Monday, August 08, 2011

Arsenal transfers....

Arsenal transfers – an alternative perspective
At the end of last season it appeared that Arsenal was a club in crisis.  Injuries and a lack of mental strength, combined with some seriously flawed defending horrified fans, and even AW appeared to be promising major changes – including transfers in and out of the club.

With the season about to start, there is a palpable sense of anger and frustration amongst fans.  We have not bought the marquee signings that we appeared to have been promised by Arsene Wenger, and our defence has not been strengthened significantly – in fact it appears to be weakened by the sale of Clichy.  The majority of the internet blames AW for not signing, blaming his stubborn refusal to change tactics and youth strategy.  However, I see things differently – we are not the same club we were five years ago, for economic reasons. 

We have about £200M worth of debt, secured on our stadium.  This is being repaid at around £20M per annum.  Our property development business has injected funds into the club – but this is not sustainable income. The sustainable income comes from match day income and the commercial deals the club enters into along with prize money.  It appears from the clubs’ annual report that money from the property deals (approx £40 million) is ring-fenced for transfers.   It’s a good amount – but once it’s gone, it’s gone – so AW has to use it wisely.  The state of the European economy is horribly grim, with low growth and realistically, growing our commercial side is challenging, hence the Far East tour and the aim of tapping new markets.

Historically, AW has not been afraid to buy - Overmars, Ljungberg, Pires, Reyes, Campbell, Gallas, Arshavin et al.  The difference between five years ago and now appears to be two-fold:

1. The amount of time it seems to take to complete the deal now
2. Who actually negotiates on behalf of the club and is responsible for completing the deal.

In the last 2 - 3 seasons, if you believe all that you read, it seems that we regularly miss out on big players.  Transfers like Arshavin and Gervinho appear to take weeks, if not months to fully secure, whilst the transfers of clubs like Manure seemingly completed at high speed.  I would argue that this is not the fault of AW, but the Board.

Ivan Gazidis is reported to be the director responsible for negotiating and closing transfer deals.  Since he and Stan Kroenke joined Arsenal our financial, commercial and marketing functions have been revamped, with new American managers coming in to sharpen up what was perceived to be the disappointing commercial performance of the club.  With this, it appears that new financial controls and processes have been introduced, and I suspect that our lack of agility in completing transfers arises from this.  Transfer deals are financially complex, with deals being made in multiple currencies; and with sterling being weak, our £40M does not go as far as we might like.  For example, three years ago, £40M would have been worth approximately 70M Euros; now it is worth 46M Euros.  Obviously our financial strength in the European market is significantly weakened.

The financial implications of deals are modelled extensively so that the full impact on the club finances are understood before any deals are finalised.  I would also expect that this modelling has to be done not once, but a number of times so that there are no financial surprises, and the impact on the cash flow of the club is fully understood.  This is very important - if an organisation runs out of cash, it does not matter what assets you have, you will almost certainly go bust - see Portsmouth and Leeds for recent examples. 
So before blaming AW for the lack of transfers, remember the board and the corporate support staff have important roles to play, and they also have some responsibility for the lack of speed in completing our transactions. Gazidis I suspect is a hard nosed negotiator, determined to get the best deal for the club - and that will sometimes mean that he will not complete deals that he feels are not in the best financial interests of the club.  

So, I would argue that whilst the Board fully back AW, it is only if the financial aspects of the deal are fully analysed and the financial implications fully understood.  This takes time, and I suspect costs us on some players.  Also the financial aspects of deals will be scrutinised ever harder – if they do not favour the club, then the deal will not be done.

I think the evidence for this perspective exists, with the very robust attitude being taken towards the sale of Fabregas to Barcelona.  The hard line stance is very much in the club's interest; not only in trying to keep our best player, but also in terms of the potential financial damage such a deal may inflict on Barcelona.  Their financial difficulties are well reported; screwing the odd million or two out of them sounds petty, but will cause debt ridden clubs like Barcelona a lot of pain both now and in the future because they cannot afford him - and eventually that will show on the pitch when they are not able to compete financially with clubs such as Arsenal which have a far more robust and sustainable business model.  The battle for European and domestic supremacy is being fought not just on the Emirates pitch, but also economically, and this is a war that AW and the board appear to be determined to win.

Tuesday, April 19, 2011

What is the Alternative Vote system?

