Tuesday, February 25, 2014

The Estonian State of Mind

Down to Parnu, Estonia's summer capital for the celebrations of Estonian Independence Day. At the church service I was sat behind the Prime Minister, Andrus Ansip, who had announced his departure from office the previous day. He seemed preoccupied and serious, as well he might. He is the longest serving Prime Minister in Estonian history, and a large number of his predecessors ended their lives in the Soviet GULAG. After the church service I was a guest in the VIP enclosure to stand with the President, Toomas Hendrik Ilves to watch the military parade. This was the largest such independence day parade in modern Estonia, and as an array of modern equipment and stern faced soldiers passed- including this year a detachment from the British Grenadier guards- I could not help thinking about whether or not Estonia was facing an existential threat. The American squadron of F-14s was slightly late, and we later learned that this was because they had been forced to divert to intercept a Russian intruder. It was a none-to-subtle reminder of the mischief that Vladimir Putin still seeks to cause, even with his NATO-guarded neighbours.

In his state of the nation address, later in the evening, President Ilves spoke of Estonia as a state of mind. He meant the pun, Estonia as a country based on intelligence and the lessons of collective experience, but also the Estonian attitude and indeed Estonia as a virtual society, the so-called E-stonia. It was a long and serious oration, as the address by the armed forces chief to the parade in the morning had been. Yet as the events in Ukraine have shown, Estonia has every reason to consider the uses of adversity, to think philosophically about its agenda and national personality. 

Ukraine has come through the fire this week. The clumsy and inept regime of Viktor Yanukovych had descended to snipers firing on the thousands of people protesting in the Maidan. It seemed that, with the Kremlin's encouragement, Yanukovych would drown the Maidan in blood in order to put down the rebellion. Then it seemed that he was prepared to cut a deal with the opposition. Then it seemed that he simply lost control over his military who refused to do his bidding. Thus he then chose to abandon K'yiv, and with his departure the regime simply collapsed. It was an extraordinary turn of events, to go within three days from the horror of a bloodbath to end with the complete victory of the Maidan and the removal of Yanukovych from office. At time of writing he remains at large, but as the scale of his greed- and execrable taste in interior design- were revealed as protesters took control of his mansion north of the capital, all sides made it plain that Yanukovych was a busted flush.  All sides, that is, except one: Russia.

The angry Kremlin denunciations of the government that has emerged in the vacuum following Yanukovych's fall seem like a big mistake. Yanukovych is a busted flush, it makes no sense to continue support for an obvious loser. Yet so much of what the Kremlin does these days seems to have remarkably little internal logic. The hostile and angry scowl that Russia habitually wears in its dealings with third parties is not merely for show, it reflects the deeply cynical, Manichean world view of Vladimir Putin and his cohorts. All weapons are used- from financial pressure to murder- to weaken perceived enemies. The ruling cohort treats democratic norms as a polite fiction and the State as a conveyor of wealth from the people to the rulers. The scale of Russian corruption is at least as brazen as in Ukraine, with the added caveat that the siloviki have been looting the country for 15 years longer than Yanukovych was able to loot Ukraine. Neither do the Russian leadership have any of the hesitancy or occasional scruples that made Yanukovych such a bad negotiating partner and ultimately a weak leader.

The Sochi Olympics- eccentric, isolated and occasionally bizarre- seem an altogether accurate reflection of Russia in 2014. The insane costs, incurred in the name of prestige, show the moral disaster lurking at the heart of Putinism. It is with a grim laugh that I greet Putin's attempts to proclaim his anti-gay persecution as part of a global crusade for conservative purity. The reality is the Putin despises all democratic norms and all rights except those that he claims for himself. It is a road that leads to barbarism. It is a road that runs from being an apologist for Stalinism to seeking to re-enact Stalinism, and it will ultimately fail.

