coming in at around $14 trillion) turned out to be that other member of that fading western club to which nobody was any longer applying for membership – the European Union.

China continues to spread its economic largesse around the globe, but few of its beneficiaries, whether in Latin America, Africa or elsewhere, are showing much inclination to copy the Chinese model or upping sticks and moving to China to work. China might aid and trade in ever increasing amounts. It will buy oil, coal and food from wherever it can get it. But there are still only two great magnetic poles for the desperate, the needy and the talented of the world: North America and Western Europe.

Of course, China, India, Brazil, and others are beginning to catch up. But let us not forget that they are doing so from a very low technological base. The majority of their citizens, moreover, remain extraordinarily poor by western standards.

And while their currencies (as in the case of China) might be ‘managed’ to produce those impressive surpluses – surpluses which still depend on the US and the EU keeping their economies open – it is still only the dollar and the besieged euro that have international pulling power.

I would also argue that there cannot be much of future in soft-power terms for a country ruled by the largest communist party in history. Much has been said of late about ‘the crisis of democracy’.

But no serious states in the world today (and here I think it reasonable not to include Cuba, North Korea, and Vietnam) are ruled by communist parties. China itself might be governed in ways that make it stable. It might even be the kind of system that most ordinary Chinese prefer to what they had before. But it has no new imitators.

Indeed, if the West and the US were in so much trouble one must wonder why US Treasury bills – not to mention the western economic model – show little sign of losing their allure. One model of market capitalism may have been hurt by the recent crisis, but the response to this, as Richard Higgott of the University of Warwick has argued, is not to replace it with another but to make it work better. There is, in addition, the rather important matter of hard power. Hard power is sometimes dismissed by those who insist that a man with an IED trumps a CIA drone and that a suicide bomber in Kabul negates American military reach. But this ignores basic military realities; and

This leads us, then, to the semantics of geopolitics.

Precisely what is it that we mean by a ‘power shift’ and how should we think of ‘the West’.

If we take the notion of the West to mean the Transatlantic region overall (North America plus the EU), then it is reasonable to suggest, as many have done, that others outside this ‘golden circle’ are now knocking very hard at the door; indeed, that they have now even entered the room itself.

But the room, we should note, was designed by the West. And when they got inside, they have all tended in the main to behave on most, if not all, issues like those who had been sitting around the high table for some time.

26 LSE Research Magazine, Issue 2, Autumn 2010

Finally, to the matter of China and its muchdiscussed peaceful rise. Here the Chinese themselves seem to understand the realities of world politics much better than do most western commentators. Naturally, like any emerging power operating in a western-dominated system, they seek more influence. There are even some within the elite who view the US as a rival and the West as an obstacle. But thus far the mainstream leadership in China, unlike some of China’s own chattering classes, have been altogether more cautious. They understand that China has risen for two reasons: by abandoning Maoism (though keeping Mao’s face on the currency) and by the grace of the US, which has not opposed China’s rise. Beijing knows this. Washington knows this.

And both have every reason not to undo what has been one of the most successful global partnerships of the last 40 years.

For China, it would be nigh on catastrophic to make any move to counter-balance the power of the US or to act globally in a way that challenged a world order that has underwritten 35 years of domestic stability and record economic growth. It would not only damage its prospects at home and unite a still very powerful West against China; it would also scare a number of other very powerful states in the region. India, South Korea, Taiwan and Japan might be closer to China than to the US or Europe, but as functioning market democracies whose security and economic needs are intimately tied up with – indeed, dependent upon – the West, they would soon run for cover. Indeed, if China were to turn nasty and nationalist, and try to ‘rule the world’, as some have speculated it will do one day, its leaders would soon discover two things: what an unforgiving place the world can be (and none more unforgiving than the Americans); and that while they might live in the vicinity, China’s prospering neighbours view themselves as part of that hugely successful and extraordinarily dynamic entity known as the West.

For them, geography is not fate: their relationships are not predetermined by where they happen to sit on a map of the world. n

Michael Cox

is a professor of International Relations at LSE and co-director of LSE IDEAS. Professor Cox has written and lectured on a wide range of topics, from the rise and fall of the United States as a superpower to rethinking the collapse of the Soviet Union.

Between 2006 and 2009 he was chair of the European Consortium for Political Research.

He is also an associate fellow at two leading international relations think tanks based in London, Chatham House and the Royal United Services Institute. Since 2004 he has been an editor of the journal International Politics. Professor Cox is also the author, editor and co-editor of more than 20 books on international relations, including most recently US Foreign Policy and Soft Power (Routledge, 2010) and Global 1989 (Cambridge University Press, 2010).

London at war ‘I behold London, a Human awful wonder of God!’ – William Blake, in Milton. For two millennia, from Roman times through the early years of the 21st century, the city has not only survived but thrived.

POPPERFOTO/GETTY IMAGES

Autumn 2010, Issue 2, LSE Research Magazine 27

LONDON

Greatness upon

THAMES under eight million. By 2030, there are expected to be almost nine million resident Londoners.

NIGEL STEAD

With the proportion of overseas-born residents having grown from under five per cent in the early 1950s to almost 40 per cent today, the capital is now more like an American gateway city than a traditional European one, with a political landscape to match. Tony Travers considers the state of London ten years after the election of its first city-wide mayor.

B

uried beneath the coverage of the 2010 UK general election was an extraordinary set of local poll results. London in particular saw the Labour Party making spectacular advances at the borough level in many of the same places where the Conservatives were winning Parliamentary seats. Labour now control 17 out of 33 boroughs, including the ‘independent’ City of London, and are thus in a dominant position within London Councils, the representative body for the capital’s local government.

At LSE London (a research group at LSE), we were struck by the fact that the election results in the London boroughs provided such a fascinating counterbalance to the general election outcome.

More important for London itself, we were impressed by what the results say about the capital’s healthy political evolution, particularly since 2000, when Londoners began voting for their mayor for the first time.

London’s government and politics have long been the object of LSE research and publication.

William Robson, a protégé of LSE founders Sidney and Beatrice Webb, published his 1939 book The Government and Misgovernment of London to argue for a metropolitan authority for ‘Greater London’. Subsequently, Robson and LSE colleagues such as Michael Wise formed the Greater London Group to give evidence to the Herbert Commission, which from 1957 to 1960 examined London government. Professor George

28 LSE Research Magazine, Issue 2, Autumn 2010

Jones, who joined the group in 1966, is still active in LSE London, which carries forward the School’s work on city government and politics.

The London boroughs were formed in 1965 as a result of the reforms that followed the Herbert Commission’s report. The Greater London Council, which was created at the same time, was abolished

by Parliament in 1986 at the behest of Margaret Thatcher’s Conservative government. Following a 14-year interregnum, the Greater London Authority (GLA) was set up under Tony Blair’s Labour government. The GLA introduced the UK’s first-ever American-style elected executive mayor, overseen by a separately-elected Assembly.

Ken Livingstone and Boris Johnson, as London’s first (2000-08) and second (2008-) city-wide mayors, have established the position as one of the most important in British politics. The attention paid by the national media and commentators to these individuals is greater than to most British political leaders. The Mayor of London is now as important a politician as a senior Cabinet minister.

London’s government can be seen as fragmented and chaotic yet at the same time flexible and competitive. Developments since 1945 have seen the capital suffer decades of decline, and then reverse the trend and expand into one of the most vibrant global cities. Between 1945 and 1985, London’s population dropped from almost eight and a half million to just over six and a half.

Subsequently, there has been sharp growth to just

Although the city has long been an international trading centre and a gateway to migrants, the immigration phenomenon has been qualitatively different since the arrival of Caribbean immigrants at the Thames port of Tilbury in 1948. Waves of inward migration have taken the proportion of overseas-born Londoners from under five per cent in the early 1950s to almost 40 per cent today. Some boroughs now have a majority of non-white residents, though many black and Asian Britons are, of course, now British-born.

London is now more like an American gateway city than a traditional European one.

Yet throughout this resurgence, London’s political make-up has remained plural and, in most places, competitive. The Greater London Council, which took in almost 700 square miles of continuous built-up city, swung backwards and forwards between Labour and the Conservatives during its 21-year existence. Ken Livingstone was first elected as an Independent, then as a Labour mayor before Boris Johnson took the office for the Conservatives earlier this year.

The ancient City of London, the financial centre, has always remained in the control of independent councillors. Outside the City, as our analysis of the May election results shows, the Conservatives and Labour remain locked into a long-term political struggle. The Liberal Democrats remain a third party overall, though they have built up a capacity to win borough elections and Parliamentary seats, particularly in South West London. Since the 1970s, London politics has become less dominated by the two major parties, with the Liberal Democrats initially making progress, followed by a number of smaller parties.

The table (see opposite) shows support for the Conservatives and for Labour in each general election since 1979. The London vote share is compared with the equivalent UK figure, with the right-hand column showing the difference

evidence of authenticity. He will be hard to beat, particularly if he puts up a big fight against cuts to London’s infrastructure spending. If Livingstone is to be his opponent, the Labour workhorse would find ‘time for a change’ a hard message to put across. The 2012 mayoral election looks set to be a classic.

Throughout its resurgence, London’s political make-up has remained plural and competitive.

The 2012 mayoral election looks set to be a classic between the London share and the UK share.

The first thing to note is that the UK-wide Conservative-plus-Labour vote share has dropped from 80.8 per cent in 1979 to 65.1 per cent in 2010. In London, the total has dropped from 85.6 per cent to 71.1 per cent. The major parties have suffered a long-term loss of support. It is for this reason, in part, that the Conservatives fell short of an overall majority and went into government in a coalition with the Lib Dems; for the same reason, Labour will find it very hard to win an overall majority at the next general election.

