tag:theconversation.com,2011:/nz/topics/finance-433/articlesFinance – The Conversation2024-03-14T17:19:18Ztag:theconversation.com,2011:article/2245742024-03-14T17:19:18Z2024-03-14T17:19:18ZBuying your first home? Here’s how to increase your chances of getting a mortgage<figure><img src="https://images.theconversation.com/files/580959/original/file-20240311-16-tn9hxt.jpg?ixlib=rb-1.1.0&rect=56%2C56%2C3342%2C2414&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/mortgage-concept-by-money-house-coins-278179301">Denphumi/Shutterstock</a></span></figcaption></figure><p>Applying for a mortgage for the first time can be a daunting task. But there are several ways you can increase your chances of having your application accepted.</p>
<p>The outcome of a mortgage application largely depends on your deposit size, ability to repay and credit score. These are the factors that make you more or less risky in the eyes of the lender.</p>
<p>As a first step, it is important that you improve your understanding of <a href="https://www.money.co.uk/mortgages/a-complete-guide-to-mortgages">what a mortgage is</a> and how the <a href="https://theconversation.com/five-ways-to-reduce-your-mortgage-repayments-in-2023-and-why-rates-have-risen-so-high-196327">repayments work</a>. </p>
<p>But make sure you are also familiar with a <a href="https://www.moneyhelper.org.uk/en/homes/buying-a-home/mortgage-affordability-calculator">mortgage calculator</a> to see what you can afford. Mortgage calculators are tools that give you an estimate of how much you could borrow from a lender or what your monthly repayments and other costs might be.</p>
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<img alt="Quarter life, a series by The Conversation" src="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/451343/original/file-20220310-13-1bj6csd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em><strong><a href="https://theconversation.com/uk/topics/quarter-life-117947?utm_source=TCUK&utm_medium=linkback&utm_campaign=UK+YP2022&utm_content=InArticleTop">This article is part of Quarter Life</a></strong>, a series about issues affecting those of us in our 20s and 30s. From the challenges of beginning a career and taking care of our mental health, to the excitement of starting a family, adopting a pet or just making friends as an adult. The articles in this series explore the questions and bring answers as we navigate this turbulent period of life.</em></p>
<p><em>You may be interested in:</em></p>
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<p><em><a href="https://theconversation.com/future-graduates-will-pay-more-in-student-loan-repayments-and-the-poorest-will-be-worst-affected-222840">Future graduates will pay more in student loan repayments – and the poorest will be worst affected</a></em></p>
<p><em><a href="https://theconversation.com/four-environmental-red-flags-to-watch-out-for-when-buying-your-new-home-215763">Four environmental red flags to watch out for when buying your new home</a></em></p>
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<h2>Try not to stretch your budget to the limit</h2>
<p>Typically, you are allowed to borrow four-and-a-half times your annual income from a mortgage lender. So, for a 30-year old earning an annual salary of <a href="https://www.forbes.com/uk/advisor/business/average-uk-salary-by-age/">£32,000</a>, the top limit will be £144,000. Two people with the same salary would be able to borrow £288,000 for a house they are buying together.</p>
<p>Next, decide whether you want to stretch your budget to its limit. The higher the value of the home you are buying, the bigger the mortgage repayment you will have to make. Not stretching your budget may help increase your chances of getting a mortgage.</p>
<p>This is because lenders consider your other outgoings, such as utility bills, council tax, childcare or other debt payments, when evaluating your application. Having an income buffer makes your mortgage application less risky for the lender as you will have more ability to repay.</p>
<p>Allowing yourself a buffer will also offer you at least some insurance against a future blip to your income, and help manage the UK’s current <a href="https://www.instituteforgovernment.org.uk/explainer/cost-living-crisis">cost of living crisis</a>. Household incomes are not keeping up with living costs and are not expected to return to 2021 levels until 2027.</p>
<h2>Improve your credit score</h2>
<p>A <a href="https://www.moneysavingexpert.com/credit-cards/what-is-a-good-credit-score/">credit score</a> shows mortgage lenders that you have managed money well and responsibly in the past. A higher credit score makes you a less risky investment for them. Various <a href="https://www.experian.co.uk/experian-account/01_free_score.html?awc=7716_1709563137_ace0ba76c949f233521c2af44416b28e">credit reference agencies</a> allow you to check your credit score for free.</p>
<p>You can protect your credit score in a number of ways. Holding one bank account for a long time is helpful but your borrowing history also matters. </p>
<p>Being close to your credit limit may lower your score. However, not having any debt at all in the past may also make it difficult for mortgage lenders to judge whether you are a responsible borrower. So a good balance is needed.</p>
<p>Missing regular payments for bills or debt will certainly dent your credit score. And be aware that if you have joint bank accounts with others, their poor credit score may also impact yours.</p>
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<img alt="An approved mortgage loan application with a house-shaped keyring." src="https://images.theconversation.com/files/580961/original/file-20240311-20-mal1md.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/580961/original/file-20240311-20-mal1md.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/580961/original/file-20240311-20-mal1md.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/580961/original/file-20240311-20-mal1md.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/580961/original/file-20240311-20-mal1md.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/580961/original/file-20240311-20-mal1md.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/580961/original/file-20240311-20-mal1md.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">There are several ways you can increase your chances of having your application accepted.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/approved-mortgage-loan-agreement-application-house-355901639">Fabio Balbi/Shutterstock</a></span>
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<h2>Save a larger deposit</h2>
<p>The risk for lenders is lower when borrowers have a large deposit in comparison to the value of the home they are buying. Lenders also charge lower interest rates on mortgage repayments when you have more of a deposit.</p>
<p>A 10% deposit is often the norm, and the rest can be borrowed from the lender. However, there are also opportunities to buy a home with <a href="https://www.ownyourhome.gov.uk/scheme/mortgage-guarantee-scheme/">only a 5% deposit</a> for first-time-buyers. </p>
<p>This type of mortgage may increase your chances of buying a home if you cannot save for a larger deposit. But be aware that lenders charge <a href="https://www.moneysavingexpert.com/mortgages/new-mortgage-scheme-for-5-deposit/">higher interest rates</a> for low-deposit mortgages as the risk is higher for them.</p>
<p>So-called <a href="https://www.skipton.co.uk/mortgages/track-record-mortgage">rental track record</a> mortgages even allow you to buy with no deposit. If you are renting at the moment and are planning to apply for a rental track record mortgage, then make sure you pay your rent on time for at least 12 months beforehand to be eligible.</p>
<p>However, it is important to be aware that smaller deposits mean a greater risk of you ending up with negative equity if house prices drop. <a href="https://www.moneyhelper.org.uk/en/homes/buying-a-home/negative-equity-what-it-means-and-what-you-can-do-about-it">Negative equity</a> is a situation where the value of your home ends up lower than the remaining value of your mortgage.</p>
<h2>Borrow for longer</h2>
<p>Currently, 55% of first-time buyers have a mortgage term of <a href="https://www.ukfinance.org.uk/system/files/2023-03/Household%20Finance%20Review%202022%20Q4.pdf">longer than 30 years</a>. Mortgages that last as long as <a href="https://www.ftadviser.com/mortgages/2019/06/26/most-mortgages-now-have-40-year-terms/?utm_campaign=FTAdviser+news&utm_source=emailCampaign&utm_medium=email&utm_content=">40 years</a> are also on the rise.</p>
<p>The longer the mortgage term, the lower your monthly repayments are likely to be as they are stretched over a longer period. This increases your ability to afford the monthly payments so again reduces the risk for lenders.</p>
<p>However, longer mortgages mean paying interest charges for a longer period, so they cost much more over time. For a £288,000 mortgage with a 5% interest rate, for example, you would make a staggering £161,653 in additional interest payments if you borrow for 40 years instead of 25. Check other scenarios <a href="https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/">here</a>.</p>
<p>With many mortgage products you can make an over payment of 10% per year. Thus, another option would be to keep your monthly payments low and make bulk payments whenever you have extra savings. This will help you to reduce the duration of the mortgage.</p>
<p>This may not be ideal for everyone. However, buying jointly with family and friends could help strengthen your repayment capacity and credit scores. You should, of course, seek independent legal advice over the risks involved before doing so.</p><img src="https://counter.theconversation.com/content/224574/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alper Kara does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Simple tips to improve your chances of having your mortgage application accepted.Alper Kara, Professor of Banking and Finance, Brunel University LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2240442024-03-13T12:28:20Z2024-03-13T12:28:20ZRobo-advisers are here – the pros and cons of using AI in investing<figure><img src="https://images.theconversation.com/files/580679/original/file-20240308-28-55toe3.jpg?ixlib=rb-1.1.0&rect=59%2C0%2C7951%2C4345&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">shutterstock</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/smart-businessman-hand-close-nft-financial-2074315681">thinkhubstudio/Shutterstock</a></span></figcaption></figure><p>Artificial intelligence (AI) is <a href="https://www.ft.com/content/6766a3bd-1cec-4e88-9f51-5ed93b39528c">shaking up</a> the way we invest our money. Gone are the days when complex tools were reserved for the wealthy or financial institutions. </p>
<p>AI-powered <a href="https://www.investopedia.com/best-robo-advisors-4693125">robo-advisers</a>, such as <a href="https://www.betterment.com/">Betterment</a> and <a href="https://investor.vanguard.com/advice/robo-advisor">Vanguard</a> in the US, and finance app <a href="https://www.revolut.com/en-HU/news/revolut_launches_robo_advisor_in_eea_to_automate_investing/">Revolut</a> in Europe, are now democratising investment. These tools are making professional financial insight and portfolio management available to everyone. But although there are plenty of advantages to using robo-advisers, there are downsides too. </p>
<p>Since the 1990s, <a href="https://arxiv.org/pdf/2104.05413.pdf">AI’s role</a> in this sector was typically confined to algorithmic trading and quantitative strategies. These rely on advanced mathematical models to predict stock market movements and trade at lightning speed, far exceeding the capabilities of human traders. </p>
<p>But that laid the groundwork for more advanced applications. And AI has now <a href="https://www.weforum.org/agenda/2017/09/robots-could-plan-your-retirement-financial-advice/">evolved</a> to handle data analysis, predict trends and personalise investment strategies. Unlike traditional investment tools, robo-advisers are more <a href="https://www2.deloitte.com/us/en/insights/industry/financial-services/financial-services-industry-predictions/2023/democratize-financial-services.html">accessible</a>, making them ideal for a new generation of investors. </p>
<p>A survey published in 2023 showed that there has been a particular <a href="https://www.investopedia.com/study-affluent-millennials-are-warming-up-to-robo-advisors-4770577">surge</a> in young people using robo-advisers. Some 31% of gen Zs (born after 2000) and 20% of millennials (born between 1980 and 2000) are using robo-advisers. </p>
<p>Another <a href="https://www.magnifymoney.com/news/robo-advisor-survey/">survey</a> from 2022 found that 63% of US consumers were open to using a robo-adviser to manage their investments. In fact, projections indicate that assets managed by robo-advisers will reach <a href="https://www.statista.com/outlook/fmo/wealth-management/digital-investment/robo-advisors/worldwide">US$1.8 trillion</a> (£1.4 trillion) globally in 2024. </p>
<p>This trend reflects not only changing investor preferences but also how the financial industry is adapting to technology.</p>
<h2>Tailored advice</h2>
<p>AI can <a href="https://www.ftadviser.com/your-industry/2023/07/17/can-generative-ai-truly-replace-a-financial-adviser/">tailor</a> investment advice to a person’s preferences. For example, for investors who want to prioritise ethical investing in environmental, social and governance stocks, AI can tailor a strategy without the need to pay for a financial adviser. </p>
<p>AI can <a href="https://www.sciencedirect.com/science/article/pii/S0275531923000077">analyse</a> news and social media to understand market trends and predict potential movements, offering insights into potential market movements. Portfolios built by robo-advisers may also be <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/poms.14029">more resilient during market downturns</a>, effectively managing risk and protecting investments.</p>
<p>Robo-advisers can offer certain <a href="https://www.ft.com/content/6694bb4a-a585-496a-b7f3-d1841984f9b3">features</a> like reduced investment account minimums and lower fees, which make services more accessible than in the past. Other features such as <a href="https://corporatefinanceinstitute.com/resources/wealth-management/robo-advisors/">tax-loss harvesting</a>, a strategy of selling assets at a loss to reduce taxes, and <a href="https://corporatefinanceinstitute.com/resources/wealth-management/robo-advisors/">periodic rebalancing</a>, which involves adjusting the proportions of different types of investments, make professional investment advice accessible to a wider audience.</p>
<p>These types of innovations are particularly beneficial for people in underserved communities or with limited financial resources. This has the <a href="https://www.brookings.edu/articles/robo-advice-an-effective-tool-to-reduce-inequalities/">potential</a> to improve financial literacy through empowering people to make better financial decisions. </p>
<h2>AI’s multifaced role</h2>
<p>AI’s impact on investment fund management goes way beyond robo-advisers, however. Fund managers are using AI algorithms in a variety of ways. </p>
<p>In terms of data analysis, AI can sift through vast amounts of market data and historical trends to identify <a href="https://doi.org/10.1016/j.frl.2022.102941">ideal assets</a> and adjust portfolios in real time as markets fluctuate. AI is also used to <a href="https://www.sciencedirect.com/science/article/pii/S0378426621002466">improve risk management</a> by analysing complex data and making sophisticated decisions. </p>
<p>By using AI in this way, <a href="https://doi.org/10.1016/j.jedc.2022.104438">traders</a> can react and make faster decisions, which maximises efficiency. Other mundane tasks like <a href="https://ieeexplore.ieee.org/document/9315986">compliance monitoring</a> are increasingly automated by AI. This frees fund managers up to focus on more strategic decisions. </p>
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<img alt="A close up of a pair of hands holding a mobile phone with pound coins superimposed onto the foreground." src="https://images.theconversation.com/files/580727/original/file-20240308-24-xg6lqw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/580727/original/file-20240308-24-xg6lqw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=350&fit=crop&dpr=1 600w, https://images.theconversation.com/files/580727/original/file-20240308-24-xg6lqw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=350&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/580727/original/file-20240308-24-xg6lqw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=350&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/580727/original/file-20240308-24-xg6lqw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=440&fit=crop&dpr=1 754w, https://images.theconversation.com/files/580727/original/file-20240308-24-xg6lqw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=440&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/580727/original/file-20240308-24-xg6lqw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=440&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">While AI is democratising investing, that comes with challenges.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/double-exposure-uk-stock-graphic-close-792232471">Loch Earn/Shutterstock</a></span>
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<h2>What are the disadvantages?</h2>
<p>One of the biggest concerns regarding AI in this sector is based on how having easy access to advanced investment tools may lead some people to overestimate their abilities and take too many financial risks. The sophisticated algorithms used by robo-investors can be opaque, which makes it <a href="https://www.lseg.com/en/insights/data-analytics/how-might-ai-impact-investment-management">difficult</a> for some investors to fully understand the potential risks involved. </p>
<p>Another concern is how the evolution of robo-advisers has outpaced the implementation of <a href="https://fastercapital.com/content/Regulatory-Compliance-in-B2B-Robo-Advisors--Navigating-the-Legal-Landscape.html#Challenges-and-Opportunities">laws and regulations</a>. That could expose investors to financial risks and a lack of legal protection. This is an issue yet to be adequately addressed by financial authorities. </p>
<p>Looking ahead, the future of investment probably lies in a hybrid model. Combining the precision and efficiency of AI with the experience and oversight of human investors is vital.</p>
<p>Ensuring that information is accessible and transparent will be crucial for <a href="https://www.turing.ac.uk/sites/default/files/2021-06/ati_ai_in_financial_services_lores.pdf">fostering</a> a more informed and responsible investment landscape. By harnessing the power of AI responsibly, we can create a financial future that benefits everyone.</p><img src="https://counter.theconversation.com/content/224044/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Robo-advisers and AI are making investing accessible to everyone, but there are also risks to consider.Laurence Jones, Lecturer in Finance, Bangor UniversityHeather He, Lecturer in Data Science/Analytics, Bangor UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2229122024-02-28T13:12:01Z2024-02-28T13:12:01ZWill Britons work until they’re 71? Expert examines proposed pension age rise<figure><img src="https://images.theconversation.com/files/574609/original/file-20240209-22-wo3zz4.jpg?ixlib=rb-1.1.0&rect=48%2C0%2C5385%2C3579&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The current pension age of 66 is set to rise to 67 by 2028.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/elderly-man-changing-light-bulbs-retired-2269968695">Andrew Angelov/Shutterstock</a></span></figcaption></figure><p>The retirement age will need to rise to 71 for UK workers in future, according to a recent <a href="https://ilcuk.org.uk/ageing-populations-forced-to-increase-state-pension-age-to-71-by-2050-to-maintain-dependency-ratio/">report</a> looking at the effect of increasing life expectancy and falling birthrates on the state pension. </p>
<p>The current pension age of 66 is set to <a href="https://www.gov.uk/government/publications/state-pension-age-review-2023-government-report/state-pension-age-review-2023#:%7E:text=The%20Pensions%20Act%202014%20brought,68%20between%202044%20and%202046.">rise</a> to 67 by 2028, and to 68 from 2044. But research by the International Longevity Centre (ILC), a thinktank focusing on ageing, says that doesn’t go far enough. </p>
<p>It suggests that anyone born after April 1970 may have to work until they are 71 years old in future. And there’s a possibility that the age limit may need to go even higher than that. The underpinning reason is the rising cost of pension provision because the number of pensioners and the value of payments are growing. </p>
<p>The government’s Office for Budget Responsibility <a href="https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/welfare-spending-pensioner-benefits/#:%7E:text=Pensioner%20benefit%20spending%20in%202023,5.3%20per%20cent%20of%20GDP">estimates</a> the state pension will cost around £124 billion this financial year. The pension level is safeguarded by the <a href="https://commonslibrary.parliament.uk/the-triple-lock-how-will-state-pensions-be-uprated-in-future/">triple lock</a>, which was first introduced in 2010. It means annual increases in payments are made in line with earnings growth, price inflation (currently 4%) or 2.5%, whichever is highest. </p>
<p>The Institute for Fiscal Studies has <a href="https://ifs.org.uk/publications/triple-lock-uncertainty-pension-incomes-and-public-finances">estimated</a> that continuing the triple lock will lead to an extra £45 billion of annual cost by 2050.</p>
<h2>It’s not just the UK</h2>
<p>The issue of rising pension costs isn’t merely a UK problem. Countries across Europe are currently grappling with the conundrum of how to look after their ageing populations in retirement. </p>
<p>Protests erupted across <a href="https://www.lemonde.fr/en/france/article/2023/06/06/in-france-a-14th-day-of-protest-to-derail-macron-s-pension-reform_6029218_7.html">France in 2023</a> in response to pension reforms which would increase the retirement age from 62 to 64. There have also been ongoing <a href="https://www.reuters.com/article/idUSL8N12F3RN/">protests in Greece</a>, which has been struggling with pension reforms since 2010. </p>
<p>Pension age increases are also <a href="https://www.etk.fi/en/work-and-pensions-abroad/international-comparisons/retirement-ages/">planned</a> in numerous other countries such as Denmark, the Czech Republic, Spain and the Netherlands.</p>
<h2>How the state pension works</h2>
<p>Unlike company-sponsored pensions, which invest money in individual accounts for future payouts, the UK state pension operates on a different principle. Instead of accumulating a personal “pot” of money, the idea is that current workers essentially fund the pensions of retirees. So, the state pension is financed from national insurance contributions and general taxation.</p>
<p>For this model to sustain itself, each new retiree entering the “pensioner pool” needs to be matched by a new worker entering the “worker pool.” As long as this balance persists, and pension claim periods remain reasonable, the system maintains its solvency.</p>
<p>Less than five years after the introduction of the state pension in 1946, the <a href="https://hansard.parliament.uk/commons/1954-11-15/debates/ed3805b1-dbb6-4f54-970e-58a43094a094/Old-AgeAndRetirementPensioners">pressures on the system</a> were already beginning to show. And the central issues are the same now as they were then – we are living longer and having fewer children. </p>
<p>In 1951, the <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/articles/howhaslifeexpectancychangedovertime/2015-09-09">UK life expectancy</a> was 66 for men and 71 for women. By 2011, it had increased to 79 for men and almost 83 for women.</p>
<p>This means that a 66-year-old in 2024 will receive a pension for an average of nearly 16 years. But since <a href="https://www.statista.com/statistics/281416/birth-rate-in-the-united-kingdom-uk/">birth rates have fallen</a> from 15 per 1000 in 1951 to 10 per 1000 in 2021, those retirees aren’t being replaced with fresh workers.</p>
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Read more:
<a href="https://theconversation.com/matching-state-pension-to-the-national-living-wage-would-help-pensioners-maintain-their-dignity-217473">Matching state pension to the national living wage would help pensioners maintain their dignity</a>
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<p><a href="https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/compendium/economicreview/april2019/longtermtrendsinukemployment1861to2018#:%7E:text=Image%20.csv%20.xls-,The%20highest%20employment%20rates%20recorded%20were%20in%20the%20years%201872,average%20employment%20rate%20was%2073%25.">In 1951</a>, the UK population was 50 million with an employment rate of 70.4%. There were 35.2 million workers who were supporting 4.5 million pensioners, or 7.8 workers for every pensioner. </p>
<p>Today, the UK’s population is more than 67 million, which includes 33.17 million <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-9366/">workers</a> and 12.8 million <a href="https://www.gov.uk/government/statistics/dwp-benefits-statistics-august-2023/dwp-benefits-statistics-august-2023#:%7E:text=The%20main%20headline%20figures%20for,5.6%25%20to%201.6%20million%20claimants">pensioners</a>. This means that every pensioner is being “supported” by just 2.6 workers. </p>
<p>Both central planks of the state pension system appear to be broken. And, to further complicate matters, we are seeing increasing levels of people <a href="https://commonslibrary.parliament.uk/how-is-health-affecting-economic-inactivity/">leaving the workforce</a> before they reach pension age, largely due to ill-health.</p>
<p>The state (in other words, the taxpayer) cannot afford the current pension provision for an ageing population for longer periods, let alone improve it. So, tough decisions have to be made, and soon. </p>
<h2>Generation X and millennials</h2>
<p>The implications of a rising retirement age won’t be felt by baby boomers like me. Generally speaking, we have benefited from jobs for life, free education, affordable housing and good company pensions. </p>
<p>The first cohort to shoulder the changes to the pension age will be generation X, born between 1965 and 1980. And they do not possess the wealth and assets of previous generations. </p>
<p>In fact, recent government <a href="https://www.gov.uk/government/statistics/analysis-of-future-pension-incomes/analysis-of-future-pension-incomes">figures</a> show that a third of the UK’s 14 million gen Xers won’t have enough savings to comfortably cover their retirement. <a href="https://www.justgroupplc.co.uk/%7E/media/Files/J/Just-Retirement-Corp/news-doc/2023/majority-of-gen-x-worried-they-wont-save-enough-for-good-standard-of-living-in-retirement.pdf">More than half</a> are not confident about achieving a good standard of living in retirement.</p>
<p>This generation, sometimes described as the “<a href="https://www.pensionsage.com/pa/Gen-X-face-huge-pension-black-hole-with-two-thirds-not-saving-enough.php">forgotten generation</a>” by finance experts, stands at a disadvantage due to their lack of early access to defined benefit pensions, which were largely closed to new employees by the time they entered the workforce. They also missed out on the financial benefits of automatic enrolment in workplace pension schemes, which was introduced only after many members of this generation had already established their careers.</p>
<p>The situation doesn’t look any rosier for the millennials, who have <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/moreadultslivingwiththeirparents/2023-05-10">struggled</a> to get onto the housing ladder and are paying back student loans. <a href="https://www.theguardian.com/money/2023/sep/04/britons-cut-pension-contributions-hargreaves-lansdown-abrdn">Research</a> last year showed that almost a third of 18 to 34-year-olds had either stopped or cut back on pension contributions to save money. </p>
<p>Perhaps it comes as no surprise that more than two thirds of this age group <a href="https://www.pensionsage.com/pa/one-fifth-unsure-over-future-certainty-of-state-pension.php">don’t believe</a> the state pension will even exist when they enter retirement. </p>
<p>While the future of the state pension in its current form remains uncertain, one thing is clear – ignoring the problem is no longer an option.</p><img src="https://counter.theconversation.com/content/222912/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Parry does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Increasing life expectancy and falling birthrates means many of us may have to keep working until beyond 71 years of age.Chris Parry, Principal Lecturer in Finance, Cardiff Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2193922024-02-25T19:05:45Z2024-02-25T19:05:45ZCritics of ‘woke capitalism’ want to return to a time when money was the only value. But it never existed<p>“Corporate virtue signalling” is a phrase of our time. <a href="https://edition.cnn.com/2023/07/21/business/desantis-bud-light-explainer/index.html">Bud Light</a> was accused of it when it hired TikTok personality and trans woman Dylan Mulvaney to promote low-cal beer. </p>
<p><a href="https://nypost.com/2022/05/07/thumbs-down-on-woke-disney-debacle-lesson-for-ceos/">Disney</a> was labelled a virtue signaller for its opposition to the US state of Florida outlawing discussions of gender fluidity and sexual orientation in schools. </p>
<p>When multi-trillion-dollar investment company <a href="https://swarajyamag.com/news-brief/larry-fink-ceo-of-worlds-largest-asset-management-firm-blackrock-rejects-accusation-of-pursuing-woke-capitalism-esg-virtue-signalling">Black Rock</a> promoted environmental, social and governance (ESG) standards, it too was branded a virtue-signaller.</p>
<p>These are only a few of the many high-profile examples of corporations who have made headlines for publicly supporting progressive social and environmental political positions. </p>
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<p><em>Review: Virtue Capitalists: The Rise and Fall of the Professional Class in the Anglophone World – Hannah Forsyth (Cambridge University Press)</em></p>
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<p>The loudest critics of virtue signalling come from the more vocal end of right-wing politics. Many conservative pundits angrily denounce the “woke” for failing to follow what they see as the real purpose of capitalism. </p>
<p>“Go woke, go broke,” they vent, insisting there is no place in the competitive world of market rivalry for taking sides on social and political issues. </p>
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<figcaption><span class="caption">Bud Light was accused of ‘virtue signalling’ when it hired trans TikTok personality Dylan Mulvaney.</span></figcaption>
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<p>Anti-woke critics want to make corporations great again: let’s get back to the old days, where making profits was the only thing harried managers had to worry about! Wheeling out <a href="https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html">Milton Friedman</a>’s hackneyed 1970 dictum, they censure today’s managers for failing to meet “the social responsibility of business […] to increase its profits”.</p>
<p>If you buy into this rhetoric you might believe that, prior to the 2020s, business leaders were unencumbered by ethical or political concerns. </p>
<p>The problem is the anti-woke mob are nostalgic for a past that never existed. This is borne out in the pages of Hannah Forsyth’s history <a href="https://www.cambridge.org/core/books/virtue-capitalists/E5DEC7049458F3FAE69C77AF6317CB51">Virtue Capitalists: The Rise and Fall of the Professional Class in the Anglophone World, 1870-2008</a>. </p>
<p>“Woke capitalism” was first called out by conservative columnist Ross Douthat, who coined the phrase in the <a href="https://www.nytimes.com/2018/02/28/opinion/corporate-america-activism.html">New York Times in 2018</a> – a decade after the period Forsyth spans in her book. </p>
<p>But what she uncovers, with all the specificity and detail to be expected from a historian, is a story of “virtue capitalism” that existed long before the concept of “wokeness” became a political weapon of the recalcitrant right. </p>
<p>In one sense, Forsyth’s book will interest those who want to know more about the history of capitalism and the mixed fortunes of the professional and managerial classes. </p>
<p>In another very important sense, it provides the material for something akin to what French philosopher <a href="https://theconversation.com/explainer-the-ideas-of-foucault-99758">Michel Foucault</a> once called “a history of the present”: it helps us understand our present situation by tracing its genealogy in the past.</p>
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Read more:
<a href="https://theconversation.com/explainer-the-ideas-of-foucault-99758">Explainer: the ideas of Foucault</a>
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<p>Forsyth shows that, contrary to the imaginings of anti-woke crusaders, capitalism has always had a relationship with virtue, and a troubled one at that. This goes back to the very beginning of modern industrial capitalism, well before “virtue signalling” became a catch cry for those yearning for an illusory version of a purely economic capitalism. </p>
<h2>The long 20th century</h2>
<p>Forsyth covers the “long 20th century”. Her book starts in 1870, when the <a href="https://en.wikipedia.org/wiki/Gold_standard#Impact">establishment of the gold standard</a> marked the birth of modern capitalism, and the ascendancy of the professional class. It ends in 2008, just before the <a href="https://www.rba.gov.au/education/resources/explainers/the-global-financial-crisis.html">global financial crisis</a> exposed the world’s vulnerability to capitalist excess. </p>
<p>The book focuses on the professional classes in Anglophone settler colonies: Australia, Canada, New Zealand and the United States, in particular. In these countries, the process of supposed civilisation was married to economic domination and colonisation, administered by a new professional class of white-collar workers.</p>
<p>With the growth of the new class of professional workers, Forsyth argues, morality became entwined with capitalism. The moral virtues that emerged centred on the value of education and a belief in meritocracy, bolstered by precision, integrity, discipline and efficiency. For workers like nurses, journalists and accountants, professionalism became associated with moral standing, which translated into economic value.</p>
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Read more:
<a href="https://theconversation.com/global-corporate-power-is-out-of-control-but-reports-of-democracys-death-are-greatly-exaggerated-210270">Global corporate power is 'out of control', but reports of democracy’s death are greatly exaggerated</a>
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<p>But the Anglophone colonial world and its capitalist economies were, as Forsyth observes, “founded on violent dispossession, where land theft in the settler colonies was the precondition to property ownership”. The so-called morality of the virtue capitalists was used to justify colonialism’s brutal acquisition and racial oppression. </p>