So as Estonia celebrated 96 years since the first proclamation of the Estonian Republic, Estonia's leaders are preoccupied with avoiding the fate that befell the country in 1939-40. Yet, even as Russia seeks to destabilize Ukraine's new government, there is a growing sense that the tide of history is turning against Putinism, that the values spoken of by President Ilves are more secure. Perhaps, in the end, the best reply to the Kremlin is to quote the words of a great Russian, and a fine man, Andrei Sakharov:

"Intellectual freedom is essential to human society – freedom to obtain and distribute information, freedom for open-minded and unfearing debate and freedom from pressure by officialdom and prejudices. Such a trinity of freedom of thought is the only guarantee against an infection of people by mass myths, which, in the hands of treacherous hypocrites and demagogues, can be transformed into bloody dictatorship. Freedom of thought is the only guarantee of the feasibility of a scientific democratic approach to politics, economics and culture."

It is a lesson learned in Estonia, and is may now be learned in Ukraine. Perhaps before long it may ring out across the benighted land of Russia too.

Monday, February 17, 2014

A positive case for Britain? Where to start!

A Yes supporting friend of mine called last night and said that he had still not seen one positive argument for the Union. I suppose that he might still be trying to cope with the destruction of the economic case for Scottish separation that has taken place over the past four days.

Let me then quickly summarize a positive case for the continuation of Britain.

Britain matters

Britain matters economically.
The sixth largest economy in the world, our peers are not just France and Germany, but Japan, Brazil, China and even the United States. Britain has significant economic influence over the whole EU (just for comparison, as a separate state, Scotland would be the economic peer of Greece). Britain is a leading member of all the major international economic groups of the world- and not merely a member but a leading player. Our cars, for example, from Jaguar to Aston Martin, Rolls Royce to the Mini to name but a few are technical marvels and style icons. Britain makes nearly twice as many cars as Italy- home of Ferrari and Fiat. British initiatives are usually listened to because we have the economic clout to back up our words- the EU single market was almost entirely a British initiative and is now seen as one of the great European achievements.

Britain matters politically
Britain is not just one of the five permanent  members of the UN security council, not merely the leading member of the Commonwealth of Nations, it is also a leader in virtually every diplomatic and political club on the planet. British funding of international aid programmes is internationally admired. We have a set of Embassies and diplomatic skills that virtually no other country can match. Britain can, when it chooses, make the weather on any subject that matters to it-  and as a leading Danish politician said only last week, smaller countries do not have that privilege.

Britain matters militarily
Britain is second only to the United States in its importance in NATO- and as one of the five legitimate nuclear weapons states it offers nuclear protection to the whole of NATO. British armed forces have been deployed across the planet in peace keeping and civilian protection roles, not just in Afghanistan, but in Sierra Leone, Mali and indeed in 80 countries across the globe. British troops are internationally respected for their professionalism and dedication. 

Britain matters culturally
The Union Jack is an international icon, used across the world on anything from clothes to furniture: you can almost literally see the Union Jack on everything. British music dominates the media of the whole planet, the English language is a global phenomenon and attracts millions to our country simply so they can learn it. The richness of our television, theatre, film making, music, dance, poetry, novels is spectacular- and we have a significant claim to be the most culturally influential country on the planet. Our multi-national tolerance is hugely admired and in soft power we stand almost in a different league to any other. From the BBC to British Airways, from Jaeger to Save the Children, British brands are global leaders.

Britain matters technologically
Britain has the most vibrant tech scene in Europe and probably second only to silicon valley across the globe. In industry, from jet engines to drugs, Britain is a hi-tech whizz kid. . A leader in research and technology, Britain has more living Nobel laureates than any European country. From Stephen Hawking to Peter Higgs, British global leadership in science is astonishing. 

Britain matters emotionally
Britain has a proud record of standing up for the right thing. Our country was the first to oppose slavery- decades before other European nations, or especially the United States, which only emancipated slaves in 1863, and abolished the colour bar only within our life times. William Wiberforce was a moral leader who remains internationally admired. Britain has been a doughty and decisive opponent of tyrants from Bonaparte to Hitler and even Stalin and Mao. For all her faults, the courageous decision to fight alone in 1940 deserves great respect. Meanwhile, Britain has become the home of millions from all around the world, a rich, diverse and vibrant country. 

