Chinese capitalism

What tech does China want?

The contours of the Communist Party’s masterplan for its technology industry are emerging


THE VISION is becoming clear. 

In a decade or so China will, if the Communist Party has its way, become a techno-utopia with Chinese characteristics, replete with “deep tech” such as cloud-computing, artificial-intelligence (AI), self-driving cars and home-made cutting-edge chips. 

Incumbent technology giants such as Alibaba in e-commerce or Tencent in payments and entertainment will be around but less overweening—and less lucrative. 

Policies to curb their market power will redistribute some of their profits to smaller merchants and app developers, and to their workers. 

Second-tier cities will boast their own tech industries with localised services that, when linked up with national data resources, compete with the less-mighty titans. 

Data will pulse through the system, available to firms of all sizes, under the watchful eye of the government in Beijing. 

China’s internet will strengthen its authoritarian design.


Clearer, too, is the way in which President Xi Jinping wants to make this vision a reality. 

Besides talking up deep tech, this involves taking the shallower sort down a peg. 

In the past nine months China’s regulators have cracked down on the county’s effervescent tech scene, which, though it has generated world-beating innovations and astounding shareholder value, is no longer seen as fit for purpose. 

As a result, the country’s hottest tech groups have lost at least $1trn in combined market capitalisation since February (see chart 1).

Foreign investors who have backed Chinese online firms are retreating. 

Domestic Chinese investors are anxious. 

Indices tracking Chinese tech stocks in Hong Kong and Chinese groups more broadly in New York are down by 40-45% since mid-February. 

No matter. 

Indeed, it may be part of the plan. 

Consumer-internet companies make up at least 40% of big Chinese stocks in the MSCI China Index. 

Like their American peers—Apple, Alphabet, Amazon, Facebook, Netflix—these firms have made tonnes of money for their shareholders. 

But, the party seems to think, at the expense of abusing their market power, exploiting workers and polluting minds.

The list of casualties is a Who’s Who of Chinese tech: Ant Group, an Alibaba affiliate whose $37bn initial public offering (IPO) was suspended days before the listing; Didi Global, whose ride-hailing app was expelled from Chinese app stores days after its own $4.4bn IPO in New York; Tencent, fined by regulators for sexually explicit content and unfair practices, and told to end exclusive music-licensing deals; the online-tutoring industry, swathes of which were barred last month from making a profit. 

And the list is getting longer. 

Trustbusters are reportedly getting ready to slap a $1bn fine on Meituan, a super-app that delivers meals. 

On August 9th the Financial Times reported that NetEase, an online-entertainment group, decided to shelve the planned IPO in Hong Kong of its music-streaming business owing to investors’ worries about the regulatory crackdown.

The ranks of potential winners are less well-defined. 

As a guiding principle, the vice-premier, Liu He, recently stated that China is moving into a new phase of development that prioritises social fairness and national security, not the growth-at-all-costs mentality of the past 30 years. 

He noted how the government will guide the “orderly development of capital”, the better to suit the “construction of a new development pattern”. 

Barry Naughton of the University of California, San Diego, calls this the “grand steerage”. 

Dexter Roberts of the Atlantic Council, a think-tank in Washington, DC, discerns an echo of Mao Zedong’s “politics-in-command” economy. 

Either way, it is a break with the old pro-growth model and the beginning of “real state capitalism”, as one investment banker puts it.

Start with data. Europe and some American states, such as California, have devised laws that seek to protect consumers from the misuse of their personal information by large companies. 

China has put similar rules in place; in some cases they are more severe than in the West. But Chinese regulators are going further. 

In a largely ignored, jargon-filled policy paper from the State Council, China’s cabinet, in April last year, data were named as a “factor of production” alongside capital, labour, land and technology. 

This hinted at the importance assigned to information by the Chinese state, notes Kendra Schaefer of Trivium, a consultancy.

China’s new data policy remains a work in progress. 

The Data Security Law will come into force on September 1st and the Personal Information Protection Law is due to be adopted by China’s rubber-stamp parliament soon. 

It is unclear how they will be enforced, though data specialists intuit that many types of data currently held by internet giants could eventually be traded on government-backed and private exchanges. 

Ant, for example, is already being prodded by authorities to open up its vast stores of personal financial data to state-owned companies and smaller tech rivals. 

No specific rules for financial-technology firms have been issued but everyone is waiting for them, says Deng Zhisong of Dentons, a law firm.