<p>Professional integrity and virtue may have given colonialism a sense of respectability, but it reflected a moral system that at best regarded Indigenous populations as the benefactors of Western civilisation and assimilation in Western culture. At worst they were seen as impending the natural course of progress, and hence dispensible. </p>
<p>The result was the displacement of the Indigenous moral systems that came before the colonisers. White virtue, cultural domination and capital expansion were inseparable companions. </p>
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<span class="caption">Hannah Forsyth.</span>
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<p>Forsyth portrays professional virtue not so much as a self-serving hypocrisy, but as a culturally narcissistic form of self-deception that masked the brutality of colonial self-interest. Indigenous populations were castigated as “savage” and in need of education. White moral authority was established as the colonial order, and it was all proper.</p>
<p>By the end of the second world war, the virtue capitalists reached their peak power. They designed a new world economic order rooted in their own sense of righteousness. <a href="https://theconversation.com/measuring-a-presidents-first-100-days-goes-back-to-the-new-deal-159852">The New Deal</a> was established in the United States, focusing on relief for the needy, economic recovery and financial reform. The “welfare state” was established elsewhere. Education and health were provided to the masses, protecting capitalism from the threat of communist revolutions. </p>
<p>Away from home, virtue translated into international development that was intent on “civilising” and “developing” the once-colonial world in the image of the professional classes.</p>
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<strong>
Read more:
<a href="https://theconversation.com/greed-is-amoral-how-wall-street-supermen-cashed-in-on-pandemic-misery-and-chaos-207311">'Greed is amoral': how Wall Street supermen cashed in on pandemic misery and chaos</a>
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<h2>An economic and moral crisis</h2>
<p>The mid-1970s ushered in an economic and moral crisis. Forsyth argues this triggered the downfall of the professional virtue capitalists after a century on the rise. By the 1980s, a new wave of managerialism was sweeping the business world. Economic management became increasingly divorced from the professions. </p>
<p>In the heyday of early neoliberalism, the conservative professional was displaced in favour of a prototypical manager who was showy, entrepreneurial and hypermasculine. The new focus was on financial and economic success, rather than professional morality. Success at all costs was the neoliberal mantra. </p>
<p>A globalising world economy became ripe for new forms of exploitation and Western wealth accumulation. A new elite discarded the old professional virtues as quaint, starchy and old-fashioned. Forsyth characterises this as “moral deskilling”. The market became the solution to all problems. </p>
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<a href="https://images.theconversation.com/files/574805/original/file-20240211-18-m5e8r4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/574805/original/file-20240211-18-m5e8r4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/574805/original/file-20240211-18-m5e8r4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=882&fit=crop&dpr=1 600w, https://images.theconversation.com/files/574805/original/file-20240211-18-m5e8r4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=882&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/574805/original/file-20240211-18-m5e8r4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=882&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/574805/original/file-20240211-18-m5e8r4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1108&fit=crop&dpr=1 754w, https://images.theconversation.com/files/574805/original/file-20240211-18-m5e8r4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1108&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/574805/original/file-20240211-18-m5e8r4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1108&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Virtue Capitalists ends with the managerial class having reached a crescendo of power, as masters of a new world order where “success is the only virtue”. The book leaves us in a world where traditional professional virtues have been all but dismantled and professional expertise has been discredited in favour of can-do capitalism. </p>
<p>There is no happy ending. With the rise of the managerial class came a new political populism characterised by a distrust of professional expertise, and professed hatred of “the elites”. Think, for example, of anti-vaccination campaigns undermining medical expertise, or climate denialists flouting the findings of climate scientists.</p>
<p>“Virtue was, and is, used for power,” writes Forsyth. That power was deployed in the long 20th century, initially to justify colonial exploitation, then to further ransack the world as it opened up to global trade. </p>
<p>Virtue, by this account, is a cloak of respectability that hides the realities of a global economy geared to produce inequality. Perhaps it hides them so well, even the professional workers crunching the gears cannot see them. </p>
<p>Virtue Capitalists is not without fault. At times, the narrative is disjointed, the argument lacks consistency and ideas are presented without being developed. The references to theorists and theories can, at times, appear superficial and unnecessary. But the strength of the work overcomes these faults. It provides us with a historical account of the tight connections between morality and economics that popular narratives have ignored.</p>
<p>Like the virtue capitalism of the past, today’s “woke” capitalism is an act of power, as much as it is an ethical movement. Where would capitalist legitimacy be if, in the wake of the global financial crisis, the 1980s entrepreneurial “success at all costs” attitude returned unvarnished? Surely capitalism’s legitimacy would have come to an end, at last. </p>
<p>While no such end was reached, there was no change to the inequality driving core of capitalism either – it was just woke-washed. The morality of today’s woke corporations serves to re-legitimise capitalism, while leaving its exploitative nature unaltered. History repeats. Virtue is still a way to increase profits. </p>
<p>This will not make the world great again. It will keep us on the same trajectory of inequality and exploitation. History’s lessons are worth learning, so we might imagine a better future. Forsyth’s book provides a valuable means to do that.</p><img src="https://counter.theconversation.com/content/219392/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carl Rhodes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Conservative critics argue the ‘social responsibility’ of business lies in increasing profits. But values have always been tied up with money-making, from the welfare state to colonialism.Carl Rhodes, Professor of Organization Studies, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2199442024-01-03T20:10:27Z2024-01-03T20:10:27ZNo one can predict how financial markets will behave with absolute certainty. Here’s why<figure><img src="https://images.theconversation.com/files/565828/original/file-20231101-23-xjz2ys.jpg?ixlib=rb-1.1.0&rect=1%2C1%2C992%2C664&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It's a mistake to assume that financial enthusiasts can predict the uncertain behaviour of markets.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Some stock market enthusiasts claim to be able to predict financial market trends with fantastic accuracy. </p>
<p>Despite the complexity of international finance, they assure us that substantial profits are within our reach if we follow their recommendations and imitate their behaviour.</p>
<p>But is it really possible to accurately predict the behaviour of financial markets?</p>
<p>As an expert in the psychology of decision-making who specializes in complexity research, I have had the opportunity to deepen my understanding of human cognition and its capacity to control real-world complex environments. For now, my conclusions are sobering and not simple.</p>
<h2>Complex decisions</h2>
<p>According to many researchers in decision-making science, understanding and managing <a href="https://sloanreview.mit.edu/article/revisiting-complexity-in-the-digital-age/">complexity is the greatest challenge of the digital age</a>. Complexity refers to the uncertain nature of the environments in which we make decisions every day. </p>
<p>While some of our financial choices may seem simple and self-evident (saving a portion of our income, setting a budget, repaying a debt), the environment in which these choices are made is <a href="https://www.taylorfrancis.com/chapters/edit/10.4324/9781315091938-2/complex-problem-solving-european-perspective%E2%80%9410-years-joachim-funke-peter-frensch">unpredictable</a>. </p>
<p>The strategies we adopt are certainly not infallible; our knowledge does not guarantee our success, and the effects of each of our decisions are uncertain and unique. This explains why the environments in which we make everyday decisions are actually highly complex. They include many interrelated factors that are constantly changing, with or without our intervention. Not to mention that the objectives we cherish are often themselves <a href="https://www.mdpi.com/2079-3200/9/3/38">contradictory</a>. </p>
<p>For example, how can we maximize investment returns while minimizing exposure to market fluctuations?</p>
<h2>Facing financial complexity</h2>
<p>Faced with financial complexity, human cognition tends to favour a reductionist approach to information processing, sometimes called <a href="https://journals.sagepub.com/doi/abs/10.1177/154193120104500415">“tunneling.”</a> Faced with the overload of information generated by complexity, we tend to concentrate on one or a few specific aspects of a situation rather than all available information because <a href="https://www.sciencedirect.com/science/article/pii/S2451958822000562">too much information kills information</a>. In other words, we take shortcuts. And guess what? These simplistic ways of thinking can lead to biased decisions. </p>
<p>We often make the mistake of attributing poor performance of our equity portfolio to a single event that stands out in our minds. We mistakenly believe that our investments will grow linearly when, in fact, they are vulnerable to exponential fluctuations caused by crises and unexpected events. We react poorly to unsuccessful investments by focusing on the consequences that could explain our financial difficulties, rather than by deepening our understanding of why the company in which we had blind faith (or the sector in which it operates) is experiencing difficulties.</p>
<p>Finally — and this is human nature — we tend to attribute responsibility for our failures to external factors beyond our control. For example, we might be tempted to blame losses incurred by certain businesses in the tourism sector on poor summer weather conditions. But in doing so, we overlook the importance of the quality of the products and services the businesses offer, or how hospitable their staff are. </p>
<h2>And market enthusiasts in all this?</h2>
<p><a href="https://corpus.ulaval.ca/entities/publication/e1743fb3-e5d8-4532-9d3f-042954bbff15">My most recent work</a> supports the literature on complex problem-solving: whether we are experts or novices, understanding and mastering complexity is a daunting challenge. </p>
<p>Many market enthusiasts will demonstrate greater skill in devising an investment strategy, managing a portfolio or accessing certain investments. </p>
<p>However, it is a mistake to assume that they can predict the uncertain behaviour of the markets. The issue is not necessarily financial knowledge, but the natural limitations of human cognition when faced with complexity. </p>
<p>Faced with international finance, there is a “wall of complexity” beyond which it is particularly difficult to progress, and we are all subject to bias and errors.</p>
<h2>So, how do we navigate through this?</h2>
<p>Despite the many challenges of financial complexity, there is light at the end of the tunnel, provided we know what to do. While there are many studies to be conducted, researchers remain optimistic about specific methods that can already help us make more informed decisions.</p>
<p><strong>1. Learn to think in systems</strong></p>
<p><a href="https://fnhpa.ca/_Library/KC_BP_5_Skills/SYSTEMS_THINKING.pdf">Systems thinking</a> is a way of perceiving reality that helps us to better understand and work with real-world complex environments. </p>
<p>Whether you want to learn how to manage your budget better or invest wisely in the stock market, get into the habit of drawing visual representations of the financial challenges you want to tackle. </p>
<p>Cause-and-effect diagrams, which use simple symbols (a + sign to show a change in the same direction between two factors, and a – sign to show opposite changes), allow you to quickly illustrate the extent and scope of a problem by representing the relationships between the parts of the same system. </p>
<p>But make no mistake, some factors are difficult to predict. </p>
<p>In short, learn to think about the “consequences of the consequences” of your choices before making any decision.</p>
<p><strong>2. Be bold, tolerate uncertainty</strong></p>
<p>Learn to tolerate situations that, at first sight, have no clear solutions and leave you in doubt. </p>
<p>Financial markets are unpredictable and poorly structured, which creates <a href="https://www.sympoetic.net/Managing_Complexity/complexity_files/1973%20Rittel%20and%20Webber%20Wicked%20Problems.pdf">“wicked problems.”</a></p>
<p>In these environments, ambiguity is the norm. Embracing uncertainty allows us to translate problems into opportunities, rather than making hasty decisions or locking ourselves into inaction. </p>
<p>There is no single “right solution” to a complex financial problem. Take a moment to evaluate your options.</p>
<p><strong>3. Test your beliefs and biases</strong></p>
<p>Don’t try to research and interpret financial information based on an assumption you hold dear. Confront your preconceived ideas using sources you would not normally consult because they take the opposite position. </p>
<p>What would a friend or colleague whom you like, but who fundamentally disagrees with you, say?</p>
<p><strong>4. Don’t trust what comes easily to mind</strong></p>
<p>Attending an inspiring conference on the sustainable economy or listening attentively to a TV report on financial ethics does not guarantee that the information that comes out of it will be helpful in the decision you have to make.</p>
<p>Although this information may be easier to retrieve from memory, it is not necessarily relevant. Don’t overestimate the likelihood of an event just because you can imagine it in great detail. </p>
<p>Get information from several sources and verify their reliability.</p>
<h2>Now what?</h2>
<p>One cannot become proficient in any area without putting in the necessary practice. Therefore, it is important for you to personally delve into the world of finance. </p>
<p>Through experience, you will develop your skills to better appreciate complexity.
To help you do this, it’s a good idea to seek the assistance of a competent professional to guide you through this highly sophisticated process. </p>
<p>But remember this: when it comes to complexity, you are human, as are those who claim to be able to read the future.</p><img src="https://counter.theconversation.com/content/219944/count.gif" alt="La Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Benoît Béchard received funding from the Social Sciences and Humanities Research Council of Canada (SSHRC), the Fonds de recherche du Québec – Société et Culture (FRQSC), and Mitacs Canada.</span></em></p>The complexity of the financial market is far beyond the information processing capabilities of human cognition.Benoît Béchard, Docteur en psychologie de la décision Ph. D., Université LavalLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2172512023-12-20T21:13:38Z2023-12-20T21:13:38ZClimate change solutions require collaboration between politicians, scientists and entrepreneurs<iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/climate-change-solutions-require-collaboration-between-politicians-scientists-and-entrepreneurs" width="100%" height="400"></iframe>
<p><a href="https://globalnews.ca/news/9932965/canada-climate-action-economy-poll/">Most Canadians agree</a> something should be done about climate change. Yet, even though there is tremendous pressure on politicians to <em>do something</em>, <a href="https://www.politico.eu/article/discontent-eu-green-deal-climate-change-backlash/">widespread discontent</a> usually follows whatever action they may take. </p>
<p>How can governments balance the desire for climate action with the usual discontent that follows any major climate regulation? Looking to the past reveals key insights.</p>
<p>Half a century ago, the depletion of planetary natural resources was also a <a href="https://doi.org/10.1086/712926">major concern</a>, alongside the perceived <a href="https://www.library.dartmouth.edu/digital/digital-collections/limits-growth">implications this would have for economic growth</a>. </p>
<p>Indeed in 1990, the biologist Paul Ehrlich <a href="https://www.nytimes.com/1990/12/02/magazine/betting-on-the-planet.html">lost his famous bet against economist Julian Simon</a> when he predicted ten years earlier that prices of raw materials would increase over the long-term due to limited supply and increased demand. This outcome did not come to pass.</p>
<p>At the same time, the reverberations of the government-supported <a href="https://www.nobelprize.org/prizes/peace/1970/borlaug/biographical/">work of biologist Norman Borlaug</a>, who helped usher in the Green Revolution, were still being felt. </p>
<p>Simply put, gloomy <a href="https://www.britannica.com/money/Malthusianism">Malthusian predictions</a> of population collapse overlooked arguably more fundamental factors of human ingenuity and technological innovation — perhaps because their impact is so hard to predict and quantify. </p>
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Read more:
<a href="https://theconversation.com/7-5-billion-and-counting-how-many-humans-can-the-earth-support-98797">7.5 billion and counting: How many humans can the Earth support?</a>
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<p>While natural resources may be limited (and the ecosystems we rely upon are fragile), alternative sources of energy can be perfected and new cultivation methods <a href="https://www.pnas.org/doi/full/10.1073/pnas.0912953109">can be invented</a>. Governments should remember the work of Borlaug and the insights it provides into promoting innovation when looking to address the climate crisis. </p>
<h2>Taxing carbon</h2>
<p><a href="https://climate.nasa.gov/what-is-climate-change/">Concern about climate change caused by greenhouse gas emissions</a> has grown exponentially since Simon and Ehrlich first made their wager in 1980. So much so that the <a href="https://www.cop28.com/en/">2023 United Nations Climate Change Conference (COP28)</a> ended with a statement of intent and pledges to move away from fossil fuels and reduce carbon emissions.</p>
<p>One commonly discussed mechanism to do so <a href="https://www.canada.ca/en/environment-climate-change/services/climate-change/pricing-pollution-how-it-will-work/carbon-pollution-pricing-federal-benchmark-information.html">are carbon pricing schemes</a>, or a carbon tax.</p>
<p>It is <a href="https://climate.mit.edu/explainers/carbon-pricing">generally accepted among economists that carbon pricing schemes</a> such as taxing pollution, subsidizing reductions in pollution, or establishing markets for emission rights, would help reduce emissions. These schemes can easily be justified on the basis that emissions are a textbook example of an “<a href="https://scholar.harvard.edu/files/stantcheva/files/lecture7.pdf">externality</a>,” or a side effect of some economic activity on third parties.</p>
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Read more:
<a href="https://theconversation.com/a-carbon-tax-on-investment-income-could-be-more-fair-and-make-it-less-profitable-to-pollute-a-new-analysis-shows-why-211485">A carbon tax on investment income could be more fair and make it less profitable to pollute – a new analysis shows why</a>
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<p>Would such a move be effective, though? The available evidence shows that carbon taxes set at reasonable levels have a <a href="https://doi.org/10.1016/j.enpol.2011.05.050">limited to sometimes insignificant effect on individual behaviour</a>, although there are <a href="https://doi.org/10.1088/1748-9326/abdae9">variations across sectors and countries</a>. </p>
<p>This limited effectiveness, and the fact that Canada only accounts for <a href="https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/global-greenhouse-gas-emissions.html">1.5 per cent of global greenhouse gas emissions</a>, suggests the planned massive increase of this tax by the Canadian federal government would have a very limited effect on global carbon emissions. It might also increase inequalities across the population, as some households <a href="https://www.cbc.ca/news/climate/carbon-tax-home-heating-oil-1.7015480">will be more impacted</a>.</p>
<p>Moreover, substantial increases in carbon taxes to account for the social cost of externalities can permanently antagonize a fraction of the population with regards to climate policies, and even trigger popular protests.</p>
<p>A planned increase in gasoline taxation triggered the widespread <a href="https://www.theguardian.com/world/2018/dec/03/who-are-the-gilets-jaunes-and-what-do-they-want">“gilets jaunes”</a> protests that paralyzed France for months. The current context is perhaps even more explosive due to high levels of inflation and <a href="https://www.theglobeandmail.com/business/article-canada-needs-345-million-more-homes-by-2030-to-cut-housing-costs-as/">rising housing costs</a> paired with higher interest rates. </p>
<p>Considering this delicate political balance, it is perhaps not surprising that governments often make bold claims about the importance of mitigating climate change <a href="https://www.politico.com/news/2022/02/08/citizens-politicians-combat-climate-change-00004590">without actually doing much</a>. </p>
<p>When they take action, as Justin Trudeau’s government did, they are criticized about the negative consequences <a href="https://edmontonjournal.com/opinion/columnists/opinion-anti-energy-policies-hurting-canadas-economy-reputation">for the energy sector</a>, public finances and <a href="https://www.cbc.ca/news/canada/calgary/bakx-scoc-ruling-1.6995962">the division of power between federal and provincial governments</a>. In the end, their decisions may also depend on <a href="https://nationalpost.com/news/politics/trudeau-pulls-carbon-tax-from-home-heating-oil">electoral considerations</a>. </p>
<p>What shall they do? Wise politicians should remember the power of their words and set up proper incentives and infrastructure for the adoption of new technologies. By shaping the public discourse and hinting at future policies, they can direct the attention of scientists and entrepreneurs to specific issues who are better placed to find solutions to environmental problems. </p>
<p>Simply put, the limits of political possibility mean governments can only do so much. It is essential that governments use their power to not just regulate, but incentivize innovation. </p>
<h2>Promoting innovation</h2>
<p>In the next few years, the advancements could be the widespread adoption of solar power, nuclear power, carbon capture and electric cars. In a few decades, it could be <a href="https://www.iaea.org/newscenter/news/what-is-nuclear-fusion">nuclear fusion</a>, some type of <a href="https://sitn.hms.harvard.edu/flash/2022/reversing-climate-change-with-geoengineering/">geo-engineering</a>, <a href="https://ftedit.ft.com/Ju3k/mvo1y8xl">space-based solar power</a> or another technology unimaginable today. At least if the <a href="https://www.cbc.ca/news/politics/power-grid-demand-electric-vehicles-1.6440595">electric grid is updated accordingly</a>. </p>
<p>This is something that governments can either hinder or facilitate. Other useful measures include investing in scientific research, as well as science, engineering and business education, and ensuring innovative firms can receive financing by cultivating a <a href="https://doi.org/10.1146/annurev-financial-111914-041825">well-developed financial sector</a>.</p>
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<strong>
Read more:
<a href="https://theconversation.com/nuclear-fusion-breakthrough-decades-of-research-are-still-needed-before-fusion-can-be-used-as-clean-energy-196758">Nuclear fusion breakthrough: Decades of research are still needed before fusion can be used as clean energy</a>
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<p>Likewise, mechanisms such as carbon taxation may be useful not primarily because of their direct effects on carbon emissions, <a href="https://doi.org/10.1088/1748-9326/abdae9">which are limited</a>, but rather because the signals that they send will spur technological innovation and the phasing-out of existing technologies. Through their words and actions, governments can help <a href="https://doi.org/10.1257/pandp.20231000">shape the direction of technological innovation</a>. </p>
<p>To fight climate change and other challenges, the world needs space and support for scientists who will revolutionize the technological environment and more entrepreneurs and financiers to help these technologies reach their full potential.</p><img src="https://counter.theconversation.com/content/217251/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Pierre Chaigneau receives funding from SSHRC. </span></em></p>We look to politicians to provide climate change solutions, but there is only so much they can do. Beyond regulation, governments should remember the key role they play in promoting innovation.Pierre Chaigneau, Associate Professor at the Smith School of Business, Queen's University, OntarioLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2180922023-11-26T19:58:11Z2023-11-26T19:58:11ZResponsible ESG investing in the Global South requires overcoming the Global North’s saviour complex<figure><img src="https://images.theconversation.com/files/561682/original/file-20231126-15-kmvdhe.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C2683%2C1510&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Socially responsible investing in the Global South should respond to local needs rather than investors' egos.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/responsible-esg-investing-in-the-global-south-requires-overcoming-the-global-norths-saviour-complex" width="100%" height="400"></iframe>
<p>ESG standards (Environment, Social and Governance) are metrics designed to guide responsible investing. The “S” in ESG has evolved into the financial innovation of social impact investing (SII), which promotes social benefits such as <a href="https://doi.org/10.1007/s10551-014-2327-0">environmental protection, gender equality and human development</a>, and also generates profits for beneficiaries and investors.</p>
<p>As rosy as this seems, how to get it done is far from settled. SII in the Global South is difficult, resulting in a paradox where — despite the best of altruistic intentions — the egos and <a href="https://global.oup.com/academic/product/the-white-mans-burden-9780199226115?lang=3n&cc=jo">saviour complexes</a> of investors benefit more than intended beneficiaries. Recent research offers some ways to mitigate this paradox.</p>
<h2>ESG culture wars</h2>
<p>ESG was co-opted into the culture wars when conservative politicians became concerned that <a href="https://hbr.org/2023/02/rescuing-esg-from-the-culture-wars">businesses had become too focused on progressive social issues</a>. </p>
<p>On one side, there are those who believe ESG <a href="https://www.irmagazine.com/esg/esg-transition-can-sustainability-still-save-world">promotes sustainability</a> and <a href="https://www.mckinsey.com/%7E/media/McKinsey/Business%20Functions/Strategy%20and%20Corporate%20Finance/Our%20Insights/Five%20ways%20that%20ESG%20creates%20value/Five-ways-that-ESG-creates-value.ashx">value creation</a> for firms. On the other side of the debate, it is maintained that ESG will <a href="https://hbr.org/2022/08/esg-investing-isnt-designed-to-save-the-planet">not save the planet</a> and that it amounts to <a href="https://www.hachettebookgroup.com/titles/vivek-ramaswamy/woke-inc/9781546090786/">empty virtue signalling</a>.</p>
<p>The <a href="https://www.economist.com/the-economist-explains/2023/06/21/how-esg-became-part-of-americas-culture-wars">ESG culture war</a> exposes the paradox of <a href="https://dx.doi.org/10.2139/ssrn.1977714">ego versus altruism</a>.</p>
<p>SII promoters cast themselves as <a href="https://doi.org/10.1177/0308518X17738253">saviours with the moral vision to solve worldwide suffering</a>, but this does not always translate into promised results in the postcolonial Global South. </p>
<p>Ironically, SII investors often <a href="https://dx.doi.org/10.2139/ssrn.1977714">bask in the glory of a victory lap, whether they deliver social impact or not</a>. What is so difficult about the Global South that authentic, altruistic motivations can go so woefully wrong?</p>
<h2>Why the Global South is so challenging</h2>
<p>Even if ESG and SII can succeed within the Global North, it is different when investing from the Global North to the Global South. Given the sums involved, it is important to understand the Global South contexts. SII is worth <a href="https://thegiin.org/assets/2022-Market%20Sizing%20Report-Final.pdf">US$1 trillion with 92 per cent of the investors based in the Global North</a> and <a href="https://thegiin.org/assets/GIIN%20Annual%20Impact%20Investor%20Survey%202020.pdf">59 per cent of the investments made in the Global South</a>.</p>
<p>Doing business in the Global South involves having to account for cultural biases and historical context, for example, in the <a href="https://doi.org/10.1108/cpoib-03-2020-0016">postcolonial behaviours of former colonizers and their subjects</a>. Failing to do so fully results in <a href="https://doi.org/10.1007/s11575-011-0113-0">strategies based on imagined rather than actual contexts</a>, reflecting an incomplete understanding of how <a href="https://doi.org/10.1002/ijfe.2554">advanced standards are adopted in developing contexts</a>. We are often left with the ill-fitting propagation of <a href="https://doi.org/10.1108/cpoib-05-2015-0017">neoliberal assumptions on what success means</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/561406/original/file-20231123-15-lr10ai.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="a village market scene" src="https://images.theconversation.com/files/561406/original/file-20231123-15-lr10ai.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/561406/original/file-20231123-15-lr10ai.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/561406/original/file-20231123-15-lr10ai.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/561406/original/file-20231123-15-lr10ai.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/561406/original/file-20231123-15-lr10ai.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/561406/original/file-20231123-15-lr10ai.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/561406/original/file-20231123-15-lr10ai.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Conducting business in the Global South requires an understanding of cultural and historical contexts.</span>
<span class="attribution"><span class="source">(Max Brown/Unsplash)</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>It is important to get SII right in the Global South. We already know that decades of crusading development and aid programs under the banner of the “<a href="https://doi.org/10.1111/j.1468-2486.2007.00705.x">white man’s burden</a>” did not work. Handouts failed to alleviate long-term poverty. </p>
<p>Taking over from the failed development initiatives, what can be done to make SII better? Maybe we can start by straightening out the ego versus altruism paradox. </p>
<h2>Mitigating the ego versus altruism paradox</h2>
<p><a href="https://doi.org/10.1108/cpoib-05-2020-0036">My recent research on SII ventures in the Global South</a> recommends three solutions for mitigating the ego versus altruism paradox: </p>
<p>• Investment narratives should be more self-aware in balancing ego with altruism. Third-party scrutiny of results should ensure that marketing of SII does not overstate or misrepresent social impact. One’s pride in their efforts to alleviate social challenges should not eclipse the results delivered.</p>
<p>• Ensure that the money is going where you want it to. Ownership structures based on local and Indigenous sensibilities is more effective at getting investment into the right hands. The SII process usually follows the neoliberal, accounting-based conventions of Global North capital markets which continue a <a href="https://www.taylorfrancis.com/chapters/edit/10.4324/9781315142876-7/financialization-socio-technical-process-eve-chiapello">“process of colonisation and value capture”</a>. Alternatively, unique structures <a href="https://www.taylorfrancis.com/books/mono/10.4324/9781351276245/measuring-improving-social-impacts-marc-epstein-kristi-yuthas">aligning qualitative or quantitative measures to constructs</a> can be created based on active discussions with beneficiaries.</p>
<p>• Take postcolonial power imbalances into consideration. Making people less poor is not a win by itself, as they remain very poor. Financial metrics should be complemented with other indications of human dignity and flourishing. This requires SII investors to make the extra effort to build direct relationships with beneficiaries, and avoid outsourcing impact activities through local intermediaries who may be exerting power over the beneficiaries.</p>
<p>SII investors should reflect on and declare their invisible power and neoliberal privilege to create a space where issues of equality and power-sharing can be discussed with beneficiaries. Engage with beneficiaries not just as business partners, but as equal human beings to avoid an <a href="https://doi.org/10.1007/s10551-015-2737-7">inadvertent, but dehumanizing colonial gaze</a>.</p>
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<a href="https://images.theconversation.com/files/561403/original/file-20231123-15-24qirl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="a digital image of a globe showing the African continent resting on a mossy surface" src="https://images.theconversation.com/files/561403/original/file-20231123-15-24qirl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/561403/original/file-20231123-15-24qirl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=415&fit=crop&dpr=1 600w, https://images.theconversation.com/files/561403/original/file-20231123-15-24qirl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=415&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/561403/original/file-20231123-15-24qirl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=415&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/561403/original/file-20231123-15-24qirl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=522&fit=crop&dpr=1 754w, https://images.theconversation.com/files/561403/original/file-20231123-15-24qirl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=522&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/561403/original/file-20231123-15-24qirl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=522&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">With a commitment to equitable collaboration and partnership, social impact investing can produce positive change.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