Britain has been able to do this, because at its heart there is not one root nation, but four nations, whose culture and history and even languages are protected and promoted within a secure democracy. It has allowed us to be open and tolerant- the home of a diverse mixture or peoples and opinions within our sometimes raucous political traditions of freedom and dissent.  

So to respond to Hugh MacDairmid, whose poem, the Little White Rose I quote:

"The Little White Rose

The rose of all the world is not for me.
I want for my part
Only the little white rose of Scotland
That smells sharp and sweet—and breaks the heart."

Hugh MacDairmid

I make a Reply to Red Hugh

For my part, the rose of all the world is in my heart.
The cumin scented tea rose, blushing in the afternoon,
the trellised climbers, frosty pink or warm yellow as an August Moon.
The hybrids sprawling out across the day, the dog rose out in early May.
My British garden a riot of colour and perfume, not merely showing a single bloom.

Sunday, February 16, 2014

SNP meltdown: A blow upon a bruise

I am slightly reluctant to write- yet again- on the Scottish referendum, but the news that keeps coming in is critical for the whole future of Scotland and indeed Europe.

The SNP policy of currency union is a shambles. It literally can not work, and the use of Sterling could only be maintained for a short period while Scotland set up a new currency and ultimately prepared to join the Euro. The inchoate rage which has descended on the Yes campaign reminds me why I have so strongly opposed the Nats all these years. Wishful thinking and bluster does not make a coherent economic policy. This is a totally avoidable own goal by Yes and it has been made because Alex Salmond is still trying to pretend that Independence is more or less the same as Devo Max. Brian Wilson in the Scotsman is devastating in his critique of the foolish bluster that the SNP has embarked upon in the face of the collapse of a key plank of SNP policy.

After the currency collapse, worse has come on Europe. The Portuguese EU Commission President Jose Barroso has said that Scotland would not ab initio be a member of the EU and that most member states would regard it as a new acceding state. Accession is not a formality, it is "difficult" and takes many years. Since we would have to get the approval of many countries with succession problems of their own, it may even be impossible for Scotland to join the EU for the foreseeable future.

Again the predictable fury of the Nats, but Barroso is not speaking for or even on behalf of the UK, he is reflecting what all the 27 other member states have told him. It is devastating to the dishonest position that Salmond has taken that EU membership would be a formality for Scotland. As with the currency, it is a complete own goal.

What has got the SNP into trouble is the dishonesty with which they have approached this debate. The fact is that both separation and the common state are set of menus with prices, there are pros and cons. By failing to face unpleasant facts about their own position they have tried to mislead the Scottish people and the world. A wish is not a claim upon reality, and instead of hard nosed reality we now see that the fantasy that separation would be a quick and easy process has been totally blown away. Intellectually the Yes campaign is dead in the water. All the SNP now has left is angry bluster, victimhood and paranoia.

Two parts bullshit, four parts bluster and a pinch of pixie dust is a pathetic economic policy and a disastrous European policy, and this is not merely "reckless" or "irresponsible", it is literally mad. It would be a century long catastrophe if Yes were to win. I don't doubt that the heidbanger fanatics will continue to support Yes through thick and thin, but anyone with two Highers to rub together, anyone with a home, anyone with a job, anyone with a stake in Scotland's future now knows the horrible truth: the SNP has been deluded by their own propaganda and now can not be trusted to cut it at any level. 

Wednesday, February 12, 2014

Hindsight is 20-20 : A Scot speaks from 2020

An OpEd piece from The Scotsman that came through a time warp from February 2020.

Looking back on the first three years of an independent Scotland, there is little, from the perspective of 2020, that we can say we did not know before the referendum of 2014. So how is it that we face such difficulties? How did Scotland fall into every trap? More to the point, how do we now address the deep crisis that we now face?