Rather than write about this system and try to explain it myself I have attached a link to the Electoral Reform Society leaflet which gives a much better explanation than I can!


http://www.electoral-reform.org.uk/downloads/What%20is%20AVweb.pdf

Monday, April 18, 2011

Do I support the economic policy of the coalition government?



Can a social liberal support neo-liberal economic policy?

In my last post, I identified myself as a social liberal, and explained why I am a Liberal Democrat.

SO, as a social liberal, I must therefore reject the policies of the coalition government then? After all, surely it is not possible to be a social liberal and support the imposition of neo-liberal economic policies based firmly upon the monetary policies of Margaret Thatcher?

First of all what is neo-liberalism?

The main policy goal of neo-liberalism is to transfer the control of the economy from the state to the private sector, in the belief that the private sector is better able to deliver more efficient government and service delivery than the public sector.  That is, that having the means of production and government in private hands is more efficient and effective than in public sector ownership.

There are ten policy positions which neo-liberals propose and are broadly supported by major financial institutions e.g. the World Bank and the IMF. Please see this link (http://en.wikipedia.org/wiki/Neo-liberal)  

  • Fiscal policy Governments should not run large deficits that have to be paid back by future citizens, and such deficits can only have a short term effect on the level of employment in the economy. Constant deficits will lead to higher inflation and lower productivity, and should be avoided. Deficits should only be used for occasional stabilization purposes.
  • Redirection of public spending from subsidies (especially what neoliberals call "indiscriminate subsidies") and other spending neoliberals deem wasteful toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment
  • Tax reform– broadening the tax base and adopting moderate marginal tax rates to encourage innovation and efficiency;
  • Interest rates that are market determined and positive (but moderate) in real terms;
  • Floating exchange rates;
  • Trade liberalization – liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by law and relatively uniform tariffs; thus encouraging competition and long term growth
  • Liberalization of the "capital account" of the balance of payments, that is, allowing people the opportunity to invest funds overseas and allowing foreign funds to be invested in the home country
  • Privatization of state enterprises; Promoting market provision of goods and services which the government cannot provide as effectively or efficiently, such as telecommunications, where having many service providers promotes choice and competition.
  • Deregulation – abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudent oversight of financial institutions;
  • Legal security for property rights; and,
  • Financialisation of capital.
The ten policy positions outlined above are sourced from Wikipedia, but appear to be broadly accurate.

In all honesty, I would have to say that I broadly agree with the majority of the above principles, however the devil, as always, is in the detail. I do not think however that the private sector is inherently more efficient than the public sector; the private sector does not have the same concerns or pressures of the private sector; for a start the private sector has less meddling from politicians!


NHS Reforms
The NHS is an enormously complex, bureaucratic organisation which has helped save the lives of millions of people since it was established in 1947.  It is expensive - its annual budget is over £110 billion, or over 7% of GDP.  60% of its budget goes on staff costs - it employs 1.7M people.


The question we as taxpayers and patients ask is do we get value for money?  Does the NHS work? We all have horror stories about patient care and waste, however you also hear fantastic compliments.


The problem as I see it is one of scale.  The NHS is one of the largest organisations in the world, and managing such a large organisation centrally is close to impossible.  To become more efficient, decision making needs to be decentralised, and decisions about clinical funding needs to be taken by medical professionals, not Whitehall bureaucrats.  I would favour a radical break up, with accountability and governance handled at a local level, but procurement may benefit from being a centrally provided service so that hospitals benefit from economies of scale.


I am torn by the proposals - I can see benefits, but huge risks as well.  My main hope would be that the NHS becomes an independent body, free from the control of politicians and able to determine its own destiny, similar to the Bank of England.  One thing is for sure - the NHS must remain free at the point of provision to those in need.


What about the cuts?
tAs at March 27 2011 The national debt according to the Office of National Statistics, stands at £875.8 billion.  This represents 58% of GDP.


If all financial sector intervention is included (e.g. Royal Bank of Scotland, Lloyds) , the Net debt was £2,252.1 billion  or 149.1 per cent of GDP.


The bald figures speak for themselves.  The UK is horrendously in debt, and that debt is growing daily because of the interest we pay on what has been borrowed. This is approximately £43 billion per annum  In order to fund government spending (which includes Defence, NHS, Welfare etc.) the UK will need to borrow £149 billion.


We can all argue about the cuts.  We all have differing priorities, and views on where the cuts should fall. I personally do not envy the government's task of getting public sector finances under control. I do not feel qualified to comment further.