From 1979 to 1997, both the Conservatives and Labour ‘over-performed’ in London – that is, their vote share in the capital was higher than in the UK as a whole, generally by one to two per cent.

But since 1997, the Tories have started to underperform their UK vote while Labour has significantly over-performed. Apart from in 2005, when the Iraq war was damaging Labour in London and other cities, the party has over-performed in the capital by six to seven per cent.

The fact that Labour’s performance surge started in 1997 makes it unlikely that the big rise in international in-migration after 1997 explains the trend change, though it might have contributed to it. The most obvious difference in 1997 as compared to previous elections was the arrival of Tony Blair and ‘New Labour’. It is possible that Blair’s deliberate efforts to appeal to the affluent middle classes paid off in London, which has a very large population of this kind. There is no doubt that London did very well economically

This year’s borough election results will give Labour heart. The party won over 180 seats, taking them from the Conservatives, the Liberal Democrats and smaller parties. Seventeen boroughs are now held, which is a remarkable position of strength given that Labour lost the general election on the same day.

out of Labour’s 13 years in office: GDP per head grew faster than in other regions. The better-off in London were able to vote Labour and be assured their income would not be too heavily taxed.

The surge has not been fully researched, so it is still not clear why Labour has managed to pull ahead in Parliamentary elections. In 2010, the party’s relatively good result in London was further embellished by its rout of the BNP in Barking and the collapse of the Respect Party across the eastern part of the city. However, all eyes in London are now turning to the 2012 mayoral contest.

Thus London has ended up with a ConservativeLiberal Democrat national government, a Conservative mayor and Labour-dominated boroughs.

Even without proportional representation, voters have delivered a moderate and plural system of government, with the overall trend away from two-party domination. London voters have, by the judicious use of their votes, created a broadly healthy and effective government system. n

In the 2008 London election, Boris Johnson brought out a huge Conservative vote in the outer suburbs, which generated a seven per cent swing to him from Ken Livingstone – compared to the share of the vote won by Steve Norris in 2004. As in GLC elections, the swing between Labour and the Conservatives became a good predictor of the following general election result.

Johnson becoming Mayor of London was a leading indicator for David Cameron’s arrival in Downing Street.

Tony Travers

is director of LSE London and a visiting professor in LSE’s Department of Government.

His research interests include local and regional government and public service reform.

He is currently an adviser to the House of Commons Communities and Local Government Select Committee, having previously worked for a number of other Parliamentary committees. He has published a number of books on cities and government, including Failure in British Government: the politics of the poll tax (Oxford University Press, 1994), with David Butler and Andrew Adonis, and The Politics of London: governing an ungovernable city (Palgrave Macmillan, 2004).

Livingstone would like to be Labour’s candidate for 2012, a full 31 years after he became GLC leader in 1981. Against the backdrop of massive public spending cuts from April 2011 onwards, Labour must hope that the Conservative-Liberal Democrat coalition will lose support, allowing Labour to re-take City Hall. Johnson has made few glaring errors in office, and the mistakes he has made appear to be seen by many voters as

General elections: comparison of UK and London vote shares (%) Conservatives

Labour London

UK

London ‘lead’

London

UK

London ‘lead’

1979

46.0

43.9

2.1

1979

39.6

36.9

2.7

1983

43.9

42.4

1.5

1983

29.9

27.6

2.3

1987

46.5

42.2

4.3

1987

31.5

30.8

0.7

1992

45.3

41.9

3.4

1992

41.9

34.4

2.7

1997

31.2

30.7

0.5

1997

49.5

43.2

6.3

2001

30.5

31.7

-1.5

2001

47.3

40.7

6.6

2005

31.9

32.3

-0.4

2005

38.9

35.3

3.6

2010

34.5

36.1

-1.6

2010

36.6

29.0

7.6

(Sources: House of Commons Library research papers, plus author’s calculations)

Autumn 2010, Issue 2, LSE Research Magazine 29

TECHNOLOGY

Everything old is new again Robin Mansell has learned from her communications research to be wary of the prevailing view that new media are an unequivocal blessing for developing societies. Here she lays out her own conclusions in an interview with LSE Research editor Stryker McGuire.

SM: Did you ever buy into the mainstream vision yourself?

RM: I’m a sceptic. This is because if you study the history of technological change in the media and IT fields, you see that many new things have come along. Many have been blips on the screen. That is one reason for scepticism.

It’s also important to remember that new and old media often work in parallel. They don’t cancel each other out. Even if you argue, for example, that the tabloid press is disappearing for financial reasons, people are still reading it. The same is true for television. The statistics on the amount of time people in the UK spend watching television are increasing; they are not decreasing even though young people in particular are spending more and more time playing around with mobile phones, iPods, etc.

New media are not completely overwhelming the old media.

That is a reason for my scepticism about transformation driven simply by new technology.

What is much more interesting is how old media and new media are glued together. How do they work together? The new media are undoubtedly game-changing, but this doesn’t necessarily mean that they supersede other ways of communicating.

SM: They’re all part of the media universe?

RM: Yes, part of the media ecology. Researchers have been talking about this since long before

30 LSE Research Magazine, Issue 2, Autumn 2010

the internet. With the advent of satellite television in the 1980s, some said it would do away with the boundaries of the nation state.

SM: But it didn’t.

RM: No. I think that a shift to screen-based viewing is a key issue. An important trend is the switch from text-based to screen-based learning. This has implications for education – not only higher education but all forms of education, where we are becoming much more fixated on the visual.

SM: We’re talking about all this in the context of our world. But what about in parts of the world where people don’t sit around in front of large digital television sets? Are we in a sense breaking into two different worlds or will we, do you think, eventually come together?

RM: I work with people, most recently in South Asia, where the research focuses on the ‘bottom of the pyramid’, which is to say the lower socioeconomic strata – people who do not have the money to buy all the newest gadgets.

Researchers are looking at the patterns of takeup of mobile service, of time spent listening to the radio, and people’s expenditures on different technologies. The research shows some really distinctive patterns – differences between northern and southern India, for example, and also between India and Sri Lanka.

Do their patterns of use eventually converge with our ours? That isn’t the biggest issue.

The issue is whether or not people value what they are able to do with the new technologies and make use of them in ways that they find productive socially or economically. If their geographies and economic relations and the way they organise politics are different from ours, why should we expect convergence in patterns of use?

SM: Is there also another factor – which has to do with government policy?

RM: Yes, for example, authoritarian states can make an enormous difference. Ethiopia closed down SMS [text messaging] for two years because they didn’t like the way it was being used. We hear about China all the time, but it is not the only country that tries to control the internet.

SM: We certainly hear about China, we hear about Iran, but is there more of this going on than we realise?

RM: Yes there are lots of instances of government intervention. Various states are adopting similar measures to those used by the Chinese government, but it’s not cheap to do this.

From a Western point of view, one needs to look carefully at why states do this. Should there be complete freedom of the media in failed states, for instance? Maybe a managed media would be a solution rather than a fullblown replication of the model of completely independent media. Using the media to support democratisation may be the end game, but how one gets there is another question.

SM: Do we need or want international codes governing this?

RM: Codes are essential but not because of the theoretical notion of freedom of media expression.

If people do not come together to discuss what kind of practices they see as being acceptable, for example, in the area of the internet and security and what kind of enforcement there should be, then there is no consensus. It has taken years of talk at the EU and the UN levels – to begin to think about these things, as one initial reaction was: ‘It’s impossible to regulate – it’s the internet!’

We now see that some controls at the margins are possible.

SM: Where are we now in terms of international regimes?

Using the media to support democratisation may be the end game, but how one gets there is another question RM: People don’t wake up in the morning and behave differently each time a new technology comes along. What is interesting is how people navigate through the rapid changes. How do they organise their lives in a media environment that is moving so quickly? The issue is not just about what the next big application will be, whether we have mobile TV or not. What is important is how these rapid changes interact with a constellation of economic, political, and cultural changes.

RM: I’d say early days. In 2005, when the World Summit on the Information Society was held, there were little groups, or ‘families’, focusing on policy for children and the internet, education, security and many other issues.

Now there are many internationally agreed changes in legislation, such as tracking email communication. Whether one agrees with this or not, the international community has come together to agree conventions and statements of good practices.

SM: Given the nature of the internet, it doesn’t seem likely that you would have anytime soon a World Trade Organisationtype body governing the internet.

On the global level, these kinds of changes have huge implications for overall issues of justice and equality. On the micro level, will people be stressed because they are on their BlackBerry and feel the pressure of work all the time? These things are changing all the time and the research challenge is to understand the how, the why, and the consequences.

Students may say: ‘There is a new technical development, that must make everything we know about the past irrelevant.’ We say: ‘No – ask yourself how is it different, and how does it stay the same?’ n

Robin Mansell

is a professor of new media and the internet in the Department of Media and Communications at LSE. Her research focuses on the social, economic, and political issues arising from the integration of information and communication technologies into society and on regulatory matters. She is editor of the forthcoming Handbook on Global Media and Communication Policy (Wiley-Blackwell), The Information Society (Routledge, 2009), and The Oxford Handbook of Information and Communication Technologies (Oxford University Press, 2007). She is currently examining the political economy of the knowledge economy, with a special emphasis on tensions between the global North and the global South.