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<h2>Optimism for the way forward</h2>
<p>There continue to be real opportunities for SII directed to the Global South. It is still possible to contribute to the “<a href="https://foreignpolicy.com/2009/10/02/the-poor-mans-burden/">revolution from the bottom</a>” imagined over a decade ago. </p>
<p>Witnessed by <a href="https://theconversation.com/how-global-business-could-be-the-unexpected-cop26-solution-to-climate-change-172133">proposals during COP26</a>, business plays an important role in redressing imbalances between the Global North and Global South and finding whole-planet solutions for whole-planet problems, including climate change. </p>
<p>Rather than giving in to the cynicism around ESG, we can improve our toolkit. SII remains a well-intentioned and important initiative. We do not have many other options and time is of the essence.</p><img src="https://counter.theconversation.com/content/218092/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>F. Haider Alvi does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Ensuring that ego and prestige of the Global North does not get in the way of on-the-ground results in the Global South will be the key to effective social impact investing in the years to come.F. Haider Alvi, Associate Professor of Innovation Finance, Faculty of Business, Athabasca UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2174732023-11-23T17:24:27Z2023-11-23T17:24:27ZMatching state pension to the national living wage would help pensioners maintain their dignity<figure><img src="https://images.theconversation.com/files/558813/original/file-20231110-27-e08yw2.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3461%2C2305&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The UK is currently 16th out of 50 European countries in terms of the best pension offering.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hands-elderly-woman-british-money-palm-596706170">Linda Bestwick/Shutterstock</a></span></figcaption></figure><p>A question that is perennially <a href="https://www.if.org.uk/research-posts/can-the-uk-afford-to-pay-pensions/">asked</a> by financial experts is: “can the government (in other words, the taxpayer) afford to keep increasing pensions?” But in my view, the real question should be: “what is the purpose of the state pension?” </p>
<p>This isn’t an economics question, it’s a moral question. And, as a society, we are poor at discussing moral questions. </p>
<p>A <a href="https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/welfare-spending-pensioner-benefits/#:%7E:text=Pensioner%20benefit%20spending%20in%202023,5.3%20per%20cent%20of%20GDP">report</a> from the Office for Budget Responsibility earlier this year stated that in the current financial year, the state pension will cost around £124 billion. This is more than the £105 billion education <a href="https://www.statista.com/statistics/298910/united-kingdom-uk-public-sector-expenditure-education/#:%7E:text=Government%20spending%20on%20education%20in%20the%20UK%202023%2C%20by%20function&text=The%20United%20Kingdom%20spent%20approximately,primary%20and%20pre%2Dprimary%20education">budget</a> and more than double the £52 billion <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-8175">defence</a> budget.</p>
<p>The level of the UK pension is safeguarded by the <a href="https://commonslibrary.parliament.uk/the-triple-lock-how-will-state-pensions-be-uprated-in-future/">triple lock</a>, which was first introduced in the June 2010 budget. It means annual increases in payments are made in line with earnings growth, price inflation (currently 4.6%) or 2.5% – whichever is highest. </p>
<p>With another triple lock <a href="https://commonslibrary.parliament.uk/the-triple-lock-how-will-state-pensions-be-uprated-in-future/">increase</a> of 8.5% in pensions due in April 2024, the state pension will rise to £221.75 per week (£11,531 per annum). This is only £20 per week less than the <a href="https://www.gov.uk/government/publications/the-personal-allowance-and-basic-rate-limit-for-income-tax-and-certain-national-insurance-contributions-nics-thresholds-from-6-april-2026-to-5-apr/income-tax-personal-allowance-and-the-basic-rate-limit-and-certain-national-insurance-contributions-thresholds-from-6-april-2026-to-5-april-2028">personal allowance</a> everyone can earn before having to pay tax or national insurance. </p>
<p>Assuming wages exceed inflation and 2.5% in line with the last five year <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/october2023">averages</a>, then the pension up-ratings could be in the region of 5% in 2025 and 2026. This will see pensioners, who have no other income, having to pay tax – in some cases, a decade after they last paid income tax.</p>
<p>So, how do we ensure that retired people are able to have a comfortable standard of living once they stop working? As a starting point, we can consider <a href="https://ec.europa.eu/social/main.jsp?catId=1606&langId=en">principle 15</a> of the European pillar of social rights, which was set out in 2017 by the European Union and maintains: “The right of workers and the self-employed to a pension commensurate with contributions and ensuring an adequate income. The right to equal opportunities to acquire pension rights for both women and men. The right to resources that ensure living in dignity in old age.”</p>
<h2>Comparing incomes</h2>
<p>The <a href="https://www.gov.uk/national-minimum-wage-rates">national living wage</a> is two thirds of UK average earnings and should be the minimum to cover “adequate income” and “dignity in old age”. The salary obtained by an adult working 37 hours per week at the national living wage is currently £10.42 per hour. This will <a href="https://www.bbc.co.uk/news/business-67484102">increase</a> to £11.44 per hour from April 2024.</p>
<figure class="align-center ">
<img alt="A table comparing incomes in 2023 from the state pension, national living wage and average earnings." src="https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A comparison of the state pension, national living wage and average earnings in the UK in 2023.</span>
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</figure>
<p>Were the UK pension matched with the national living wage, it would be set at a figure of £22,308 per year, and pensioners’ income would be vastly different as of April 6 2024. </p>
<p>Even after paying more than £1,900 in tax, the poorest pensioner would be still be £225.15 per week better off than they are today. And the extra disposable income could be recycled into the economy through increased expenditure, with knock-on impacts in indirect taxes such as VAT. </p>
<h2>A European comparison</h2>
<p>A <a href="https://www.almondfinancial.co.uk/pension-breakeven-index-how-does-the-uk-state-pension-compare-to-the-rest-of-europe/">recent survey</a> by pension advice firm Almond Finance UK shows the UK is currently 16th out of 50 countries in terms of the best pension offering across Europe. Spain tops the survey, with Belgium in second place and Luxembourg third. </p>
<p>Bringing the state pension in line with the national living wage would move the UK up to fourth position, ahead of Bosnia and Herzegovina, Cyprus, Lichenstein, France, Denmark and Switzerland.</p>
<p>Such an increase would raise the annual cost to the Treasury from the current <a href="https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/welfare-spending-pensioner-benefits/#:%7E:text=Pensioner%20benefit%20spending%20in%202023,5.3%20per%20cent%20of%20GDP">£124 billion</a> to £236 billion. And such a large increase in expenditure would require more taxes or more borrowing, which would accrue more debt interest in turn. But this sum could be reduced by £13 billion by charging pensioners national insurance. </p>
<p>In a response to an <a href="https://www.dailyrecord.co.uk/lifestyle/money/calls-living-state-pension-payments-30501193">online petition</a> in August, which called for the state pension to be matched to the national living wage, the government <a href="https://petition.parliament.uk/petitions/636088">said</a> it had “no plans to increase the state pension to equal 35 hours a week at the national living wage”. It went on to describe the state pension and national living wage as having “different purposes” and said that a direct comparison could not be drawn between the two. </p>
<p>With the <a href="https://theconversation.com/autumn-statement-live-experts-respond-to-chancellors-tax-and-benefit-cuts-218211">focus</a> on cutting both business rates and national insurance in the autumn statement, it’s worth considering how those measures will help to ensure that pensioners live in dignity in old age.</p><img src="https://counter.theconversation.com/content/217473/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Parry does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>How does the UK ensure a decent standard of living for its elderly population?Chris Parry, Principal Lecturer in Finance, Cardiff Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2145592023-11-06T13:34:05Z2023-11-06T13:34:05ZClimate change hits indebted businesses hardest, new research suggests<figure><img src="https://images.theconversation.com/files/556689/original/file-20231030-25-gfhibp.jpg?ixlib=rb-1.1.0&rect=297%2C1154%2C6833%2C3452&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Climate change leads to investment droughts, too. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/businessman-with-umbrella-standing-on-cracked-earth-royalty-free-image/685394718">mgstudyo/E+/Getty Images</a></span></figcaption></figure><p>Climate change poses the biggest risks to the <a href="https://doi.org/10.1002/wcc.565">most vulnerable people</a>, and the same is true for businesses: Highly leveraged companies – those that have accumulated too much debt – are uniquely susceptible to climate shocks. That’s what we found in a forthcoming study in The Review of Corporate Finance that analyzed data from <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4541036">more than 2,500 U.S. publicly listed companies</a> over 16 years. </p>
<p>As professors who study <a href="https://www.bryant.edu/academics/faculty/kuang-huan">climate finance</a> and <a href="https://www.bryant.edu/academics/faculty/zheng-cathy">corporate governance</a>, we wanted to understand how climate change affects businesses, and how <a href="https://www.investopedia.com/terms/s/stakeholder.asp">stakeholders</a> – people who have a stake in a firm’s success, such as consumers, employees and investors – respond to it. </p>
<p>So we and our colleagues <a href="https://apps.ualberta.ca/directory/person/elghoul">Sadok El Ghoul</a> at the University of Alberta and <a href="https://sc.edu/study/colleges_schools/moore/directory/guedhami_omrane.php">Omrane Guedhami</a> at the University of South Carolina conducted a study to examine how climate risk affects indebted companies.</p>
<p>We found that climate change delivers a one-two punch to highly leveraged firms by intensifying the costs that stakeholders impose on them.</p>
<p>Consider consumers. Researchers know that climate change can push people to mix up their purchasing patterns – by buying greener products, for example, or by engaging in boycotts. And while evolving consumer preferences pose a challenge to all businesses, it’s harder for a company that’s deep in debt to adapt.</p>
<p>Our study suggested as much. Two years after facing intense climate change exposure, highly indebted firms saw sales growth fall by about 1.4% on average, we found. In monetary terms, that translates into an average US$59.7 million loss per company. </p>
<p>Climate change also worries investors, we found. Companies exposed to climate risk face the threat of financial and operational disruptions that may drain lenders’ funds, particularly for firms already burdened with high debt. By examining capital issuance within our sample of companies, we found that climate exposure reduced firms’ net debt issuance – meaning new debt minus retired debt – by around $457 million per firm on average. This is an additional hurdle for indebted businesses trying to raise money.</p>
<h2>Why it matters</h2>
<p>Researchers have long known that indebted companies are at greater risk of product failures and <a href="https://doi.org/10.1111/j.1540-6261.1994.tb00086.x">losing market share</a> <a href="https://doi.org/10.1016/S0304-405X(03)00070-9">when economic conditions go south</a>. Having too much debt can even force companies out of business, as some analysts contend <a href="https://www.washingtonpost.com/business/economy/analysts-toys-r-us-might-have-survived-if-it-did-not-have-to-deal-with-so-much-debt/2018/03/15/42752326-286a-11e8-874b-d517e912f125_story.html">happened with Toys R Us</a>. </p>
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<a href="https://images.theconversation.com/files/556917/original/file-20231031-25-psqa9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A STORE IS CLOSED sign is affixed to an automatic door at the entrance of a Toys R Us location." src="https://images.theconversation.com/files/556917/original/file-20231031-25-psqa9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/556917/original/file-20231031-25-psqa9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/556917/original/file-20231031-25-psqa9x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/556917/original/file-20231031-25-psqa9x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/556917/original/file-20231031-25-psqa9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/556917/original/file-20231031-25-psqa9x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/556917/original/file-20231031-25-psqa9x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">A shuttered Toys R Us store in Orlando, Fla.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/toys-r-us-store-that-was-shuttered-in-2018-is-seen-on-june-news-photo/1151373510?adppopup=true">Paul Hennessy/NurPhoto via Getty Images</a></span>
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<p>Our research suggests that climate change, which the World Economic Forum predicts will endanger <a href="http://www3.weforum.org/docs/WEF_Global_Risk_%20Report_2020.pdf">about 2% of global financial assets by 2100</a>, will push already shaky companies to the brink. It underscores the immense and asymmetric effects global warming will have on businesses – and the reality that the most vulnerable firms are set to endure the worst.</p>
<h2>What’s next</h2>
<p>Our study highlights the disproportionate impacts of climate change on financially fragile businesses. Moving forward, we plan to explore the influence of climate change on firms’ business behaviors, particularly in terms of their ethical conduct. </p>
<p>Regarding climate solutions, one of us (Huan Kuang) has shown how companies can use innovation to reduce their climate vulnerabilities. In <a href="http://dx.doi.org/10.2139/ssrn.4150960">a working paper</a> co-authored with <a href="https://www.isenberg.umass.edu/people/bing-liang">Bing Liang</a> of the University of Massachusetts Amherst, every 1% increase in climate-related innovation – as measured by patent data – was found to reduce firm-level carbon emissions growth by around 100,000 metric tons.</p>
<p>However, indebted firms may not rush to invest in new technologies without some prodding. That means policy incentives will be key to success, and further research is needed to determine what they should look like.</p>
<p>Climate change could also have more complicated economic effects than many people realize. For example, if it forces companies that aren’t viable out of business, that would be a good thing for the economy – at least in theory, as one of us (Ying Zheng) explored <a href="https://doi.org/10.1057/s41267-020-00309-x">in a recent paper</a> on a related subject.</p>
<p>Many questions remain unanswered, but it’s already clear that climate change will have important and multifaceted effects on the future of business. We encourage other researchers to investigate further.</p>
<p><em>The <a href="https://theconversation.com/us/topics/research-brief-83231">Research Brief</a> is a short take on interesting academic work.</em></p><img src="https://counter.theconversation.com/content/214559/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Global warming plus leverage equals a big mess for companies.Huan Kuang, Assistant Professor of Finance, Bryant UniversityYing (Cathy) Zheng, Associate Professor of Finance, Bryant UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2142682023-11-01T19:24:05Z2023-11-01T19:24:05ZGrandiose visions and arrested development: a new biography considers the contradictory life of Elon Musk<p>Elon Musk, the world’s richest man, has his fingers in many pies, none of them your standard Four and Twenty – space exploration, electric cars, AI and social media, among others. </p>
<p>He became a global leader in space exploration when NASA had virtually vacated the field, and his electric vehicle company Tesla, headquartered in the gas-guzzling United States, has by far the <a href="https://money.usnews.com/investing/articles/the-10-most-valuable-auto-companies-in-the-world">biggest market capitalisation of any car manufacturer in the world</a>, yet he has few formal qualifications in either field.</p>
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<p><em>Review: Elon Musk: A Biography – Walter Isaacson (Simon & Schuster)</em></p>
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<p>Many see Musk as a 21st-century idiot savant. Others, watching him reduce an important social media platform – Twitter – to cyber-rubble, think of him simply as an idiot. Maybe both are true, or maybe other readings of his life are true. Aged 52, Musk certainly merits a good, searching biography. </p>
<p>Walter Isaacson seems well credentialed for the task. He has written biographies of Henry Kissinger, Benjamin Franklin, Albert Einstein, Steve Jobs and Leonardo da Vinci that have won awards or become bestsellers, or both. </p>
<p>Isaacson began his working life as a journalist. He spent more than two decades at Time during the magazine’s heyday, rising to become editor in 1996. Since then, he has been chief executive of the CNN cable television network, headed the <a href="https://www.aspeninstitute.org/">Aspen Institute</a> (a longstanding non-profit think tank), become a professor of history at Tulane University, and done various jobs for both Republican and Democrat governments. </p>
<p>This year he was awarded the National Humanities Medal by US President Joe Biden.</p>
<p>Isaacson’s virtue as a biographer is his reporter’s ability to gather enormous amounts of material and quickly render it as a (generally) smooth and readable account of a life bursting with dramatic events. His project only began in 2021 and covers events up to <a href="https://edition.cnn.com/2023/04/20/world/spacex-starship-launch-thursday-scn/index.html">Space X’s unsuccessful Starship rocket launch in April 2023</a>.</p>
<p>Musk made himself available for numerous interviews. He gave Isaacson access to places and people at key moments, such as the purchase of Twitter (now known as X), and regularly emailed Isaacson at 3am with his thoughts – and thought bubbles.</p>
<p>Isaacson also interviewed 130 other people, and his labours have uncovered newsworthy information that has been widely reported – and, in one case, <a href="https://www.washingtonpost.com/books/2023/09/10/elon-musk-walter-isaacson-biography-review/">corrected</a> – since the book’s publication.</p>
<p>For instance, Isaacson builds on earlier reporting by the Washington Post to reveal the extent to which Musk’s Starlink satellite network has been crucial to the Ukrainian military’s ability to fight Russia’s invasion, providing them with continued access to the internet on the battlefield after the Russians destroyed access to other internet services. He shows how Musk was persuaded by the Russians to temporarily <a href="https://www.theguardian.com/technology/2023/sep/07/elon-musk-ordered-starlink-turned-off-ukraine-offensive-biography">cut off the Starlink access</a> after he believed their entreaties that any further victories by Ukraine would provoke nuclear war.</p>
<p>The implications of these remarkable revelations have been examined by the ABC’s Matt Bevan in a recent episode of his <a href="https://www.abc.net.au/listen/programs/if-youre-listening/should-elon-musk-have-stopped-ukraine-attacking-russia-/102929348">If You’re Listening</a> podcast. But even though Isaacson revealed this information, he does not pause to discuss it in any detail. That’s one of the shortcomings of this book.</p>
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<h2>Lord of the Flies on steroids</h2>
<p>Perhaps seduced by Musk’s apparent candour or a publisher’s pressure to rush to print, Isaacson accepts his subject’s words without sufficient scepticism. For instance, Musk’s childhood experiences at a veldskool in 1970s South Africa read like Lord of the Flies on steroids. Bullying was the norm and children were encouraged to fight over meagre food rations. “Every few years, one of the kids would die,” writes Isaacson.</p>
<p>Really? Says who? Musk, apparently. No one from the school is listed in the source notes, to confirm or refute this account. Throughout the book, Musk comes off as a shameless self-dramatiser, but that doesn’t mean his biographer should succumb to it.</p>
<p>Isaacson is an adherent of the “grand man” school of history. He has written only one biography of a woman – the Nobel Prize-winning biochemist <a href="https://www.nobelprize.org/prizes/chemistry/2020/doudna/facts/">Jennifer Doudna</a>. He is far less interested in, or comfortable with, the role structures and systems play in shaping events.</p>
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<a href="https://images.theconversation.com/files/555695/original/file-20231024-19-l2isp1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/555695/original/file-20231024-19-l2isp1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/555695/original/file-20231024-19-l2isp1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=916&fit=crop&dpr=1 600w, https://images.theconversation.com/files/555695/original/file-20231024-19-l2isp1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=916&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/555695/original/file-20231024-19-l2isp1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=916&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/555695/original/file-20231024-19-l2isp1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1151&fit=crop&dpr=1 754w, https://images.theconversation.com/files/555695/original/file-20231024-19-l2isp1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1151&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/555695/original/file-20231024-19-l2isp1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1151&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>As <a href="https://www.newyorker.com/magazine/2023/09/18/elon-musk-walter-isaacson-book-review">Jill Lepore pointed out in the New Yorker</a>, Isaacson also has “an executive’s affinity for the <a href="https://www.investopedia.com/terms/c/c-suite.asp">C-suite</a>”, meaning he pays little attention to the people who work for Musk or the impact of his actions on their lives.</p>
<p>The core question driving the biography is: has Elon Musk had to be such an “asshole” (Isaacson’s term) to achieve what he has? Isaacson acknowledges it is much the same question he asked about Steve Jobs in his earlier biography of the Apple cofounder.</p>
<p>I lost count of the times the question, or a variation of it, was posed during the book’s 670 pages, but in classic Time-style both-sidesing, Isaacson keeps toggling between admonishing Musk for behaving like an “asshole” and admiring his ability to get results. He rarely if ever lifts his gaze beyond this binary, which means he ignores lessons learned from all those people, past and present, who have achieved things without treating people appallingly.</p>
<p>It also means achievements are seen solely through the prism of one person’s actions. In a perceptive article in Vox, <a href="https://www.vox.com/culture/23872485/elon-musk-walter-isaacson-biography-review">Constance Grady</a> reminds us that Musk’s determination to override safety concerns in Tesla factories has led to worker injury rates equivalent to those in a slaughterhouse. </p>
<p>Grady allows that Isaacson reports the increased injury rates, but notes his vagueness about exactly what kind of injuries occurred. Citing 2018 <a href="https://revealnews.org/article/tesla-says-its-factory-is-safer-but-it-left-injuries-off-the-books/">work by the Center for Investigative Reporting</a>, she reveals Tesla workers were “sliced by machinery, crushed by forklifts, burned in electrical explosions, and sprayed with molten metal”.</p>
<p>She also notes Isaacson downplaying the company’s experience of COVID-19. Musk, a fervent libertarian allergic to any form of regulation, kept the factory running during the global pandemic. Isaacson says “the factory experienced no serious COVID outbreak”, but Grady reports there were 450 positive cases.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/elon-musks-hardcore-management-style-a-case-study-in-what-not-to-do-194999">Elon Musk's 'hardcore' management style: a case study in what not to do</a>
</strong>
</em>
</p>
<hr>
<h2>From Twitter to X</h2>
<p>Musk has an immense work ethic and expects everyone working for him to share it. By relentlessly questioning all assumptions – “the laws of physics are unbreakable; everything else is a recommendation” – Musk and those working in his companies have indeed achieved a lot.</p>
<p>I am not really in any position to assess Musk’s contribution to space exploration, AI or car manufacturing. But I am willing to accept the evidence of Isaacson’s biography that they have been substantial – or, in the case of AI, promise to be. </p>
<p>I feel better able to assess Musk’s contribution to social media. Here, the evidence presented by Isaacson and many others is that Musk has damaged, perhaps irretrievably, Twitter – which he has renamed X, a letter of the alphabet to which he seems inordinately attached. Not only has he named one of his children X, he waves away the letter’s other connotations.</p>
<p>In 1999, Musk cofounded the online bank <a href="https://en.wikipedia.org/wiki/X.com_(bank)">X.com</a>. He soon learned there was another company aimed at revolutionising online transactions, PayPal, founded at around the same time by Peter Thiel, Max Levchin and Luke Nosek. </p>
<p>The companies merged in 2000, amid a classic Silicon Valley phallus-waving struggle over who had the idea first and who should take over whom. Levchin derided X.com as a “seedy site you would not talk about in polite company”. “If you want to take over the world’s financial system,” Musk rebutted, “then X is the better name.”</p>
<p>Musk lost the nomenclature war then, but realised his dream more than two decades later when he bought Twitter for <a href="https://www.nytimes.com/2022/10/27/technology/elon-musk-twitter-deal-complete.html">US$44 billion</a> and could call it whatever he liked.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/fallen-crypto-king-sam-bankman-fried-was-perfectly-positioned-to-make-a-religion-of-himself-213893">Fallen crypto king Sam Bankman-Fried was 'perfectly positioned to make a religion of himself'</a>
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<h2>Impulsive, determined, clueless</h2>
<p>The picture of Musk that emerges in Isaacson’s book is of an impulsive, utterly determined person who is genuinely talented as a physicist and businessperson, and genuinely clueless when it comes to human relationships. He either doesn’t get people or doesn’t care about them – or, more likely, both. </p>
<p>He dotes on his children, especially X (I guess you need to do something to compensate for naming a child after a letter), yet he is capable of breathtaking callousness and rank sexism. He whispered in his first wife’s ear on their wedding night that he was the alpha male in the relationship.</p>
<p>In 2021, Musk’s third wife, Shivon Zilis, was pregnant with twins conceived with Musk by in-vitro fertilisation, and was in a hospital in Texas experiencing complications. At the same time, and in the same hospital, a woman serving as a surrogate for Musk and his ex-wife, Claire Boucher – better known as the Canadian-born musician Grimes – was also experiencing pregnancy complications.</p>
<p>Zilis and Boucher, not to mention the surrogate, did not know about the other’s pregnancy. </p>
<p>As Isaacson drolly comments elsewhere in the book:</p>
<blockquote>
<p>Musk developed an aura that made him seem, at times, like an alien, as if his Mars mission were an aspiration to return home, and his desire to build humanoid robots were a quest for kinship.</p>
</blockquote>
<p>Musk is on record saying humanity is in danger of not having enough smart people and it is his duty to populate the planet with as many of them as possible. To date, he has 11 children. If that notion sounds disturbingly like eugenics, it is not something Isaacson reflects on as he studiously documents Musk’s chaotic love life.</p>
<p>Nor does he delay his rat-a-tat-tat narration of every twist and turn in Musk’s dramatic life to question his subject’s burning desire to make humanity a “multi-planet civilisation” by colonising Mars. Musk is obsessed with this goal because he is worried about the prospect of our planet being destroyed by the accelerating consequences of climate change. </p>
<p>A laudable ambition, no doubt. But neither he nor his biographer stops to ask: if humanity fails so badly that it destroys this world, why would you think it could make life better on another, already inhospitable planet?</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/556981/original/file-20231031-25-buzfds.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/556981/original/file-20231031-25-buzfds.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/556981/original/file-20231031-25-buzfds.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=105&fit=crop&dpr=1 600w, https://images.theconversation.com/files/556981/original/file-20231031-25-buzfds.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=105&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/556981/original/file-20231031-25-buzfds.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=105&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/556981/original/file-20231031-25-buzfds.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=132&fit=crop&dpr=1 754w, https://images.theconversation.com/files/556981/original/file-20231031-25-buzfds.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=132&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/556981/original/file-20231031-25-buzfds.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=132&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The surface of Mars.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Mars_pathfinder_panorama_large.jpg">NASA/JPL, Public domain, via Wikimedia Commons</a></span>
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</figure>
<h2>Startling achievements and childish petulance</h2>
<p>It is easy and tempting to poke fun at Musk. Perhaps this is because his personality combines grandiose visions with arrested development, startling achievements with childish petulance. His idea of dieting is to get hold of the diabetes medication Ozempic – the dieter’s drug du jour – begin an intermittent fasting regime, then make his first meal of the day a bacon-and-cheese burger and sweet-potato fries topped with a cookie-dough ice-cream milkshake. </p>
<p>Or do you remember how Musk responded in 2018 to a mild rebuke of his frenetic desire to play the hero rescuing children trapped in a cave in Thailand with a purpose-built mini-craft? That’s right, by <a href="https://www.theguardian.com/technology/2018/jul/15/elon-musk-british-diver-thai-cave-rescue-pedo-twitter">labelling one of the actual rescuers a “pedo guy”</a>.</p>
<p>But it is dangerously easy. Social media plays an important role in modern society. Whatever its benefits, and they are many, the algorithms embedded in social media platforms – by their owners, let’s not forget – neatly sidestep nuance and reason in debate, turbo-charge conflict and emotion, and play a role in the spread of misinformation and disinformation.</p>
<p>Musk is now the owner of one such social media platform. But since buying Twitter last year, he has not been able to bend it to his will. His mistake – perhaps fatal, according to Isaacson – appears to be that he sees it as a technology company, something he understands, when it is really an “advertising medium based on human emotions and relationships”, something he does not understand.</p>
<p>Musk proclaims himself a free-speech advocate, but he has already displayed flagrant biases. He allowed Ye (formerly Kanye West) to <a href="https://www.cnbc.com/2022/11/21/kanye-west-returns-to-twitter-after-restrictions-for-antisemitic-posts.html">tweet anti-Semitic remarks</a>. He tweeted a florid conspiracy theory about the savage <a href="https://edition.cnn.com/2023/01/27/politics/paul-pelosi-attack-video-release/index.html">attack on Paul Pelosi</a>, husband of the then speaker of the US House of Representatives, Nancy Pelosi. And he has asserted China’s repression of the Uyghurs was an issue that “<a href="https://campaignforuyghurs.org/cfu-denounces-elon-musks-deeply-troubling-comments-on-uyghur-genocide/">had two sides</a>” – perhaps because China was <a href="https://www.bbc.com/news/business-59863859">important to his car company, Tesla</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/wrong-elon-musk-the-big-problem-with-free-speech-on-platforms-isnt-censorship-its-the-algorithms-182433">Wrong, Elon Musk: the big problem with free speech on platforms isn't censorship. It's the algorithms</a>
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<hr>
<p>Musk has become obsessed by what he calls the “woke-mind virus”, which he believes is infecting social discourse. Whatever the excesses and blind spots of those on the progressive side of politics, Musk sees this virus almost everywhere. </p>
<p>A longtime devotee of comics and science fiction, he has increasingly given rein to his conspiratorial tendencies, as if he really thinks The Matrix trilogy was a documentary series. In one of his 3am tweets, Musk wrote: “My pronouns are Prosecute/Fauci”. As Isaacson trenchantly comments: </p>
<blockquote>
<p>It made little sense, wasn’t funny, and managed, in just five words, to mock
transgender people, conjure up conspiracies about the 81-year-old public health
official Anthony Fauci, scare off more advertisers, and create a new handful of
enemies who would now never buy Tesla.</p>
</blockquote>
<p>Nor does Musk’s belief in free speech extend to the social media postings of Twitter employees or their comments on internal Slack messaging. He trampled on the company’s internal culture of healthy dissent, peremptorily firing three dozen employees who had criticised the company.</p>
