Who Elected the Rating Agencies?

by Henry Farrell on March 31, 2009

I’m not particularly keen on the current Irish government, but “this”:http://www.irishtimes.com/newspaper/breaking/2009/0331/breaking59.htm seems a bit much:

Ireland may need “new faces in Government”, an analyst with debt ratings agency Standard & Poors said this morning. Frank Gill, speaking a day after the agency lowered Ireland’s credit rating, also said Ireland had a “very low” chance of defaulting on its debt during an interview with Newstalk radio this morning. Mr Gill said a change of Government may be required in an effort to stabilise the debt to gross domestic product ratio. That ratio may rise to above 9.5 per cent, according to the Government, more than three times the European Union limit. Ireland has lost its prized “AAA” credit rating from Standard & Poor’s, which yesterday downgraded its outlook for the Irish economy, blaming the deterioration in public finances. In a move that will make the cost of Government borrowing more expensive and put further pressure on the economy, Standard & Poor’s lowered Ireland’s rating from AAA, the top rating possible, to AA+.

I wouldn’t have thought that this was an especially opportune moment for credit rating agencies to start throwing their weight around given their major contribution to the ongoing crisis, but even in normal times, this would have struck me as serious over-reach. Credit rating agencies are purely private bodies, with an awful lot of political power. In theory, they impartially pronounce upon the perceived riskiness of lending to particular debtors, putting money in particular deals and so on. In practice, their decisions often prove to be quite political. But rarely as political as this. I don’t think that this comment can be interpreted as anything but a statement that Standard and Poor’s willingness to improve Ireland’s credit rating is dependent on the Irish Dail and Irish voters kicking the current government out. That’s a very dubious – and very political – action for a purportedly neutral and technical body to be taking.

Update: Thanks to nnyhav in comments for pointing to this “later story”:http://www.irishtimes.com/newspaper/finance/2009/0401/1224243794208.html.

Reacting to S&P’s decision to cut the Republic’s rating, economists and market analysts yesterday homed in on its concern that there would not be a credible plan for the public finances until after the next election. Mr Gill told The Irish Times that the statement was not meant to question the State’s leadership, and simply reflected the challenge facing the Government and the uncertainty surrounding the banks. He also stressed that a AA+ rating was still broadly positive. “That is a very high rating and this suggests an extremely low probability of default,” he said.

I originally thought that this looked like a walkback rather than a clarification and said as such – then I saw that the Irish Times had changed their original story (without saying that they were doing this) to include the full quote which appears considerably more ambiguous than the original story implied.

Mr Gill said a change of Government may be required in an effort to stabilise the debt to gross domestic product ratio.

“It’s likely that for there to be a buy in into what are going to be inevitable tax hikes in order to stabilise the debt to GDP ratio, you are going to need new faces in the Government. This is typically the case in the aftermath of an economic crisis,” Mr Gill said

The GDP ratio may rise to above 9.5 per cent, according to the Government, more than three times the European Union limit.

Educational Equity and Educational Equality

by Harry on March 31, 2009

Lots of schools these days have “equity and diversity” committees My guess is that no-one wonders much what diversity is in “equity and diversity” because we all have a pretty good sense of what it is – acceptance, toleration, and perhaps celebration of the various ethnic, racial, national, gender and sexual orientations in our midst. But what on earth is equity?

People (teachers, education students, other scholars in education) ask me this reasonably often, because they think that, as a professional philosopher who thinks a lot about education I ought to have an answer. I used to shrink from the question because the term “equity” is on that I never use, but recently I have become bolder. A School of Education recently asked me to prepare a lecture on “Equity, Equality, and Social Justice in Education”, and in the talk I just talked about equality and social justice, and said, bluntly, that I don’t understand “equity” and wish people would stop using the term.

After saying that, I thought I should do a couple of bits of research. The first was to run a search in amazon for books with the words “equity” and “education” in the title. 7,235 results. Fortunately, most of them seem not actually to have equity in the title, and when I looked at the 107 books published in the last 90 days I found that many only use “equity” somewhere in the text, and a few of those (including Hidden Markets by my colleague Patricia Burch) use “equity” in the way that is standard in finance circles, to mean capital. But there’s enough to confirm that equity in education is a standard phrase that ought to be easy to understand. The second thing I did was to read a bunch of books by scholars concerned with school improvement and the internal life of schools whose work I admire, to see how they use the term “equity” and figure out whether there was some obvious meaning that I was missing (Ronald Ferguson’s excellent Toward Excellence with Equity: An Emerging Vision for Closing the Achievement Gap, which I promise to review in the “Books Every Teacher Should Read” category when I get a chance, is the only one with “equity” in the title, but all the school reform improvement/reform books I’ve read recently use the term, and most of them prefer it to equality).

Having done that research I think I was wrong to wish that people stop using it, even though I’ve been right to resist using the term myself. It is a vague concept, but the best authors who use it do so knowing that it is very vague, and feeling, rightly, quite comfortable with that. I’ll explain.

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Markets crowd out sharing (episode MCXXXVI)

by Chris Bertram on March 31, 2009

It seems that Ryanair’s Michael O’Leary “may have been put in charge of international space collaboration”:http://news.bbc.co.uk/1/hi/world/7973747.stm .

You and Elijah are now friends

by Eszter Hargittai on March 31, 2009

In case the various existing modern-version Haggadahs out there are not modern enough for you, try this. Thanks to Carl Elkin for CC-licensing this, see his page for the rest of the story.

Facebook Haggadah

Opening the Overton Window

by John Q on March 31, 2009

One of the effects of the Global Financial Crisis is that the window of ideas now regarded as thinkable has expanded greatly. Willem Buiter typically works close to the edge of the window, but even so, I doubt that he would have written this in the Financial Times a year ago:

[Tax havens] should be closed down.

The easiest way to achieve this is to make it illegal for any natural or legal person from a non-tax haven country to do business with or enter into transactions with any natural or legal person in a tax haven. That ought to do it. Tax haven, again, is defined not with respect to tax rates or tax bases, but with respect to bank secrecy, that is, with respect to the information shared by the country’s financial institutions with foreign tax authorities. That information sharing should be automatic and comprehensive.

As regards regulatory havens, once common G20 standards for regulatory norms, rules and regulations has been set, countries that violate these standards would be black-listed. The obvious sanction is non-recognition of contracts drawn up in the regulatory haven jurisdiction and non-recognition of court decisions in these regulatory havens. That ought to do it.

The logic hasn’t changed in the last year, but the idea that the OECD could simply cut off economic interactions with places like the Cayman Islands and Liechtenstein (let alone, say, Switzerland) wasn’t thinkable then. It is now.

Update Marshall McLuhan moment: In comments, Willem Buiter points to this piece, written a year ago, and taking an equally strong line. Despite getting this example wrong, I still think the window has shifted.

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