RM: Some do hope for this. But what has emerged is a very fluid Internet Governance Forum which is under the auspices of the UN. Some say it is just a talking shop, but if you look at what the talk is producing at every level, from the technical issue of whether there are enough internet Protocol addresses for the world’s computers, or to whether or not states should have the final word in blocking communications over the internet, this Forum is very influential in generating ideas that can pop up elsewhere.

SM: Can you give me an example?

RM: There is an ongoing battle over the internet address question. Under the current arrangement at the present rate of growth, there may not be enough space for all the addresses for internet devices that will be needed. Under a new arrangement that is under discussion, we would have an almost infinite number. You might think more is better, but there is a commercial element. If the number is finite, money can be made by selling them, so some influential companies want to keep the current arrangement.

SM: What is it like doing research in a field that’s constantly on the move? © APPLE

Autumn 2010, Issue 2, LSE Research Magazine 31

SPECIAL REPORT: TERRORISM

A WAR GONE AWRY The term ‘war on terror’ has pretty much dropped out of the lexicon of geopolitics. Even the United States, where such a febrile mood ruled for several years after the attacks of 11 September 2001, has adopted not only a different vocabulary in the fight against the most appalling extremism, but a different approach. ‘Our long-term security will not come from our ability to instil fear in other peoples, but through our capacity to speak to their hopes,’ President Barack Obama said earlier this year when he introduced the US government’s new national security strategy. In 2009, David Miliband, who was then Britain’s foreign secretary, made a distinct, but equally telling point: ‘The idea of a “war on terror” gave the impression of a unified, transnational enemy, embodied in the figure of Osama bin Laden and Al Qaeda. The reality is that the motivations and identities of terrorist groups are disparate.’ So where are we in the fight against Islamist ultra-radicalism? In this LSE Research Special Report, Justin Gest, Mina Al-Lami and Kristian Coates Ulrichsen provide some fascinating – and disturbing – answers.

How we got terrorism wrong Are our efforts to counter terrorism counter-productive? Often they are, says Justin Gest. The real threat to democracies comes less from terrorist outrages than from feardriven policies that push Muslims into a shell of alienation and vilification.

A

sk any pundit or passerby about the single greatest threat to Western democracies posed

by Muslim communities today. What will the answer be? Inevitably: terrorism.

Governments and policy makers reflect this broad consensus, which has crystallised in the form of security regimes and practices that prioritise

32 LSE Research Magazine, Issue 2, Autumn 2010

counterterrorism at the expense of certain civil liberties and social cohesion.

But let’s examine this idea more critically, as I have in my research and in a recently published book, Apart: alienated and engaged Muslims in the West. Terrorist attacks typically harm or murder citizens at random to communicate a political message of dissent or opposition. At their worst, they kill thousands and spread fear

and insecurity – sensitising markets, fostering distrust, and creating jobs for bored office building security guards worldwide.

Terrorist attacks shake societies to their core, particularly when they are performed by socalled home-grown terrorists. Indeed, most troublesome is the physical proximity of these individuals to the rest of us, the intricate way they were previously woven into our daily existence, the access they held to our most precious people, symbols and possessions.

Westerners have few ways of shielding themselves personally from fellow countrymen.

We can lock our doors, place cameras on the streets, perhaps even carry a can of mace. But ultimately, those doors must be opened, we must walk those streets, and we must shake hands with others without keeping our other hand on a defence mechanism. Indeed, an oversecuritised society is not much of a society at all.

For this reason, it is therapeutic to rationalise how different the perpetrators of atrocities are. We portray them as ‘rare breeds’, ‘removed’, ‘strange’ or ‘extreme’ from the people we encounter on our way to work and at the pub. Surely, there must be something about them that explains why they would commit such horrific crimes.

SPECIAL REPORT: TERRORISM

The differences we identify are typically base.

Maybe the perpetrator was of a foreign nationality. He was different-looking. Perhaps she was deranged or on the fringe. While this convinces us that we would rarely encounter such a person in our quotidian existence, our minds also internalise the difference to trigger caution when encountering it anew. If we can’t find an obvious difference, we come to the conclusion that the attack was a shame and an anomaly.

Consider the appalling massacre in Cumbria in June of this year. The perpetrator was a local taxi driver with no foreign allegiances – just family strife and tax evasion allegations. The policy reaction was hardly a reconsideration of taxi transport or taxes. Attention has instead been focused on access to guns.

However, in the case of the 9/11 and 7/7 terrorist attacks, ‘difference’ was plain for all to see. Murder was committed in the name of a religion by those proclaiming to carry out its doctrine.

And in characterising their difference in the most general way – Islam, and not Salafi Islam or radical Islam, but generic Islam – both the perpetrators and those surviving them fingered millions of Western Muslims as being of a different character and worthy of future caution. Facing external scrutiny and accusations of negligence or sympathy, Western Muslim communities have since been cornered into forced patriotism or a careful defence of their embattled (but still meaningfully relevant) faith.

Yet internally, Western Muslims have since initiated a perplexing dialogue about identity and propriety. British Muslims are disappointed

with fellow Britons’ vilification of their religion and questioning of their fair citizenship. But they are equally disappointed with fellow Muslims’ interpretation of their faith and with their divisive statements. Unprovoked hate crimes against peaceful, religious Muslims were committed not only by non-Muslims in the aftermath of 7/7, but also by less religious (or even secular) Muslims who were upset that their public image was tarnished. Of course, peaceful, religious Muslims were never the problem.

Democracy’s strength is based on liberty, equality, and active political dialogue. Insecurity inspires foolish policy decisions that limit our civil freedoms. Fear cripples our capacity to interact with one another on equal terms. And distrust prohibits active political communication. In light of this analysis, the greatest threat to liberal democracies often derives from the social and political choices that we – not terrorists – make in the wake of terrorist attacks. The threat is never the attack itself. If there is any silver lining to the horrendous harm of terrorism, it is that these attacks often mobilise a rejuvenated interest in politics, a spike in news consumption, and renewed civic debate. We must be careful that they are also not the impetus of social division and questionable security regimes.

Since the 9/11 and 7/7 attacks, not to mention similar atrocities elsewhere, Western countries have implemented search practices that target people based on their appearance; exceptional rules that extend detention times for those held on charges pressed predominantly against certain minorities; citizenship criteria that discriminate against residents with roots in certain countries and not others;

gerrymandering that dilutes the legislative strength of particular voting blocs.

Counterproductively, these measures put at risk the productive integration and political activism of the fastest growing minority in Europe – Muslim communities. According to recent studies, there are an estimated 20 million Muslims residing today in the European Union (out of a total estimated population: 501 million). Though they do not comprise more than ten per cent of any one country, demographers expect their total population to double by 2020, comprising 20 per cent of the EU’s total population by 2050.

The greatest threat to democracies by Muslim communities is their withdrawal from the political system in their respective countries. Withdrawal of this sort initiates a cycle in which social and political alienation leads to low civic participation, which leads to a lack of legislative responsiveness to citizens’ needs, which leads to institutionalised disadvantage, which fosters further withdrawal.

Political systems cannot function well if vast segments of their populaces are disengaged from a system perceived to be morally bankrupt and discriminatory.

Furthermore, Muslims’ civic participation and their greater social acceptance isolates terrorists and weakens extremists’ contentions that the democratic political system does not provide fair channels for effective activism and reform.

If we are most concerned with the strength of democracy, we need to encourage tolerance and the inclusion of Muslim communities within the greater society.

Terrorism is a hurtful but ephemeral anomaly.

Alienation can pervade society and last a lifetime. n

Justin Gest

iSTOCK

is a research associate at LSE Global Governance and co-founder and deputy director of the Migration Studies Unit at LSE. Currently he is a Harvard College Fellow in the Department of Government at Harvard University. His research examines a variety of topics in political science and sociology, including citizenship, political engagement, migration and integration, identity politics, globalisation and social theory, as well as international migrants’ rights and comparative migration policies.

Dr Gest is the author of Apart: alienated and engaged Muslims in the West (HurstColumbia University Press, 2010).

Autumn 2010, Issue 2, LSE Research Magazine 33

SPECIAL REPORT: TERRORISM

Whac-A-Mole:

losing an anti-terror battle Internet regulation and censorship have backfired, says Mina Al-Lami. The effect has been to further radicalise members of target groups, which then portray the attacks on them as a ‘crusade’.

I

n the global war on terror, the ‘battle for hearts and minds’ was a made-inAmerica strategy to win over Muslims, but it was Al Qaeda that took that plan and ran away with it. The main ideological battlefield was the internet. Ever since 9/11, the United States and its allies have fought extremism on the web with two main weapons: regulation and censorship. And ever since, thanks to the largely unregulated nature of the internet, technology-savvy extremists have refined and adapted their skills, successfully overcoming the enemies’ restrictions.

© CORBIS

34 LSE Research Magazine, Issue 2, Autumn 2010

Many Muslim extremists and potential radicals found in Islamist web forums a space where they could vent frustration and grievances they could not express anywhere else. Rather than devising smart but probably time-consuming strategies for winning hearts and minds, security services in the United States, Europe and elsewhere opted for the shorter (and unsustainable) option of simply closing down online platforms they deemed dangerous.

While some of the high-profile closures may give security services the brief gratification of winning a battle and delivering a virtual blow, it definitely has not enabled them to win the war.

If anything, as I have found in the course of my research on the conflict zones I’m most familiar with – Iraq and Afghanistan – such efforts have only further radicalised members of the target groups, which then portray such attacks as a ‘crusade’ to silence dissident voices and condemn the West’s ‘arrogance’ in allowing only one narrative to emerge.

