Hong Kong recovery ‘made in China’


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Yes, this further supports the notion that some of the world economic improvement was due indirectly to ‘one time’ inventory building and additions to capacity in China, including the eurozone, where exports nudged France and Germany to positive GDP reports.

Hong Kong Climbs Out of Recession as Trade Improves

August 14 (Bloomberg) — Hong Kong climbed out of a yearlong recession as trade improved, adding to signs that the global economy is recovering.

Gross domestic product rose a seasonally adjusted 3.3 percent in the second quarter from the previous three months, after dropping 4.3 percent in the first quarter, the government
said today. The median estimate in a Bloomberg News survey of seven economists was for a 1.2 percent gain.

The Hang Seng Index has gained 84 percent from this year’s low in March as China’s record lending and 4 trillion yuan ($585 billion) stimulus package help the city, which is a hub for
trade and finance. Hong Kong’s government raised its forecast for this year’s GDP to a contraction of between 3.5 percent and 4.5 percent today from a previous estimate of a 5.5 percent to
6.5 percent decline.

“This rebound has largely been ‘Made in China,’” said Brian Jackson, a senior strategist at Royal Bank of Canada in Hong Kong. “Exports to the mainland have picked up, while easy
liquidity conditions there have contributed to recent gains in Hong Kong’s asset prices, providing a strong boost to Hong Kong consumers.”

The economy shrank 3.8 percent in the second quarter from a year earlier, after a 7.8 percent drop in the previous three months. The first-quarter contraction from the previous three
months was the worst since data began in 1990.

Singapore Retail Sales Post Smaller Drop as Recession Recedes

By Stephanie Phang

August 14 (Bloomberg) — Singapore’s retail sales fell the least in three months in June as the nation emerged from its worst recession since independence 44 years ago and an annual island-wide sale supported spending.

The retail sales index dropped 8.2 percent from a year earlier after sliding a revised 10.4 percent in May, the Statistics Department said today. The median estimate of 11 economists surveyed by Bloomberg News was for a 9.2 percent decline. Adjusted for seasonal factors, sales rose 2.3 percent from May.

Singapore’s economy expanded for the first time in a year last quarter as manufacturing and services improved. The government raised its 2009 export forecast this week as policy makers around the world predict the worst of the global recession is past after pledging about $2 trillion in stimulus measures and cutting interest rates.

“We should generally expect gradual improvement in retail sales from hereon,” said Kit Wei Zheng, an economist at Citigroup Inc. in Singapore. He cited “firmer signs of a turnaround in labor markets, and perhaps some positive spillovers on confidence from the buoyant property and equity markets.”

Singapore’s benchmark stock index has climbed 49 percent this year and home sales by developers including Frasers Centrepoint Ltd. rose 9.1 percent in June from May, according to the Urban Redevelopment Authority.

Singapore employers fired fewer workers last quarter, cutting 5,500 jobs compared with 12,760 in the first three months of the year, the Ministry of Manpower said July 31. The seasonally adjusted unemployment rate held at 3.3 percent.


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China steel expansion halted


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Yes, this further supports the notion that some of the world economic improvement was due indirectly to ‘one time’ inventory building and additions to capacity in China, including the eurozone, where exports nudged France and Germany to positive GDP reports.

China stops expansion projects in steel industry for three years

August 13 (China Daily) — China’s Ministry of Industry and Information Technology (MIIT) Thursday announced a three-year moratorium on approvals of new expansion-related proposals in the iron and steel industry, as the government pledges to eliminate outdated capacity.

MIIT Minister Li Yizhong said overcapacity in the steel industry was “the most evident” of all the industrial sectors, with this year’s estimated total output capacity at 660 million tons, compared with estimated demand at 470 million tons.

He called for steel mills to stop expansions for the next three years. Projects with total capacity of about 58 million tons already under construction would continue, he said.

“If the trend goes down like this, the steel industry will come to a dead end,” he said.

Another move to step up elimination of outdated capacity was consolidation of the industry, he said. Steel mills in Hebei province would reduce their overall capacity from 120 million tons to 80 million tons annually over the next two to three years.

He said the ministry was drafting steel industry consolidation guidelines aimed at reforming the world’s largest market. He gave no time for their publication.

The Shanghai Securities News reported in late July that China would release the guidelines in September.