Another prong of the state’s strategy is to redistribute the wealth and power large tech platforms have accrued over the past decade. 

E-commerce groups such as Alibaba, JD.com and Pinduoduo have been targeted by the State Administration for Market Regulation (SAMR), China’s newish antitrust regulator, which accuses them of monopolistic behaviour. 

Merchants on these platforms often indeed pay high fees and must choose between selling on one or the other. 

Payment systems run by Tencent and Alibaba have prevented exchange of information between them, which led to a bifurcation of the market.

The giants are now being forced to shift to more open models where payments and shopping activity are no longer exclusive to one platform, allowing merchants to regain some control over the prices of their wares. 

Analysts believe that the changes will lead to higher margins for sellers and lower prices for consumers but slower growth for the tech titans. 

Alibaba warned investors in early August that long-running tax benefits could soon come to an end, adding billions of dollars in costs.

Workers will benefit from the wealth transfer, too. 

Companies like Didi and Meituan, which use armies of low-paid drivers or warehouse staff, are on the hook. 

The authorities are already going after Meituan for not providing adequate care to such employees. 

It will be forced to raise wages and give drivers better insurance. 

Meituan’s market value has fallen by a fifth, or $42bn, since the measures were announced in late July.

The final facet of China’s campaign is a transfer of resources from internet companies to firms that can create tangible advances in technologies that the party deems less frivolous. 

This would represent a striking shift in Chinese economic governance, which since the 1990s has put rapid development and attracting foreign direct investment over all else. 

Under-regulated internet firms have been the prime example.

Local officials lowered taxes and gave away land in order to attract the online giants to their cities and provinces.

Now the government wants to use such carrots, as well as its anti-tech sticks, to create a less unruly and more hardware-focused technology sector that will help it surpass America and the rest of the West in economic might, writes Rush Doshi, an adviser to President Joe Biden, in his new book, “The Long Game: China’s Grand Strategy to Displace American Order”. 

Mr Xi has referred to “great changes unseen in a century” in areas such as AI and quantum computing (which would harness the weirdness of subatomic physics to drastically speed up certain types of calculations). 

These, he has suggested, will usher in a new global economic order that revolves around China. 

Senior officials believe that if China can get a first-mover advantage on the cutting edge of technology, it will become not just an economic superpower but a geopolitical and military one, too, writes Mr Roberts of the Atlantic Council.

Move fast and regulate things

Many politicians in America and Europe would love to fashion their technology sectors into something like Mr Xi’s vision: less social media and other “spiritual opium”, as Chinese state press recently dubbed video-gaming, and more strategic development of the technological infrastructure of the 21st century. 

This includes computer chips, clean energy and much besides, partly to counteract an effort by America and its allies to restrict exports to China of some critical technologies such as semiconductors. 

When launching a new business, entrepreneurs and investors must therefore ask, “How does this solve China’s problems?” sums up Liu Jing of Cheung Kong Graduate School of Business in Beijing.

Yet the way China’s regime is going about its desired transition is far from guaranteed to work. 

One problem stems from who is doing the regulating. 

The Communist Party presents an image of a unified force with a single set of objectives. In fact, like any large bureaucracy, Chinese authorities are fragmented, and can act at cross-purposes.

The policies behind the techlash are born of sweeping goals for society from the highest reaches of central government, an echelon of engineers and economists who lack speciality in most of the sectors in the firing line. 

But it is up to specialists in bodies such as SAMR and the Cyberspace Administration of China (CAC) to enact these objectives. 

And as regulators’ remits expand, the odds of a clash shorten.

Some run-ins have already happened. 

A recent policy from the central bank aimed at breaking up powerful fintech groups spilled into antitrust territory covered by SAMR, notes Angela Zhang of the University of Hong Kong. 

Following Didi’s post-IPO app ban and online tutors’ profit-prohibition, in both of which the CAC played a part, the China Securities Regulatory Commission (CSRC), which has spent years trying to convince global investors that Chinese markets are stable, had to contact bankers and investment funds to assure them that other industries would not be treated so harshly. 

The CSRC’s move was interpreted by some as a sign that regulators were rethinking their scorched-earth tactic. 

Instead, the situation highlights how poorly co-ordinated the campaign has been at times.

Another worry is that the crackdown has spooked entrepreneurs and venture capitalists. 

It is true that some smaller firms view the tech giants as bullies that have strong-armed rivals and snuffed out competition. 