While Western states constantly bemoan the internet’s alleged role in radicalisation, especially the radicalisation of the Muslim diaspora, they make too little effort to understand why and how such radicalisation occurs, if at all, online.

Nearly a decade after 9/11, there are lessons to be learned here. A recalculation of approaches is due after years of futility in attempting to silence extremist voices on the web through superficial and unsustainable measures.

I believe that more democratic measures, such as open spaces where words and deeds are questioned and challenged, stand a better and more lasting

The history of jihadism on the web can be traced back to the 1990s, with the conflicts in Bosnia and Chechnya providing the raison d’être for the early websites

chance of defeating the narratives of violent extremism. Countering the narrative is the way forward if the battle for hearts and minds is really to live up to its name.

The history of jihadism on the web can be traced back to the 1990s, with the conflicts in Bosnia and Chechnya providing the raison d’être for the early websites. The purpose of these sites was to report the news from these hotspots, to raise funds, and to recruit mujahedeen fighters. Crucially, it should be remembered that these struggles by oppressed populations were deemed legitimate at the time by the majority of Muslims (and indeed by many non-Muslims) given their defensive – hence relatively uncontroversial – nature.

Online, Jihadist media proliferated rapidly as both bandwidth and internet access grew in Muslim countries and the jihadists’ mastery of technology increased. What’s more, with censorship of jihadists’ offline media activities on the rise, their online presence naturally expanded. By some accounts – and these figures are imprecise – there were 10 to 15 jihadist websites before 11 September 2001, compared to nearly 5,000 by 2005. Cut off from mainstream media outlets and under security surveillance out in the real world, it was no surprise that the internet became jihadists’ medium of choice – especially given its inherent attributes, including, among others, a lack of censorship, free access, anonymity, immediacy, and global reach.

All the while, jihadist media productions online became more and more sophisticated.

By the late 2000s, the crude early videos and statements legitimising the killing of citizens had been transformed into glossy documentarystyle productions, sometimes carrying softer messages. Moreover, Al Qaeda’s loosely knit networks started to look for ways to be more open and accessible in order to interact with not only its adherents but also other audiences.

In a bid to win over Muslims and address the crisis of legitimacy Al Qaeda faced in the Muslim

world because of its targeting of civilians in terrorist operations, key Al Qaeda figures, such as Aymen Al Zawahiri, made themselves available for ‘open interviews’ online. In these interviews they gently responded to criticisms while strongly defending their ideology and strategies. As for the war on terror, jihadist forums remained an important source for ‘alternative’ news for many Muslims suspicious of Western reporting of the war.

Even so, jihadist forums remain closed spaces, serving mostly to promote ideology despite their attempts to emulate mainstream media and win new followers. They are echo chambers where words and deeds go uncontested – communities of closure that shun sceptics and fence-sitters, nurtured by verses from the Quran taken out of context and the work of ancient and contemporary radical Muslim scholars that create the comforting illusion of legitimacy.

Forum members inevitably subscribe to the Salafist jihadist ideology, to a world where Al Qaeda-affiliated or -inspired mujahedeen can do no wrong. For the ‘mujahedeen’ to simply be out there, putting their lives on the line, waging jihad and blowing themselves up – acts seen by some as expressions of selflessness and sacrifice for the sake of the ummah, the global Muslim community – gives these ‘holy warriors’ almost superhuman qualities in the minds of many.

It was not until after 9/11, when jihad was deemed to have gone global, that the most radical websites became the subject of constant scrutiny and censorship. With sites hosting disturbing material such as beheadings and fatwas that legitimised the killing of civilians, efforts to close jihadist sites mounted. Such concerns rose to the fore with every terrorist attack or attempt, whether the internet played any role or not.

In May 2008, US Senator Joseph Lieberman, chair of the Homeland Security and Governmental Affairs Committee, launched a fierce campaign on jihadist media. He called on YouTube to

remove jihadist material, claiming the videosharing platform ‘unwittingly permits Islamist terrorists groups an active, pervasive and amplified voice’. YouTube parent Google initially stood its ground, arguing that its site was richer because it hosted a diverse range of views and that stifling debate would be counterproductive.

Four months later, under fire in the US and UK, YouTube quietly updated its guidelines, allowing the banning and removal of videos that incite violence or include hate speech.

That allowed YouTube to crack down on many jihadist videos. But the practical impact of such actions was, and is, minimal. How do you realistically police content when, according to YouTube itself, hundreds of thousands of videos are uploaded daily – amounting to 24 hours of video per minute.

That same year, in one of the most momentous attacks against jihadist sites to date, the three top Jihadist forums – Al Ikhlaas, Al Firdaws, and Al Buraq, all sponsored by the Al Fajr Media Centre, one of Al Qaeda’s main media arms – were mysteriously shut down. The three forums, along with a fourth – Al Hesba, which dropped from sight days later – never resurfaced, at least not under their original names. The Western media made much of the cyber-attack, for which no government or agency claimed responsibility, possibly in order to avoid blame for an anti-democratic act.

Any self-congratulation would have been premature. In the wake of the closure of the Al Fajr forums, some members simply migrated to alternative jihadist forums, which number in the hundreds. On other forums, members who had once been passive became more active.

Suddenly, the cyber-attack became a cause célèbre. On non-jihadist Islamic and Arabic forums, ‘emergency’ discussions took place on how to counter the Al Fajr cyber attacks, which many forum visitors surmised were not the last. Sure enough, the following month, three more forums went offline, while others suffered blackouts.

Autumn 2010, Issue 2, LSE Research Magazine 35

Members of Aljazeeratalk not only challenge material posted by jihadists but also take the initiative in exposing them

2006 and claims more than 22,000 subscribers, along with a greater number of visitors to the site and hundreds of news correspondents from across the world. It was voted the best Arabiclanguage blog in the 2007 Deutsche Welle international weblog awards, the BOBs. The forum’s name, logo, and even its base (Doha, Qatar) are easy to confuse with the famous Aljazeera satellite TV channel.

Moreover, many of the satellite channel’s top reporters and programme hosts are listed on Aljazeeratalk as bloggers. All of which is not surprising since the idea of Aljazeeratalk forum was conceived in the corridors of the Aljazeera TV channel by young journalists who wanted to take freedom of expression to a higher level.

The cyber-attacks, predictably, encouraged extremists to devise measures that would both guarantee the survival of jihadist material online and avenge the attacks. New forums and websites were launched, such as Electronic Jihad and Jihad Archive. As a precautionary measure, jihadists agreed to increase their presence on popular non-jihadist forums, mainly Arabic ones like Aljazeeratalk, both to have credible platforms that are not normally subject to closure and to win over potential followers.

The attacks also inspired members to look for new platforms, ones that were both popular and could not be closed. Enter the Facebook invasion. Young jihadists pointed to the popularity of the social networking site, especially among young people, who are the ideal recruits, and to its global reach; they even cited its role in Barack Obama’s presidential campaign. Thus was launched in December 2008 a Facebook group called ‘Knights of the Solidarity Invasion’.

It immediately had over 100 members and served as an effective temporary platform for virtual assemblies and meetings.

It didn’t last long. Alerted to its presence, Facebook disabled the group, while admitting it was hard to monitor such activities with a user base of over 140 million. (Facebook now has more than 500 million users.) Not to be defeated, jihadists announced Phase II of the Facebook invasion. This time, instead of creating a single group – and single target – they decided to join established groups on

36 LSE Research Magazine, Issue 2, Autumn 2010

Facebook, especially Arab or Muslim ones, and to gradually promote their ideology and material. To ensure the survival of jihadist material online, ‘support brigades’ consisting of hundreds of zealous and internet-savvy volunteers were created.

So within months of the Al Fajr attacks the online jihadist media had not only fully recovered, but perhaps become more resilient for having learned new methods to overcome closures and evade security restrictions. The jihadists’ recovery shows how difficult it is to fight them online. First, technically, the unregulated nature of the internet makes it almost impossible to get rid of material once and for all. Second, tactically, jihadists’ online presence resembles its offline presence, which in turn resembles that of Al Qaeda: it is decentralised and diffuse, making it more resilient. Last but not least, ideologically, closing sites and censoring material does not do away with the beliefs and fervour that fuel jihadism.

The vitality of open, pluralist platforms that offer a wide range of viewpoints is perhaps best exemplified by Aljazeeratalk, the biggest multimodal Arabic-language website in the Middle East. Aljazeeratalk describes itself as an independent non-profit institution that seeks to ‘promote citizen media based on the philosophy that every citizen can be a journalist, thus increasing news sources and presenting new points of view’. It was launched on 6 June

With a forum that takes no responsibility for articles written and viewpoints expressed, Aljazeeratalk is a perfect platform for all to have their say. The trademark motto of AlJazeera Channel, ‘the opinion and the other opinion’, making room for dissident, was strongly adopted on Aljazeeratalk forum.

Among these voices were those of jihadists.

Aljazeeratalk not only allowed jihadists to post their material online and participate in debates on ideology, it went further, offering them their very own platform, called Militants.

Yet Militants is not the only section where jihadists are active. Jihadists became members of the forum’s top section, Politics. Articles and news posted by Jihadists on the various sections of Aljazeeratalk usually end with links to Jihadist forums, a calculated strategy to win new followers. Many of the pseudonyms of members on jihadist forums are the same ones used in Aljazeeratalk and their signatures include photos of Al Qaeda icons or flags.