The ministry will issue another guideline on energy conservation and emissions reductions in key sectors, including the chemical and steel sectors in the second half of this year.

The country’s steel mills produced 50.68 million tons of steel in July, up 12.69 percent year on year.


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French Non-Farm Payrolls Fall Less Than Expected


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Proactive fiscal measures, exports, and very ugly automatic stabilizers seem to have slowed the decline in employment, coupled with productivity increases that are supporting output with lower levels of employment.

French Non-Farm Payrolls Fall Less Than Expected as Slump Eases

August 14 (Bloomberg) — French companies cut fewer jobs than expected in the second quarter as the euro area’s second-largest economy exited its worst recession since World War II.

Payrolls, excluding government employees, farm workers and the self-employed, dropped by 74,100, or 0.5 percent, to 15.65 million, the Paris-based Labor Ministry said today. That was less than the 0.8 percent drop forecast by three economists in a Bloomberg News survey, and compared with a loss of 168,300 jobs in the first quarter.

“The current weakness of domestic demand and excess production capacity account for both the weakness in companies’

pricing power and the continued deterioration of the labor market,” said Caroline Newhouse-Cohen, an economist at BNP Paribas, in a report yesterday. “A lot of uncertainties are still weighing on the French economy.”

The French economy returned to growth in the second quarter as exports rose and 30 billion euros ($42.8 billion) in government spending and tax cuts introduced by President Nicolas Sarkozy helped consumer spending. Companies cut investment at a slower pace than in the two previous quarters.

Rising joblessness in France is curbing government revenue and boosting welfare spending, pushing up the budget deficit.

The budget shortfall will soar to 8.3 percent of gross domestic product next year, more than the 7 percent to 7.5 percent the government expects, according to the Organization for Economic Cooperation and Development.

France’s jobless rate hit a three-year high of 9.4 percent in June, the European Union statistics office said on July 31.

On Aug. 11, Adecco SA, the world’s largest supplier of temporary workers, reported a surprise second-quarter loss and said it will deepen cost cuts as sales decline because fewer companies are hiring. The company, based in Zurich, cut about 2,000 jobs in the quarter and told workers in France that an additional 350 jobs will be cut and 100 branches merged in 2009.

The number of temporary workers in France fell 3.7 percent in the second quarter from the first and 32.1 percent from a year earlier to 419,600, the Labor Ministry said. French monthly wages rose 0.4 percent in the second quarter from the first, when they climbed 0.8 percent, the Labor Ministry also said today. From a year ago, wages rose 2.2 percent.


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First Lady Requires More Than 20 Attendants


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Yes, seems to be seriously excessive!

First Lady Requires More Than 20 Attendants

By Dr. Paul L. Williams

1. $172,2000 – Sher, Susan (Chief Of Staff)

2. $140,000 – Frye, Jocelyn C. (Deputy Assistant to the President and Director of Policy And Projects For The First Lady)

3. $113,000 – Rogers, Desiree G. (Special Assistant to the President and White House Social Secretary)

4. $102,000 – Johnston, Camille Y. (Special Assistant to the President and Director of Communications for the First Lady)

5. Winter, Melissa E. (Special Assistant to the President and Deputy Chief Of Staff to the First Lady)

6. $90,000 – Medina, David S. (Deputy Chief Of Staff to the First Lady)

7. $84,000 – Lelyveld, Catherine M. (Director and Press Secretary to the First Lady)

8. $75,000 – Starkey, Frances M. (Director of Scheduling and Advance for the First Lady)

9. $70,000 – Sanders, Trooper (Deputy Director of Policy and Projects for the First Lady)

10. $65,000 – Burnough, Erinn J. (Deputy Director and Deputy Social Secretary)

11. Reinstein, Joseph B. (Deputy Director and Deputy Social Secretary)

12. $62,000 – Goodman, Jennifer R. (Deputy Director of Scheduling and Events Coordinator For The First Lady)

13. $60,000 – Fitts, Alan O. (Deputy Director of Advance and Trip Director for the First Lady)

14. Lewis, Dana M. (Special Assistant and Personal Aide to the First Lady)

15. $52,500 – Mustaphi, Semonti M. (Associate Director and Deputy Press Secretary To The First Lady)

16. $50,000 – Jarvis, Kristen E. (Special Assistant for Scheduling and Traveling Aide To The First Lady)

17. $45,000 – Lechtenberg, Tyler A. (Associate Director of Correspondence For The First Lady)