China’s most innovative startups have had the choice of selling out to big tech or facing a quick and brutal demise, says Mr Liu. 

The recent dismantling of online monopolies has been a godsend for many promising, young executives who have long struggled under the thumb of big tech, he observes. 

And entrepreneurs have flocked to the approved deep-tech fields: last year alone Chinese founded 22,000 chip firms, 35,000 cloud-computing companies and 172,000 AI startups.

But the tech giants’ founders, such as Jack Ma of Alibaba, are still held in high regard by other technology bosses. 

Many industry executives now feel that years of hard work and sacrifice have gone unnoticed by their new regulatory overlords. 

The Communist Party has communicated its intentions and goals poorly to a generation of talented businesspeople, says an executive at a small startup. 

If the current turmoil persists, China may end up with an open field for free and fair competition “but no one to run the companies”, says another executive.

Investors face similar considerations. 

A prominent private-equity financier says that he fully agrees with the goals of the regulation campaign. 

If carried out correctly China could reduce inequality while becoming a model for regulating big tech. 

But, he adds, the tactics have not been thought out. 

Pointing to China’s world-beating fintech sector, he warns that “harming China tech is harming China as a nation.” 

A more level playing field could let smaller tech companies flourish. 

But “who would invest in these right now?” asks Chen Long of Plenum, a Beijing-based research group.


A big test of investor sentiment will come with the rumoured IPO of ByteDance, a $180bn unlisted giant which owns TikTok and its Chinese sister short-video app. 

But venture capitalists are already getting cold feet. 

Fundraising for privately held tech firms peaked at $28bn in the last quarter of 2020, when the techlash began, according to CB Insights, a data provider. 

In the second quarter of this year Chinese startups raised just $23bn, even as those in America raked in ever more capital (see chart 2). 

The bulk of last year’s litter of new deep-tech companies probably predates the clampdown. 

Their prospects and easy access to capital are far from assured.

Apparently without irony, Chinese media have likened the government’s push to spur the domestic semiconductor industry to China’s Great Leap Forward. 

In 1958 Mao decreed that farmers set up furnaces in their backyards in order to help China surpass Britain in steelmaking. 

What the media have omitted to mention is that the resulting steel was mostly unusable pig-iron. 

Meanwhile, millions of Chinese starved as fields went unploughed. 

Mr Xi’s technological leap towards cutting-edge chips and other deep tech will not be as calamitous—China is too prosperous for that. 

But it is not immune to the law of unintended consequences. 

Auf Wiedersehen

Germany’s export-driven foreign policy is being challenged

But that does not mean it will change much



Angela merkel and Joe Biden dined together on July 15th in Washington during what was almost certainly her final trip to America as Germany’s chancellor. 

The date was a reminder of the unique closeness of the two allies. 

It was the 75th anniversary of the arrival in Bremerhaven of the first care packages (Co-operative for American Remittances to Europe), parcels of food and supplies that prevented starvation for many in war-ravaged Germany.

There was a great show of warmth between the lame-duck chancellor and the American president. 

Mr Biden is trying to mend relations with America’s closest allies after Donald Trump treated them with scorn. 

But the love-in had its limits: on Russia and China, Germany and America are not aligned. 

“Russia is work in progress between the two allies, but there is a wide gap in what is the right strategy for China,” says Charles Kupchan of the Council on Foreign Relations, a think-tank.

Despite rumblings of discontent at home, even within her own party, Mrs Merkel continues to stick to her course in many of her dealings with Moscow and most of her relationship with Beijing. 

This has become an acute problem with Nord Stream 2, a €9.5bn ($11.2bn) undersea pipeline, fiercely opposed by America’s Congress, that will bring natural gas from Russia’s Yamal peninsula to the German coast, circumventing Ukrainian and Polish transit routes. 

The project is expected to be completed in August.

“Nord Stream 2 is a heavy millstone around our necks that is harming our credibility,” says Wolfgang Ischinger, a former German ambassador to America. 

The pipeline has largely nullified the credit Mrs Merkel won for press-ganging other Europeans into imposing sanctions against Russia after its annexation of Crimea in 2014. 

In May Mr Biden attempted to defuse the row by waiving sanctions on the company building the pipeline and on Matthias Warnig, a former East German intelligence officer who is its chief executive. 

But he needs something in return, as Congress looks likely to demand fresh sanctions next month.