When the top jihadist sites were closed, Aljazeeratalk proved an important and credible platform where members discussed the attacks, exchanged information, and posted and viewed material. The forum has shown that extreme ideologies and radicals that endorse them become vulnerable when stepping out of their comfort zones, including their own websites.

Despite their satisfaction with being allowed access to Aljazeeratalk, jihadists fail to realise that this pluralist platform is a double-edged sword that can be used as a strong weapon to delegitimise them.

The majority of Aljazeeratalk members are Muslims, including some who demonstrate superior religious knowledge and therefore are in a position to question and defy the claims of extremists. Members of Aljazeeratalk not only challenge material posted by jihadists but also take the initiative in exposing them. There is a vast armoury of articles, analyses, and photos contesting the Salafist jihadist ideology. When any new Al Qaeda production is posted on jihadist forums and Aljazeeratalk alike, the responses are very different. It is accepted, cheered and praised in the former but liable

to be scrutinised, questioned and many times condemned in the latter.

Which brings us back to the censoring, banning and blocking of Islamist websites like the Al Fajr progeny. Do such measures mean that young diasporic Muslims won’t ask questions or have access to extremist literature? The answer is no. What they may do is seek information elsewhere, possibly in closed communities, whether online or offline, that will provide and strongly promote only one narrative. The way to address the problem of extreme ideology is through debate and contestation, and not through the superficial method of closing websites. Otherwise, the security services will continue their futile effort of whacking a mole that just pops up somewhere else. n

Mina Al-Lami

is an Iraqi Visiting Fellow at the Department of Media and Communications under the Scholars at Risk scheme, an LSE-wide initiative coordinated by the School’s Centre for the Study of Human Rights. Ms Al-Lami’s research has concentrated on Islamic extremist groups, with a particular emphasis on the use of media and propaganda by jihadist groups, on online radicalisation, and on online counterextremism measures. Before she left Iraq in 2006, Ms Al-Lami served as a security information analyst with the United Nations in Iraq, and a lecturer of English language at Baghdad University.

SPECIAL REPORT: TERRORISM

Canary in the coal mine Gulf states, beware. Kristian Coates Ulrichsen says Yemen is a sign of what can go wrong when a country fails to develop political legitimacy and build a sustainable, productive non-oil economy.

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he failed bombing of Northwest Airlines Flight 253 over Detroit on Christmas Day 2009 was the latest and by far the most visible in a string of security incidents to have originated in Yemen. Umar Farouk Abdulmutallab’s unsuccessful attempt to detonate 80 grams of explosive hidden in his underpants catapulted Yemen up the global security agenda. Following years of comparative neglect, the international community belatedly shifted its focus to the interconnected socio-political, economic and transnational challenges confronting Yemen’s embattled and long-serving president, Ali Abdullah Saleh.

These interlocking issues act as threat multipliers that feed off each other; collectively, they have pushed Yemen to the brink of failed statehood.

This has profound implications for the security and stability of the oil-rich Gulf Cooperation Council (GCC) states, and has forced a recalibration of regional and international approaches to Yemen’s problems.

This country of nearly 24 million people on the Arabian Peninsula faces a combination of systemic challenges, each of which, on its own, would be profoundly destabilising. These include a military rebellion in the northern province of Sa’dah that has flared intermittently with six rounds of fighting since 2004, a growing southern secessionist movement that challenges the post-1990 reunification

settlement, and the reconstitution of Al Qaeda in the Arabian Peninsula (AQAP) following the merger of its Yemeni and Saudi wings in January 2009.

Underlying all of these hard threats to security is the imminent depletion of oil and water reserves, and the erosion of regime legitimacy and state capacity to govern effectively or even fairly. Across the Gulf of Aden, state collapse in Somalia has facilitated destabilising flows of men, money and material between Somalia and Yemen. This has injected the multiple drivers of conflict and insecurity in the Horn of Africa into the Gulf’s regional security equation. The result is a failing political economy on the south-western flank of the Arabian Peninsula that can no longer be contained within Yemen itself.

The danger has been brewing for some time, and tracking it has been part of my research at the Centre for the Study of Global Governance.

Between 2003 and 2006, AQAP mounted an intermittent campaign of terrorist attacks against Western symbols in Saudi Arabia. These culminated in an audacious attempt to disrupt the export of oil through the Abqaiq oil processing facility in February 2006. The failed assault intended to strike at the heart of the social and wealth redistributive contract binding the Gulf states to their societies and the global economy.

Saudi Arabia eventually neutralised the threat from AQAP, which claims to be subordinate to the terror network run by Osama bin Laden,

Autumn 2010, Issue 2, LSE Research Magazine 37

within a year of his inauguration as Yemenis made up 90 of the 188 remaining detainees as of March 2010.

iSTOCK

by mounting a vigorous and multi-dimensional counter-terrorist campaign that systematically targeted extremist networks, terrorist financing and the misuse of religion to legitimate recourse to violence. Saudi Arabia also developed an innovative network of rehabilitation centres that sought to address the underlying causes of radicalisation and re-integrate former militants into society.

This mix of hard and soft security measures greatly diminished the capability of terrorist organisations in the GCC region. However, they did not succeed in eradicating the threat altogether, and the deteriorating security and governance situation within Yemen provided an opportunity for militants to regroup and reorganise. In January 2009, the emergence of two Saudis in positions of leadership in the reconstituted AQAP exposed the inherent weaknesses in regional and international security responses to the challenge of transnational terrorism. Both Saud al Shihri and Muhammad al Awfi were ex-Guantanamo Bay detainees who then spent five months in Saudi Arabia’s rehabilitation programme before being deemed ready for re-integration into society in May 2008. Their subsequent reappearance in Yemen damaged the credibility of the Saudi programmes and also complicated President Barack Obama’s pledge to close Guantanamo

The deteriorating security and governance situation within Yemen provided an opportunity for militants to regroup and reorganise 38 LSE Research Magazine, Issue 2, Autumn 2010

The re-emergence of AQAP highlighted the renewed threat to regional stability from the overspill of violence from Yemen. This became very clear in the group’s official pronouncements and choice of targets, including a new plot to attack oil installation facilities in Saudi Arabia by a cell consisting of 47 Saudis and 51 Yemenis that was uncovered in March 2010. Most dramatically, it came close to assassinating the Saudi Arabian deputy minister of the interior, Mohammed bin Nayef, in August 2009.

Such a brazen and high profile attack on a senior member of the Saudi ruling family was unprecedented in the recent history of transnational terrorism in the Arabian Peninsula.

The would-be assassin, 23-year old Saudi national Abdullah Asiri, featured on a list of 85 ‘most-wanted’ terror suspects issued by Saudi security forces in February 2009. After receiving training in Yemen, he returned to the kingdom and gained access to the Prince, the architect of Saudi Arabia’s counter-terrorist strategy, by claiming he wished to renounce his links to terrorism.

Inter-regional linkages with Somalia also proliferated as exchanges of militants and weaponry intensified across the Gulf of Aden.

Somalia’s minister of defence even accused Yemeni militants of fuelling the flames of regional conflict following their dispatch of two boatloads of weapons to Somalia in December 2009. The intertwined political economy of Yemeni-Somali conflict extended to cooperation in acts of piracy off the Somali coastline and to the training of Yemeni militants in Somali camps organised by the Islamic insurgent group Al Shabaab. This threatens global maritime and energy security: an estimated 3.3 million barrels of oil pass through the Gulf of Aden each day from the GCC states to consumer markets in Europe and North America.

Two events late in 2009 internationalised Yemeni insecurity and demonstrated the growing complexity of threats in today’s interconnected world. Umar Farouk Abdulmutallab’s attempted Christmas attack dominated world headlines and took American intelligence and security agencies by surprise. They had expected any terrorist attack on the United States homeland to originate in the Afghanistan-Pakistan borderlands rather than Yemen, and did not believe AQAP capable of such an extended operation.

Yet, just six weeks beforehand, the long reach of Yemeni-based terror first made its presence felt after the US citizen Anwar Al Awlaqi was implicated in the radicalisation of the Fort Hood shooter, Nidal Malik Hasan, with whom he had corresponded before the massacre that killed 13 soldiers on 5 November. Subsequent investigation into Awlaqi’s alleged role in AlQaeda in the Arabian Peninsula indicated that he also met with Abdulmutallab while living

As difficult as it may be to contain a terrorist build-up within Yemen, a failure to do so would carry worrying implications for the GCC states themselves

in Yemen. The information linking Awlaqi to a nexus of international terrorism contributed to President Obama’s unprecedented decision to authorise his targeted killing as a military enemy of the US in April 2010.

The combination of these spokes of terror radiating outward from Yemen and the geo-commercial importance of the Arabian Peninsula and Gulf of Aden sea lanes magnifies the geopolitical significance of this regional instability. It can plausibly be argued that this presents at least as great a challenge as the ongoing military campaign in Afghanistan, a landlocked country in central Asia of only marginal importance to the global economy. A frequent justification of Western involvement in Afghanistan is that this is necessary to safeguard their internal security from possible future terrorist attacks. Looked at in cold geostrategic terms, though, it is Yemeni instability that has exhibited a genuinely transnational and far reaching threat over the past year.

This is not to recommend international military intervention in Yemen, far from it, but merely to emphasise the gravity of its crisis of governance and breakdown of security.

International concern for the systemic and interconnected crises facing Yemen set in motion a strategic reassessment of the range of responses from GCC member-states. Hitherto, regional policy had largely followed a policy of attempted containment in line with the notion that the GCC – which in addition to Saudi Arabia includes Kuwait, Bahrain, Oman, Qatar, and the United Arab Emirates – was ‘an island of stability in a sea of instability.’ The reassessment marked the beginning of a new phase of sustained international engagement between Yemen and its regional partners, which worried that unless they adopted a new and comprehensive approach their own relative stability would be threatened.