On sober reflection it is clear that the 18 month timetable from the September 18th referendum to the establishment of a separate state was extremely short. Too short to complete the transitional arrangements to allow Scotland to obtain full membership of the European Union. The unhappy compromise of a duel-headed UK/Scottish delegation at EU ministerial meetings lasted a bare three months, as it became clear that the Scottish government was less interested in the drudgery of technical meetings and more interested in making gestures over negotiations with the rest of the UK. Now we remain in limbo, with Spain, Belgium and the New UK - likely to be renamed the Anglo-Welsh confederation after the new constitution comes into force there next spring- reluctant to complete the agreements without further Scottish concessions. We function as part of the EU, but as yet we still have no participation in the policy process. The irony is the new popularity of the EU in the New UK has cemented London as a key decision maker, while it is the formerly pro-EU- now much less so- Edinburgh, that is the unpopular kid in the playground.

Of course even the easiest issue, the sea border, is still not agreed, and the arbitration process may yet go on for another five years. The revenues from the oil fields- sadly far lower now after the effective withdrawal for the US from the global energy market as the result of their huge leadership in renewable energy research- are collected and held in trust, but the great hope for Scottish wealth has disappointed. It may be "Scotland's Oil", but the new Republic of Arabia that has arisen from the Saudi revolution needs to address huge social problems after the civil war, so will keep pumping, and the high costs of the North Sea are likely to render the bulk of production uneconomic. The depressed state of oil-bust Aberdeen speaks volumes.

Even more serious for the Scottish government is the mess in the financial markets. Shortly after Nicola Sturgeon took the First Minister's job after Alex Salmond's tragic heart attack, she attempted- in line with the previous SNP position- to repudiate the Scottish share of the UK debt. This desperately ill-judged decision has had echoes throughout the three years of independence that we have endured. Although she quickly back-pedalled, the damage was done. After having been told that such a repudiation would close the global debt market completely to Scottish government borrowing, her frantic attempts to find sovereign lenders in the Gulf and Russia was greeted with uproar across the EU. In the end the UK-IMF-ECB funded rescue package co-ordinated, ironically, from London, has stabilized the Scottish Pound- albeit 30% below Sterling, but imposed eye-wateringly tight spending restrictions- in line with the same restrictions imposed on Hungary and Serbia after they joined the Euro- still a distant prospect for Scotland, alas- last year. We can only hope that the bitter medicine of devaluation, root and branch government cuts and radical economic reform can deliver the more sustainable economy we can now only pray for.

Meanwhile the transfer of RBS- now the NatWest group- to London has removed a major headache from Bute House, but left all of Scotland's banking system in foreign hands- and after the emergency introduction of the Scottish Pound, banks are still slow to increase lending to Scottish entrepreneurs. The bursting of the Scottish reputation for financial probity has seen the loss of almost all the once flourishing financial services business- mostly gone to Dublin or Geneva- and the money men of Charlotte Square, in decline for so long, are now distant ghosts.

If the economic scene is a "more stable crisis" and relations with Europe, while difficult, now set to be solved within a couple of years, the relationship with the United States remains very brittle. The peremptory closure of Holy Loch to nuclear submarines, which forced the UK to transfer their Trident base to Savannah, Georgia, while new facilities are built in Plymouth- was political point scoring which cost badly needed jobs. While the Russian Ambassador was clearly delighted, the American Ambassador called it "the effective end of US engagement in Europe". After the short Sino-Japanese war of May 2018 with the abortive nuclear strike by Japan, the US has enough on its plate in Asia, without having to worry about uppity Europeans. Although the assassination of Vladimir Putin in 2016 brought hope for a more liberal Russia, the fact remains that the EU is dealing with a hostile and deeply authoritarian enemy in the Kremlin. The Belarusian rebellion has left Russia brooding and resentful, and the weakening of NATO could hardly have come at a worse time for the EU.