<p>His longstanding, largely successful mantra of getting things done cheaply and quickly, regardless of impediments, finally ran aground after he proposed <a href="https://www.nytimes.com/2023/02/26/technology/twitter-layoffs.html">cutting the company’s workforce by 75%</a>. </p>
<p>Just before Christmas last year he decided it was imperative to move all the company’s servers from Sacramento to Oregon as a way of saving money. Remember how presidential aspirant <a href="https://www.theguardian.com/us-news/2023/may/24/ron-desantis-2024-twitter-launch-tech-outage">Ron De Santis’ big live interview on X went horribly wrong</a> earlier this year? That was because of problems with the servers, writes Isaacson. </p>
<p>More recently, the drastic cutting of the site’s moderators led to <a href="https://www.cnbc.com/2023/10/09/x-formerly-twitter-amplifies-disinformation-amid-the-israel-hamas-conflict.html">floods of misinformation</a> following the attack on Israel by Hamas on October 7.</p>
<p>Musk has also begun to realise that advertising, which previously comprised 90% of Twitter’s revenue, is susceptible to public perceptions. It fell by more than half in the first six months of Musk’s ownership, according to Isaacson. </p>
<h2>Geopolitical implications</h2>
<p>As mentioned earlier, Musk has found himself playing a key role in a war with geopolitical implications. </p>
<p>Immediately before invading Ukraine in early 2022, <a href="https://www.reuters.com/world/europe/russia-behind-cyberattack-against-satellite-internet-modems-ukraine-eu-2022-05-10/">Russia launched a malware attack</a> that crippled the US satellite company providing internet service to Ukraine. Its deputy prime minister, Mykhailo Fedorov, reached out to Musk via Twitter, appealing for help.</p>
<p>Musk did, donating US$80 million worth of technology to Ukrainian forces, including Starlink’s <a href="https://www.space.com/ukraine-russia-war-spacex-starlink-satellite-internet">solar and battery kits</a>, which were able to defeat Russian efforts to jam them. </p>
<p>Musk’s intervention was widely praised, but in September 2022, when the Ukrainians planned to use Starlink to guide a drone attack on the Russian naval fleet at Sevastopol in Crimea, he refused to help. He had been listening to the Russian ambassador, who had reached out to him a few weeks before. </p>
<p>Russia had annexed Crimea in 2014 and the ambassador persuaded him not only of Russia’s inalienable right to Crimea, but of the prospect of nuclear war if the Ukrainians were allowed to try and retake it. He told Isaacson he had been studying foreign policy and military history: “Musk explained to me the details of Russian law and doctrine that decreed such a response.”</p>
<p>Has technology put an individual private citizen in such a position before? </p>
<p>Individual companies, such as the Krupp manufacturing company, notoriously played an important role in arming Nazi Germany. Individual media proprietors, such as Rupert Murdoch, have played a role in encouraging war, as when Murdoch’s media outlets overwhelmingly editorialised in favour of the United States invading Iraq in 2003.</p>
<p>The combination of new global communication technologies and decades of unwillingness by governments to find ways to regulate them adequately has now put one unelected citizen, as childishly impulsive as he is brilliant, in a rare position. </p>
<p>The question is not simply, is he equipped to make such decisions, but how and why has it come to this?</p><img src="https://counter.theconversation.com/content/214268/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Matthew Ricketson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Some see Elon Musk as an idiot savant; others think of him simply as an idiot. How did an unelected citizen come to wield such power?Matthew Ricketson, Professor of Communication, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2153892023-10-19T13:18:25Z2023-10-19T13:18:25ZFootball and big money: what some professional players in Ghana told us about handling their finances<p>Footballers are among the best paid sportsmen in most parts of the world. </p>
<p>The unfortunate reality, however, is that the retirement <a href="https://www.theghanareport.com/top-5-players-who-went-broke-after-making-millions-in-football/">experiences</a> of many former professional footballers have been awful. Within the sports media landscape, there have been <a href="https://www.moneynest.co.uk/bankrupt-footballers/">reported cases</a> of once-wealthy footballers who have gone bankrupt soon upon retirement. Notable examples in Ghana are former Black Stars players Sammy Adjei, John Naawu, Joe Odoi, Prince Addu Poku and Amusa Gbadamoshie. </p>
<p>According to some <a href="https://scholar.google.com/scholar?output=instlink&q=info:0Ha1K3SHR4kJ:scholar.google.com/&hl=en&as_sdt=0,5&scillfp=13443085754161180526&oi=lle">academics</a> this unfortunate situation stems in part from the fact that the danger of falling into a professional void is high. This is because, like most sports, football confers skills that are not easily transferable to non-sporting occupations. The availability of jobs in football is also very limited. So most footballers earn a very high income during their active career period and face a high degree of income uncertainty upon retirement.</p>
<p>The lifestyle of footballers (during the active playing period and upon retirement) has also been highlighted by several <a href="https://scholar.google.com/scholar?output=instlink&q=info:cxNwMuOE4DsJ:scholar.google.com/&hl=en&as_sdt=0,5&scillfp=5439326496234156066&oi=lle">reports</a> as a key driver of the financial mess that some footballers have got themselves into. </p>
<p>Again, there have been reported cases of footballers engaging in irresponsible financial behaviour. Examples include gambling, spending on luxurious brands, lavish parties and generally maintaining an expensive and unsustainable lifestyle. A lack of financial knowledge has often been associated with this kind of financial behaviour.</p>
<p>I am a <a href="https://ugbs.ug.edu.gh/ugbsfaculty/profile-faculty_member/godfred-matthew-yaw">professor</a> of accounting who, with others, has conducted a <a href="https://www.tandfonline.com/doi/pdf/10.1080/23750472.2023.2248150">study</a> to investigate the level of financial literacy of professional footballers in Ghana and ascertain its impact on their financial behaviour and financial wellbeing. </p>
<p>We found low levels of financial literacy, and poor financial behaviour, among footballers. The results suggest that to promote responsible financial behaviour among footballers, enhancing their financial literacy is key. We found very strong support for the argument that responsible financial behaviour, proxied in this study by savings and investment behaviour, is key to attaining financial wellness in life.</p>
<h2>The study design</h2>
<p>Financial literacy has been described as the ability to use the needed knowledge and skills to manage one’s financial resources effectively to improve welfare in the future. </p>
<p>Financial behaviour, on the other hand, can be <a href="https://www.grin.com/document/934971">described</a> as the “ability to regulate planning, budgeting, checking, managing, controlling, searching and storing daily funds”. It covers spending and saving habits, borrowing patterns, budgeting and access to financial products. </p>
<p>Using questionnaires, we surveyed 300 footballers who competed in the 2020 Ghana Premier League.</p>
<p>The questionnaire had two sections: one on the demographic details of the respondents; the other on their financial literacy, financial behaviours and financial wellbeing.</p>
<p>Currently, the Ghana Premier League has 18 registered clubs. At the time of the study, these clubs employed 480 registered footballers. Compared with clubs in Europe, England, Asia and even many other parts of Africa, the net worth of Ghanaian clubs is very <a href="https://www.fifa.com/en/media-releases/fifa-publishes-global-transfer-report-2021">low</a>. Revenues from international transfers – an important funding source for most Ghanaian clubs – have been very low over the years. For instance, the Federation of International Football Associations (FIFA) in its 2021 report on international transfers <a href="https://www.fifa.com/en/media-releases/fifa-publishes-global-transfer-report-2021">recorded</a> that Ghanaian football clubs together made a net profit of only US$50 million in the last decade.</p>
<h2>Footballers’ finances</h2>
<p>Our study revealed that the population of footballers was largely youthful. Nearly 90% were 30 years old or below, which is similar to footballers in other countries. This is expected as footballers are mostly active in their prime years. About 86% had some form of education, mainly up to senior high school level. The majority of the respondents were married and close to 58% of them had three or more dependants aside from their nuclear family. Thus, most of the footballers were providers for families although 39% said they lived with their parents or friends. On average, these footballers earned GHS2,000 net monthly income (US$177 at the time of the study), which, compared to other professionals, is low. </p>
<p>Overall, we found that the footballers had a low level of financial literacy. They ranked setting of long-term goals high but their interest in seeking financial knowledge was very low. It was therefore not surprising that most of the footballers seemed uncertain about where their money was spent.</p>
<p>We found that the footballers, generally, did not exhibit responsible financial behaviour. Very few had any interest in products such as bonds, stocks, mutual funds and insurance policies. But they seemed diligent in comparing prices when purchasing a product or service in a shop.</p>
<p>Interestingly, footballers were optimistic about their financial wellbeing. Most of those surveyed were confident in their capacity to meet current financial needs, had a very positive outlook on their future financing needs and made choices to enjoy life. The average footballer is always hopeful of securing lucrative contracts in future. </p>
<h2>Better performance</h2>
<p>Efforts to enhance the financial wellbeing of footballers can begin with investing in training programmes to make them financially literate. Second, football clubs can engage financial coaches to provide practical guidance to players during their active playing days to help shape their financial behaviour. </p>
<p>Given that financial wellbeing is closely <a href="https://www.emerald.com/insight/content/doi/10.1108/JHASS-05-2021-0101/full/pdf">associated</a> with psychological wellbeing, such initiatives could have a positive effect on the performance of players on the field.</p><img src="https://counter.theconversation.com/content/215389/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Godfred Matthew Yaw Owusu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Most Ghanaian footballers have poor levels of financial literacy and financial behaviour.Godfred Matthew Yaw Owusu, Professor of Accounting, University of GhanaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2130492023-09-27T12:33:25Z2023-09-27T12:33:25ZDeceit pays dividends: How CEO lies can boost stock ratings and fool even respected financial analysts<figure><img src="https://images.theconversation.com/files/548905/original/file-20230918-17-ptg4pm.jpg?ixlib=rb-1.1.0&rect=38%2C6%2C4243%2C2805&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Everyone is vulnerable to the 'truth bias' − even people paid to know better.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/businessman-slipping-a-stack-of-cash-into-his-suit-royalty-free-image/184088887">Stephanie Phillips/E+ via Getty Images</a></span></figcaption></figure><p>The multibillion-dollar collapse of FTX – the high-profile cryptocurrency exchange whose founder now <a href="https://www.nytimes.com/2023/08/14/technology/sam-bankman-fried-ftx-prosecutors.html">awaits trial on fraud charges</a> – serves as a stark reminder of the perils of deception in the financial world.</p>
<p>The lies from FTX founder Sam Bankman-Fried date back to <a href="https://www.nytimes.com/2022/12/13/business/ftx-sam-bankman-fried-fraud-charges.html">the company’s very beginning</a>, <a href="https://www.documentcloud.org/documents/23450429-show_temp-8?responsive=1&title=1">prosecutors say</a>. He lied to customers and investors alike, it is claimed, as part of what <a href="https://www.justice.gov/usao-sdny/video/statement-usa-damian-williams-us-v-samuel-bankman-fried-caroline-ellison-and-gary">U.S. Attorney Damian Williams has called</a> “one of the biggest financial frauds in American history.”</p>
<p>How were so many people apparently fooled?</p>
<p>A new study in the Strategic Management Journal sheds some light on the issue. In it, my colleagues and I found that even professional financial analysts <a href="http://doi.org/10.1002/smj.3546">fall for CEO lies</a> – and that the best-respected analysts might be the most gullible.</p>
<p>Financial analysts give expert advice to help companies and investors make money. They predict how much a company will earn and suggest whether to buy or sell its stock. By guiding money into good investments, they help not just individual businesses but the entire economy grow.</p>
<p>But while financial analysts are paid for their advice, they aren’t oracles. As a <a href="https://scholar.google.com/citations?user=UP9FYAUAAAAJ&hl=en">management professor</a>, I wondered how often they get duped by lying executives – so my colleagues and I used machine learning to find out. We developed an algorithm, trained on S&P 1500 earnings call transcripts from 2008 to 2016, that can <a href="http://doi.org/10.1002/smj.3546">reliably detect deception</a> 84% of the time. Specifically, the algorithm identifies distinct linguistic patterns that occur when an individual is lying.</p>
<p>Our results were striking. We found that analysts were far more likely to give “buy” or “strong buy” recommendations after listening to deceptive CEOs – by nearly 28 percentage points, on average – rather than their more honest counterparts.</p>
<p>We also found that highly esteemed analysts fell for CEO lies more often than their lesser-known counterparts did. In fact, those named “all-star” analysts by trade publisher Institutional Investor were 5.3 percentage points more likely to upgrade habitually dishonest CEOs than their less-celebrated counterparts. </p>
<p>Although we applied this technology to gain insight into this corner of finance for an academic study, its broader use raises a number of challenging ethical questions around using AI to measure psychological constructs.</p>
<h2>Biased toward believing</h2>
<p>It seems counterintuitive: Why would professional givers of financial advice consistently fall for lying executives? And why would the most reputable advisers seem to have the worst results? </p>
<p>These findings reflect the natural human tendency to assume that others are being honest – what’s known as the “<a href="https://www.nbcnews.com/think/opinion/why-humans-believe-most-people-are-telling-truth-even-when-ncna1259456">truth bias</a>.” Thanks to this habit of mind, analysts are just as susceptible to lies as anyone else. </p>
<p>What’s more, we found that elevated status fosters a stronger truth bias. First, “all-star” analysts often gain a sense of overconfidence and entitlement as they rise in prestige. They start to believe they’re less likely to be deceived, leading them to take CEOs at face value. Second, these analysts tend to have closer relationships with CEOs, which studies show can <a href="https://journals.sagepub.com/doi/abs/10.1177/009365092019003002">increase the truth bias</a>. This makes them even more prone to deception.</p>
<p>Given this vulnerability, businesses may want to reevaluate the credibility of “all-star” designations. Our research also underscores the importance of accountability in governance and the need for strong institutional systems to counter individual biases.</p>
<h2>An AI ‘lie detector’?</h2>
<p>The tool we developed for this study could have applications well beyond the world of business. We validated the algorithm using fraudulent transcripts, retracted articles in medical journals and deceptive YouTube videos. It could easily be deployed in different contexts.</p>
<p>It’s important to note that the tool doesn’t directly measure deception; it identifies language patterns <a href="https://doi.org/10.1177/0146167203029005010">associated with lying</a>. This means that even though it’s highly accurate, it’s susceptible to both false positives and negatives – and false allegations of dishonesty in particular could have devastating consequences. </p>
<p>What’s more, tools like this struggle to distinguish socially beneficial “white lies” – which foster a sense of community and emotional well-being – from more serious lies. Flagging all deceptions indiscriminately could disrupt complex social dynamics, leading to unintended consequences. </p>
<p>These issues would need to be addressed before this type of technology is adopted widely. But that future is closer than many might realize: Companies in fields such as investing, security and insurance are <a href="https://www.fox13news.com/news/st-pete-based-tech-startup-creates-ai-that-analyzes-if-someone-is-lying-online">already starting to use it</a>. </p>
<h2>Big questions remain</h2>
<p>The widespread use of AI to catch lies would have profound social implications – most notably, by making it harder for the powerful to lie without consequence. </p>
<p>That might sound like an unambiguously good thing. But while the technology offers undeniable advantages, such as early detection of threats or fraud, it could also usher in a <a href="https://billmoyers.com/content/sissela-bok">perilous transparency culture</a>. In such a world, thoughts and emotions could become subject to measurement and judgment, eroding the sanctuary of mental privacy. </p>
<p>This study also raises ethical questions about using AI to measure psychological characteristics, particularly where privacy and consent are concerned. Unlike traditional deception research, which relies on human subjects who consent to be studied, this AI model operates covertly, detecting nuanced linguistic patterns without a speaker’s knowledge.</p>
<p>The implications are staggering. For instance, in this study, we developed a second machine learning model to gauge the level of suspicion in a speaker’s tone. Imagine a world where social scientists can create tools to assess any facet of your psychology, applying them without your consent. Not too appealing, is it? </p>
<p>As we enter a new era of AI, advanced psychometric tools offer both promise and peril. These technologies could revolutionize business by providing unprecedented insights into human psychology. They could also violate people’s rights and destabilize society in surprising and disturbing ways. The decisions we make today – about ethics, oversight and responsible use – will set the course for years to come.</p><img src="https://counter.theconversation.com/content/213049/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven J. Hyde owes shares in Prodigy Intelligence, which develops AI psychometrics company. </span></em></p>Financial analysts have a gullibility problem − and the better their reputation, the worse it is.Steven J. Hyde, Assistant Professor of Management, Boise State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2112182023-09-19T13:24:27Z2023-09-19T13:24:27ZSouth Africa’s smallholder vegetable farmers aren’t getting the finance they need: this is what it should look like<p>Fresh efforts are being made to increase the share of black ownership in South Africa’s agricultural sector. This follows decades of missteps and badly designed interventions that have failed to significantly change the ownership patterns in the sector.</p>
<p>The latest plan – known as the <a href="https://static.pmg.org.za/220607Agriculture_and_Agro-processing_Master_Plan_Signed.pdf">agriculture and agro-processing master plan</a> – aims to provide, among others, comprehensive farmer assistance, development finance, agricultural research and development and extension services. </p>
<p>It also aims to increase the share of black ownership and the contribution of small-scale producers in the country by 2030.</p>
<p>The master plan has been signed by government and representatives from various businesses and civil society organisations within the agricultural sector. It is the first multi-stakeholder strategic plan in the country. Its aim is to promote transformation in agriculture and agro-processing sectors affected by apartheid. </p>
<p>However, farming is a capital and resource intensive business, which requires access to sufficient finance. In a <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/650189832232f1281216cb5b/1694599558497/Vegetables+Working+Paper_OXFAM_13092023%5B12%5D.pdf">recent study</a> we looked at the funding challenges facing smallholder farmers in the vegetables value chain. A smallholder farmer is someone engaged in agricultural activities on a small scale, generally farming less than 10 hectares of land, selling part of their crop and farming for subsistence. </p>
<p>The study provides valuable insights that could help inform the implementation of the masterplan. For example, one of the main findings is that there is an urgent need for government to provide “patient” finance – such as longer repayment periods – to allow farmers to build capabilities, accumulate returns and be profitable. The current problem with government funding is that it’s limited in both scale and scope and provided on a piecemeal basis.</p>
<p>This is not to suggest that there is no financing available for farmers. What’s in contention is whether what’s available helps farmers enter, expand and grow.</p>
<h2>How financing is offered affects who gets to farm</h2>
<p>Farming needs substantial investment in on-farm infrastructure and equipment. This includes fencing, farming tools, tractors, boreholes and pumps, irrigation systems, shade nets and greenhouse tunnels. </p>
<p>Research by <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/650189832232f1281216cb5b/1694599558497/Vegetables+Working+Paper_OXFAM_13092023%5B12%5D.pdf">the Centre for Competition, Regulation and Economic Development</a> found that it can cost a farmer between R2.5 million and R3 million (around US$159,000) to install an irrigation system and greenhouse tunnels on a 5-hectare farm. These are substantial investments for smallholder farmers. </p>
<p>Short repayment periods mean that farmers are required to pay back their loans sometimes before they have even become profitable. </p>
<p>The issue of financing is particularly concerning given that smallholder farmers are self-financed or have limited access to debt finance.</p>
<p>As one farmer put it:</p>
<blockquote>
<p>The problem why farmers are collapsing and exiting the vegetable farming business is because farmers get a loan to start farming and they make losses in the first years which means that they can’t re-pay the loan, so they start selling farm assets to repay the loan.</p>
</blockquote>
<p>This is counterproductive. If a farm goes under, all the funding and non-financial support previously provided to get the enterprise started is lost.</p>
<p>Patient funding is the answer. Patient financing in agriculture is financing and support that’s made on a longer-term basis and that recognises the extended time frames and risks associated with agricultural cycles and the time it takes for the farmer to become profitable. </p>
<p>The lack of patient financing also stands in the way of farmers being able to access reliable and consistent markets, such as supermarkets. Supermarkets have stringent requirements which often entail farmers needing to invest further in their farms. The investment required can be in the form of infrastructure such as packhouses, pack sheds, cold rooms, proper financial statements, and refrigerated trucks to deliver to the stores. </p>
<p>Government support does not cover weather and climate change related risks. These are increasingly affecting smallholder farmers who still practise open field farming. </p>
<p>Many farmers also complained of complicated application forms and bureaucratic application processes to obtain finance. Often small farmers don’t have all the requirements stipulated on the forms, such as bookkeeping. This limits their chances of getting access to finance. There is also a lack of assistance from the department on how applicants can fill out the forms when they encounter difficulties. </p>
<p>As one farmer suggested: </p>
<blockquote>
<p>The challenge with government support is that it comes and helps in piecemeal and they don’t go all the way. Also, government does not come to visit the farm to check and evaluate or monitor progress.</p>
</blockquote>
<h2>What needs to done</h2>
<p>Government needs to provide patient finance to allow farmers to build capabilities, accumulate returns and be profitable. </p>
<p>This will safeguard the participation of smallholder farmers by allowing them to access more reliable and consistent markets. It will also benefit consumers through better quality produce and avoid potential food shortages in the wake of high inflation and the energy crisis in South Africa. </p>
<p>Having the agriculture and agro-processing master plan in place is helpful. But it needs to be put into practice properly. If smallholder farmers are its focus, then more emphasis needs to be placed on providing them with access to finance, to equip them with the tools to achieve better production.</p><img src="https://counter.theconversation.com/content/211218/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Karissa Moothoo Padayachie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Financing is available to farmers. What’s in contention is whether what’s available helps farmers enter the industry, expand and grow.Karissa Moothoo Padayachie, Researcher for the Centre for Competition, Regulation and Economic Development, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2110092023-08-18T11:12:18Z2023-08-18T11:12:18ZClimate change is making debt more expensive – new study<figure><img src="https://images.theconversation.com/files/543226/original/file-20230817-14573-wkk79g.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5004%2C3333&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/tokyo-japan-august-26-2021-sign-2178575211">Ned Snowman/Shutterstock</a></span></figcaption></figure><p>Earth is overheating due to the greenhouse gas emissions from burning fossil fuels. This is “the biggest market failure the world has seen” according to economist <a href="https://www.aeaweb.org/articles?id=10.1257/aer.98.2.1">Nicholas Stern</a>. The rational behaviour of companies that pollute by making profitable commodities, and consequences of most people’s desire to drive everywhere are creating irrational outcomes for everyone: an increase in the average global temperature which threatens to make the planet uninhabitable. </p>
<p>But our <a href="https://pubsonline.informs.org/doi/10.1287/mnsc.2023.4869">recent research</a> indicates that this pollution will have a direct financial cost. We used artificial intelligence to combine Standard and Poor’s (S&P) <a href="https://www.spglobal.com/ratings/en/about/intro-to-credit-ratings">credit ratings formula</a> (which captures the ability of those who borrow money to pay it back) with climate-economic models to simulate the effects of climate change on sovereign ratings for 109 countries over the next ten, 30 and 50 years, and by the end of the century.</p>
<p>We found that by 2030, 59 countries will see a deterioration in their ability to pay back their debts and an increased cost of borrowing as a result of climate change. Our predictions to 2100 entail the number of countries rising to 81.</p>
<p>Financial markets and businesses need credible information on how climate change translates into material risks to be able to factor them into all decisions they make. Although it is important to design economic tools and policies that can mitigate the effects of climate change, the field of economics responsible for doing so is relatively young. </p>
<p>New financial products have emerged to help countries and investors take better account of the climate and environment being degraded as a result of debt markets, but several problems remain.</p>
<p>Credit ratings or environmental, social and governance (ESG) ratings (which assess how well a company manages these kinds of risks) are not based on scientific information, and are often charged with <a href="https://www.ft.com/content/74888921-368d-42e1-91cd-c3c8ce64a05e">greenwashing</a>. For example, some investment funds branded as green according to these ratings, have been <a href="https://www.theguardian.com/business/2023/may/02/green-investment-funds-pushing-money-into-fossil-fuel-firms-research-finds">linked to fossil fuel companies</a>.</p>
<p>Financial institutions such as banks frequently misunderstand models for predicting the economic costs of climate change and underestimate risks such as <a href="https://www.ft.com/content/a5027391-41a4-4e21-a72d-f8189d6a7b71">temperature rises</a>, according to a <a href="https://actuaries.org.uk/media/qeydewmk/the-emperor-s-new-climate-scenarios.pdf">recent report</a> by actuaries – people who use mathematics to measure and manage risk and uncertainty.</p>
<p>Their research found “a clear disconnect” between climate scientists, economists, the people building these economic models and the financial institutions using them. </p>
<p>In our study, we tried to integrate climate science into financial indicators widely used and understood by investors, such as credit ratings. Without such science-based indicators, financial decision making will reflect risk calculations which are incorrect and misrepresent the <a href="https://www.nature.com/articles/s41558-020-00984-6">economic consequences</a> of climate change.</p>
<h2>Debt servicing to rise almost everywhere</h2>
<p>Credit ratings express a country’s ability and willingness to pay back debt and affect the cost of borrowing to nations as well as other entities, such as corporations and banks. Inevitably, these costs are passed on to the public.</p>
<p>When interest rates rise for banks, businesses find it more expensive to fund their operations and so raise prices for consumers. Higher costs to banks also mean higher mortgage interest rates for residential borrowers. When banks invest savings such as pensions in bonds offered by countries hit by climate disasters, their worth is affected too, meaning that pensions may fall in value.</p>
<p>Our <a href="https://pubsonline.informs.org/doi/10.1287/mnsc.2023.4869">paper</a> has three key findings. First, in contrast to much of the economics literature, we found that climate change could have material effects on economies and credit ratings as early as 2030. </p>
<p>Credit ratings are categorised in a 20-notch ladder scale, with default being the lowest rating, equivalent to one notch, and AAA being the highest rating at 20 notches. The highest rating signifies the lowest risk of an entity not paying back its debts and vice versa.</p>
<p>Under a high-emissions scenario in which recent emissions continue on an upwards trajectory, 59 countries would suffer downgrades of just under a notch by 2030, rising to 81 countries facing an average downgrade of two notches by 2100.</p>
<p>The nations which would be most affected include Canada, Chile, China, India, Malaysia, Mexico, Slovakia and the US. More importantly, our results show that virtually all countries, whether rich or poor, hot or cold, will suffer downgrades if the current trajectory of carbon emissions is maintained.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/543218/original/file-20230817-23-spmgd3.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A global map depicting how much each country's credit rating is expected to fall." src="https://images.theconversation.com/files/543218/original/file-20230817-23-spmgd3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/543218/original/file-20230817-23-spmgd3.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=363&fit=crop&dpr=1 600w, https://images.theconversation.com/files/543218/original/file-20230817-23-spmgd3.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=363&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/543218/original/file-20230817-23-spmgd3.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=363&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/543218/original/file-20230817-23-spmgd3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=456&fit=crop&dpr=1 754w, https://images.theconversation.com/files/543218/original/file-20230817-23-spmgd3.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=456&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/543218/original/file-20230817-23-spmgd3.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=456&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Rating downgrades under a high-emissions scenario (20-notch scale).</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Second, if countries honoured the <a href="https://unfccc.int/sites/default/files/english_paris_agreement.pdf">Paris Agreement</a> and limited warming to below 2°C, the impact on ratings would be minimal.</p>
<p>Third, we calculated the additional costs of servicing debt for countries (best interpreted as increases in annual interest payments) to be between US$45–67 billion (£35-53 billion) under a low-emissions scenario, and US$135–203 billion under a high-emissions one. These translate to additional annual costs of servicing corporate debt, ranging from US$9.9–17.3 billion to US$35–61 billion in each case.</p>
<p>As climate change batters national economies, debt will become harder and more expensive to service. By connecting climate science with indicators that are already baked into the financial system, we’ve shown that climate risk can be assessed without compromising the integrity of scientific assessments, the economic validity of the modelling and the timeliness necessary for making effective policies.</p>
<hr>
<figure class="align-right ">
<img alt="Imagine weekly climate newsletter" src="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/434988/original/file-20211201-21-13avx6y.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p><strong><em>Don’t have time to read about climate change as much as you’d like?</em></strong>
<br><em><a href="https://theconversation.com/uk/newsletters/imagine-57?utm_source=TCUK&utm_medium=linkback&utm_campaign=Imagine&utm_content=DontHaveTimeTop">Get a weekly roundup in your inbox instead.</a> Every Wednesday, The Conversation’s environment editor writes Imagine, a short email that goes a little deeper into just one climate issue. <a href="https://theconversation.com/uk/newsletters/imagine-57?utm_source=TCUK&utm_medium=linkback&utm_campaign=Imagine&utm_content=DontHaveTimeBottom">Join the 20,000+ readers who’ve subscribed so far.</a></em></p>
<hr><img src="https://counter.theconversation.com/content/211009/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Patrycja Klusak receives funding from the International Network for Sustainable Financial Policy Insights, Research and Exchange (INSPIRE).</span></em></p><p class="fine-print"><em><span>Matt Burke receives funding from the International Network for Sustainable Financial Policy Insights, Research and Exchange (INSPIRE).</span></em></p>The first ‘climate-smart’ sovereign credit rating shows 59 nations will have lower ratings before 2030 without emissions cuts.Patrycja Klusak, Affiliated Researcher, Bennett Institute of Public Policy, University of Cambridge and Associate Professor in Banking and Finance, University of East AngliaMatt Burke, WTW Research Fellow, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2018672023-08-04T01:52:43Z2023-08-04T01:52:43ZAustralia will soon have its first Islamic bank. What does this mean, and what are the challenges?<p>Islamic banks have become an integral part of the financial system in many Muslim-majority countries, as well as in nations with sizeable Muslim minorities such as the United Kingdom, South Africa, Sri Lanka and Thailand.</p>