As difficult as it may be to contain a terrorist build-up within Yemen, a failure to do so would carry worrying implications for the GCC states themselves. Although the post-oil transition is a distant concern for Saudi Arabia, Kuwait, the United Arab Emirates, and Qatar, they do need to overhaul entrenched subsidisation and redistributive mechanisms that come with fabulous oil wealth and then to grow a productive economic sector. Meanwhile, Bahrain and Omani oil reserves are projected to run out within 20 years barring unexpected new discoveries. The rulers in both countries urgently face the need to renew the bases of their legitimacy to overcome the drawdown of

the oil wealth that has, in effect, purchased social order in these states.

Transitioning toward a post-oil era in all GCC states will involve painful socio-political decisions and the dismantling of decades of patterns of behaviour that depended so heavily on income from a single resource. From the GCC perspective, Yemen is the canary in the coal mine – a danger sign of what can go wrong when a country fails to develop political legitimacy and build a sustainable, productive non-oil economy. The challenges to government authority in southern and northern Yemen plainly demonstrate how existing socio-economic discontent and regional marginalisation can fracture and fragment societal cohesion. Similar fissures and unequal patterns of access to resources exist in the GCC states and could become transmitters of conflict in the future.

In the final analysis, Yemen’s regional partners would do well to work alongside the international community in a sustained process of engagement that addresses the totality of Yemen’s problems rather than focusing excessively on the counter-terror dimension. A nuanced and collective policy framework offers the best chance of repairing state-society relations and enabling the re-extension of legitimate governmental authority.

Yemen’s enduring significance will become apparent in the medium- to longer-term when the GCC states undergo their own transition to a post-oil era. The key question will be whether they can manage the processes of change in a more orderly and consensual manner than Yemen has. The inconvenient truth confronting GCC policy makers is that they face similar systemic and structural obstacles to reform, and while they enjoy greater material resources to buttress the transition, their dependence on oil has both been longer lasting and deeper rooted. n

Kristian Coates Ulrichsen

is a research fellow at LSE Global Governance and deputy director of the Kuwait Research Programme on Development, Governance and Globalisation in the Gulf States. His research focuses on the politics and security of the Arabian Peninsula and the emerging geopolitics of regional insecurity. Dr Coates Ulrichsen is the author of a forthcoming book, Insecure Gulf: the end of certainty and the transition to the post-oil era (Hurst & Company). With LSE Professor David Held, he is co-editor The Transformation of the Gulf: politics, economics and the global order (Routledge, 2011).

CLIMATE CHANGE

Time for action – again Beneath the clatter of headlines and controversies surrounding the debate on global warming, battalions of academic researchers are laying the groundwork for policies that Nicholas Stern says could lead to a safer and more prosperous world.

LSE researchers are helping governments from around the world to make progress towards a new international treaty ahead of the United Nations climate change conference in Cancún, Mexico, at the end of this year.

After the disappointment of the last conference, in Copenhagen in December 2009, policy makers are understandably cautious about the prospects for success. But members of the Grantham Research Institute on Climate Change and the

Environment at LSE (and their colleagues at the Centre for Climate Change Economics and Policy, which is jointly hosted with the University of Leeds) are assisting negotiations by analysing the key issues that must be resolved in order to secure an international agreement.

The Copenhagen Accord, put forward by Brazil, China, India, South Africa and the United States at the end of last December’s meeting of the United Nations Framework Convention on Climate

Change (UNFCCC) has provided a platform for building such an agreement. More than 100 countries have now associated themselves with the accord, and pledges of action have been made by countries that together are responsible for more than 80 per cent of current annual emissions of greenhouse gases.

The accord commits countries to deep cuts in emissions of greenhouse gases in order to ‘hold the increase in global temperature below

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40 LSE Research Magazine, Issue 2, Autumn 2010

Negotiations and agreements must be sustainable, founded on sound analysis and ideas

make to adapt to those impacts of climate change that are likely to occur in the next couple of decades because of present levels of greenhouse gases in the atmosphere.

2 degrees Celsius’. Research published by LSE late last year showed that in order to have a 50 per cent chance of avoiding a global warming of more than 2˚C, global annual emissions of greenhouse gases would have to be reduced from about 47 billion tonnes in 2010 along a ‘climate responsible’ path to 44 billion tonnes in 2020, much less than 35 billion tonnes in 2030, and much less than 20 billion tonnes in 2050.

A programme funded by the reinsurance company Munich Re is considering what role financial risk transfer mechanisms might play in dealing with effects due to changes in the frequency, intensity and distribution of extreme weather events which threaten people, their livelihoods and their property. The programme is providing information to policy makers who are seeking guidance about how risk sharing through the establishment of microinsurance schemes and catastrophe risk pools, for instance, might complement measures to reduce risks, such as flood defences and building codes.

An analysis by LSE researchers has shown that actions pledged through the Copenhagen Accord would, if delivered, reduce global emissions from a ‘business as usual’ level of about 56 billion tonnes in 2020 to about 48 billion tonnes. While this falls substantially short of the target of 44 billion tonnes, it might still be possible, although much more costly and requiring cuts in global emissions of at least four per cent per year, to reach a path that is consistent with a 50 per cent chance of avoiding a warming of more than 2˚C. However, the chance of achieving such rapid cuts after 2020 look remote, and it would make much more sense to raise the level of ambition for the next ten years. Some countries, as the accord recognises, believe that a warming of 2˚C may result in climate impacts that are too dangerous to accept. It calls for an assessment by 2015 of whether the long-term goal should be strengthened to hold warming below 1.5˚C. Researchers at LSE are investigating whether such a goal could be achieved, and if so what action would be required to meet it. This work integrates both science and economics, drawing upon existing evidence and the best available models for estimating future effects. The results will be published before the conference in Cancún at the end of this year.

Many countries are seeking guidance on policies that will help them to achieve significant reductions in emissions. This will mean breaking the link between emissions and growth. Only if this link is broken can we make the transition to a lowcarbon economy. A number of research projects at LSE are exploring such economic policies.

Those policies are, in large measure, based on the fundamental insight that climate change is the result of the largest market failure the world has ever seen: the prices of goods and services do not reflect the true costs associated with the impacts of greenhouse gas emissions that would result from climate change. Therefore, effective policies must address this failure by creating a price on emissions (ie, a carbon price). Such a price can be created, for instance,

through a carbon tax or through a cap and trade system.

The carbon markets group at LSE is examining the strengths and limitations of current systems, such as the European Union’s Emissions Trading Scheme; how they might be improved, and what lessons they offer for policy makers who are considering the establishment of comparable mechanisms in other parts of the world.

Regulation and standards, with their implicit prices on carbon and clarity on requirements, will also be key parts of a policy package.

LSE researchers are also studying how other policies can promote low-carbon economic growth by fostering creativity and innovation across many sectors, from power to transport to agriculture, in both developing and developed countries. This research is set in the context of the other major challenges which countries face, such as reforming the world’s financial systems and stimulating economic activity in the wake of the global slowdown. And most importantly, the researchers are considering how the huge risks posed by climate change can be managed while also overcoming poverty in the developing world. Indeed these are the two defining challenges of our century.

The Copenhagen Accord recognises that developing countries will require significant support from developed countries to help them with the transition to low-carbon growth and to adapt to those impacts of climate change that cannot now be avoided. The accord committed developed countries to provide $100 billion per year by 2020.

The United Nations Secretary-General, Ban Ki Moon, established a high-level advisory group to look at different sources of climate financing, recognising that developed countries would find it difficult to provide additional money from current public funds and that developing countries would insist that support was provided over and above existing commitments on overseas aid. This group, of which I am a member, is chaired by Meles Zenawi, prime minister of Ethiopia, and Jens Stoltenberg, prime minister of Norway, and is examining a range of potential sources of revenue for financing mitigation and adaptation activities in developing countries, ranging from taxes on, or trading schemes for, international aviation and shipping, to making use of the International Monetary Fund’s special drawing rights, which can boost a beneficiary country’s official reserves.

It is clear that much progress still needs to be made to devise a new international treaty that covers all the world’s nations and will be strong enough to tackle climate change effectively, while at the same time equitable enough to gain the agreement of all countries. A strong political agreement on the key aspects of action could be achieved at the next meeting of the UNFCCC in Cancún, allowing the chance for a formal treaty to be drawn up afterwards and signed at the following UNFCCC meeting scheduled to take place in South Africa at the end of 2011.

The work of researchers at LSE and other institutions around the world is helping policy makers to overcome the obstacles that stand in the way of success, by opening up and scrutinising options and helping to prioritise measures that are technically feasible and economically effective. Negotiations and agreements must be founded on sound analysis and ideas if they are to be built and sustained.

These present not just exciting intellectual challenges for researchers, but also, in good LSE tradition, opportunities to suggest policies for a safer and more prosperous world. n

Nicholas Stern

is IG Patel Professor of Economics and Government, chair of the Grantham Research Institute on Climate Change and the Environment, and chair of the Centre for Climate Change Economics and Policy at LSE. Professor Lord Stern of Brentford also directs the Asia Research Centre and the India Observatory at LSE. He led a review of the economics on climate change for HM Treasury; the Stern Review was published in October 2006 and soon became one of the most influential documents in the field of climate change economics. Professor Lord Stern was chief economist of the World Bank (2000-2003) and later head of the UK Government Economic Service. He is a fellow of the British Academy and an honorary fellow of the American Academy of Arts and Sciences.