Yet during a joint press conference after their meeting, the two leaders announced no new compromise over the pipeline. 

Mrs Merkel said Europe had “a number of instruments at our disposal” to react if the Russians stopped the transit of gas through Ukraine, which fears the loss of transit fees, but she did not commit to the use of any in particular. 

Nor did she outline any new German initiative to bolster Ukraine, such as helping it develop new sources of revenue and energy infrastructure. 

For his part, Mr Biden said, “The chancellor and I have asked our teams to look at practical measures we could take together” and to evaluate the impact of Russian actions on Europe’s energy security and on Ukraine. 

“We’ll see,” he said. “We’ll see.”

Like her predecessors Mrs Merkel has tried to balance loyalty to Germany’s allies with attempts to engage with adversaries economically. 

Yet whereas Willy Brandt’s Ostpolitik (eastern policy) was one of the most successful doctrines of the post-war years, Wandel durch Handel (change through trade), the mantra of the past two decades, is a distortion of Ostpolitik, argues Hans Kundnani of Chatham House, a British think-tank. 

Ostpolitik at least had reunification as a strategic objective: the idea of political change through trade is often little more than an excuse for closer commercial ties with autocratic regimes. 

It is one of the reasons that other EU leaders recently scuppered Mrs Merkel’s push for the first EU summit with Vladimir Putin since the Russian president annexed Crimea.


Until a couple of years ago Germany’s China policy was guided mainly by Wandel durch Handel, promoted in particular by the big carmakers that are Germany’s most important industry. 

Over the past ten years China has become Germany’s biggest trading partner, with goods exchanges growing to $243bn last year. 

And Volkswagen, Europe’s biggest carmaker, now sells more than 40% of its passenger cars in China (see charts).

But German enthusiasm for doing business with China has abated. 

At the start of 2019 the BDI, the main German industry association, published a paper calling China a “systemic competitor” and outlining its concerns about high barriers to entry, state subsidies to local firms and other distortions in the Chinese market.

Siegfried Russwurm, the bdi’s boss, recently said that Germany needs “an honest discussion about how we deal with autocratic trading partners”. 

Human rights are not an internal affair, insisted Mr Russwurm, describing as “unacceptable” China’s treatment of the Uyghurs, a Muslim minority.

Policies are changing too. 

A new law requires German firms with more than 3,000 employees to prove by 2023 that their supply chains are free of human-rights abuses (from 2024 it will apply to those with more than 1,000). 

Penalties for infractions can be 2% of a company’s annual revenue.

Even so, Mrs Merkel is sticking to her policy of treating China with kid gloves. 

She was loth to ban Huawei, a Chinese firm, from bidding for contracts to build Germany’s fifth-generation telecoms networks, as America wanted. 

In the last days of Germany’s rotating presidency of the EU last December, she pushed through a treaty that is meant to grant European firms better access to the Chinese market. 

This irritated the incoming Biden administration, and has been blocked by the EU parliament. 

And in June Mrs Merkel made fellow G7 leaders water down their summit’s final communiqué to avoid upsetting China.

Will Mrs Merkel’s successor chart a different course? 

Of the three people vying to replace her after an election in September, two give the impression they are not aware of the extent of the challenge posed by Russian and Chinese aggression, says Constanze Stelzenmüller of the Brookings Institution, a think-tank. 

Armin Laschet, the Christian Democratic (CDU) candidate, and Olaf Scholz of the Social Democrats make feeble arguments about America wanting a “new cold war” and trying to force Europeans to “decouple” from China.

In contrast Annalena Baerbock, the Greens’ candidate, wants to stand up to Russia and China. 

But her chances are receding, with the latest polls giving the Greens less than 20% of the vote while the CDU and its allies hover around 30%. 

As a potential junior partner she would carry some weight on China and Russia policy, but it is hard to say how much; her priority would be climate change. 

That is why Mr Biden will continue to listen to Mrs Merkel, even though she is on her way out. 

Her successor is likely to follow her faithfully. 

The two big reasons to doubt the global boom

Cracks are appearing in the US and Chinese engines of growth

Ruchir Sharma

The head office of Didi in Beijing. Chinese regulators have announced an investigation into data security concerns at the ride-hailing group © Ng Han Guan/AP


Though economists expect the reopening boom in the global economy to roar through the coming quarters, there are two increasingly pressing reasons to question its strength and length: China and the US. The two superpowers are the locomotives of global growth, but cracks are appearing in their economic engines.