18. Tubman, Samantha (Deputy Associate Director, Social Office)

19. $40,000 – Boswell, Joseph J. (Executive Assistant to the Chief Of Staff to the First Lady)

20. $36,000 – Armbru ster, Sally M. (Staff Assistant to the S ocial Secretary)

21. Bookey, Natalie (Staff Assistant)

22. Jackson, Deilia A. (Deputy Associate Director of Correspondence for the First Lady)

Copyright 2009 Canada Free Press.Com

There has never been anyone in the White House at any time that has created such an army of staffers whose sole duties are the facilitation of the First Lady’s social life. One wonders why she needs so much help, at taxpayer expense, when even Hillary, only had three; Jackie Kennedy one; Laura Bush one; and prior to Mamie Eisenhower social help came from the President’s own pocket.

By the way… his does not include makeup artist Ingrid Grimes-Miles, 49, and “First Hairstylist” Johnny Wright, 31, both of whom traveled aboard Air Force One on her recent trip to Europe!


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German balanced budget law pending


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(email exchange)

>   On Mon, Jun 22, 2009 at 9:10 AM, wrote:
>   
>   And reach Wolfgang Munchnau in the FT today. Germany is really going nuts here.
>   German sado-fiscalism!
>   

As he says towards the end, it’s a moral issue.

This type of thing is the largest long term risk to economic well being.

I am starting to call it the federal ‘contribution’ rather than the federal ‘deficit’ hoping that might help.

Berlin weaves a deficit hair-shirt for us all

by Wolfgang Münchau

June 21 (FT) —

A decision was taken recently in Berlin to introduce a balanced-budget law in the German constitution. It was a hugely important decision. It may not have received due attention outside Germany given the flood of other economic and financial news. From 2016, it will be illegal for the federal government to run a deficit of more than 0.35 per cent of gross domestic product. From 2020, the federal states will not be allowed to run any deficit at all. Unlike Europe’s stability and growth pact, which was first circumvented, later softened and then ignored, this unilateral constitutional law will stick. I would expect that for the next 20 or 30 years, deficit reduction will be the first, second and third priority of German economic policy.

Anchoring the stability law at the level of the national constitution is an extreme measure – like locking the door, and throwing the keys away. It can only ever be undone with a two-thirds majority – and even a future Grand Coalition may not be able to deliver this as both of the large parties are in a process of secular decline. It means that future fiscal policy will be in the hands of the justices of Germany’s Constitutional Court. The new law replaces a much softer constitutional clause – a golden investment rule that said deficits can only be used to finance investments. It was not a satisfactory rule, but at least it allowed structural deficits in principle. The new law not only sets draconian deficit ceilings, it also provides a detailed numerical toolkit to implement the rules over the economic cycle.

I can foresee two outcomes. First, Germany might end up in a procyclical downward spiral of debt reduction and low growth. In that case, the constitutionally prescribed pursuit of a balanced budget would require ever greater budgetary cuts to compensate for a loss of tax revenues.

To meet the interim deficit reduction goals, the new government will have to start cutting the structural deficits by 2011 at the latest. There is clear danger that the budget consolidation timetable might conflict with the need for further economic stimulus, should the economic crisis take another turn for the worse. There is still economic uncertainty. Bankruptcies are rising, and the German banks are just about to tighten their credit standards again. I simply cannot see how Germany can produce robust growth in such an environment, not even in 2011. If that scenario prevails – as I believe it will – the new constitutional law will produce a pro-cyclical fiscal policy with immediate effect.

One could also construct a virtuous cycle – the second outcome. If Germany were to return to a pre-crisis level of growth in 2011, and all is well after that, the consolidation phase would then start in a cyclical upturn.

Either of those scenarios, even the positive one, is going to be hugely damaging to the eurozone. In the first case, the German economy would become a structural basket case, and would drag down the rest of Europe for a generation. In the second case, economic and political tensions inside the eurozone are going to become unbearable. Over the past 25 years, France has more or less followed Germany’s lead at every turn, but I suspect this may be a turn too far. Deficit reduction has not been, nor will it be, a priority for Nicolas Sarkozy, the French president. On the contrary: he has listened to bad advice from French economists who told him that budget deficits are irrelevant, and that he should focus only on structural reforms. Budget deficits and debt levels matter in a monetary union. But a zero level of debt is neither necessary nor desirable.