LSE researchers are also exploring what investments developing countries should

Autumn 2010, Issue 2, LSE Research Magazine 41

THE POLICY PERSPECTIVE

At the COAL face As the CEO of Drax Power Ltd, LSE alumna Dorothy Thompson wants the UK government to support her plans to transform Britain’s largest coal-fired power station and one of its biggest emitters of CO2 into one of the cleanest electricity generators – of any type.

Here, she makes her argument.

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he UK power industry of 1983, when I graduated from LSE, and the shape of the industry today could not be more different. I consider myself fortunate to have been equipped with an excellent training in economics from LSE, for economics is so fundamental to many of the major challenges and dilemmas we face in my industry today.

Back then, electricity generation was a publicsector activity, and all of the country’s large power stations were owned by the Central Electricity Generation Board. The transmission, distribution and supply of electricity was also the responsibility of the public sector. Today the entire electricity industry is in the private sector.

Electricity is an unusual commodity. It cannot be stored in significant quantities. It always has to be in over-supply to make sure the lights don’t go out. Generating electricity from fossil-fuel power plants produces emissions that are a public good, but which through acid rain and global warming have a major impact on the welfare of current and future generations, as research by, among others, LSE’s Grantham Research Institute on Climate Change and the Environment has shown. It is challenging, therefore, to create efficient market mechanisms for electricity – and yet it is critical to our economy. How the UK meets its ambitious carbon-reduction and renewables targets while keeping the lights on is one of the biggest policy challenges for the new

42 LSE Research Magazine, Issue 2, Autumn 2010

coalition government, the energy industry, and all those who invest in power generation and infrastructure projects. With the coming closure of many old coal and nuclear plants, and with ambitious government targets for renewable generation and CO2 reduction to be met, the market and the policy framework have to incentivise an unprecedented investment in energy infrastructure of over £200 billion by 2020, and that investment must ultimately deliver a decarbonised sector.

I believe that as the largest and most efficient coal-fired power station in the country, Drax has a crucial role to play in the UK’s transition towards a low-carbon economy. That is why Drax has decided to embark on the most comprehensive low-carbon, biomass strategy of any energy producer in this country.

Drax’s emissions reduction strategy breaks down into three distinct approaches: improve, adapt and develop. The first approach, improving the efficiency of our existing facilities, is well under way. We are investing £100 million in a turbine upgrade programme will save one million tonnes out of our current annual total of around 20 million tonnes of CO2 emissions. This alone is equivalent to 275,000 cars being taken off the road. The second approach, adapting our current facilities, entailed the construction and operation of the largest biomass co-firing facility in the world. This facility, which has been in operation since June, gives us the capability to replace a proportion of the coal that we burn with biomass – organic, plant-

based material – and co-fire it with coal in the existing boilers to produce up to an eighth of our output.

The extent to which we use the new facility is, however, dependent on the government’s policy framework. Compared with burning coal, it costs two to three times as much to produce the same amount of energy by burning biomass. This, as with all other renewable technologies, is uneconomical without adequate government support. Because co-firing ordinary biomass receives a quarter of the economic support as offshore wind, not all biomass is economically feasible.

Just to give you an idea of the amount of time and resource we have dedicated to trying to make biomass work, we have trialled around 70 types of biomass so far and selected about 20 types that we expect to source and burn regularly. We have the capacity to co-fire around 1.5 million tonnes of biomass a year, which would make us the UK’s biggest user of biomass. It has taken seven years for us to reach this point. With that experience, we hope to be the first in the UK to convert a coal-burning boiler into one that can run on 100 per cent on biomass. This represents a very cost-effective way to substantially reduce CO2 emissions while maintaining Drax’s ability to support the National Grid, complement other less flexible forms of renewable generation (eg, wind), and respond to changes in demand. However, this potentially groundbreaking change would need clarity from government and regulators on our access to appropriate financial support.

The third approach, developing new dedicated facilities, relates to our work with Siemens Project Ventures on developing a £2 billion investment programme to build three new 290 megawatt biomass plants. We expect these plants to become operational sometime between 2014 and 2016, helping to make us one of the largest renewable power generators in the country. The rationale for Drax’s efforts to substantially reduce its carbon emissions in the here and now is clear.

coal-fired plant, at worst a quarter, at best less than a twentieth of the CO2 emissions.

DREAMSTIME

Our chosen fuel, biomass, is a renewable source of energy and can be sustainable. As the world’s fourth largest energy resource after oil, coal and gas, it is plentiful and diverse. Relative to other renewable energy sources, electricity generation from biomass is a proven technology, and it may surprise people to learn that for years biomass has provided more electricity in the UK than any other renewable resource, but for the last four or five years electricity generation from biomass has been largely static due to certain limitations in the government’s policy framework.

Get the framework right and we are saying that we are ready and willing to increase our biomass use significantly. Our biomass commitments are four fold. First, under the right regime we will immediately begin engineering design work on one of our generating units to demonstrate full conversion to biomass. Converting any of Drax’s coal-fired generating units to full biomass is a double win – it takes coal out of the energy mix and delivers large-scale, cost-effective, secure and reliable renewable power.

Second, we will move forward with the development of new dedicated biomass-fired power plants, subject to the economic case being proven. In order to do this we require a guaranteed level of government support for the lifetime of the plants, bringing costs into line with other renewable technologies.

Offshore wind, for example, has certainty over the support it gets for 20 years. If the new government were to offer the same long-term support to dedicated biomass plants then Drax

would be in a much better position to make a credible investment case.

Third, we will optimise the amount of biomass co-fired with coal at Drax Power Station. The current support for co-firing is insufficient – it is simply cheaper to burn coal, even when allowing for the cost of carbon under the European Union Emissions Trading Scheme.

Not only that, but the amount of co-firing allowed in any one year is capped. The cap is limiting investment and will constrain the renewables boom and make alternative lowcarbon solutions less likely.

Given that coal-fired power plants still supply one third of our electricity, and given that carbon capture and storage will not be available for widespread use for many years, it is important that other means of cleaning up coal-fired power generation are promoted and supported. Government policy should be supported by evidence and, in this case, there is overwhelming evidence in support of the case that we have made.

Last, but by no means least, we commit to burn only sustainable biomass. We ensure that all suppliers of biomass provide their supply chain data to us to enable an accurate ‘field to furnace’ calculation of greenhouse gas emissions which is verified by independent auditors. Compared with the least carbon-intensive gas-fired plant, biomass burnt at Drax Power Station during 2009 had, at worst, just over half the CO2 emissions, at best less than a tenth, and against

As someone who has seen the power industry go through massive changes since my student days at LSE, I shall be disappointed if our various biomass projects don’t go forward in the UK. After all, we are not asking for wholesale policy change, simply a relatively modest development of the policy framework to keep pace with innovative thinking. Furthermore, a significant and timely contribution from biomass will ensure that the overall cost to UK consumers of meeting the government’s very demanding renewables and carbon reduction targets will be lower. Drax Power Station provides around seven per cent of the UK’s electricity and is a vital strategic asset. In fact, if Drax were able to pursue its biomass plans it could also contribute to the thousands of green jobs that the government says it needs. As such, it will make a vital contribution to the economy as the country switches to low-carbon electricity in the form of clean fossil fuels, nuclear and renewables. I would argue that we are already the most efficient coal-fired power station in the UK. For security of supply, the UK will continue to need plants like Drax in operation for some years to come whether or not the policy framework incentivises us to substantially reduce our carbon emissions. If our bold plans to help bridge the gap to the low-carbon economy and bolster the UK’s economy receive the support I think they deserve, we are ready to act in a way which will help secure competitive UK electricity supplies for 2020 and beyond. n

Dorothy Thompson

holds two degrees from LSE – a BSc (1982) and an MSc (1983), both in economics. She is the CEO of Drax Group plc, the owner and operator of Drax Power Station, the largest coal-fired power station in the UK. She was previously the head of the European business of InterGen NV, the power generation subsidiary of Shell NV and Bechtel Inc. Prior to joining InterGen in 1998, she worked for Powergen and before that American Express and the Commonwealth Development Corporation.

Autumn 2010, Issue 2, LSE Research Magazine 43

THE ACADEMIC PERSPECTIVE

Research in the time of Tremors from the February 2010 Chilean earthquake were felt as far away as Buenos Aires. Carolyn Côté-Lussier felt them, albeit in a different way, in even more distant London as she prepared for a research trip to Santiago.

T

he news of an earthquake hitting the central west coast of Chile was terrible. Not only because of its effect on Chile, and especially on people living close to the epicentre – Concepción, Constitución and the archipelago Juan Fernandez -- but also because the world was still reeling from the devastating earthquake which hit Haiti about a month beforehand. Selfishly, I thought, what will become of our trip to Santiago? My colleague, Monica Gerber, and I had been awarded a Santander Universities grant and were planning to head down to Santiago in less than three weeks. After considering different options (such as postponing the trip) we learned that LSE’s travel insurance company deemed it safe to travel to Chile. So off we went.

Not knowing what to expect, I thought nothing of the slightly dishevelled Santiago airport, but Monica pointed out ceiling panels which had fallen, closed shops and tents set up around the airport to house airline check-in desks. We drove straight into the city centre which seemed for the most part untouched by the earthquake. Later, however, I noticed some of its aftermath, such as a fallen church tower and a seven foot long Christmas tree-shaped crack in the wall on the 16th floor of the building where we had rented a small two-bedroom apartment.