<p>Australia is poised to join them. From mid-2024,
<a href="https://islamicbank.au/">Islamic Bank Australia</a> is set to offer Australia’s 813,000 Muslims a banking service aligned with their religion’s strictures against profiting from interest or investing in harmful industries such as alcohol or gambling.</p>
<p>The fundamental distinguishing feature of an Islamic bank is its adherence to Islamic, or Sharia, law. As such, Islamic banks differ from their counterparts in four main ways: they do not charge or pay interest; they don’t engage in property speculation or activities such as derivatives trading; they do not invest in businesses that are deemed unlawful by Islam; and they typically appoint a second board specifically to oversee their compliance with these rules.</p>
<p>Why do these rules and conventions exist, and how do they work in practice?</p>
<h2>1. No interest</h2>
<p>For devout Muslims, conventional banking services are problematic because of the main way most banks make profit – by charging interest on loans.</p>
<p>Islam’s holy book, the Quran, prohibits all transactions associated with interest. The third chapter (the <a href="https://www.al-islam.org/enlightening-commentary-light-holy-quran-vol-3/section-11-usury-forbidden-means-achieving-success">Surah Al-Imran, verse 130</a>) says:</p>
<blockquote>
<p>O’ you who have Faith! Do not devour usury, doubled and multiplied, and be in awe of Allah; that you may be prosperous.</p>
</blockquote>
<p>Usury refers to lending money at unreasonable interest rates, but the term is <a href="https://www.merriam-webster.com/dictionary/usury">sometimes used</a> to mean any charging of interest at all. Judaism and Catholicism have also traditionally outlawed usury, although historically they have allowed more wiggle room in how this is applied. </p>
<p>Sharia law prohibits banks from charging any interest on loans at all. But that doesn’t mean Islamic banks are opposed to earning profit.</p>
<p>To comply with Sharia law, an Islamic bank enters into a joint venture or partnership agreement with depositors and borrowers, which allows sharing of profit and loss between bank and customers.</p>
<p>Islamic banks provide loans under a profit-and-loss contract rather than one involving interest-based repayments. In this arrangement, borrowers pay an agreed share of their profits to the bank.</p>
<p>Similarly, deposits with the bank don’t earn interest, but instead they earn a return that will rise or fall in line with the bank’s overall profits.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/islamic-finance-provides-an-alternative-to-debt-based-systems-191168">Islamic finance provides an alternative to debt-based systems</a>
</strong>
</em>
</p>
<hr>
<p>One potential pitfall of this model is it might encourage borrowers to take unnecessary business risks, knowing their bank will share the losses. This, in turn, would potentially reduce the returns to those who have deposited funds with the bank and also increase the credit risk for banks.</p>
<p>To help guard against this risk, borrowers typically agree to allow the bank to act as a partner in the business, rather than simply as a creditor. This lets the bank monitor the business’s performance more closely, and share directly in its profits and losses.</p>
<figure class="align-center ">
<img alt="Hands using laptop showing blurred spreadsheet and graphs" src="https://images.theconversation.com/files/541149/original/file-20230804-27-htvbrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/541149/original/file-20230804-27-htvbrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/541149/original/file-20230804-27-htvbrx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/541149/original/file-20230804-27-htvbrx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/541149/original/file-20230804-27-htvbrx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/541149/original/file-20230804-27-htvbrx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/541149/original/file-20230804-27-htvbrx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Rather than paying interest, business borrowers typically share a portion of their profits with the bank.</span>
<span class="attribution"><span class="source">Campaign Creators/Unsplash</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<h2>2. No speculative assets</h2>
<p>The Quran (<a href="https://www.al-islam.org/enlightening-commentary-light-holy-quran-vol-3/section-36">Surah Al-Baqarah, verse 275</a>) says: </p>
<blockquote>
<p>…Allah has permitted trading and forbidden usury.</p>
</blockquote>
<p>From this, Islamic scholars infer that purchasing land or property purely for speculation is not permissible, but buying it to undertake economic activities is allowed. This means Islamic banks cannot engage in the kind of debt-based financing that underpins the home or business loans offered by many Australian banks.</p>
<p>Instead, an Islamic bank can finance a home purchase by taking part-ownership of the property, according to the proportion of the purchase price that was provided by bank finance rather the buyer’s own funds. </p>
<p>Similarly, Islamic banks can provide loans to buy land that will be used for economic activities, but cannot profit purely from land price appreciation.</p>
<p>Shariah law also prohibits Islamic banks from engaging in derivatives trading (trading in financial products such as futures contracts, options or swaps) because this involves speculating on an asset’s market performance, rather than on economic activity itself. </p>
<h2>3. No ‘socially harmful’ business</h2>
<p>Sharia law does not allow an Islamic bank to finance economic sectors that are deemed harmful to people’s wellbeing, such as alcohol, tobacco, gambling, adult entertainment, pork products, or arms production.</p>
<h2>4. Islamic corporate governance</h2>
<p>Islamic banks typically appoint two boards: a regular board of directors similar to those that govern most banks, and a Sharia supervisory board to oversee compliance with Islamic laws. </p>
<h2>What are Islamic Bank Australia’s prospects?</h2>
<p>The main challenge for Islamic Bank Australia will be to gain accreditation from the Australian Prudential Regulatory Authority (<a href="https://www.apra.gov.au/">APRA</a>), which regulates Australia’s commercial banking industry. The bank says it is planning to apply for this in mid-2024, after which it can open to the public.</p>
<p>Next, it will need to attract a significant client base. As of October 2022 it reportedly had <a href="https://www.abc.net.au/news/2022-10-12/australia-first-islamic-bank-granted-lending-licence-from-apra/101458162">almost 8,000 prospective customers</a> on its waiting list.</p>
<p>The arrival of Sharia-compliant banking will bring some new issues for Australia’s banking sector more broadly. </p>
<p>Australia does not yet have any supervisory body for monitoring Sharia-compliant banking, meaning all responsibility in this area would fall to the bank’s own supervisory board. In many Muslim-majority countries, such as Malaysia for example, a separate Sharia Advisory Council, typically appointed by the country’s central bank, oversees the Islamic finance industry. </p>
<p>Islamic Bank Australia’s Sharia committee has <a href="https://islamicbank.au/shariah-committee/">three members</a>: Malaysia-based Ashraf Md Hashim, who also sits on that country’s Sharia Advisory Council; Mohamed Ali Elgari, an Islamic economics academic in Saudi Arabia; and Australia-based Islamic banking scholar Rashid Raashed.</p>
<p>Many other Islamic banks worldwide also have overseas Sharia scholars sitting on their boards. But given the complexity of the role, these appointees will need to be familiar with current practices in Australia’s financial landscape too.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/is-islamic-banking-more-risky-compared-to-conventional-banking-62993">Is Islamic banking more risky compared to conventional banking?</a>
</strong>
</em>
</p>
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<p>A related issue is the question of how Islamic Bank Australia will interact with Australia’s existing banks. Besides adhering to Sharia law, it will also need to comply with all of Australia’s banking regulatory requirements. In doing so, it will inevitably come across interest-based transactions. </p>
<p>For example, Islamic Bank Australia must maintain an account for settling any transactions with the Reserve Bank, and will have to refer to existing benchmarks, such as the underlying interest rate, as references for the dividends and charges applied to customers under its profit-and-loss contracts. </p>
<p>Islamic Bank Australia and existing banks will have to get used to adapting to the rules and customs, but it has been done successfully in other Western countries and so Australia should be no exception.</p><img src="https://counter.theconversation.com/content/201867/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Islamic banks must follow Sharia law, and as such take a different approach to traditional Australian banks. They don’t charge interest, and are much more selective about which activities they fund.Md Safiullah (Safi), Senior Lecturer in Finance, RMIT UniversityAbul Shamsuddin, Professor of Finance, University of NewcastleLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2073112023-07-24T01:21:44Z2023-07-24T01:21:44Z‘Greed is amoral’: how Wall Street supermen cashed in on pandemic misery and chaos<figure><img src="https://images.theconversation.com/files/537695/original/file-20230717-216459-ap8f50.jpg?ixlib=rb-1.1.0&rect=26%2C8%2C5964%2C3970&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">'Charging Bull' and 'Fearless Girl' sculptures outside the New York Stock Exchange.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p><a href="https://www.simonandschuster.com/books/Chaos-Kings/Scott-Patterson/9781982179939">Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis</a> chronicles the cold-blooded response of Wall Street to the COVID pandemic. New York finance journalist Scott Patterson reports how savvy investors used the devastation of the pandemic to reap billions in profits. </p>
<p>Combining insider access with masterful storytelling, Patterson’s meticulously researched book tells the tales of the investors, scientists and mathematicians whose creativity, expertise and risk-taking created financial opportunities out of a worldwide disaster that killed millions. </p>
<hr>
<p><em>Review: Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis (Scribner)</em></p>
<hr>
<p>Chaos Kings is not so much about the rapacious “greed is good” mentality of the 1980s. In 2021, the prevailing attitude was more like “greed is amoral”, technical even. As the profits flowed from the COVID disaster, there was little hint of any ethical quandary. All stops were taken out in the pursuit of profit from pain. </p>
<p>The most disconcerting aspect of Patterson’s account is how the men who did this (they are all men) are generally presented as quite sympathetic, if flawed, characters. On the one hand, Patterson presents them as unique, each one something of a stock-market superman. On the other hand, they remain human, all too human. </p>
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<a href="https://images.theconversation.com/files/537644/original/file-20230717-96368-wo8n77.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/537644/original/file-20230717-96368-wo8n77.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/537644/original/file-20230717-96368-wo8n77.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=918&fit=crop&dpr=1 600w, https://images.theconversation.com/files/537644/original/file-20230717-96368-wo8n77.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=918&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/537644/original/file-20230717-96368-wo8n77.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=918&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/537644/original/file-20230717-96368-wo8n77.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1153&fit=crop&dpr=1 754w, https://images.theconversation.com/files/537644/original/file-20230717-96368-wo8n77.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1153&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/537644/original/file-20230717-96368-wo8n77.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1153&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Patterson not only renders the work of finance high-flyers as understandable as possible to the layperson, he makes them relatable as human beings. They were horrified by the carnage around them, but carried on with the job of buying and selling stocks and bonds to cash in on the catastrophe. </p>
<p>Chaos kings is the name Patterson gives these people, because they thrive on disaster, exploiting it to beat the financial markets they play in. Masculinity comes out in full force as the kings strive to be the best and the smartest, as if literally vying for position of finance monarch. </p>
<p>They are the “winners” determined to be the biggest dogs in the pack, but theirs is not a masculinity of brute force. It is that of unbridled free-market competition. This competition is revealed as an almost infinitely larger version of the school playground where boys jostle for pole position in childish games, the consequences of which are far from childish. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/could-better-regulation-reconcile-trading-and-ethics-180442">Could better regulation reconcile trading and ethics?</a>
</strong>
</em>
</p>
<hr>
<h2>The COVID casino</h2>
<p>In the pages of Patterson’s book, we meet colourful characters from up and down Wall Street who closely studied the illness and death spawned by COVID as it spread around the world. They worried about the pandemic; they were concerned about how government could control it. But most of all, they were “the smartest guys in the room”, who used it for their own financial gain.</p>
<p>Nassim Taleb, Bill Ackman, Yaneer Bar-Yam, Mark Spitznagel – these are not household names. But they all won big in the pandemic casino by operating as crisis-hunting “stock market visionaries”. </p>
<p>Theirs was not a random spin on the roulette wheel, but the calculated bluffing of the seasoned poker player. With inestimable grace under pressure, they were hellbent on recognising the “black swan” of unpredictable events like the pandemic, using that recognition to make counter-intuitive trading decisions and stay ahead of the game. </p>
<p>Patterson’s chaos kings succeeded because they had the courage to defy conventional wisdom. A combination of maverick intelligence and steely nerve saw them consolidating while others diversified, buying while others sold, taking risks while others played it safe. Above all, they were cool while those around them panicked. </p>
<p>Others saw the pandemic as a “dragon king”: a rare and powerful event that leads to disastrous outcomes. The trick was to see the dragon coming before anyone else, and to outsmart it for one’s own benefit. </p>
<p>The Wall Street winners moved early, capitalising on the uncertainty. They gained early and special knowledge of the pandemic to outsmart their rivals. Their arsenal of techniques included theoretical sophistication, savant-like mathematical skills, and a deep yet unconventional understanding of markets. </p>
<p>The investors who failed to capitalise on chaos were wracked with envy – jealous they did not have the skills, nerve or knowledge to make the same bets. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/538442/original/file-20230720-23-5dabfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/538442/original/file-20230720-23-5dabfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/538442/original/file-20230720-23-5dabfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/538442/original/file-20230720-23-5dabfx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/538442/original/file-20230720-23-5dabfx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/538442/original/file-20230720-23-5dabfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/538442/original/file-20230720-23-5dabfx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/538442/original/file-20230720-23-5dabfx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The New York Stock Exchange, where the ‘chaos kings’ exploited the uncertainty of the pandemic.</span>
<span class="attribution"><span class="source">Wikimedia Commons</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<h2>On the doorstep of doom?</h2>
<p>Many of the chaos kings were schooled in crisis profiteering during the 2008 Global Financial Crisis. They learned, too, from the 1987 Black Monday crash. But those events were small-time in comparison to what was happening in 2020. </p>
<p>COVID offered an opportunity of unprecedented proportions, and the chaos kings looked at it as having even more potential upside than the Wall Street crash that spawned the great depression in the 1930s – upside for them, at least, as they were able to win while everyone else was losing. </p>
<p>A times, Patterson’s storytelling takes on the character of well-written objective reportage. But his book also reads, in some ways, like a set of interconnected fictional short stories, filled with thrilling twists, turns and revelations. </p>
<p>The plots err towards being heroic, Odyssean even. Tale after tale is recounted about the up-and-down adventures of the chaos kings, who prance around the world’s stage, from New York to London and Davos, and beyond. The Wall Street protagonists undertake epic journeys, fight mythical beasts and weather calamitous acts of nature, only to return home stronger and richer men. They are the financial victors in a world of losers. </p>
<p>But Chaos Kings is not fiction and Patterson does not entirely accept his own heroic narrative. He also alerts us to its tragic side, its pathos even. Beyond any putative heroism, Patterson appears keenly aware that making heroes out of a small handful of financial winners offers no salvation for the victims of the catastrophe. </p>
<p>He ends pessimistically, stating that we remain on the “doorstep of doom”. Between the pandemic, the climate crisis and the increasingly unpredictable geopolitics represented by the Russian invasion of Ukraine, Patterson seems resigned to our dismal collective fate. He is a keen observer of the world, deftly recording its demise with precision and panache. </p>
<p>Chaos Kings provides a superb, if harrowing, account of people who profit from catastrophe and the broken lives of people they will never meet or see. These are “crisis hunters” who hide behind cold computer screens, playing with other people’s lives as if they were meaningless pieces in a parlour game for the wealthy elite. </p>
<p>Read it and weep.</p><img src="https://counter.theconversation.com/content/207311/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carl Rhodes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A new book exposes how the ‘chaos kings’ of high finance play with other people’s lives as if they were meaningless pieces in a parlour game for the wealthy elite.Carl Rhodes, Professor of Organization Studies, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2055112023-06-27T16:00:54Z2023-06-27T16:00:54ZWelsh mining towns had alternative currencies 200 years ago – here’s what the crypto world could learn from them<figure><img src="https://images.theconversation.com/files/532005/original/file-20230614-21-yyoovi.jpg?ixlib=rb-1.1.0&rect=0%2C28%2C2400%2C1156&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A halfpenny token issued by the Parys Mining Company of Anglesey in 1788. The hooded druid design was used for many years and was the first of hundreds of token designs.</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Conder_Token_1788_Anglesey_Halfpenny_DH275_composite.jpg">BrandonBigheart/Wikimedia</a></span></figcaption></figure><p><em>You can also read this article <a href="https://theconversation.com/dyma-beth-allair-byd-crypto-ei-ddysgu-or-arian-cyfredol-oedd-yn-cael-ei-dalu-i-weithwyr-yng-nghymru-canrifoedd-yn-ol-205424">in Welsh</a>.</em></p>
<p>The global cryptocurrency market has seen a number of recent setbacks: from the collapse of the <a href="https://www.ft.com/content/c10bc6f7-abbe-45dc-9367-042186c3336f">Terra/Luna system in May 2022</a> to the failure of <a href="https://www.ft.com/content/913ff750-d1f4-486a-9801-e05be20041c1">FTX</a>, one of the largest crypto exchanges in the world. </p>
<p>Because of these factors, and other concerns over cryptocurrencies’ <a href="https://ccaf.io/cbnsi/cbeci/ghg">carbon emissions</a>, these assets <a href="https://www.bloomberg.com/news/articles/2022-09-30/does-crypto-owe-anyone-an-apology-after-2-trillion-of-losses">lost US$2 trillion in value</a> (£1.5 trillion) in 2022.</p>
<p>But while cryptocurrencies get a lot of attention today, in some ways they are not a revolutionary concept. Hundreds of years ago, workers in Wales were often paid with alternative currencies instead of money.</p>
<p>These currencies were physical tokens that represented and were linked to the value of real money. Many cryptocurrencies work in a similar way, acting as digital tokens that <a href="https://www.oecd.org/finance/The-Tokenisation-of-Assets-and-Potential-Implications-for-Financial-Markets-HIGHLIGHTS.pdf">represent a ledger of financial assets</a> (this is known as “tokenisation”).</p>
<p>Digital currencies are also not reliant on any central authority, such as a <a href="https://www.bloomberg.com/opinion/articles/2021-03-15/cryptocurrencies-are-rising-so-are-the-stakes-for-governments">government or bank</a>, to uphold or maintain their network of exchange. Again, this is similar to how physical tokens were used by Welsh mining companies. </p>
<h2>Currency crisis</h2>
<p>Towards the end of the 18th century the coinage of Britain was in a deplorable state due to the severe <a href="https://coinsandhistoryfoundation.org/2021/07/13/eighteenth-century-britain-coinage-in-crisis/#:%7E:text=The%20production%20of%20silver%20coins,of%20coins%20made%20from%20it.">shortages</a> of silver and copper coins. During the Industrial Revolution people migrated from the countryside into mining and manufacturing centres. But living in towns required money, and the ability to pay wages was impossible for businesses without small change. </p>
<p>With an influx of new workers using money, new shops were opened to meet demand, creating more jobs that required payment in coins. Although the production of counterfeit coins was illegal and <a href="https://www.jstor.org/stable/4091719">punishable by death</a>, it was not illegal to produce tokens with other designs which could be used instead of coins. </p>
<p>The first great era of token production during the <a href="https://education.nationalgeographic.org/resource/industrial-revolution-and-technology/">first Industrial Revolution</a> began in 1787 with the issue of the <a href="https://www.britishmuseum.org/collection/term/BIOG214134">Parys Mining Company</a> token. This company mined at Parys Mountain on the Welsh island of Anglesey. It briefly produced more copper than any other mine in the world during the Industrial Revolution. </p>
<figure class="align-center ">
<img alt="A quarried landscape of brown and orange earth." src="https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531672/original/file-20230613-15-vt2pzd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">What Parys mountain on Anglesey looks like today.</span>
<span class="attribution"><a class="source" href="https://pixabay.com/photos/anglesey-parys-mountain-wales-3816220/">rhianjane/Pixabay</a></span>
</figcaption>
</figure>
<p>It also used the high-quality ore from its mine to produce tokens which could be exchanged for official coin at full value at any one of its shops or offices. This made the Parys Mining Company the first company in the world to issue tokens. These were described as the “<a href="http://provincialtokencoinage.weebly.com">premier tokens</a>” of the 18th century by that era’s coin experts.</p>
<p>Soon, practically every town in Britain was producing its own tokens. This was driven in part by a shortage of government coinage and improvements in coin manufacturing by <a href="https://globalcapitalism.history.ox.ac.uk/files/case28-matthewboultonscoinspdf">Matthew Boulton’s Soho Mint</a> in Birmingham, who also turned his hand to tokens. </p>
<p>By the turn of the 19th century, the total supply and fast circulation of tokens, foreign coins and other substitutes probably <a href="http://projects.exeter.ac.uk/RDavies/arian/welsh.html">exceeded</a> those of the official coin of the country.</p>
<p>The process of tokenisation was subsequently seen in other countries, in particular the United States. Mining and logging camps in the 19th century US were typically owned and operated by a single company, often <a href="https://www.jstor.org/stable/1992612">in remote</a> locations with poor access to cash. </p>
<p>These companies would often pay their workers in “scrip”, or tokens. The workers, given the limited places they could spend scrips, had little choice but to purchase goods at company-owned stores. By placing large mark ups on goods, the <a href="https://rethinkq.adp.com/artifact-coal-company-scrip-miners/">company</a> could increase their profits and enforce employee loyalty. </p>
<figure class="align-left ">
<img alt="A close up of a silver coin on a green background." src="https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=576&fit=crop&dpr=1 600w, https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=576&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=576&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=724&fit=crop&dpr=1 754w, https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=724&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/531992/original/file-20230614-19842-dbn8gn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=724&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A Parys penny produced by the Parys Mining Company.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Parys_Penny.jpg">Obscurasky/Wikimedia</a></span>
</figcaption>
</figure>
<p>While the production of tokens by the Parys Mining Company were spurred on by the first Industrial Revolution, the adoption and popularity of Bitcoin and other cryptocurrencies has been hastened by the <a href="https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/">fourth Industrial Revolution</a>.</p>
<p>Although they are more than 200 years apart, the history of these tokens have important lessons for today’s cryptocurrencies. First, for cryptocurrencies to succeed there needs to be various ways for individuals to accumulate the crypto/tokens, plus a demand and use for the crypto that means it holds its value, and trusted environments where exchange for goods and services can take place.</p>
<p>And second, for cryptocurrencies to be successful and sustainable in the long term they must uphold their original purpose of having an ecosystem that remains independent of a single company or government. Efforts to lock cryptocurrencies to a single organisation do not look positive, for example Facebook’s failed attempt to <a href="https://www.coindesk.com/layer2/2022/01/28/reflecting-on-facebooks-hilarious-well-deserved-crypto-failure/">launch a cryptocurrency</a>, announced in 2019. </p>
<p>The tokens of Welsh mining companies inherently failed when the closures of the mine or shops led to the removal of one or more of the three components of the ecosystem. And then people left with the tokens lost their money, a lesson for us today.</p><img src="https://counter.theconversation.com/content/205511/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A Welsh mining company was the first to issue tokens to workers as an alternative form of payment.Edward Thomas Jones, Senior Lecturer in Economics / Director of the Institute of European Finance, Bangor UniversityLaurence Jones, Lecturer in Finance, Bangor UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2081902023-06-26T14:00:35Z2023-06-26T14:00:35ZAfrica needs its own credit rating agency: here’s how it could work<figure><img src="https://images.theconversation.com/files/533431/original/file-20230622-17-t2nl2v.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Credit ratings are important for developing economies in Africa</span> <span class="attribution"><span class="source">Wikimedia Commons</span></span></figcaption></figure><p>The credit rating industry in Africa is dominated by the three international agencies: <a href="https://www.moodys.com/">Moody’s</a>, <a href="https://www.spglobal.com/ratings/en/">S&P</a> and <a href="https://www.fitchratings.com/">Fitch</a>. Together they control an estimated 95% of the credit rating business globally. </p>
<p>Credit rating agencies are institutions that assess a borrower’s creditworthiness in general terms, or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money – an individual, a corporation, a state or provincial authority, or a sovereign government. Investors use a credit rating to make decisions about risk and return. So the rating is required if an institution wants to raise funds on financial markets.</p>
<p>South Africa was the <a href="https://www.aprm-au.org/wp-content/uploads/2021/03/21-International-credit-rating-agencies-in-Africa-perceptions-trends-and-challenges.pdf">first African country</a> to receive a sovereign rating, in 1994. To date, <a href="https://www.aprm-au.org/wp-content/uploads/2021/03/21-International-credit-rating-agencies-in-Africa-perceptions-trends-and-challenges.pdf">32 African countries</a> have received a sovereign rating from at least one of the “big three” agencies. </p>
<p>But policy makers are increasingly <a href="https://au.int/en/pressreleases/20220208/aprm-denounces-moodys-inaccuracies-ghanas-rating-downgrade">dissatisfied</a> with their approach and methodology. Some of the criticisms are that agencies are <a href="https://myjoyonline.com/akufo-addo-takes-on-global-rating-agencies-describes-their-work-as-reckless">quick to downgrade African</a> countries but slow when upgrades are due; that they <a href="https://www.brookings.edu/wp-content/uploads/2021/10/21.10.07_Perception-premiums.pdf">fail to accurately account for risk perception</a>; that they don’t <a href="https://aprm.au.int/en/documents/2023-01-30/africa-sovereign-credit-rating-review-6th-edition">consult adequately with stakeholders</a>; and that they <a href="https://econpapers.repec.org/article/afjjourn4/v_3a7_3ay_3a2022_3ai_3a1_3ap_3a8-9.htm">lack independence and objectivity</a>. </p>
<p>A recent study by the <a href="https://www.undp.org/africa/publications/lowering-cost-borrowing-africa-role-sovereign-credit-ratings">UN</a> showed that subjective biases in credit ratings had cost African countries a <a href="https://www.undp.org/press-releases/more-objective-credit-ratings-could-save-billions-african-countries-development">combined US$74.5 billion</a>. This was through funding opportunities lost and excess interest paid on public debt.</p>
<p>Conditions are therefore ripe to advance the idea of establishing an African credit rating agency as a partial solution. <a href="https://financefeeds.com/chinas-new-credit-rating-agency/">China</a> has its own state-owned rating agency, Dagong Global Credit Rating Company. The Arab countries are also calling for their <a href="https://www.tradearabia.com/news/BANK_409480.html">own rating agency</a>.</p>
<p>As a <a href="https://www.linkedin.com/in/misheck-mutize-phd-68131a2a/?originalSubdomain=za">lead expert with the African Union</a> on ratings agencies, I can explain the framework this agency would operate in and why it makes business sense.</p>
<h2>African Union official decisions</h2>
<p>In March 2019, African Union (AU) ministers of finance and economy officially adopted <a href="https://au.int/en/documents/20190308/2019-stc-finance-monetary-affairs-economic-planning-and-integration">a declaration that such an institution was needed</a>. The AU also developed a proposal for the legal, financial and structural aspects of the rating agency. What’s not yet agreed is how the sustainability, credibility and independence of the agency will be achieved. But there is a way this could be achieved as I set out below.</p>
<p>The need for an African Rating agency has been <a href="https://www.africanews.com/2022/05/16/au-chair-wants-pan-african-financial-rating-agency//">reiterated</a> by the current Chair of the AU, President <a href="https://www.uneca.org/stories/eca%E2%80%99s-conference-of-ministers-%28com2022%29-kicks-off-in-dakar%2C-senegal">Macky Sall</a> of Senegal, and the Champion of the AU financial institutions, President <a href="https://au.int/en/pressreleases/20220720/ghana-supports-establishment-african-credit-rating-agency">Nana Akufo-Addo</a> of Ghana. They highlighted it as an important step towards intra-continental integration. It would also enable AU member states to access capital and integrate the continent with global financial markets.</p>
<h2>Institutional model</h2>
<p>When the AU establishes a new institution, it can be either:</p>
<ul>
<li><p>an organ of the union funded by its member states’ contributions, or</p></li>
<li><p>a self-funded autonomous specialised agency of the union. </p></li>
</ul>
<p>Because the credit rating business requires credibility and independence, the best option is the specialised agency. Examples already in operation are the <a href="https://www.afreximbank.com/">African Export-Import Bank</a> and <a href="https://www.arc.int/">Africa Risk Capacity</a> agency. </p>
<p>As an independent specialised agency of the AU, the agency would have diverse classes of shareholders. African governments could own it either directly or through their designated public institutions. Shareholding could include other smaller African-owned rating agencies, multilateral finance institutions and African national financial institutions.</p>
<p>As a financing structure, the agency would adopt the “issuer-pay” business model. The issuers of debt will pay the agency for rating its entity and products.</p>
<p>It would be fully funded by its shareholders and through loans from pan-African financial institutions. Multilateral development banks would either encourage or make it mandatory for their clients to have a rating from the African rating agency. Once this is done it should be able to sustain itself through revenue generated from its services. </p>
<p>As is the process in the AU, the African rating agency would be established through an agreement, signed by at least 10 member states. </p>
<h2>The business case</h2>
<p>There are still 22 African countries that have no credit ratings from the “big three” agencies. This will be a clear niche for the AU rating agency. </p>
<p>There is also tremendous value in the alternative rating sector, which cannot afford the cost of maintaining a rating from the “big three”. This includes small to medium enterprises, initial bond offerings and initial public offerings. The agency could also provide environmental, social and governance scores and foreign direct investment ratings. These rating services are urgently needed on the continent to complement governments’ efforts to support the development of domestic financial markets.</p>