What I can say though is that in 2002, gross national debt stood at 30% of GDP.  In less than ten years our debt has increased from 30% to 58% of GDP, and the responsibility for that lies squarely on the Labour Government.

Why I am a Liberal Democrat!

Quite a few of my friends and acquaintances find the idea of being a Liberal Democrat somehow strange.  Pre-Coalition the Lib Dems were viewed by many as fringe party that had no chance of ever being elected, and no chance of obtaining real influence or power.
How things have changed.... or have they?  To explain why I am a member of the Liberal Democrats, an explanation of what a Liberal (or liberalism) actually is...


What does it mean to be a Liberal


A Liberal traditionally has believed in the liberty of the individual and equal rights. In believing in liberty, I mean the belief that individuals are capable of:

  • governing themselves
  • exercising free will
  • taking responsibility for one's own actions
As such, Liberals have traditionally believed in 'small' government.  I am not so sure that I agree fully with Thomas Paine who argued that 'government even in its' best state is a necessary evil', however I do believe that a state that involves itself too deeply in the lives of its citizens' on a day to day basis results in some unhealthy outcomes i.e.:
  • the erosion of civil liberties and the creation of a climate of fear through which central control by the state is both encouraged and desired
  • a diminution in the overall ability of the people to take responsibility for their own lives
Looking at the above, it is clear why I do not support Labour - the actions of the last Labour government with its strong centralised, statist instincts resulted in some of the most illiberal legislation the UK has ever seen, with a corresponding reduction in the rights of the individual.  All done in the name of the 'war on terror'.

Ah, I hear you cry, surely then you must be a Conservative?  They believe in small government as well....

As a Liberal, I believe in equal rights, however equal rights do not occur naturally in society; in order for people to have equal rights, there is a need for the state to provide a framework within which the rights of the individual are guaranteed.  In most countries this would be through a written constitution, however the UK does not have one of these.  Today, the principle of equal rights is embedded in legislation (Equality Act 2010 and its predecessors) and the much maligned and misunderstood Human Rights Act.  It is here that I diverge from the Conservatives.

As far as I can see, the Conservative Party is truly ambivalent on human rights. They talk about the rights of the individual, however they are remarkably unwilling to enshrine those rights in law - after all, if they truly believed in human rights, surely they would have introduced a Human Rights Bill sometime in the twentieth century?  After all, they were the dominant government for much of it!

Liberal also believe in free and fair elections and a multi-party democracy that reflects the fact that we live in a plural society (one within which there are many cultures and sub-cultures).  Again, Conservative philosophy and policy dictates against this - their passionate defence of the first past the post voting system (a system which is perceived to be the only way of producing 'strong' government) is a system which actively discriminates against multi-party democracy and does little to ensure the representation of the cultures existing in the UK today. 

At heart I am a social liberal; I believe that the state has a role to play in governing the way our society develops and changes.  Unfettered capitalism and rule by the markets is a philosophy I CANNOT bring myself to believe in.  There is no morality or ethics or justice in the market - to my mind monopolies are developed through market freedoms because there is no such thing as a perfect market.  The recent failure of the international financial services system indicate the need for real governance and regulation; the obscene levels of profit which are generated by the financial services industry illustrate a failure of the market which was eminently preventable by previous Labour and Conservative administrations the explosion in property prices and the escalation of prices of commodities are all indications of market failures, as perfect competition does not exist.


What about on the world stage?  Is Liberal philosophy relevant?


Liberals have always accepted the reality of war.  War is sometimes - some would argue often- necessary in  order to pursue the attainment of liberal objectives of democracy and free trade.  However, in the world we live in today, characterised by the forces of globalisation and interdependency, the unilateral use of force to achieve liberal objectives will mainly result in a cycle of violence that will be very difficult to break.  A perfect example of this is the outcomes of the war in Iraq and to a lesser extent Afghanistan, where coalition forces still remain and sustain losses on a regular basis.  Liberal thinking led to the creation of the worlds' major international institutions, creating a framework through which international conflict could be reduced and minimised.  This of course includes the European Union, which had its roots in the post war efforts to minimise opportunities for conflict through the management of strategic resources - coal and steel, as well as nuclear weapons.


SO, as a social liberal, I must therefore reject the economic policies of the coalition government then? After all, surely it is not possible to be a social liberal and support the imposition of neo-liberal economic policies based firmly upon the monetary policies of Margaret Thatcher? 


That is a question for my next blog.