Turning to the Scottish domestic scene. It was, I suppose, inevitable that independence would lead to a fracturing of Scottish politics. What few might have seen was the radicalization that the wrenching changes have brought about. The huge job losses in Edinburgh, Aberdeen and on the Clyde drove Scottish unemployment up to over 30%, and the Scottish state sector obviously could not stand the strain- the tight spending curbs have meant that many Scots can not survive on benefits- and many skilled workers have fled for better economic climbs. The Scottish "handyman" has of course become a figure of fun in prosperous Estonia, but the emigration is a tragedy of missed opportunities, even if it has help reduce unemployment to just below the still terrifying 25% mark. 

Of course the recovery of the Liberals under their irrepressible leader, Willie Rennie- especially in their new electoral fortress of the North East- has squeezed the SNP even in their former heartland, However it is the emergence of the radical Saor Alba coalition to challenge the SNP from the left that is giving our embattled first minister so little room for manoeuvre. Glasgow left wing populism has a long history, and the SNP never really gained more than a shallow loyalty there- now it is gone. The bitter remnants of the once mighty Scottish Labour Party have been infected with a radical anti-globalist agenda, and Saor Alba combines a deeply left wing anti-capitalism with the kind of nationalist agenda that is no longer fashionable even in France since Marine LePen narrowly lost the 2017 election there. Although the electoral maths are against Saor Alba, they are eating the SNP's political lunch and it is no wonder that Nicola Sturgeon has so embarrassingly wailed in public about her "impossible job".

In the end, in the face of the huge problems our new state faces, it is hard not to wonder what might have been if the result had been 51.3-48.7 against instead of in favour of separation. As Willie Rennie said on the floor of the New Parliament House (yet another fiasco) only last week, "The SNP promised us roses all the way, but we got thistles. No jobs, few opportunities, difficult relations with London, Washington and Brussels, and at least another ten years before we can get back to the economic level we had in those distant sunny uplands of 2014- hardly a record that the first minister and her rag-bag party can be proud of". As she faces her second election without the sympathy vote of the first one, the uncertainties are gathering round. Maybe the new "Party for Britain" might just make an electoral breakthrough next year too. An irony, most certainly, but no longer beyond the bounds of probability. Yet, after the unfortunate booing of King Charles at the opening of the New Parliament House last year, and the growing and overt Republicanism of Saor Alba, it is clear that few expect the increasingly unpopular current settlement to last, so political uncertainty will remain the order of the day for the foreseeable future.

As the latest poll shows, most Scots would vote overwhelmingly to rejoin the Union, but that is the one thing off the political agenda. The anti-Scottish backlash which has given support to the firm line taken by the Conservative government in London has definitively taken the British identity away from English and Welsh as much as from Scottish people. Deeply though we may regret it now, the fact is that there really is no going back. Britishness: the currency, the passport, the flag, the military, the soft power and all, is gone. Now we have to endure at least a decade of economic upheaval to get our house in order- and even then Scotland will be a poorer, narrower, harder country than it was only six years ago. No wonder the new Canadian high commission received over 40,000 applicants on day one of their new working visa regime. 

Though so many are voting with their feet, those of us who stay must surely agree with the new Estonian Ambassador in Edinburgh who said, on her appointment "In Estonia we had to make freedom work, and for us freedom and independence were the same thing. In Scotland, you already had freedom, and you did not understand the sacrifice you needed to make to be independent. Now you do understand this, you are lost in uncertainty and you must still make still further sacrifices. You must now start a very difficult road- one which took us thirty years to complete, and may take you even longer. We are richer than you now because we work harder- so you must not expect to get a free ride from anyone, not even your EU friends". 

Bitter words for us to stomach perhaps, but as we all now know, how true. 