<p>With the backing that comes from affiliation to the AU, the rating agency could secure substantial business in the ratings of domestic instruments that are aligned with the continent’s goals. </p>
<p>It would have the advantage of understanding the domestic context of Africa. So it could issue more informative and detailed ratings than those issued by the “big three”.</p>
<h2>Way forward</h2>
<p>The African Union is forging ahead with its plans to establish an African rating agency to complement the three dominant international agencies, and support the development of domestic financial markets in Africa. Although it will have to overcome challenges to gain investors’ support, there is a <a href="https://www.brookings.edu/wp-content/uploads/2016/07/04-foresight-capital-market-growth-songwe-1.pdf">huge appetite</a> for an alternative and complementary credit rating institution in Africa. Its success will be in developing a comprehensive methodology adapted to the African context, and resident analysts that understand the continent’s dynamics.</p><img src="https://counter.theconversation.com/content/208190/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Misheck Mutize is affiliated with the African Union as a Lead Expert on Credit Ratings</span></em></p>African states say a pan-African rating agency will enable them to access capital and integrate the continent with global financial markets.Misheck Mutize, Post Doctoral Researcher, Graduate School of Business (GSB), University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2055192023-06-01T12:30:26Z2023-06-01T12:30:26ZWar in Ukraine might give the Chinese yuan the boost it needs to become a major global currency – and be a serious contender against the US dollar<figure><img src="https://images.theconversation.com/files/528317/original/file-20230525-29-2upko8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">China and the U.S. compete to be the world's largest economy, but the dollar dominates the yuan as a currency.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/sino-us-trade-war-royalty-free-image/1216692156">peng song/Moment Collection/Getty Images</a></span></figcaption></figure><p>The Chinese economy’s sheer size and rapid growth are impressive.</p>
<p>China maintained one of the <a href="https://www.worldbank.org/en/country/china/overview#1">highest economic growth rates</a> in the world for more than a quarter of a century, helping lift <a href="https://www.worldbank.org/en/news/press-release/2022/04/01/lifting-800-million-people-out-of-poverty-new-report-looks-at-lessons-from-china-s-experience">over 800 million people</a> out of poverty in just a few decades. The country is the <a href="https://wits.worldbank.org/CountrySnapshot/en/CHN">largest exporter in the world</a> and the most important trading partner of Japan, Germany, Brazil and many other countries. It has the <a href="https://www.imf.org/external/datamapper/NGDPD@WEO/OEMDC/ADVEC/WEOWORLD">second-largest economy</a> after the U.S., based on the market exchange rate, and the largest <a href="https://databankfiles.worldbank.org/public/ddpext_download/GDP_PPP.pdf">based on purchasing power</a>.</p>
<p>And yet the yuan still lags as a major global currency. The war in Ukraine, which started in February 2022, may change that. </p>
<p>As a <a href="https://www.loyola.edu/sellinger-business/faculty-research/directory/chuluun">professor of finance</a> and <a href="https://www.mheducation.com/highered/product/international-financial-management-eun-resnick/1264413092.html">expert on international finance</a>, I understand how this geopolitical conflict may put China’s currency on the next phase of its path to becoming a global currency – and prompt the onset of the decline of the U.S. dollar from <a href="https://www.bis.org/statistics/rpfx22_fx.htm">its current dominance</a>. </p>
<h2>Chinese yuan’s slow progress</h2>
<p>China has long wanted to make the yuan a global force and has mounted significant efforts to do so in recent years. </p>
<p>For example, the Chinese government <a href="https://www.reuters.com/article/uk-china-economy-yuan/china-launches-yuan-cross-border-interbank-payment-system-idUKKCN0S204320151008">launched the Cross-Border Interbank Payments System</a>, or CIPS, in 2015 to facilitate cross-border payments in yuan. Three years later, in 2018, it launched the world’s <a href="http://www.xinhuanet.com/english/2018-03/26/c_137065815.htm">first yuan-denominated crude oil futures contracts</a> to allow exporters to sell oil in yuan. </p>
<p>China has also emerged perhaps as the <a href="https://hbr.org/2020/02/how-much-money-does-the-world-owe-china">world’s largest creditor</a>, with the government and state-controlled enterprises extending loans to dozens of developing countries. And China is <a href="https://www.cnn.com/2023/04/24/economy/china-digital-yuan-government-salary-intl-hnk/index.html">developing a digital yuan</a> as one of the world’s first central bank digital currencies. Even the trading hours for the yuan were <a href="https://www.reuters.com/article/china-yuan-trading/update-1-china-to-extend-fx-market-trading-hours-to-further-internationalise-yuan-idINL1N33K0GJ">recently extended</a> on the mainland.</p>
<p>Thanks to these efforts, the yuan is now the <a href="https://www.bis.org/statistics/rpfx22_fx.htm">fifth-most-traded currency</a> in the world. That is a phenomenal rise from its <a href="https://www.bis.org/publ/rpfx02.htm">35th place in 2001</a>. The yuan is also the <a href="https://www.swift.com/our-solutions/compliance-and-shared-services/business-intelligence/renminbi/rmb-tracker/rmb-tracker-document-centre">fifth-most-actively used currency</a> for global payments as of April 2023, up from 30th place in early 2011. </p>
<p>Rankings can be misleading, though. The yuan’s average trading volume is still <a href="https://www.bis.org/statistics/rpfx22_fx.htm">less than a 10th</a> of the U.S. dollar’s. Moreover, almost all trading was against the U.S. dollar, with little trading against other currencies.</p>
<p>And when it comes to global payments, the actual share of the yuan is a <a href="https://www.swift.com/our-solutions/compliance-and-shared-services/business-intelligence/renminbi/rmb-tracker/rmb-tracker-document-centre">mere 2.3%</a>, compared with 42.7% for the dollar and 31.7% for the euro. The yuan also constituted <a href="https://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4">less than 3%</a> of the world foreign exchange reserves at the end of 2022, compared with 58% for the dollar and 20% for the euro.</p>
<figure class="align-center ">
<img alt="Two men shake hands in front of Russian and Chinese flags" src="https://images.theconversation.com/files/528318/original/file-20230525-27-sg2yw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/528318/original/file-20230525-27-sg2yw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=425&fit=crop&dpr=1 600w, https://images.theconversation.com/files/528318/original/file-20230525-27-sg2yw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=425&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/528318/original/file-20230525-27-sg2yw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=425&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/528318/original/file-20230525-27-sg2yw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=534&fit=crop&dpr=1 754w, https://images.theconversation.com/files/528318/original/file-20230525-27-sg2yw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=534&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/528318/original/file-20230525-27-sg2yw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=534&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Russian Prime Minister Mikhail Mishustin meets with Chinese President Xi Jinping in Beijing on May 24, 2023, with the two countries signing a new set of trade agreements.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/russian-prime-minister-mikhail-mishustin-meets-with-chinas-news-photo/1257684729">Alexander Astafyev/Sputnik/AFP</a></span>
</figcaption>
</figure>
<h2>US dollar’s dominance questioned</h2>
<p>The U.S. dollar has reigned supreme as the dominant global currency for decades – and concern about how that benefits the U.S. and potentially hurts emerging markets <a href="https://scholar.harvard.edu/gopinath/publications/dominant-currency-paradigm-0">is not new</a>. </p>
<p>The value of the <a href="https://www.reuters.com/markets/currencies/recession-worries-could-support-dollar-after-monstrous-2022-rally-2022-12-08/">U.S. dollar appreciated significantly</a> against most other currencies in 2022 as the Federal Reserve hiked interest rates. This had negative consequences for residents of almost any country that borrows in dollars, pays for imports in dollars, or buys wheat, oil or other commodities priced in dollars, as these transactions became more expensive. </p>
<p>After Russia invaded Ukraine in early 2022, the U.S. and its Western allies put sanctions on Russia, <a href="https://www.swift.com/news-events/news/message-swift-community">including cutting Russia’s access</a> to the global dollar-based payments system known as the Society for Worldwide Interbank Financial Telecommunication, or SWIFT. That clearly displayed how the dollar can be weaponized. </p>
<p>With Russia largely cut off from international financial markets, it stepped up its trade with China. Russia began <a href="https://www.cnn.com/2022/09/06/energy/china-russian-gas-payments-ruble-yuan/index.html">receiving payments for coal and gas in yuan</a>, and Moscow <a href="https://www.reuters.com/markets/currencies/permitted-share-chinas-yuan-russian-wealth-fund-doubled-60-finmin-2022-12-30/">increased the yuan holdings</a> in its foreign currency reserves. Russian companies like Rosneft <a href="https://www.rosneft.com/press/releases/item/212071/">issued bonds denominated in yuan</a>. According to Bloomberg, the yuan is now the <a href="https://www.bloomberg.com/news/articles/2023-04-03/china-s-yuan-replaces-dollar-as-most-traded-currency-in-russia">most-traded currency in Russia</a>.</p>
<p>Other countries took notice of Russia’s increasing use of the yuan and saw an opportunity to decrease their own dependency on the dollar.</p>
<p><a href="https://www.reuters.com/business/energy/bangladesh-pay-russia-yuan-nuclear-plant-2023-04-17/">Bangladesh is now paying Russia in yuan</a> for the construction of a nuclear power station. <a href="https://www.nasdaq.com/articles/china-completes-first-yuan-settled-lng-trade">France is accepting payment in yuan for liquefied natural gas</a> bought from China’s state-owned oil company. A Brazilian bank controlled by a Chinese state bank is becoming the first Latin American bank to <a href="https://www.bloomberg.com/news/articles/2023-03-30/brazil-takes-steps-to-transact-in-yuan-as-ties-with-china-grow#xj4y7vzkg">participate directly in China’s payments system, CIPS</a>. <a href="https://www.bloomberg.com/news/articles/2023-02-22/iraq-pivots-to-yuan-for-china-imports-in-defense-of-own-currency#xj4y7vzkg">Iraq wants to pay for imports from China in yuan</a>, and even Tesco, the British retailer, <a href="https://www.economist.com/leaders/2013/02/09/yuan-for-the-money">wants to pay for its Chinese imported goods in yuan</a>. </p>
<p>The combined dollar amount of these transactions is still relatively small, but the shift to yuan is significant.</p>
<h2>Yuan still not freely available</h2>
<p>China keeps <a href="https://www.safe.gov.cn/en/2023/0222/2067.html">a tight grip</a> on money coming in and out of the country. Such capital controls and limited transparency in Chinese financial markets mean China still lacks the deep and free financial markets that are required to make the yuan a major global currency. </p>
<p>For the yuan to achieve a truly global standing, it needs to be freely available for cross-border investment and not just serve as a payment medium to accommodate trade. </p>
<p>But the war in Ukraine may have just made it feasible for the yuan to eventually join the ranks of the dollar and the euro – even if the volume isn’t there yet. And any U.S. policy decisions that weaken the reputation and strength of U.S. institutions – such as <a href="https://theconversation.com/voters-want-compromise-in-congress-so-why-the-brinkmanship-over-the-debt-ceiling-206465">the recent drama over raising the debt ceiling</a>, which brought the government to the brink of default – will accelerate the rise of the yuan and decline of the dollar.</p><img src="https://counter.theconversation.com/content/205519/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tuugi Chuluun does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Despite China’s economic power, the yuan lags as a major global currency. Here’s why current US interest rates and sanctions on Russia may change that.Tuugi Chuluun, Associate Professor of Finance, Loyola University MarylandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2022122023-05-11T18:16:45Z2023-05-11T18:16:45ZThe triple challenge facing impact investments in the developing world<figure><img src="https://images.theconversation.com/files/525575/original/file-20230511-9582-efkzv2.jpeg?ixlib=rb-1.1.0&rect=0%2C22%2C1911%2C1310&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">By the end of 2020, the size of the impact investment market was estimated at US$715 billion.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/68751915@N05/6848822477">Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>The term <em>impact investing</em> first appeared in 2007 at a <a href="https://books.google.fr/books?hl=fr&lr=&id=LhxIwPYYhfEC">Rockefeller Foundation meeting</a>. It is defined as an investment with the intention of generating a <a href="https://www.jstor.org/stable/24703550">positive social and environmental impact</a> as well as a financial return.</p>
<p>Supported by powerful institutional actors at the international level (G8, OECD and UN), impact investing is growing. At the end of 2020, the size of the market was estimated at <a href="https://thegiin.org/research/publication/impinv-survey-2020/">US$715 billion</a> by the Global Impact Investing Network (GIIN), a network of actors considered to be a major player in the impact-investing ecosystem.</p>
<h2>A complex ecosystem</h2>
<p>Impact investors are generally divided into two main types: private impact investors (PIIs), which include foundations or third-party investors such as private equity funds, pension funds and other institutional investors, and development finance institutions (DFIs), which are government-backed financial institutions.</p>
<p>On the demand side, the actors are social enterprises, cooperatives, for-profit enterprises with a social mission and non-profit entities that require capital to develop from a social or environmental perspective. They range from <a href="https://sajbm.org/index.php/sajbm/article/view/1601">small to large entities</a>. For example, in the Philippines, many for-profit social enterprises are developing, such as <a href="https://fhmoms.com/">Filipina Home-based Moms</a>, an organisation that trains mothers in digital skills to help them prepare for online jobs. In another area, Futuristic Aviation and Maritime Enterprise is developing a transponder that tracks small fishing boats at sea to increase the safety of fishermen.</p>
<p>GIIN estimates that achieving the UN Sustainable Development Goals (SDGs) by 2030 in <a href="https://theconversation.com/fr/topics/pays-emergents-26780">emerging countries</a> will cost <a href="https://www.oecd.org/newsroom/Covid-19-crisis-threatens-sustainable-development-goals-financing.htm">about US$2.5 trillion per year</a>. Once reserved to the public sector, the area of social enterprise is now increasingly attracting private capital, enabling governments to make progress toward SDGs. </p>
<p>[<em>Nearly 80,000 readers look to The Conversation France’s newsletter for expert insights into the world’s most pressing issues</em>. <a href="https://theconversation.com/fr/newsletters/la-newsletter-quotidienne-5?utm_source=inline-70ksignup">Sign up now</a>]</p>
<p>Our recent <a href="https://books.google.fr/books?id=5nCVEAAAQBAJ&lpg=PA378">research</a> on emerging Asia details the key challenges impact investing still faces today if it is to be effective.</p>
<h2>First challenge: mitigating country risk</h2>
<p>An appropriate governance framework, including effective public administration, respect for the rule of law, low levels of corruption and transparency in business procedures, is necessary for impact investing to develop, as it helps to <a href="https://www.oecd-ilibrary.org/development/cooperation-pour-le-developpement-2016/investir-en-produisant-un-impact-social-dans-les-pays-en-developpement_dcr-2016-11-fr">reduce country risk for investors</a>.</p>
<p>The OECD proposes a framework as a tool for governments, and the first step is to define impact investing’s legal framework. For example, the Philippines and Thailand have done this by adopting a legal definition of social enterprises. In contrast, the Indonesian government’s failure to define impact investing may have been an obstacle to its development.</p>
<h2>Challenge two: developing non-financial intermediaries</h2>
<p>In order to achieve a mutual understanding between impact investing’s supply and demand sides, exchanges of knowledge and experience are essential to highlight what works and what does not and to ensure that appropriate incentives are in place on both sides.</p>
<p>On the demand side, investment funds, contract development and management skills support structures are increasingly used to support the emergence and growth of social entrepreneurs. In addition, there is a need for local enterprises to better understand the rules of the game. The exchange of good practice can be very helpful. This is why networks are essential to match supply with demand.</p>
<p>The <a href="https://avpn.asia/">Asian Venture Philanthropy Network</a> (AVPN) is a good example of such a network. There are also American accelerators such as Dao Ventures, or the <a href="https://www.rockefellerfoundation.org/blog/social-impact-investing-china-tipping-point">Rockefeller Foundation</a>.</p>
<h2>Challenge 3: Measuring non-financial impact</h2>
<p>Evaluating the impact is difficult both in terms of measurement and in terms of impact-investing data. Some of these difficulties are not new. The social impact of microfinance has been the subject of much <a href="https://researchportal.bath.ac.uk/en/publications/what-is-the-evidence-of-the-impact-of-microfinance-on-the-well-be">debate</a>. Some progress has been made in this area with the development by the GIIN of the Impact Reporting and Investment Standards (IRIS), a catalogue of <a href="https://www.inclusivebusiness.net/ib-knowledge/ib-choice/enquete-annuelle-2018-sur-les-investisseurs-impact">performance metrics</a> used by impact investors to measure the social returns of their investments.</p>
<p>These metrics are one of the first tools for investors to measure and compare across investments or portfolios. There are also alternatives such as the Acumen Fund’s Lean Data methodology. However, there is <a href="https://journals.sagepub.com/doi/abs/10.1177/1098214018779141">consensus</a> about the many limitations of existing measurement devices.</p>
<h2>Specific approaches</h2>
<p>The same issues that are at stake in developed countries – standardisation of procedures, transparency, the danger of “impact-washing” – also exist in emerging countries but with some specificities.</p>
<p>First, standardisation must be tempered by the need for specific (local and idiosyncratic) approaches. Otherwise, it can impose on companies approaches that do not allow for proper development management and are resource intensive.</p>
<p>Second, the challenges of transparency need to be balanced against the issue of political power, as the challenges of transparency differ between democratised and non-democratised countries. The challenge of measuring impact concerns all countries, but in a sense it is accentuated for emerging countries because of the inadequacy of information systems and because social impact is more important than environmental impact and the difficulties of measurement are more numerous.</p><img src="https://counter.theconversation.com/content/202212/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Les auteurs ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur organisme de recherche.</span></em></p>The development effectiveness of these investments could be enhanced by, among other things, greater transparency or better impact measurement.Emmanuelle Dubocage, Professeur des Universités en finance, Directrice du laboratoire IRG, Université Paris-Est Créteil Val de Marne (UPEC)Evelyne Rousselet, Maître de conférences, Université Gustave EiffelLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1994742023-02-23T06:15:25Z2023-02-23T06:15:25ZClass and the City of London: my decade of research shows why elitism is endemic and top firms don’t really care<p>During the COVID pandemic, as most wages <a href="https://commonslibrary.parliament.uk/what-happened-to-wages-in-the-coronavirus-pandemic/#:%7E:text=Since%20November%202020%2C%20wages%20have,November%202020%20and%20December%202021.">stagnated</a>, workers in the City of London were enjoying <a href="https://www.theguardian.com/business/2022/jun/11/what-cost-of-living-crisis-bumper-executive-bonuses-make-a-comeback">bumper pay packets</a>. Average partner salaries in one corporate law firm <a href="https://www.thetimes.co.uk/article/lawyers-lead-the-way-as-million-pound-salaries-rain-down-on-the-city-rdmxjfs67">exceeded £2 million</a> for the first time. Investment bankers received their <a href="https://www.theguardian.com/business/2022/feb/16/weve-had-a-run-on-champagne-biggest-uk-banker-bonuses-since-financial-crash">highest bonus payouts</a> since 2008.</p>
<p>City bosses have long justified these exceptional rewards by claiming that they are available to anyone with sufficient intellect and willingness to work hard – regardless of their gender, ethnicity or social class. In the <a href="https://www.goldmansachs.com/our_firm/investor_relations/financial_reports/annual_reports/2003/pdf/GS03AR_businessprncples.pdf">words of Goldman Sachs</a>, one of the City’s most iconic players:</p>
<blockquote>
<p>Advancement depends on merit … For us to be successful, our people must reflect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional; it is what we must be.</p>
</blockquote>
<p>But studies tell a different story about the City of London’s culture and demographics. In October 1986, the “<a href="https://en.wikipedia.org/wiki/Big_Bang_(financial_markets)">Big Bang</a>” – the name given to the sudden deregulation of financial markets to enhance London’s status as a global financial centre – was also supposed to signal the creation of a new, <a href="https://www.bbc.co.uk/news/business-37751599">more egalitarian</a> City. Yet four decades on, <a href="https://www.thebridgegroup.org.uk/news/partner-law">research</a> <a href="https://static1.squarespace.com/static/5c18e090b40b9d6b43b093d8/t/5f6c69ea4d0d1b29037581f3/1600940523386/BG_SEB_Partner_Law_Sep2020_SUMMARY_FINAL.pdf">shows</a> that more than half of all partners at the leading law firms are white, male and privately educated, while more than 90% of bosses at eight top financial service firms are from society’s most privileged backgrounds – a demographic that comprises just over 30% of the entire UK population.</p>
<p>I began <a href="https://www.researchgate.net/publication/293014505_Understanding_social_exclusion_in_elite_professional_service_firms_field_level_dynamics_and_the_%27professional_project">researching</a> this <a href="https://bristoluniversitypress.co.uk/highly-discriminating">issue</a> more than ten years ago, after briefly working in business development for a City law firm. Despite being appointed in almost equal numbers to men, women were significantly under-represented at the firm’s senior levels, comprising fewer than 20% of its partners. There was also a striking lack of ethnic diversity among all staff, and it was especially rare to see any black lawyers.</p>
<p>Soon after I joined, I was offered a session with a style consultant who, my manager explained, would help me appear “more professional”. The consultant’s primary advice was to wear more make up and put on skirt-suits.</p>
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<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption"></span>
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<p><strong><em>This article is part of Conversation Insights</em></strong>
<br><em>The Insights team generates <a href="https://theconversation.com/uk/topics/insights-series-71218">long-form journalism</a> derived from interdisciplinary research. The team is working with academics from different backgrounds who have been engaged in projects aimed at tackling societal and scientific challenges.</em></p>
<hr>
<p>In any industry where people are regularly spotlighted as a firm’s most important resource, hiring staff for any other reason than their ability might appear to make little sense. In the City, however, white middle-class men have always been particularly valued for other qualities.</p>
<p>Consider this exchange I had with asset manager Toby* in 2019. I started by asking on what basis his clients selected their financial advisers, to which he replied: “They have expectations of meeting people with expertise, really.”</p>
<p>But when I asked how they assess this expertise, Toby said it was “a difficult question”:</p>
<blockquote>
<p>I think they’re choosing us basically on whether they like the sound of us or the look of us. Most of our sales force is [made up of] white, middle-class males … Let’s try a thought experiment. If we turned up with, I don’t know, a black woman and a white bloke, but a bit spivvy with an Essex accent … Yeah, I don’t know. I really don’t know. God, that sounds really bad.</p>
</blockquote>
<p>Many City executives have told me that a certain type of “social ease”, often cultivated at private schools, allows colleagues to get away with bullshit and bluff. Or as one senior executive at a FTSE 100 firm put it:</p>
<blockquote>
<p>We all know that people with the right accent and mannerisms … sound much more believable. Equally, I want to say that we can see through that – but the truth is, we can’t.</p>
</blockquote>
<h2>‘We give the jobs to other posh people’</h2>
<p>Many of my interviews were conducted in the late 2010s, a time when “diversity and inclusion” was a buzz phrase among elite City firms. I was keen to find out how serious these firms – spanning finance, legal services, management consulting, accounting and auditing – were about changing the social makeup of their staff, particularly those earning the biggest bucks.</p>
<p>Prestigious City firms, some with billion-pound revenue streams, have long tried to position themselves as “<a href="https://www.ft.com/content/376f3374-cf1e-4923-8c24-e4dbafe70b6d">money meritocracies</a>”, where success and promotion is based purely on an employee’s performance and the profits they generate.</p>
<p>Privately, however, City insiders I spoke to repeatedly blamed deviations from this rule on outright favouritism. One hedge fund manager, Michael, confided: “It’s easy to explain. Basically, we give the top jobs to other posh people who are our mates.”</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Four white men in suits walking away from the camera" src="https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Businessmen in the City of London financial district.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-20-april-2019-business-1822728791">I.R. Stone/Shutterstock</a></span>
</figcaption>
</figure>
<p>Investment manager James said that frequently, recruitment and promotion “becomes a subjective call”, at which point decision-makers typically revert to type. I asked him what “type” that might be:</p>
<blockquote>
<p>Myself … I’m already doing that role and I know what I’m doing. Therefore, I’m more likely to go towards the sort of people who are like I am, which is why you end up with the stereotypical male – mid-40s, white. It’s why the profession’s full of them.</p>
</blockquote>
<p>To date, efforts to diversify according to gender and ethnicity appear to have had very limited results. In 2014, <a href="https://www.suttontrust.com/our-research/pathways-banking-education-background-finance/">The Sutton Trust</a> found that within <a href="https://www.theglobalcity.uk/financial-professional-services">financial services</a>, more than 60% of bosses educated in the UK had attended private schools, as opposed to just 7% of the population at large. And despite many interventions designed to improve representation of women at senior levels, a <a href="https://www.fnlondon.com/articles/under-10-of-top-city-dealmakers-are-women-its-still-very-testosterone-fuelled-20200810">2020 study</a> of the City’s top “deal-makers” in investment banks found that less than one in ten were women.</p>
<p>I believe that City firms’ efforts to become more diverse and inclusive, and to deliver more equal representation at the top, have not worked <em>because they were never meant to</em>. Instead, they are a form of “reputation laundering”, offering only the illusion of change in order to protect their privileges and rewards. This conclusion is based on my interviews with more than 400 City leaders and workers – among them diversity experts and human resource managers charged with trying to change the culture of this rarefied world.</p>
<h2>The phoney ‘war for talent’</h2>
<p>Class-based recruitment strategies are perceived to offer City firms certain benefits – in particular, sustaining the impression of status and prestige to competitors, clients, potential colleagues and even policymakers. This in turn helps justify the high fees they charge, and the exceptional profits they generate.</p>
<p>Defining employee “talent” in narrow terms creates an artificial impression of scarcity in available skills. At entry level, City firms battle to attract graduates from the UK’s most elite universities. This “war for talent” is largely phoney – in reality, the skills the firms need are available from a much wider cohort of graduates – but it has helped convince both City firms and clients of these employees’ exceptional worth.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Three Black men in suits chatting outside an office building" src="https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=406&fit=crop&dpr=1 600w, https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=406&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=406&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=510&fit=crop&dpr=1 754w, https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=510&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=510&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Non-white employees are typically much less likely to reach client-facing executive roles.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-20-april-2019-business-1819187273">I.R. Stone/Shutterstock</a></span>
</figcaption>
</figure>
<p>This narrative was invoked in the wake of the 2008 financial crisis when, despite being closely implicated in this catastrophic collapse, <a href="https://www.ft.com/content/d4f02d66-1d84-11e0-a163-00144feab49a">top bankers argued</a> against punitive regulation on the basis that it would drive “scarce” UK financial talent <a href="https://www.newstatesman.com/politics/2011/06/banks-threats-tax-government">to other countries</a>. More recently, it was used to justify the <a href="https://www.theguardian.com/business/2022/oct/14/bankers-bonuses-double-since-2008-crash-tuc-study-finds">very large bonuses</a> paid out to UK bankers in 2022 amid the growing cost of living crisis.</p>
<p>One law firm partner explained why his firm preferred to appoint “polished” candidates from elite universities, in preference to the very best who might be educated elsewhere:</p>
<blockquote>
<p>From a business perspective, you can’t afford to have people in meetings who will not look good to the clients, [even if] some might be very, very bright.</p>
</blockquote>
<p>In part, this can be explained by City managers adopting a risk-averse strategy to recruitment. In the context of a considerable oversupply of job applications, a “good” degree from an “elite” university acts as an easy signal of probable competency. As asset manager Reena explained:</p>
<blockquote>
<p>If we hire somebody from a completely different background and they don’t work out, the person who hires them is going to look like a fool. [Whereas] if we continue to hire the exact same type of person – the Oxbridge-educated white male, for argument’s sake – and that person doesn’t work out, which often happens, nobody will blame the hiring manager for making that decision.</p>
</blockquote>
<p>Leigh, a former <a href="https://www.investopedia.com/terms/t/trader.asp#:%7E:text=A%20trader%20is%20an%20individual,the%20person%20holds%20the%20asset.">City trader</a>, describes himself as a working-class “<a href="https://en.wikipedia.org/wiki/Barrow_boy">barrow boy</a>”. He said that following the Big Bang in 1986, the City’s banks all started saying they had to recruit “only the best” university students:</p>
<blockquote>
<p>They came from Oxford or Durham or wherever – anywhere that looked good and if they could bullshit their way in … Some of them were good, but not all. They’d come in as graduates and have to learn on the job, but they had no common sense.</p>
</blockquote>
<p>This is not to say that the City has no diversity at all. But demographics differ between job roles, and class differences are most tolerated in more technical or “quantitative” roles such as trading, where performance can be more objectively measured and perceived success does not depend on personal relationships with clients. However, even these roles remain dominated by men, while diversity is considerably more likely in less prestigious and often lower-paid <a href="https://www.investopedia.com/terms/m/middleoffice.asp#:%7E:text=What%20Is%20the%20Middle%20Office,technology%20(IT)%20as%20well.">middle</a>- and <a href="https://www.investopedia.com/terms/b/backoffice.asp#:%7E:text=What%20Is%20Back%20Office%3F,%2C%20accounting%2C%20and%20IT%20services.">back-office</a> jobs.</p>
<h2>The City’s way of ‘doing diversity’</h2>
<p>In the early 2010s, when diversity and inclusion agendas were still quite new, Liam, a black corporate lawyer, sounded somewhat cynical when I spoke to him about the sincerity of these strategies:</p>
<blockquote>
<p>Their dream scenario is to try and find a nice, uncontroversial way to try and ‘do diversity’ without having to change much of anything else.</p>
</blockquote>
<p>Several years after that, Gus, a partner at one of the “big four” accountancy firms, reflected on why they had adopted these diversity agendas:</p>
<blockquote>
<p>Why does anything like this become popular? I guess we were quite influenced by what other firms were doing around the same time – and that’s probably still true today … It was just the buzz in the City at the time.</p>
</blockquote>
<p>While some firms have made efforts to become more diverse in their higher-profile, client-facing and revenue-generating jobs, when it comes to social class the focus has largely been on access rather than career progression. Thousands of young people, generally aged between 16 and 21 and from working-class backgrounds, have taken part in these <a href="https://www.researchgate.net/publication/350590737_Organisational_Social_Mobility_Programmes_as_Mechanisms_of_Power_and_Control">social mobility programmes</a> – often conducted with charities such as the Social Mobility Foundation, UpReach, the Sutton Trust and the City Brokerage.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/londons-skyscrapers-tell-a-rich-story-about-the-citys-worship-of-finance-69743">London's skyscrapers tell a rich story about the City's worship of finance</a>