We were in Santiago to meet with colleagues at the School of Psychology of the Pontificia Universidad Católica de Chile to discuss a collaborative research project. Our research

44 LSE Research Magazine, Issue 2, Autumn 2010

required surveying a representative sample of Santiago residents on their fear of crime, the perceived legitimacy of the criminal justice system, and their support for harsh criminal justice policies. The work, which will form part of our PhD dissertations, is associated with the European Commission project Euro-justis, which takes similar soundings across Europe. The Santiago survey is the only comparable research being conducted in South America, and Chile, with its own history of dictatorship and social injustice, represents an interesting point of comparison to the European data.

The earthquake, which hit on 27 February shook not only Chile’s physical world, but also its social world. The chaos that follows any natural disaster led to looting and vigilantism in Concepción and other severely affected areas. The news media soon turned their attention to the apparent social breakdown and what some called a slow governmental, military and police response to the quake. Some reports fuelled rumours that criminal gangs were opportunistically leading the apparent crime wave, while others maintained that well-to-do people were also engaging in looting. Some Chileans, frustrated with the lack of governmental response, took justice into their own hands by forming posses, some of them armed.

All of this had important implications for our research, for the unease and chaos would obviously shape public attitudes towards the criminal justice system. It gave us, as researchers, a unique opportunity to conduct

comparisons of the effects of the earthquake and the ensuing events on fear of crime and perceptions of the criminal justice system.

Physical convulsions like an earthquake are a reminder that social research does not operate in a vacuum. So together with our colleagues at Universidad Católica, we decided to conduct the survey in both Santiago and Concepción.

To our study we decided to add measures to capture the ways in which the earthquake and its aftermath affected individuals; the new results could then be compared to earlier data, allowing us to map changes in the two cities before and after the earthquake.

One of the things we will be looking at is the extent to which instability and insecurity caused by a natural disaster can influence political ideology.

Previous studies have shown that political conservatism is associated with psychological needs and that feeling threatened can actually make people more politically conservative than they might be otherwise. As reported in a 2003 article in the Psychological Bulletin of the American Psychological Association, John T Jost, Jack Glaser and Arie W Kruglanski, found significant positive and negative correlations between epistemic needs (eg, intolerance of ambiguity and openness to experience, respectively) and political conservatism (based on a review of 88 different samples from studies conducted in various countries between 1958 and 2002). Moreover, they found that, when faced with threats to themselves or to the social system, people tend to adopt more conservative attitudes.

In our research, Monica Gerber, Jonathan Jackson and I have found that in the UK individuals’ psychological needs have direct and indirect effects, through political conservatism, on fear of crime, confidence in the police and punitive attitudes. For instance, a need for rule-following positively predicts punitive attitudes directly, but also indirectly through cultural conservatism.

The earthquake and its aftermath may have had the effect of increasing epistemic and

Monica Gerber and Carolyn Côté-Lussier

When faced with threats to themselves or to the social system, people tend to adopt more conservative attitudes

existential needs, such as rule-following, potentially leading to the adoption of more conservative attitudes towards crime and the criminal justice system.

It is hard to say precisely how the earthquake and its aftermath will have affected Chilean society. Having been in Santiago, what we do know is that while the infrastructural damage may have been minimal, the earthquake resonated in the capital in other ways. Every conversation turned towards the earthquake: where people were, which floor they lived on, whether they knew anyone who had been seriously affected directly or indirectly by the earthquake. We got news of someone’s friend being killed by the Tsunami in Juan Fernandez, and of family members having to pay exorbitant prices for architects, who are now in extraordinarily high demand, to make repairs to their damaged homes. Of course such events will have varying effects on individuals, while the broader social effects may be longer lasting.

Our colleagues at Universidad Católica were eager to address how these events affected Chile’s social consciousness. How will Chilean society reconcile its image of crime and justice with the fact that so many individuals took part in the looting and vigilantism? How do you regain trust in a governmental and criminal justice system which fails you in a time of dire need?

Since January, Chile has had a new, centre-right government, one that seems bent on adopting harsh criminal justice policies. Will the earthquake and its aftermath lead to more support for the government (given the looting and vandalism), or less (if people feel the authorities responded inadequately to the crisis)?

As we pursue our research, we are aware of the sensitivity of the issues at hand. In the end, our hope is to contribute to the growing body of knowledge about a citizenry’s perception of its criminal justice system, and in some small way help Chileans come to terms with the societal consequences of the earthquake. n

Carolyn Côté-Lussier

is a PhD student in LSE’s Methodology Institute.

In her research, she uses experimental social psychology to study social stereotypes about criminals and how these stereotypes relate to psychological needs, political ideology and policy preferences, such as support for harsh criminal justice policy. Ms Côté-Lussier is currently involved in the evaluation of a National Offender Management Service programme designed to improve race equality in UK prisons.

Monica Gerber

is also a PhD student in LSE’s Methodology Institute. Her chief research interests include attitudes towards punishment, right-wing authoritarianism, social-dominance orientation, moral foundations, and system-justification theory. Ms Gerber is currently conducting studies which test the motivational basis of punitive attitudes and the extent to which punishment may serve a system-justifying function.

Pictures of earthquake damage in Constitución

by Francisco Salvo Espinosa

Autumn 2010, Issue 2, LSE Research Magazine 45

FOOTNOTES

Seeing is believing: research in motion Where university applicants once compared printed prospectuses, they now compare websites. Alongside text, photographs, and interactive maps, there is a demand for video content. Jon Adams began producing online videos at LSE in late 2008. This aim was to try to meet the expectations of visitors to the website, and to provide short, accessible stories about research activities within the School.

At the time, I was an academic studying how science popularisations were written and received. I’d been to enough conferences and departmental seminars to know there were interesting stories that didn’t intersect with the agenda of current affairs, and one of my aims was to showcase the good work of academics whose research was unlikely to interest newspaper editors. An additional aim was to broaden the perception of LSE as more than just an economics School.

It is not possible in a five minute film to cover a subject in depth, but the videos can deliver striking messages. (They can be seen here: lse.ac.uk/newsAndMedia/videoAndAudio/ research/Home.aspx). We’ve learned, from

46 LSE Research Magazine, Issue 2, Autumn 2010

Filippa Lentzos of BIOS, that we needn’t worry too much about the threat posed by biological weapons, while Arne Westad of LSE IDEAS has argued that we ought to be considerably more worried about nuclear weapons than we currently are.

The videos cannot substitute for the journal articles and lectures and tutorials by which our academics establish their credibility and transitively that of the School. And they don’t try to. But the notion that there’s something inherently trivial about video is mistaken.

Video content is here to stay. The format has an extraordinary pedagogic potential: we can produce animated graphics, we can embed

annotations, speech can be replayed, images paused and magnified to full screen. And very recently, YouTube has begun trials of an instant closed-caption option which allows videos to be instantly translated into multiple languages.

All for free.

Posting videos on the LSE website would have been unthinkable only a few years ago. But the astonishing expansion of the internet – both in terms of the number of people it now reaches and in terms of the sheer volume of information it is able to deliver – has changed all that.

The near ubiquity of broadband has not only made online video possible, but in changing the way in which information is accessed and disseminated, it has made it necessary. n

Jon Adams

is a research video producer in the External Relational Division at LSE. Dr Adams came to the School in 2005 to work on a major Leverhulme Trust-Economic and Social Research Council project, ‘How Well Do “Facts” Travel?’, in the Department of Economic History. His work there looked at what happens to scientific facts when they are disseminated in, for example, popular-science literature. With his videos, Dr Adams is taking dissemination in a new and different direction.

LSE Language Centre provides a range of language programmes for students, academic staff, alumni and the general public. Over 2,000 people take a course with us every year. We offer: English for Academic Purposes – foundation and pre-sessional programmes English for Business – summer school and tailor-made programmes Degree options in: French, German, Literature, Russian, Spanish and (from 2011) Mandarin Certificate courses in: Arabic, French, German, Italian, Japanese, Mandarin, Portuguese, Russian and Spanish – including business options in selected languages Tandem Learning – find a buddy, exchange your languages, attend language events

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LSE IDEAS public lecture

The Political Economy of the Cold War Monday 18 October, 6.30-8pm, Old Theatre, Old Building SPEAKER: Professor Niall Ferguson In his inaugural lecture, Niall Ferguson compares the American and the Soviet economic systems and asks how far the outcome of the Cold War was economically determined from the outset. In particular, what role did commercial and financial globalisation play in enhancing US power in the world?

Niall Ferguson is Philippe Roman Chair in History and International Affairs at LSE IDEAS for 2010-11.

Tickets available from 10am on Monday 11 October at lse.ac.uk/events For details of other LSE public events which are free and open to all please view lse.ac.uk/events

An exhibition presented by the LSE Centre for the Study of Human Rights and the Documentation Center of Cambodia

Young Khmer Rouge Soldiers © Documentation Center of Cambodia Archives

1 November – 10 December 2010, Monday to Friday 10am – 8pm Atrium Gallery, The London School of Economics and Political Science, www.lse.ac.uk/humanrights Cambodia: Reflections of the Khmer Rouge portrays life under the Khmer Rouge in Cambodia, and brings the story up to date with information about the ongoing trials of former Khmer Rouge leaders. The exhibition features material from the archives at the Documentation Center of Cambodia, much of which has not been seen outside of Tuol Sleng, the former detention centre in Phnom Penh.

mCÄmNÐlÉkßrkm<úCa Documentation Center of Cambodia (DC-Cam)