Monday, February 10, 2014

Speaking truth to power

The Internet is said to be killing off professional journalism. As with sport and business and many other professions the gap between the top of the tree- the millionaire columnists (or centre forwards or CEOs) and and the journeyman hack (or sub editor or middle manager) has widened by a factor of a hundred in the past two decades. The difference is that the bottom of journalism is now essentially unpaid. Perhaps that is also become true elsewhere, but the number of unpaid internships in the media seems still to be rather ahead of other sectors. Journalists are now more or less exclusively drawn from the wealthy- usually privately school educated- middle class. Whereas a Brian Redhead say or a Walter Cronkite established journalism as a trusted profession, the emergence of agenda- driven journalism in the mold set by Rupert Murdoch brought hard nosed economics and even harder nosed opinions to the business of establishing and reporting facts.

Yet there is an interesting paradox- as it has grown ever cheaper to report- either for print or broadcast media- from around the world, so reporting, instead of growing broader, has in fact grown narrower. The dishevelled but expert foreign correspondent- a figure of some glamour during the Vietnam war- has given way to well groomed but rather vacuous figures, as parodied by The Day Today or Drop the Dead Donkey

The descent of journalism has reached ludicrous levels in the past four weeks. Whereas once the issues raised by the rebellion in Ukraine would have been addressed as being of major significance to our own position, now the level of knowledge is assumed to be zero and therefore interest is assumed to zero too. The result has been the insane spectacle of the weather becoming the major- indeed often the only- news story. In the past three months weather stories have been on the front pages of newspapers more than five times more than any other story.

As the trial of the Murdoch editorial team drags on in the London courts, the grubby details of the corruption of Murdoch and his business ethics remind us again and again: journalism has lost its way, and with it a major source of healthy dissent has been lost. Journalists, a small and self satisfied clique, can no longer speak truth to power. The media have been corrupted by greed, incompetence and the pathetically low expectations of our society. 

You might as well subscribe to the Meteorological Office email as bother to read the tripe that masquerades as journalistic integrity these days. Any headline with capitals in (When will the weather ever END. More wet weather NEXT WEEK, etc.) can be ignored. 

In fact while you are at it, ignore the lot. 

Wednesday, February 05, 2014

BRIC, BRICS or MINT: the true story of investment fiascos

"Market gurus" in Investment Banking are in the business of marketing like everyone else, so much of what they do is more to do with presentation than reality. I have been forcibly reminded of this in recent weeks as yet another "emerging markets" crisis has unfolded on the currency and stock exchanges of the planet. 

In a way "Emerging Markets" is itself more a presentational than real idea, because the only thing that the so-called  "emerging markets" really have in common is that they are poorer than the so-called "developed markets". About three quarters of the worlds population lives in "emerging markets", and some are growing and some are collapsing. Hence the need for an overpaid "market guru" to try to make some kind of sense of the huge pile of data that comes from 75% of the world. Jim O'Neill, an economist with Goldman Sachs, is usually credited with coining the acronym "BRIC", standing for Brazil, Russia, India, China. Sometimes South Africa is added- BRICS. But BRIC or BRICS, the idea is that investors should allocate money to these markets en bloc as a separate asset class. From the point of view of investment, the idea is that these large, but relatively primitive economies should offer higher growth and therefore better investment returns.

In practice the returns from investing in BRIC states are actually rather questionable. The levels of corruption in India or Russia, or the role of the state in Russia or China or the social unrest in Brazil or Russia implies a higher risk premium. In other words you get a better return, not because of structural growth, but because you are exposing your capital to a higher risk- you SHOULD be getting a better return. In practice, when blending returns over a reasonable time frame, the BRIC states as a whole have not generally outperformed the developed markets. So for higher risk, investors get lower returns. This is the fundamental problem of "emerging markets"- in many cases they are not "emerging" at all, they are often -at best- stagnant. The exception has been China, but as a foreign investor your position is compromised and there is no level playing field for investors in the domestic market- nevertheless the Hong Kong and Shanghai exchanges have provided far better returns than- say- MICEX in Russia. In India, the bureaucracy of the system strangles entrepreneurship and inward investors are at an even bigger disadvantage than they are in China or Russia.