</strong>
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<p>This seems positive and in one sense it is. I have interviewed several hundred of these students as they aim to secure a career in investment banking or with other financial and professional service firms. Many described these opportunities as “life changing”, telling me uplifting stories of their experiences as they first engaged with the City – sometimes while still at school.</p>
<p>Aspirant banker Max explained how everything about the City seemed to him “oversized” – from the office buildings to the furniture that fills them:</p>
<blockquote>
<p>I mean, you’re in this massive building with these massive tables and chairs, and really awesome decor and art, and there’s people who are really well spoken and really professional in their suits.</p>
</blockquote>
<p>Rahul sounded similarly awestruck as he described how growing up, he had seen the City from a distance but never expected to find himself there:</p>
<blockquote>
<p>My father was a greengrocer. We used to go to the market and [on the way] we’d be able to see the City … I used to literally stand and stare over and imagine what it would be like to be there. To fast-forward a couple of years and be able to be at the [bank’s] office was quite amazing.</p>
</blockquote>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Skyscrapers in the City of London" src="https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The City of London skyline: ‘I used to stand and stare …’</span>
<span class="attribution"><a class="source" href="https://pixabay.com/photos/skyline-london-financial-district-4587051/">Waid1995/Pixabay</a></span>
</figcaption>
</figure>
<p>Participants of these schemes were frequently told that, given the City’s “meritocratic culture”, they should have high expectations of getting in. As Emily put it: “They say all the time: it doesn’t matter who you are, you can do anything as long as you work hard enough.”</p>
<p>Sam described having learnt that: “Anybody could become the CEO of a major bank. It’s just all about sacrifice … To do well, to rise up the ranks, it’s definitely the people that are the hardest working.”</p>
<p>Yet the reality for these working-class interns could soon feel very different. On entering mainstream graduate recruitment programmes, some told me they quickly discovered that “merit is a myth”. When we spoke in 2019, bank intern Mishal, a black woman in her early twenties from a working-class background, described her experience in visceral terms:</p>
<blockquote>
<p>What those people have been telling you [about diversity] is just the corporate crap that everybody vomits from their mouths … If you’d interviewed me [before] I probably would have said all those things. But now that I’ve actually been in a bank and seen it – I kept saying to my friends over the summer: “I have been sold dreams.”</p>
</blockquote>
<p>Mishal’s disillusionment was striking. “[They’ve] told me one thing and then I’ve come in and it’s a complete opposite other thing,” she complained. “Your motivation has to be so strong, because everything they tell you turns out not to be true.”</p>
<p>Some of the interns I met felt very self-conscious of their “different” appearance and demeanour, compared with the image that is so carefully cultivated by these City firms. Kasia described one of her encounters during an internship at an investment bank:</p>
<blockquote>
<p>My team had sent me to a meeting with about 40 white, middle-aged men. There was not a single female in the room … No one was below 35, 40 years old … I was just trembling with fear – like, I’m not valuable in this room.</p>
</blockquote>
<p>Many interns said they felt strong pressure to assimilate while navigating sometimes hostile and frightening cultures. Kasia described making efforts to change her look and accent, adding:</p>
<blockquote>
<p>I don’t want to be viewed as a social experiment who’s come, like, from the street … I want to be judged based on my abilities.</p>
</blockquote>
<p>Young people like Kasia and Mishal are far from victims and would not wish to be seen as such – although neither went on to be offered a graduate job. However, it is clear that for some young interns, assimilation into the City of London is impossible – especially where class intersects with ethnicity.</p>
<p>Nor are these problems restricted to entry-level recruitment, as evidenced by lower retention rates and slower career progression for those who are employed. A <a href="https://static1.squarespace.com/static/5c18e090b40b9d6b43b093d8/t/5fbc317e96e56f63b563d0f2/1606168962064/Socio-economic_report-Final.pdf">2020 study</a> of eight major financial services firms found that employees from less privileged backgrounds took 25% longer to progress, despite no evidence of poorer performance. Describing how your educational background can cast a shadow over a whole career, asset manager Euan told me, only half-jokingly: “It’s like if you went to an ex-poly – in the City that comes with a lifetime of shame!”</p>
<p>Tanya, a black woman working for a City finance firm, graduated from a leading <a href="https://russellgroup.ac.uk/about/">Russell Group university</a> but still described the barriers – some blatant, others more subtle – that she felt had delayed her career progression within the firm:</p>
<blockquote>
<p>It’s difficult to exactly know the impact because a lot of it’s quite subtle. But I’m always, always focusing on creating the right impression, the right amount of assertiveness … It’s exhausting and there’s less energy to focus on work. But you never want to come across as the “angry black woman”, so even when there is more blatant discrimination, it’s too dangerous to complain.</p>
</blockquote>
<h2>The myth of merit</h2>
<p>Many people are taken in by the City’s “myth of merit” – not least some of its top bosses, who prefer to believe their own positions are based on exceptional talent and hard work, rather than any inherited privilege. Attempts I have made to question this narrative, both during informal conversations and formal interviews, have sometimes met with robust responses. As corporate lawyer Kris said when we spoke a few years ago:</p>
<blockquote>
<p>I came from a relatively humble background myself and I got into the system … I think they would be quite offended if you said the major City firms were unmeritocratic. I would be offended.</p>
</blockquote>
<p>And indeed, some working-class figures have acquired legendary status. In his <a href="https://www.theguardian.com/books/2010/jan/30/city-london-david-kynaston">biography of the City of London</a>, historian David Kynaston profiles several, including John Hutchinson – a “brash whiz-kid” who took on a key role trading gilts at <a href="https://www.nytimes.com/1986/09/28/business/merrill-lynch-s-london-blitz.html">Merrill Lynch</a>. Playing up the successes of such figures has helped to support the City’s meritocratic narratives.</p>
<p>The emphasis on merit also helps cement the impression that these firms are engaged in highly complex work that only the very smartest people can do. In her <a href="https://www.dukeupress.edu/liquidated">superlative work</a> exploring the City’s US equivalent, Wall Street, anthropologist Karen Ho shows how this exaggerated narrative helped situate investment bankers as the epitome of control and technical competency, offering them a “naturalised” right to their place near the top of the social order – both in terms of earnings and status.</p>
<figure>
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<figcaption><span class="caption">The Big Bang in 1986 changed the culture of the City – but its elitist image has endured despite calls for change.</span></figcaption>
</figure>
<p>Similarly, in London since the <a href="https://www.bbc.co.uk/news/business-37751599">Big Bang</a>, a discourse of “smartness” (of intellect) has become central to the image of investment bankers and other City professionals. This means financial rewards which far outstrip most other sectors’ pay levels can be justified on the basis that they are fairly allocated to “only the brightest and best”.</p>
<p>Many City workers <em>are</em> exceptionally qualified and also very bright. By the 2010s, new entrants to investment banks in the UK were typically among the top 1% of performers in A-levels or equivalent. Corporate lawyer, Rob, explained that while in the old days “it didn’t really matter if you were a bit dim”, the <a href="https://www.independent.co.uk/news/business/analysis-and-features/the-day-big-bang-blasted-the-old-boys-into-oblivion-422005.html">arrival of the American banks</a> in the wake of the Big Bang led to a more “intensive, more competitive style of work … more of a meritocracy”.</p>
<p>However, the City’s highly remunerated jobs are still overwhelmingly done by white men who have benefited from a private school education – the children of the affluent middle and upper classes. Furthermore, if any unfair recruitment practices or treatment of employees come to light, City firms typically employ the shield of “<a href="https://www.nytimes.com/2019/11/20/style/diversity-consultants.html">unconscious bias</a>” to explain away any discrepancies in staff makeup or treatment.</p>
<p>This response can suggest a sort of “no-fault discrimination” where since everybody is to blame, nobody is. Some academics <a href="https://scholar.harvard.edu/iris_bohnet/what-works">argue</a> that putting a heavy focus on unconscious bias reflects a misguided, highly individualised response to what is actually a systemic, structural problem.</p>
<p>But in the City of London, my research shows that discrimination is also, in part, a conscious choice that offers systematic advantages for more privileged groups – while supporting an image of “desirable elitism”. And where this is the case, City firms prefer us to look away.</p>
<figure>
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<figcaption><span class="caption">Ian Clarke came through HSBC’s management training scheme in 2008, but resigned from his job in global sales in 2021 after writing a report about the bank’s lack of diversity.</span></figcaption>
</figure>
<p>Investment banks are characterised by opacity and secrecy – sometimes justified by their need to to maintain a “competitive advantage”. But the related use of <a href="https://en.wikipedia.org/wiki/Non-disclosure_agreement">non-disclosure agreements</a> for employment contracts has meant that many discrimination cases involving City firms have never seen the light of day.</p>
<p>Where this was not the case, legal actions and tribunals have periodically shed light on instances of <a href="https://www.cnbc.com/2022/03/17/london-insurance-firm-fined-1-million-over-bullying-sexual-harassment.html">bullying and sexual harassment</a> (leading to a more than £1 million fine) and <a href="https://www.ft.com/content/310caee4-d2d9-4f88-9a2b-f6d790b9eb1b">gender discrimination</a> (£2 million payout). There is strong evidence that the City’s historic “laddish” culture <a href="https://www.thetimes.co.uk/article/has-the-city-booted-out-lad-culture-tfc9mqptl">continues to exist</a> in <a href="https://www.standard.co.uk/business/lloyd-s-of-london-culture-drinking-sexism-b988746.html">pockets</a>, and that in some cases this leads to <a href="https://twitter.com/Telegraph/status/1505838573467144193">hostility</a> towards individuals who exist outside established white, male, middle-class norms.</p>
<h2>Why this matters</h2>
<p>Over the past 40 years, inequalities of income and wealth have become more pronounced in the UK. The <a href="https://ifs.org.uk/publications/characteristics-and-incomes-top-1">share of national income</a> taken by the top 1% increased from almost 6% in 1977 to around 14% in 2019. The City’s remuneration practices are implicated here, with the Institute of Fiscal Studies <a href="https://www.theguardian.com/business/2022/may/04/city-london-bonus-boom-risk-driving-up-inequality-institute-fiscal-studies">reporting</a> in 2022 that the City’s pay and bonus packages exacerbate inequality.</p>
<p>The UK’s <a href="https://www.theguardian.com/commentisfree/2023/jan/30/england-old-boys-club-zahawi-wealthy-network">cosy relationship between finance and politics</a> enhances the City’s influence. Bosses and politicians alike claim this is justified because of the City’s <a href="https://www.economicsobservatory.com/how-important-is-the-city-to-the-uk-economy#:%7E:text=Economists%20use%20the%20expression%20because,City%20(Hutton%2C%202022).">major contribution</a> to the UK economy in terms of jobs, tax revenues and trade.</p>
<p>Yet an alternative argument is that the UK’s oversized financial sector impoverishes the UK, resulting from what author Nicholas Shaxson calls the “<a href="https://www.theguardian.com/news/2018/oct/05/the-finance-curse-how-the-outsized-power-of-the-city-of-london-makes-britain-poorer">finance curse</a>”. He cites <a href="https://www.independent.co.uk/news/business/news/finance-curse-uk-economy-sector-city-of-london-loss-financial-services-a8571036.html">research</a> estimating that an oversized City of London inflicted costs of £4.5 trillion on the UK economy between 1995 and 2015. This is explained in part by lost economic output since the 2008 financial crisis, and in part from “<a href="https://eprints.whiterose.ac.uk/143275/1/Baker%20The-UKs-Finance-Curse-Costs-and-Processes%20final.pdf">misallocation costs</a>” as big finance has generated activities that distort the rest of the UK economy – diverting skills, investments and resources from more productive uses.</p>
<p>Shaxson also points to £700 billion of “excess profits” and “excess remuneration” enjoyed by big finance which might otherwise have contributed to the UK economy. He suggests the salaries, bonuses and profits paid out by the City significantly exceed what is necessary to incentivise the supply of financial products and services in an efficient, competitive market.</p>
<p>At the heart of these eye-watering figures are policies first implemented during the 1980s, which privileged the need to maximise shareholder returns over reinvesting profits. This <a href="https://neweconomics.org/uploads/files/NEF_SHAREHOLDER-CAPITALISM_E_latest.pdf">short-term agenda</a> has been associated with rising salaries at the top, growing inequality in UK society, and even increased levels of environmental destruction.</p>
<p>At the same time, financial institutions have been afforded ever-more influence over UK economic policy. Wealthy City donors have <a href="https://www.independent.co.uk/news/uk/politics/tory-funding-donors-money-general-election-lib-dems-labour-a9362571.html">helped fund political parties</a> to ensure policies are prioritised that protect their interests. City leaders have not only shaped laws and regulations in their favour, but also influenced society and culture. This includes promoting a form of “winner takes all” individualism in which the notion of the common good has slowly dissipated.</p>
<p>In the UK, the <a href="https://policy.bristoluniversitypress.co.uk/why-we-cant-afford-the-rich">poorest 10%</a> pay a higher proportion of their income in tax than the richest 10%, while <a href="https://www.nytimes.com/2021/10/11/opinion/pandora-papers-britain-london.html">corporate tax avoidance strategies</a> have additionally limited the redistribution of wealth. In 2015, the Bank of England’s then chief economist, Andy Haldane, <a href="https://twitter.com/BBCNewsnight/status/625081308063121408">warned</a> that under our system, businesses are now “almost eating themselves”. He called on policymakers to consider new models of corporate governance that “share the spoils more equally between a wider set of stakeholders in a firm”, including employees and customers.</p>
<h2>Will the City ever change?</h2>
<p>In 2021, the <a href="https://en.wikipedia.org/wiki/City_of_London_Corporation">City of London Corporation</a> (the City’s formal governing body) set up an <a href="https://www.cityoflondon.gov.uk/supporting-businesses/business-support-and-advice/socio-economic-diversity-taskforce">independent taskforce</a> with a vision of encouraging “equity of progression”, where high performance is valued over “fit” and “polish”. I was a member of this two-year initiative, which culminated in the publication of a <a href="https://www.cityoflondon.gov.uk/assets/Business/breaking-the-class-barrier-december-2022.pdf">five-point pathway</a> to achieve a more socio-economically diverse City of London.</p>
<p>The impact of this taskforce is debatable, but to be fair to its many committed participants, delivering more inclusive and diverse organisations is a “wicked problem” that is difficult, if not impossible, to solve. Not least because not everybody agrees on the nature of the problem – nor even that the problem exists.</p>
<p>Efforts at change have generally been pinned on the “business case” – that once hiring managers are convinced discrimination is irrational, they will feel compelled to act. Yet this is unlikely to work because the incentives are not there. Class-based inequalities embedded within systems and structures offer elite City firms certain benefits, while diversification carries perceived risks.</p>
<p>The business case sometimes suggests diversification will make the City a better or even safer place, by allowing for cognitive difference while preventing “<a href="https://www.cityam.com/businesses-without-diversity-are-plagued-by-groupthink/">groupthink</a>”. But new entrants are generally subjected to strong socialisation processes that train them to present and even think much the same, as management consultant, Diletta, explained to me:</p>
<blockquote>
<p>As much as [firms] talk about diversity, especially now with all this stuff on social class – it’s almost impossible to exist outside the norms … That’s what training is all about. We’re extremely effective at making sure everybody is packaged up and churned out looking and sounding exactly the same. That’s our product. It’s what we sell.</p>
</blockquote>
<p>It seems that in the City, people can be different as long as they are the same. A genuine desire among many City people to deliver fairer outcomes is no match for institutional inertia. When it comes to social class, firms have historically tended to adopt a “deficit” model where young people from working-class backgrounds are assumed to lack the necessary forms of “polish” to get on, and efforts centre on how these deficits can be addressed.</p>
<p>But the challenges they face are not limited to “polish”. Growing up poor in a rich society contributes to long-lasting and sometimes career-limiting feelings of stigma and shame. Abdul explained his feelings as he struggled to access a graduate position in an investment bank:</p>
<blockquote>
<p>I was surrounded by people who were, I suppose you could say, better than me … I didn’t belong.</p>
</blockquote>
<p>An emphasis on social mobility is an attractive agenda for both City leaders and politicians who can present change as a “win-win” – for talented people and the organisations they join. But in practice, this is a zero-sum game: when opportunities are not expanding in absolute terms, for some people to move up others must move down. Current conversations allow City and other elites to avoid such uncomfortable truths.</p>
<p>Instead they focus on more palatable, less threatening questions of culture and behaviour, over the fundamental changes that are needed if the UK’s resources and rewards are to be more fairly distributed. The City of London must recognise its own role in perpetuating – and increasing – economic injustice if ever this status quo is to change.</p>
<p><em>* All interviewees’ names have been changed to protect their anonymity.</em></p>
<hr>
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<img alt="" src="https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=112&fit=crop&dpr=1 600w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=112&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=112&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=140&fit=crop&dpr=1 754w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=140&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=140&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p class="fine-print"><em><span>Research mentioned in this article received funding from government and charitable bodies. However, to protect confidentiality I do not mention which organisations. There is no conflict of interest and individuals took part on the basis of informed consent. I was a working group member for the Corporation of London Taskforce on Socioeconomic Diversity, which is mentioned in this article. I am the author of the recently published book Highly Discriminating: Why The City Isn't Fair and Diversity Doesn't Work. </span></em></p>My research suggests City firms’ efforts to deliver more equal representation at the top have not worked because they were never meant to.Louise Ashley, Senior Lecturer, Queen Mary University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1982392023-01-25T09:45:32Z2023-01-25T09:45:32ZGhana’s domestic debt restructuring has stalled: four reasons why<figure><img src="https://images.theconversation.com/files/506072/original/file-20230124-25-1zkzkc.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ghana is trying to put together a debt restructuring programme to satisfy major stakeholders</span> <span class="attribution"><span class="source">Wikimedia Commons</span></span></figcaption></figure><p>Ghana is <a href="https://theconversation.com/ghana-had-a-bad-time-in-2022-4-reads-to-catch-up-on-what-happened-196087">facing</a> multiple financial and economic challenges and <a href="https://www.imf.org/en/News/Articles/2022/12/12/pr22427-imf-reaches-staff-level-agreement-on-a-3-billion-three-years-ecf-with-ghana">has requested a US$3 billion</a> bailout from the International Monetary Fund (IMF) to help it restore macroeconomic stability. This will include bringing public debt down to more manageable levels from the <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/38092/EnglishReport.pdf?sequence=9&isAllowed=y">currently estimated</a> 105% of GDP to 55% in present value terms by 2028. </p>
<p>IMF assistance, which is yet to be approved by the fund’s executive board, is <a href="https://www.imf.org/en/News/Articles/2022/12/12/pr22427-imf-reaches-staff-level-agreement-on-a-3-billion-three-years-ecf-with-ghana">conditional</a> on Ghana restructuring its public debt – domestic and external – which in turn requires the buy-in of bondholders. This means that those who lent money to the government by buying bonds will have to agree to the restructuring, such as a longer repayment period.</p>
<p>As a first step of the debt restructuring, the Ghanaian government announced a voluntary Domestic Debt Exchange Programme (DDEP) in early December 2022. It seeks to exchange about GHS137.3 billion (US$11.45 billion or about 15% of 2021 <a href="https://www.google.com/search?q=ghana+gdp&rlz=1C1GCEU_en-GBGB1004GB1004&oq=ghana+gdp&aqs=chrome.0.69i59j0i10i512l5j69i65l2.5032j1j7&sourceid=chrome&ie=UTF-8">GDP</a>) of existing <a href="https://twitter.com/mytheoz/status/1599531393570459652">domestic notes and bonds</a> held by various local investors for a package of 12 (initially four) new bonds with different payout dates. </p>
<p>For any sovereign debt restructuring exercise to succeed, a <a href="https://www.imf.org/-/media/Files/Publications/WP/2020/English/wpiea2020162-print-pdf.ashx">qualifying majority</a> (usually 75%) of debt holders must agree to change the contract’s key financial terms. This prevents a minority investor group from holding out and preventing the debt restructuring from proceeding.</p>
<p>But the subscription to this programme is below 50%, well below the government’s 80% target. Bondholders have stated that the terms offered mean that they will lose money. </p>
<p>Groups such as the Ghana Individual Bondholders Forum have <a href="https://www.theghanareport.com/bondholders-to-lose-88-2-of-investments-at-current-inflation-rate-ghana-individual-bondholders-forum/">estimated</a> losses of 50% to 90% on their investments if they exchange their current instruments. </p>
<p>That’s where things are stuck, forcing government to extend the closing date for the bond exchange three times already since early December 2022. </p>
<p>So what’s gone wrong? Why has the government not been able to get domestic bondholders to accept the terms it has put on the table?</p>
<p>I offer four reasons: investors face significant losses; the government’s “take-it-or-leave-it” approach; a lack of faith in the government; and the fact that there’s no sense of sharing the burden.</p>
<h2>What’s behind the standoff</h2>
<p><strong>Significant losses by investors:</strong> My colleague <a href="https://www.myjoyonline.com/dr-yakubu-abdul-salam-haircuts-in-ghanas-domestic-debt-exchange-programme-a-not-so-simple-explainer/">Dr Yakubu Abdul-Salam</a> estimates that investors will lose 62.40% of their bond’s original market value. The Ghana Individual Bondholders Forum <a href="https://www.theghanareport.com/bondholders-to-lose-88-2-of-investments-at-current-inflation-rate-ghana-individual-bondholders-forum/">says</a> bondholders will lose about 88.2% of their investments at current inflation levels. Several bondholders have refused to participate. This is contrary to the government’s earlier expectation of “<a href="https://mofep.gov.gh/press-release/2022-12-05/commencement-of-domestic-debt-exchange">overwhelming support for this exchange</a>”.</p>
<p>Ghana’s government has so far <a href="https://mofep.gov.gh/press-release/2023-01-16/domestic-debt-exchange-programme-extension">announced three extensions</a> of the deadline as it struggles to reach the industry benchmark of a qualifying majority. The new 31 January 2023 deadline may not be met either.</p>
<p><strong>Government’s take-it-or-leave-it approach</strong>: Government has presented the plan as a free or voluntary choice. But there are no real alternatives on the table. </p>
<p>If the restructuring is not carefully managed, it could have a substantial impact on the domestic financial sector, which owns a large portion of the bonds. Any losses within the financial sector then cascade into adverse effects on economic growth, employment and inequality.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/ghana-and-the-imf-debt-restructuring-must-go-hand-in-hand-with-managing-finances-better-191877">Ghana and the IMF: debt restructuring must go hand-in-hand with managing finances better</a>
</strong>
</em>
</p>
<hr>
<p>The government’s approach has been to “divide and conquer”. Instead of meeting all the bondholders’ representatives through, for example, a national debt forum, the government has met some groups individually to offer or change concessions. </p>
<p>This strategy means one group loses out and another gains. For example, individual bondholders were initially excluded from the bond exchange programme. They were included after pension funds were exempted from the programme.</p>
<p><strong>Lack of good faith in the government:</strong> Bondholders feel that the government has not been truthful about the dire state of the economy.</p>
<p>The current administration has sought to <a href="https://allafrica.com/stories/202209220502.html">blame</a> the Russia-Ukraine conflict and the COVID-19 pandemic for Ghana’s current economic and financial challenges. The conflict has been a contributing factor but several studies, including one by the <a href="https://documents1.worldbank.org/curated/en/829241580327419447/pdf/Ghana-Joint-World-Bank-IMF-Debt-Sustainability-Analysis-December-2019.pdf">World Bank</a>, have shown that Ghana’s finances were precarious even before the pandemic. For example, the country’s external (foreign) and overall debt were at a high risk of distress as far back as 2019. </p>
<p>In other words, the country had been living beyond its means for years. It only needed an external shock to expose the weakness.</p>
<p><strong>No sense of burden-sharing:</strong> Bondholders have also expressed reservations about the burden of the bond swap not being shared across the society. Nor is it being pitched as though it would achieve better outcomes for the country. </p>
<p>One of the key lessons from Jamaica’s successful debt exchange programme, as highlighted in a 2012 <a href="https://www.imf.org/external/pubs/ft/wp/2012/wp12244.pdf">IMF study</a>, is that</p>
<blockquote>
<p>there was a perception that the burden was being shared across the society to achieve a better outcome for the country as a whole. </p>
</blockquote>
<p>This made the plan acceptable to those directly affected. </p>
<p>In Ghana’s case, the government’s divisive approach has made it difficult for bondholders to appreciate the severity of the situation and thus reach acceptable comprises. One demonstration of <a href="https://www.myjoyonline.com/government-should-adopt-principle-of-burden-sharing-dr-assibey-yeboah/">burden sharing</a>, for example, would be to cut wasteful public expenditure and the size of government. Without this, the terms of the bond swap amount to what the convener of the Individual Bondholders Forum has described as</p>
<blockquote>
<p><a href="https://theindependentghana.com/individual-bondholders-forum-debt-exchange-program-state-sponsored-pickpocketing/">state-sponsored theft or pickpocketing</a>.</p>
</blockquote>
<h2>How can uptake be improved?</h2>
<p>Ghana must comprehensively restructure its public debt and improve its public finances. But the proposed bond exchange must be restructured to increase its chances of acceptance by domestic bondholders. </p>
<p>How can this be done?</p>
<p>Firstly, by organising a national debt forum with all stakeholders. The forum would offer an opportunity for frank conversations with all bondholders present rather than the current siloed divide-and-rule approach whose outcome has been the inclusion, exclusion and re-inclusion of certain categories of domestic bondholders.</p>
<p>Secondly, the government must renegotiate with the IMF to extend the “below 55% of GDP in NPV terms by 2028” public debt target to at least 2032. This would buy the country time to adjust gradually. The scale of cuts and debt restructuring needed now could be milder. It would also mitigate the ripple effects on the economy, which includes some domestic financial institutions possibly going under due to considerable losses. </p>
<p>Thirdly, the government must share the burden by cutting down on wasteful expenditure. In <a href="https://www.imf.org/external/pubs/ft/wp/2012/wp12244.pdf">Jamaica</a>, they understood the need “to change course, away from a history of continued public debt expansion and government deficits, which had not delivered in terms of economic growth and improved standards of living”. The same could be said of Ghana.</p><img src="https://counter.theconversation.com/content/198239/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Theophilus Acheampong is affiliated with the IMANI Centre for Policy and Education, Accra, Ghana.</span></em></p>Ghana’s finance ministry is struggling to build consensus on the country’s debt burden.Theophilus Acheampong, Associate Lecturer, University of AberdeenLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1977772023-01-17T20:16:09Z2023-01-17T20:16:09ZCryptocurrencies are in crisis, but they are not going to disappear<figure><img src="https://images.theconversation.com/files/504333/original/file-20230112-22-3byu1u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A worker from Hope House, an organization that sponsors the use of cryptocurrencies on El Zonte beach, makes a purchase at a small shop that accepts bitcoins, in Tamanique, El Salvador, June 9, 2021.</span> <span class="attribution"><span class="source">(AP Photo/Salvador Melendez)</span></span></figcaption></figure><p>Cryptocurrencies are experiencing their worst crisis <a href="https://www.investopedia.com/terms/c/cryptocurrency.asp">since the arrival of the first crypto assets and virtual currencies</a> in the 1990s and their democratization in the 2010s. </p>
<p>Bitcoin had an unprecedented tumble in late 2020 and has yet to recover. In addition to this sharp decline, there is much discussion about the worrisome collapse of some so-called <a href="https://www.investopedia.com/terms/s/stablecoin.asp">stablecoins</a>, which are supposed to be less volatile. </p>
<p>This is compounded by the fall of cryptocurrency giants, particularly due to <a href="https://www.investopedia.com/what-went-wrong-with-ftx-6828447">allegations of fraud in cases like the FTX scandal</a>. At its peak, FTX had one million users and was the third-largest cryptocurrency exchange in terms of volume.</p>
<p>Experts agree that the aftershocks of its collapse have hit investors hard and will likely slow the pace of crypto asset adoption <a href="https://www.cnbc.com/2022/12/19/three-ways-the-ftx-disaster-will-reshape-crypto.html">for the next few years</a>. </p>
<hr>
<p>
<em>
<strong>
À lire aussi :
<a href="https://theconversation.com/investir-dans-les-cryptoactifs-voici-comment-limiter-le-risque-detre-expose-a-une-fraude-182835">Investir dans les cryptoactifs : voici comment limiter le risque d’être exposé à une fraude</a>
</strong>
</em>
</p>
<hr>
<p>As an expert in the field of cryptocurrencies, I will try to answer the following question: are cryptocurrencies really here to stay, or are they just a fad?</p>
<h2>Speculation and extreme volatility</h2>
<p>Cryptoassets include tokens that can be used for digital currency purposes (i.e. cryptocurrencies such as Bitcoin and Ethereum). They are also used for investment in an entity (a <a href="https://www.bitpanda.com/academy/en/lessons/what-is-the-difference-between-utility-tokens-and-security-tokens">“security token,”</a> which entitles the holder to ownership of a portion of an entity), or for products or services (a <a href="https://www.bitpanda.com/academy/en/lessons/what-is-the-difference-between-utility-tokens-and-security-tokens">“utility token,”</a> which entitles the holder to a product once it has been produced, for example).</p>
<p><a href="https://blog.bitpanda.com/en/what-are-stablecoins">Stablecoins</a>, which are supposed to be associated with lower volatility, are unique in that they are backed by a currency (e.g. the U.S. dollar), a commodity (e.g. gold) or a financial instrument (e.g. a stock or a bond). This is to keep the value of the digital currency stable.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/478155/original/file-20220808-7938-ivi7mn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="man shows the screen of his phone on which his cryptocurrency balance can be seen" src="https://images.theconversation.com/files/478155/original/file-20220808-7938-ivi7mn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/478155/original/file-20220808-7938-ivi7mn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/478155/original/file-20220808-7938-ivi7mn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/478155/original/file-20220808-7938-ivi7mn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/478155/original/file-20220808-7938-ivi7mn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/478155/original/file-20220808-7938-ivi7mn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/478155/original/file-20220808-7938-ivi7mn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Erich García, a 33 year-old programmer and YouTuber, poses with his bitcoin wallet, at his home in Havana, Cuba, in March 2021.</span>