China alone accounted for more than a third of growth in the world economy over the past five years. 

Today a 1 percentage point slowdown in China shaves a third of a point off global growth in gross domestic product, so the world has reason to worry when Beijing tightens the screws. 

That’s happening, with the crackdown on the tech sector.

In recent years, as the old economy industries of the commodities and manufacturing sectors have become mired in debt and decay, China’s boom has been sustained by a new economy, concentrated in the tech sector. 

Over the past decade, the digital economy’s share of China’s GDP has quadrupled to a staggeringly high 40 per cent.

But tech giants could pose a standing challenge to the ruling party at a time when it tries to revive the socialist values of early revolutionary years. 

China had no tycoon worth more than $10bn a decade ago; now it has nearly 50. 

Over the past year, China generated 238 new billionaires, more than twice as many as any other country. 

Most of that wealth arose in tech.

The crackdown has been cast as a healthy move to contain monopolies, or as a state bid to gain control over big data. 

It is, however, also an unsurprising response by the Communist party to this unprecedented explosion in wealth and inequality.

This new campaign follows an old pattern, going back at least to economy tsar Zhu Rongji in the early 1990s. 

China has risen as an economic superpower over the past four decades as the state retreated, freeing capitalists to generate growth. 

But at times state managers step in to restrain capitalism when its apparent excesses — of corruption or debt bubbles or inequality — grow too glaring for their liking.

Often the campaign has been accompanied by a slowdown in the economy but ends before the damage goes too far. 

Nearly a decade ago, Beijing launched a massive anti-corruption drive that cut down many rich tycoons, who were soon replaced by a new breed of tech magnates.

This time the stakes appear higher. 

It’s hard to see how any other sector could make up for a shock to the digital economy, and the damage is already clear. 

Since the crackdown began, the market cap of Chinese tech has fallen by a third, or around $1tn. 

The rise of new tech unicorns has dried up. 

And it’s not clear that Beijing is prepared to back off yet, given how powerful the tech giants have become and the widespread belief that data is the new gold.

The US is the world’s second economic engine, representing about one-fifth of global growth over the past five years. 

Many forecasters assume that the global recovery will get a huge boost from the $2.5tn in additional savings that Americans squirrelled away during the pandemic and will presumably now spend as the economy fully reopens.

However, that is not how consumers behaved in the past.

As a recent article in Barron’s pointed out, excess savings have been released in spending sprees only in nations that were defeated and destabilised in war, where consumers feared their currency might soon be rendered worthless. 

In the US, the last major episode of forced saving came under rationing in the second world war. 

America won and, rather than spend wildly after the war, Americans sat on those extra savings for years.

Conditions are similar now. 

Americans have chosen to spend only about a third of their pandemic stimulus checks, saving or paying down their debts with the rest. 

The new Delta variant threatens to reinforce this caution. 

The US is also approaching a “fiscal cliff”. 

New government spending will plummet sharply in coming months. 

Most economists are banking on extra strong consumption growth to pick up the slack. 

But history is not on their side. 

After a stimulus sugar rush, growth tends to fall back quickly.

Signs of engine trouble are flashing in China and the US, which in recent years have accounted for over half of global growth. 

While the debate raging in financial markets focuses on whether the uptick in inflation will be transitory, it is time to ponder the possibility that the economic boom will prove more transitory than expected.


The writer, Morgan Stanley Investment Management’s chief global strategist, is author of ‘The Ten Rules of Successful Nations’

Put Central Bankers in Their Place

Current loose monetary policies in developed economies are likely to increase wealth inequality, and in the short term there is little that monetary and regulatory authorities can do about it. Resolving the problem will instead require finance ministers with a strong political mandate to implement redistributive measures.

Howard Davies



LONDON – In the Forbes list of the World’s Most Powerful People for 2012, Ben Bernanke, then the chair of the US Federal Reserve, held the sixth position, while Mario Draghi, then the president of the European Central Bank, came in at number eight. 

They were both ranked above Chinese President Xi Jinping. 

As the global economy struggled with the aftermath of the global financial crisis that began in 2008, and its European cousin, the eurozone crisis, central banks were in the driving seat, easing quantitatively like there was no tomorrow. 

They were, it was often said, “the only game in town.” 

Even at the time, some thought there was an element of folie de grandeur in their elevation.

This time is different. 