So, as investors have recognised that BRIC states are not the easy ride that was hoped, O'Neill came up with yet another easy acronym: MINT. This one is Mexico, Indonesia, Nigeria and Turkey. As with BRIC, these are economies that are roughly the same sort of size, but otherwise fundamentally uncorrelated. Yet while it took maybe a decade for the market to see that BRICs were not that fundamentally attractive, it has taken less than a year to see that MINT states are significantly weaker than the hype implies. The meltdown- political and economic- of Turkey, which happens every decade or so has returned to haunt investors even more dramatically this time. As Turkey faces yet another collapse is it not time to ask why global finance still insists on a commodity approach to "emerging markets" investment?

The BRICS and MINT hype is built upon the fact that these markets have the capacity to take large inward investment flows- whether or not they do this efficiently or generate adequate returns for investors is not the point- the critical thing is that they have the capacity for investment firms to place big bets. From the point of view of "market guru" marketing, there is no point in selling a brilliant company or indeed country, if it is too small for large capital flows to get in. In other words, the major market players know that the "emerging markets" that they sell are not the best investment returns, but merely the best returns that large capital flows can get into.

In fact, as my use of inverted commas around the term "emerging markets" may have already hinted to you, I do not believe in the concept of "emerging markets" at all-  that too is more marketing bullspiel. If one draws an arbitrary line of GNP per capita or industrial development or education level, or any one of a dozen or so data matrices, all you are really doing is measuring relative poverty. If you are an optimist, then poorer people get richer, as they have in China over the past forty years, if you are a historian you can see that this is not always true- as the peoples of Afghanistan, Egypt and Iran can tell you.

So, to invest in poor countries or not?

Firstly it is important not to listen to the fashion led agendas of market gurus. From Jim O'Neill to Mark Mobius, all have their own agenda, which is most definitely not the same as yours. In the end it boils down, not to collective, commodity based, mediocre investment, but to individual economies, sectors and entrepreneurs. Some countries, such as Estonia or Singapore, have the social and scientific capital to make a leap from backwardness to developed world life-styles in a single generation. Other states, such as India or Russia have a huge economic and political inertia that is resistant to that kind of large scale change. Yet even in these slow states it is possible to find entrepreneurs. However in such closed systems, it is very difficult to find such good investments in open markets. So if you are taking the market risk of India, then it would make more sense to invest in private equity than in the relatively thin public markets- the risk between the public and private markets is not that distinct, as it would be where stock exchanges have much higher levels of liquidity relative to GDP. The market gurus won't tell you this, because they have an interest in you buying their funds or the stocks that they already own. Private Equity investments are many orders of magnitude smaller than the stuff they are trying to sell to you. 

Of course what is true for emerging markets is true across all of the investment markets- there is no deus ex machina, there are only hucksters of various types attempting to part you from your money. This is the point that Nassim Nicholas Taleb has made repeatedly in his various books, including his latest, Antifragile. Investments in packaged products, such as funds, do not- and in fact probably cannot- out perform the general market over time. The fallibility of the human in charge will sooner or later lead to under performance.

It is now five years since I left my career in the City of London. I worked in JP Morgan, Robert Fleming, UBS, and Lazard over the course of nearly twenty years. I advised several other institutions, from Bank Vontobel to UniCredit. All of these institutions shared the same flawed investment methodology- and this broken risk model is why the financial system will go through yet more turbulence in the coming years. Although dressed up in quantitive models, in the end the flaw in the investment markets is precisely the same hucksterism that we see more obviously in "emerging markets"- it is a human failing, not a structural failing, that is gnawing away at the foundations of global capital.

For me that insight has led me to Estonia and to begin entrepreneurial investment, rather than the market investment that I used to cover. It is a far slower and more intricate process than the preparation of investment strategy reports that I used to do, yet in the end I believe that I can create more value and more wealth for myself and for others than I did as part of the questionable social utility of global investment banking. That remains to be seen, of course, but it is certainly an interesting experiment.