<span class="attribution"><span class="source">(AP Photo/Ramon Espinosa)</span></span>
</figcaption>
</figure>
<p>Bitcoin’s plunge is followed in the <a href="https://www.nbcnews.com/tech/crypto/bitcoin-plunge-breaks-24000-200-billion-wipe-crypto-market-weekend-rcna33234">headlines</a> on a daily basis. While this is not the first time it has fallen, it is particularly noteworthy as it is the biggest drop in value <a href="https://www.cnbc.com/2022/05/12/bitcoin-btc-price-falls-below-27000-as-crypto-sell-off-intensifies.html">since late 2020</a>. The collapse is partly due to rising interest rates and the flight of investors from these risky investments. Although it is recovering, Bitcoin is still a long way from the heights it once reached.</p>
<p>This media coverage raises many questions about the sustainability of these cryptoassets. Indeed, the latter are marked by extreme volatility in their <a href="https://news.harvard.edu/gazette/story/2021/09/regulating-the-unregulated-cryptocurrency-market/">unregulated markets</a> in addition to being associated with <a href="https://medium.com/wolverineblockchain/the-surprising-similarities-between-cryptocurrencies-tulips-4c4ab5a1bea1">speculation by many players in the financial world</a>.</p>
<p>Indeed, the BBC recently reported that cryptocurrency laundering <a href="https://www.bbc.com/news/technology-60072195">rose 30 per cent in 2021</a>. The <a href="https://www.ftc.gov">U.S. Federal Trade Commission</a>, which aims to protect U.S. consumers, reported that in 2021, fraud schemes cost investors <a href="https://www.ftc.gov/business-guidance/blog/2022/06/reported-crypto-scam-losses-2021-top-1-billion-says-ftc-data-spotlight">more than $1 billion in cryptocurrencies</a>. Needless to say, very few of the defrauded investors have recovered their money.</p>
<h2>One billion users by 2022</h2>
<p>Yet we are seeing a slow but sure increase in the adoption of cryptocurrencies by companies. In an ongoing study of the impact of cryptocurrency adoption by public companies on their social responsibility, I noted that many of them, such as Starbucks and McDonald’s, have started to accept Bitcoin as a form of payment. This is particularly the case in their branches in El Salvador, following that country’s adoption of <a href="https://globalnews.ca/news/8171521/el-salvador-adopts-bitcoin-legal-tender/">Bitcoin as legal tender</a>.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1487634924865740804"}"></div></p>
<p>Others, such as Japanese online retail giant <a href="https://www.rakuten.ca/">Rakuten</a>, have chosen to accept cryptocurrencies even if their country is not pushing to adopt Bitcoin as a currency. They say they are driven by a desire to offer more payment options to their customers.</p>
<p>The user base for cryptocurrencies is growing year on year. For example, Crypto.com, an exchange platform, estimated that about 295 million people had entered the cryptocurrency market as of <a href="https://assets.ctfassets.net/hfgyig42jimx/5i8TeN1QYJDjn82pSuZB5S/85c7c9393f3ee67e456ec780f9bf11e3/Cryptodotcom_Crypto_Market_Sizing_Jan2022.pdf">December 2021</a>. The platform expected the number of users to cross the one billion mark by December 2022.</p>
<p>Cryptocurrencies also allow people with unreliable or insecure banking systems to access a parallel banking system that is independent of the traditional banking system. Offering a less affluent part of the population access to a different form of banking system is one of the reasons the President of El Salvador gave <a href="https://www.nytimes.com/2022/07/05/world/americas/el-salvador-bitcoin-national-currency.html">for making Bitcoin legal tender in the country</a>.</p>
<h2>A healthy fluctuation</h2>
<p>The growing interest in <a href="https://www.cnbc.com/2021/06/18/whats-defi-crypto-based-decentralized-finance-explained.html">decentralized finance (DeFi)</a>, as well as the development of the metaverse, are also factors that influence the sustainability of cryptocurrencies. Decentralized finance often relies on stablecoins for its operation. Meanwhile, the metaverse, a <a href="https://theconversation.com/what-is-the-metaverse-and-what-can-we-do-there-179200">universe of 3D virtual worlds</a>, also allows the use of cryptocurrencies to purchase goods or services, creating an immersive world.</p>
<p>Experts in the sector believe that, despite the debacle that the cryptoasset market has experienced recently, decentralized finance — particularly via products backed by cryptoassets — <a href="https://www.cnbc.com/2022/06/03/crypto-firms-say-thousands-of-digital-currencies-will-collapse.html">is here to stay</a>. This is because there is a market and players willing to participate.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/478162/original/file-20220808-7938-udt4nr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="person holds a Bitcoin coin in front of a screen" src="https://images.theconversation.com/files/478162/original/file-20220808-7938-udt4nr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/478162/original/file-20220808-7938-udt4nr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=379&fit=crop&dpr=1 600w, https://images.theconversation.com/files/478162/original/file-20220808-7938-udt4nr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=379&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/478162/original/file-20220808-7938-udt4nr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=379&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/478162/original/file-20220808-7938-udt4nr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=476&fit=crop&dpr=1 754w, https://images.theconversation.com/files/478162/original/file-20220808-7938-udt4nr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=476&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/478162/original/file-20220808-7938-udt4nr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=476&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Cryptocurrencies can be used for transactional purposes in the metaverse.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>Moreover, they argue that while this sharp decline in cryptocurrency-related markets does remove some players, this is a welcome change. By the admission of <a href="https://www.youtube.com/watch?v=H1FYJlaxlOg">Raoul Ullens</a>, co-founder of <a href="https://blockchainweek.be/">Brussels Blockchain Week</a> (an annual conference devoted to blockchain and cryptocurrencies):</p>
<blockquote>
<p>it is healthy, for the adoption, the maturation of these Web3 technologies, to skim, to rebalance the sector. […] An unhealthy ecosystem will not attract the masses.</p>
</blockquote>
<p>According to these players, such a drop in the cryptoasset markets is not only necessary, but also healthy, contributing as it does to rebalancing the valuation of cryptocurrencies.</p>
<h2>Cryptocurrencies are here to stay</h2>
<p>The launch of cryptocurrencies by central banks, via central bank digital currencies (CBDCs), also lends weight to the argument that cryptoassets are here to stay. Indeed, the Bank of Canada is currently working on the <a href="https://www.bankofcanada.ca/research/digital-currencies-and-fintech/projects/central-bank-digital-currency/">creation of a CBDC</a>. According to the institution, a CBDC issued by the Bank of Canada would be an “official digital currency (that) would retain its face value in Canadian dollars because it is issued by the <a href="https://www.bankofcanada.ca/research/digital-currencies-and-fintech/projects/central-bank-digital-currency/?_gl=1*11n5guo*_ga*NTA4MDM3MDQwLjE2NzM1NTYyOTg.*_ga_D0WRRH3RZH*MTY3MzU1NjI5Ny4xLjAuMTY3MzU1NjI5Ny4wLjAuMA..&_ga=2.93130141.106029617.1673556298-508037040.1673556298">Bank of Canada</a>, just like bank notes.”</p>
<p>Other nations in the world have already issued such a currency, including the <a href="https://www.ndtv.com/business/here-are-the-timelines-and-status-of-central-bank-digital-currencies-in-some-countries-2820164">Bahamas (Sand Dollar) and Nigeria (eNaira)</a>. One reason CBDCs are different from privately issued digital currencies (such as Bitcoin or Ethereum) is that their intended use is for transaction purposes only, not for investment or speculation. They offer the same possibilities of use as cash. </p>
<p>CBDCs also aim to promote the financial inclusion of a part of the population that has little or no access to the traditional banking system, and to simplify the implementation of monetary and fiscal policy in the issuing countries.</p>
<p>Developments in the world of digital currencies, whether in the metaverse or with the arrival of the CBDC, and the craze that they continue to generate, mean cryptocurrency is here to stay.</p>
<p>This durability means the form of cryptoassets take will continue to evolve and transform with the technologies that support them (notably, blockchains) and the variation in demand from users and/or investors.</p><img src="https://counter.theconversation.com/content/197777/count.gif" alt="La Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Annie Lecompte has received funding from the Fondation des CPA du Québec.</span></em></p>An expert in the field of cryptocurrencies answers the question: Is crypto really here to stay or is it just a fad?Annie Lecompte, Assistant prof - Audit, Université du Québec à Montréal (UQAM)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1942242022-12-30T08:25:46Z2022-12-30T08:25:46ZWhat ancient wisdom can teach businesses about sustainable finance<figure><img src="https://images.theconversation.com/files/497994/original/file-20221129-24-k5dpj7.jpg?ixlib=rb-1.1.0&rect=491%2C431%2C7497%2C3784&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Sustainable finance.</span> <span class="attribution"><span class="source">MEE KO DONG / Shutterstock</span></span></figcaption></figure><p>The world of business tends to prioritise concepts of <a href="https://study.com/learn/lesson/profit-maximization-theory-formula.html#:%7E:text=Profit%20maximization%20is%20the%20act%20of%20achieving%20the%20highest%20revenue%20or%20profit.">profit maximisation</a>, <a href="https://uk.indeed.com/career-advice/career-development/economies-of-scale#:%7E:text=Economies%20of%20scale%20are%20when%20businesses%20benefit%20from%20their%20size%20by%20being%20able%20to%20reduce%20costs%20as%20the%20production%20and%20their%20customers%20increase.">economies of scale</a> and the importance of <a href="https://www.fool.com/investing/stock-market/basics/shareholder-value/">shareholder value</a>. As the industry has developed over centuries, these concepts have become deeply embedded in global financial systems. </p>
<hr>
<iframe id="noa-web-audio-player" style="border: none" src="https://embed-player.newsoveraudio.com/v4?key=x84olp&id=https://theconversation.com/what-ancient-wisdom-can-teach-businesses-about-sustainable-finance-194224 &bgColor=F5F5F5&color=D8352A&playColor=D8352A" width="100%" height="110px"></iframe>
<p><em>You can listen to more articles from The Conversation, narrated by Noa, <a href="https://theconversation.com/us/topics/audio-narrated-99682">here</a>.</em></p>
<hr>
<p>But some businesses in certain parts of the world operate based on respect for <em>all</em> living beings, not just humans – particularly in countries that adhere to dharmic religions such as Jainism and Hinduism (primarily across the Indian subcontinent, southeast and central Asia). Learning about such ways of working could help the global business world to become more sustainable and address the climate crisis. </p>
<p><a href="http://www.bruno-latour.fr/node/552.html">Research</a> shows that nature has long been treated as a resource or something “outside” the economic system, that exists for the benefit of humans. But the fact that the <a href="https://wwf.panda.org/discover/our_focus/biodiversity/biodiversity/">rate of species extinctions</a> as a result of human activity is at least 1,000 times the natural rate shows just how interdependent humans and nature are. The effects of business on our climate are also clear, with <a href="https://manchesteruniversitypress.co.uk/9781526146984/">71%</a>of the world’s fossil fuel emissions coming from just 100 multinational corporations.</p>
<p>Addressing this attitude to nature in much of the business world would require changing <a href="https://www.bbc.co.uk/programmes/m000py8t">economic theory and belief systems</a> to recognise the sentience of <em>all</em> life on earth and the need to protect other living beings. This would require profound behavioural and cultural transformation to meet the environmental challenges the world faces right now.</p>
<p>But economics and finance professionals often <a href="https://www.ecobooks.com/books/comgood.htm">remove this issue from their equations</a>, adding to social and ecological devastation. The growing global <a href="https://www.imf.org/en/Publications/fandd/issues/2021/09/mark-carney-net-zero-climate-change">green finance</a> movement is certainly a step in the right direction, but more radical changes in financial theory are required to address the environmental crisis and make all business more sustainable. </p>
<h2>Religious inspiration</h2>
<p>My <a href="https://www.routledge.com/Inclusive-and-Sustainable-Finance-Leadership-Ethics-and-Culture/Shah/p/book/9780367759407">research</a> shows how finance could draw on certain ancient religious traditions to encourage such behavioural and cultural shifts. Indeed, there are many belief systems that do not separate nature from humanity, but rather encourage its preservation. Businesses can follow such doctrines and still be successful.</p>
<p><a href="https://www.britannica.com/topic/dharma-religious-concept">Dharma</a>, for example, is generally understood to mean moral virtue and outlines a path towards sustainable living. The dharmic religions of India – the Hindu, Sikh, Buddhist and Jain belief systems – have never separated man from animals and nature. These belief systems were never anthropocentric (regarding humans as central to life on earth). Their traditions date back thousands of years and were shaped long before humanity faced the existential crises that we do now. </p>
<p>What is even more prescient about these ancient religions, especially for the world of business and finance, is that their sustainable practices are actually hiding in plain sight. Their leaders are already practising business sustainably, simply because they have always seen it as the right way to operate – their motivations are driven by culture, belief and tradition.</p>
<figure class="align-center ">
<img alt="An image of the outside of Jain Temple, Jodhpur, India; sunset in the background." src="https://images.theconversation.com/files/498016/original/file-20221129-16-ntw4vf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/498016/original/file-20221129-16-ntw4vf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/498016/original/file-20221129-16-ntw4vf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/498016/original/file-20221129-16-ntw4vf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/498016/original/file-20221129-16-ntw4vf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/498016/original/file-20221129-16-ntw4vf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/498016/original/file-20221129-16-ntw4vf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A Jain temple near Jodhpur, India.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/catalog/collections/2982245250522678953-228b8eec9666030e44d069633b4ff46dad2ad38d0cf7116549b6c474fe90ca97">Harsh S/Shutterstock</a></span>
</figcaption>
</figure>
<p>Jains, for example, have for thousands of years believed in respect for all living beings including plants and animals. The central philosophy of <a href="https://www.pewresearch.org/fact-tank/2021/08/17/6-facts-about-jains-in-india/">Jainism</a> – one of the world’s oldest religions – is called Ahimsa and is based on non-violence in thought, word and deed.</p>
<p>During my research I interviewed several prominent Jain business leaders that follow this way of thinking, including <a href="https://www.flame.edu.in/about-flame/leadership/governing-body/vallabh-bhanshali">Vallabh Bhanshali</a>, co-founder of Indian investment company Enam Securities Group and <a href="https://www.forbes.com/profile/abhay-firodia/?sh=70e77b6d16bb">Abhay Firodia</a>, chairman of Indian automaker Force Motors and whose <a href="https://www.dnaindia.com/mumbai/report-navalmal-kundanmal-firodia-a-businessman-with-vision-1585710">father</a> invented Asia’s most popular affordable transport vehicle, the auto-rickshaw.</p>
<p>For many Jains, as well as those from other dharmic religions such as Sikhs and Hindus, philanthropy is “<a href="https://www.iglobalnews.com/icommunity/columns/india-the-home-of-philanthropy-as-duty-not-choice">a duty not a choice</a>”. They aim to work within the nature and limits of money to practise a compassionate form of capitalism. </p>
<p>But this attitude is not limited to dharmic religions. <a href="https://www.emerald.com/insight/publication/doi/10.1108/9781787437838">Research</a> shows that before colonisation, many parts of Africa used strong social and communal networks of shared ownership.</p>
<figure class="align-left ">
<img alt="A sea view of Handelsbanken headquarters in Stockholm, Sweden." src="https://images.theconversation.com/files/498018/original/file-20221129-14-7k2o5e.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/498018/original/file-20221129-14-7k2o5e.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/498018/original/file-20221129-14-7k2o5e.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/498018/original/file-20221129-14-7k2o5e.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/498018/original/file-20221129-14-7k2o5e.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1131&fit=crop&dpr=1 754w, https://images.theconversation.com/files/498018/original/file-20221129-14-7k2o5e.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1131&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/498018/original/file-20221129-14-7k2o5e.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1131&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Handelsbanken headquarters in Stockholm, Sweden.</span>
<span class="attribution"><a class="source" href="https://www.handelsbanken.com/en/press-and-media/media-bank">Handelsbanken</a></span>
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</figure>
<p>And the Swedish bank <a href="https://www.handelsbanken.com/en/about-the-group/handelsbanken-through-history">Handelsbanken</a> was established in 1871 to operate in an organic way by building trust and relationships that are local and sustainable. It provides vital funding to smaller businesses that can be neglected by major high street banks.</p>
<h2>Beyond finance</h2>
<p>Finance has often been a <a href="https://davidkorten.org/wcrw/">destructive force</a> in communities, society and nature. It promotes individualism and can cause inequality instead of co-operation and income parity.</p>
<p>Ignorance of the variety of capitals beyond the financial – culture, relationships, trust, leadership, spirituality and community capital – and their importance in building contented and harmonious societies, could be addressed by looking to these other, ancient traditions. Learning about these other types of capital could help to revive and elevate their importance in the business world. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/beyond-gdp-changing-how-we-measure-progress-is-key-to-tackling-a-world-in-crisis-three-leading-experts-186488">Beyond GDP: changing how we measure progress is key to tackling a world in crisis – three leading experts</a>
</strong>
</em>
</p>
<hr>
<p>Faith was <a href="https://warwick.ac.uk/fac/arts/english/currentstudents/undergraduate/modules/fulllist/special/statesofdamage/syllabus201516/graeber-debt_the_first_5000_years.pdf">central to finance</a> for thousands of years – even the City of London had 104 churches before the world wars – but it is often ignored in contemporary financial research and education. By making business education much more inclusive of diverse cultures and wisdoms, more industry leaders can learn to operate with conscience, contentment and responsibility.</p><img src="https://counter.theconversation.com/content/194224/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Atul K. Shah does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Transforming finance could help businesses become more compassionate and inclusive.Atul K. Shah, Professor, Accounting and Finance, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1955782022-12-27T19:20:14Z2022-12-27T19:20:14Z6 non-fiction reads for kids this summer, recommended by kids aged 9 to 11<figure><img src="https://images.theconversation.com/files/499962/original/file-20221209-25000-8w73ee.jpg?ixlib=rb-1.1.0&rect=0%2C8%2C5607%2C3724&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Drew Perales/Unsplash</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Kids are often gifted books for Christmas, but the trick is to get them to read them! </p>
<p>No one likes nagging their kids to read, though we know <a href="https://www.smh.com.au/education/read-the-room-it-s-time-to-act-on-our-children-s-literacy-20220904-p5bf7w.html">reading is crucial</a> to their <a href="https://www.cambridge.org/au/academic/subjects/education/teacher-training-and-professional-develop/english-and-literacies-learning-how-make-meaning-primary-classrooms">critical and literacy development</a>. </p>
<p>But what do <em>they</em> think about books and reading over the summer? Kids’ voices are often overlooked when it comes to cultural criticism. </p>
<p>For the past two years, I have been facilitating a children’s book club. In our most recent session, I asked the participants – aged 9 to 11 – to share their summer reading recommendations. </p>
<p><a href="https://www.bloomsbury.com/au/children-and-biography-9781350236370/">My research</a> has found that kids respond positively to non-fiction books in social reading environments. Reading non-fiction impacts positively on their civic and critical literacy. So, we focused on non-fiction recommendations.</p>
<p>These tips – straight from the kids themselves – might help adult readers to know what books to buy this Christmas, or to hunt out at the library over summer.</p>
<hr>
<h2>1. You Don’t Know What War Is: The Diary of a Young Girl from Ukraine by Yeva Skalietska</h2>
<p>This is <a href="https://www.bloomsbury.com/au/you-dont-know-what-war-is-9781526660138/">an eye-opening and heart-breaking story</a> about a 12-year-old girl called Yeva Skalierska, living through the Ukraine war of 2022. </p>
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<a href="https://images.theconversation.com/files/499963/original/file-20221209-19531-ygz235.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/499963/original/file-20221209-19531-ygz235.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/499963/original/file-20221209-19531-ygz235.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=908&fit=crop&dpr=1 600w, https://images.theconversation.com/files/499963/original/file-20221209-19531-ygz235.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=908&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/499963/original/file-20221209-19531-ygz235.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=908&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/499963/original/file-20221209-19531-ygz235.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1142&fit=crop&dpr=1 754w, https://images.theconversation.com/files/499963/original/file-20221209-19531-ygz235.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1142&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/499963/original/file-20221209-19531-ygz235.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1142&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>A normal girl who loves school and spending time with friends, she suddenly goes through shelling and bombing right out the front of her own house. She travelled around Ukraine with her grandmother, and many other Ukrainians, trying to escape the war and danger. This book is Yeva’s personal diary account of the experiences of the war through her eyes. </p>
<p>I found it fascinating that a girl so similar to me can be going through something so drastically different. This is happening at this very moment, not in the history books, which makes me wonder why we have to have more war like this. This is a good book for anyone wanting to understand the impact of war on children and families and to put into perspective the things we might complain about that don’t really matter. </p>
<p><strong>– Chloe, age 11</strong></p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/5-must-read-books-about-russia-and-ukraine-our-expert-picks-179832">5 must-read books about Russia and Ukraine: our expert picks</a>
</strong>
</em>
</p>
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<h2>2. Goodnight Stories for Rebel Girls: 100 Inspiring Young Changemakers by Jess Harriton and Maithy Vu</h2>
<p>This is <a href="https://www.rebelgirls.com/products/100-inspiring-young-changemakers">the latest book</a> in the amazing <a href="https://www.rebelgirls.com/products/good-night-stories-for-rebel-girls">Goodnight Stories for Rebel Girls</a> series. </p>
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<p>The book contains 100 short stories about young changemakers. A changemaker is someone who has achieved something in the world to make it a little bit better. These changemakers are from all parts of the world with different abilities. </p>
<p>The book is introduced by conservationist Bindi Irwin. The subjects in this book include Greta Thunberg (activist), <a href="https://en.wikipedia.org/wiki/Isabella_Springmuhl_Tejada">Isabella Springmuhl</a> (fashion designer) and Zendaya (actor and singer). </p>
<p>I think this book is wonderful because this Rebel Girls book focuses on young people only. Young girls aren’t usually recognised as having an impact in the world, so that’s what makes this book special. People who read this will see how great young people are at making the world a better place.</p>
<p><strong>– Darcy, age 11</strong></p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/empathy-starts-early-5-australian-picture-books-that-celebrate-diversity-153629">Empathy starts early: 5 Australian picture books that celebrate diversity</a>
</strong>
</em>
</p>
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<h2>3. Welcome to Your Period by Melissa Kang and Yumi Stynes</h2>
<p>This is <a href="https://www.hardiegrant.com/au/publishing/bookfinder/book/welcome-to-your-period-by-yumi-stynes/9781760503512">a very informative book</a> about welcoming you to your period and what is going on with your body as you grow up and start changing into a young woman. The authors are two women that have experienced everything you’re starting to go through and know all the tricks to managing your period. </p>
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<a href="https://images.theconversation.com/files/499965/original/file-20221209-30762-p3m533.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/499965/original/file-20221209-30762-p3m533.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/499965/original/file-20221209-30762-p3m533.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=769&fit=crop&dpr=1 600w, https://images.theconversation.com/files/499965/original/file-20221209-30762-p3m533.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=769&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/499965/original/file-20221209-30762-p3m533.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=769&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/499965/original/file-20221209-30762-p3m533.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=967&fit=crop&dpr=1 754w, https://images.theconversation.com/files/499965/original/file-20221209-30762-p3m533.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=967&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/499965/original/file-20221209-30762-p3m533.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=967&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>They understand what you’re going through and how you may feel about the situation. The book makes you feel as if it’s nothing to worry or be scared about. The authors act like your big sisters; they’ll guide you and teach you everything you need to know about your body. They make you feel comforted, with different alternatives to manage your period to suit your body type, and help you talk to somebody you can trust and help you through that process. </p>
<p>I think that this book is a really great preparation for when you don’t have your period but when you feel like you need to start managing it or talking to a helpful adult who can help you through this tough time.</p>
<p><strong>– Arly, age 10</strong></p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/first-periods-can-come-as-a-shock-5-ways-to-support-your-kid-when-they-get-theirs-177920">First periods can come as a shock. 5 ways to support your kid when they get theirs</a>
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<h2>4. Barefoot Kids by Scott Pape (2022)</h2>
<p><a href="https://www.harpercollins.com.au/9781460763650/barefoot-kids/">This book</a> is all about money and how to invest properly. It teaches you about money and how to use it a “smart” way. </p>
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<a href="https://images.theconversation.com/files/499966/original/file-20221209-25362-uu9du9.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/499966/original/file-20221209-25362-uu9du9.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/499966/original/file-20221209-25362-uu9du9.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/499966/original/file-20221209-25362-uu9du9.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/499966/original/file-20221209-25362-uu9du9.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/499966/original/file-20221209-25362-uu9du9.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/499966/original/file-20221209-25362-uu9du9.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/499966/original/file-20221209-25362-uu9du9.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Usually, when I think of a book about money, I think “oh no I’m not reading that!”. But this book was super fun, exciting and interesting. I loved it. It included short interviews of children who started a business and got heaps of money. It was really inspiring and amazing for giving ideas. It had good instructions of what to do to earn money, and I found it interesting that children five and up can have their own business. </p>
<p>I definitely recommend this book to other kids aged nine and up, because I gave it to my cousin who is nine years old, and she loved it. It definitely helps children to be “smarter” with money than most adults. I think it would be very intriguing for kids with a short attention span. </p>
<p>It tells kids that they are the boss, while also telling them to get parents’ permission and help. It tells you how to separate money into four buckets and has apparently changed lives. I give this book a five-star rating.</p>
<p><strong>– Sienna, age 11</strong></p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/teaching-kids-about-maths-using-money-can-set-them-up-for-financial-security-85327">Teaching kids about maths using money can set them up for financial security</a>
</strong>
</em>
</p>
<hr>
<h2>5. How to Speak Dog: a Guide to Decoding Dog Language by Aline Alexander Newman</h2>
<p><a href="https://www.harpercollins.com.au/9780008257910/how-to-speak-dog/">How to Speak Dog</a> is a fantastic book about how to communicate with dogs. This book tells you when your dog is sick, sad, happy or scared. It has many interesting facts about dogs. It even tells you how to deal with an aggressive dog and what to do if a dog attacks you. How to Speak Dog even has some pages on how to train your dog.</p>
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<a href="https://images.theconversation.com/files/499967/original/file-20221209-28456-qh64s7.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/499967/original/file-20221209-28456-qh64s7.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/499967/original/file-20221209-28456-qh64s7.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=896&fit=crop&dpr=1 600w, https://images.theconversation.com/files/499967/original/file-20221209-28456-qh64s7.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=896&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/499967/original/file-20221209-28456-qh64s7.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=896&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/499967/original/file-20221209-28456-qh64s7.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1126&fit=crop&dpr=1 754w, https://images.theconversation.com/files/499967/original/file-20221209-28456-qh64s7.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1126&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/499967/original/file-20221209-28456-qh64s7.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1126&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>I think people will like this book because it has lots of information about dogs and dogs are a common pet. They could have a new puppy with some bad habits, and they might need help training their pup. </p>
<p>I have a dog and this book was very helpful to me because I learnt from it that my dog is scared when he shows the whites of his eyes. My favourite thing about this book is that they have funny facts on every page. Facts like: “A dog can smell half a teaspoon of sugar dissolved in an Olympic sized swimming pool.”</p>
<p><strong>– Avery, age 9</strong></p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/to-pat-or-not-to-pat-how-to-keep-interactions-between-kids-and-dogs-safe-182419">To pat or not to pat? How to keep interactions between kids and dogs safe</a>
</strong>
</em>
</p>
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<h2>6. Against all Odds: Young Readers’ Edition by Richard Harris and Craig Challen</h2>
<p>This is <a href="https://www.phoenixdistribution.com.au/against-all-odds-young-readers-edition">an interesting, educational, and suspenseful</a> book, with exhilarating and thrilling twists all through it. </p>
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<p>(Editor’s note: the book tells the inside story of the cave rescue of a boys’ soccer team in Thailand, back in 2018. It’s written by the two Australian cave divers involved in the rescue.)</p>
<p>This book explained everything in great detail, giving the reader a real idea of what’s happening. I liked how they made the book extremely fascinating, and the authors went far to explain everything to an understandable degree. </p>
<p>I disliked how such a large chunk of the book was an autobiography about Craig and Richard. I would recommend this for 10-15 year olds, since younger children may not understand the complex vocabulary used in the book. I would rate it 7.5/10.</p>
<p><strong>– Molly, age 11</strong></p><img src="https://counter.theconversation.com/content/195578/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kate Douglas does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>How can you get your kids to read this summer? Research has found they respond well to reading non-fiction – so we’ve gathered 6 top non-fiction books, recommended by the kids themselves.Kate Douglas, Professor of English, Flinders UniversityLicensed as Creative Commons – attribution, no derivatives.