Although central banks continue to buy bonds incontinently, fiscal policy has been the key response to the COVID-19 pandemic. 

In the United States, President Joe Biden and Congress have led the charge. 

In the European Union, the European Commission’s Recovery and Resilience Facility is at the heart of the €750 billion ($884 billion) Next Generation EU plan, while in the United Kingdom, Chancellor Rishi Sunak is signing the checks.

So are central bankers’ noses out of joint, as they play second fiddle to the finance ministries, a position in the orchestra to which few aspire?

It seems that they are, as the last 18 months have seen a remarkable expansion of the central banks’ fields of activity, largely driven by their own ambitions. 

So they have moved into the climate change arena, arguing that financial stability may be put at risk by rising temperatures, and that central banks, as bond purchasers and as banking supervisors, can and should be proactive in raising the cost of credit for corporations without a credible transition plan. 

That is a promising new line of business, which is likely to grow.

Central banks are also trying to move into social engineering, specifically the policy response to rising income and wealth inequality, another hot button topic with high political salience. 

In part, this new interest in inequality is a defensive move. 

Central banks have been stung by growing criticism that their policy mix of low or even negative interest rates, combined with quantitative easing, has given the wealthier members of society huge uncovenanted gains by pushing up asset prices.

Those fortunate members of society with money to invest in stocks, high-end property, and expensive artworks have seen their net worth grow rapidly as funds flowed into appreciating assets. 

So central bankers have been forced to defend their actions and to attempt to prove that, taken in the round, the chosen policy mix has also benefited poorer families by sustaining jobs. 

Some have been convinced by that argument; others not so much.

The mixed reaction has drawn a further response from monetary authorities. 

One element has been rhetorical. 

In 2009, less than 0.5% of all central bankers’ speeches recorded on the Bank for International Settlements (BIS) database mentioned inequality, or the distributional consequences of their policies. 

In 2021, the figure is 9%, almost 20 times as many.

But talk is cheap. 

Is there any evidence that a concern for inequality has influenced policy? 

Indeed, is there any evidence that monetary policy can be used to moderate or reverse growing inequality?

The Chief Economist of the BIS, Claudio Borio, believes there is. 

He argued at the end of last month that “there is a lot that monetary policy can do to foster a more equitable distribution over business cycles.” 

Part of the argument is traditional, drawn from the textbook of central banking 101. 

He refers to “the havoc that high inflation can wreak on the poorer segments of society,” and shows that income inequality tends to decline when inflation averages less than 5%. 

So far, so conventional.

But he accepts that there can be a problem if interest rates are kept low for a long time to fight off recession. 

In those circumstances, “there may be a trade-off in terms of wealth inequality.” 

That is particularly true, he thinks, in the case of financial recessions, which can be more long-lasting, and where interest rates need to be held down for a long period to allow credit excesses to be worked off. 

So, what is the answer? 

It is “a more holistic macro-financial stability framework.” 

Oh, dear.

I have nothing against holism, I should add. 

But it can be vague as a guide to policy. 

In this case, what it primarily means is that governments should offset the impact of loose monetary policy on income and wealth inequality by the use of fiscal policy to ensure that post-tax inequality is moderated. 

They should also work on labor-market regulation to rebalance bargaining power in favor of employees. And they should invest more in education. 

These are all, of course, Good Things, but they take us away from central banking.

Can central banks really do no more than pass the buck to the Ministries of Finance and Economy? 

Not quite: if they are financial regulators, they can help promote financial inclusion and literacy, but that takes decades to have an impact. 

It may be, too, that macroprudential policies can be used to smooth credit booms and busts, which may reduce the scale of the problem low interest rates are designed to resolve. 

It is too soon since their introduction after the financial crisis to know whether that will turn out to be the case.

The slightly depressing conclusion is that the current monetary policy settings in the world’s developed economies are likely to create greater wealth inequality, and that in the short term there is not a lot monetary and regulatory authorities can do about it, save mentioning it in speeches. 

If the problem is to be resolved, we will need to see finance ministers with a strong political mandate to implement redistributional policies, rather than Fed chairmen and governors featuring prominently in this decade’s power lists.


Howard Davies, the first chairman of the United Kingdom’s Financial Services Authority (1997-2003), is Chairman of NatWest Group. He was Director of the London School of Economics (2003-11) and served as Deputy Governor of the Bank of England and Director-General of the Confederation of British Industry.