I am a little surprised not to hear howls of protests from France and other European countries. Germany has not consulted its European partners in a systematic way. While the Maastricht treaty says countries should treat economic policy as a matter of common concern, this was an example of policy unilateralism at its most extreme.

What is the rationale for such a decision? It cannot be economic, for there is no rule in economics to suggest that zero is the correct level of debt, which is what a balanced budget would effectively imply in the very long run. The optimal debt-to-GDP ratio might be lower for Germany than for some other countries, but it surely is not zero.

While the balanced budget law is economically illiterate, it is also universally popular. Average Germans do not primarily regard debt in terms of its economic meaning, but as a moral issue. Der Spiegel, the German news magazine, had an intriguing report last week on the country’s young generation. One of the protagonists in its story was a young woman who had borrowed a little money to set up her own company. The company turned out to be a success, and she had began to repay the loan. And yet she said she had not felt proud of having taken on debt.

This general level of debt-aversion is bizarre. Many ordinary Germans regard debt as morally objectionable, even if it is put to proper use. They see the financial crisis primarily as a moral crisis of Anglo-Saxon capitalism. The balanced budget constitutional law is therefore not about economics. It is a moral crusade, and it is the last thing, Germany, the eurozone and the world need right now.


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Back from a week off


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Been away for a week.

First impressions:

Seems world fiscal responses both automatic and more recently proactive have turned the tide.

Looking for a quick return to positive GDP (from very depressed levels) helped by very low inventories in general.

But relatively slow returns to ‘normal’ in many sectors as well.

And central banks doing a lot of foot dragging regarding rate hikes due to large continuing output gaps (high unemployment).

The eurozone lags as it’s passed on proactive fiscal measures and instead is waiting for exports to pick up, and makes these kinds of counterproductive noises:

“The European Union (EU) has officially opened the excessive deficit procedure against Ireland, Greece, Spain and France since their budget deficits shot up beyond the EU’s limit amid the financial crisis.

The decisions, which were taken by EU foreign ministers in Luxembourg on Monday, required the four countries, as well as Britain, which had been under the excessive deficit procedure, to take corrective actions to rein in their deficits by Oct. 27, 2009.

Under the EU’s Stability and Growth Pact, all member states have to keep their budget deficits below 3 percent of their gross domestic product (GDP).”

Q1 Earnings generally better than expected.

This is all very good for US equities.

A few selected somewhat positive headlines from the past week with the most recent on top:

Malaysia Keeps Interest Rate Unchanged as Export Slump Eases
South Korean Current Account Rises, N.Z. Exports Gain
China’s Economy Recovering on Investment Surge, Citic Says
European Retail Sales Decline Least in 11 Months
European Confidence Rises for First Time in 11 Months
ECB’s Wellink Doesn’t See ‘Real Deflation’ in Europe
Tumpel-Gugerell Says ECB Sees No Deflation Risk, Badische Says
Germany’s Economy to Return to Growth Next Year
B0E spots hopeful economic signs
U.K. Has Biggest Budget Deficit Since World War II
U.K. Mortgage Lending Rose 16% in March, CML Says
Industrial Production Index Seen Up For 1st Time In 6 Months
Govt Submits Record Extra Budget For FY09 To Finance Fresh Stimuli
China’s External Demand Showing Signs of Recovery, Sun Says
China to launch more stimulus investment in second quarter
China Central Bank’s Yi Sees Signs of Economy Rebound
WB official: China a ‘bright spot’ in 2009 world economy


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Euro News Highlights


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This raises national budget deficits and inches them closer to a liquidity crisis:

Highlights

Europe Unemployment Rate Rises More Than Expected
Trichet Says Spending, Deficits Can’t Keep Rising, Le Monde Says
Germany’s Steinbrueck Says New GDP Outlook to Be Clearly Worse
German Retail Sales Unexpectedly Fall After Unemployment Rises
France, Germany Not Satisfied With G-20, Sarkozy Says
Sarkozy Says Concrete Decisions Are Needed on Tax Havens

Europe Unemployment Rate Rises More than Expected

by Jurjen van de Pol

Apr 1 (Bloomberg) — European unemployment increased more than economists expected in February to the highest in almost three years as the recession forced companies across the continent to cut output.

The jobless rate in the euro zone rose to 8.5 percent from a revised 8.3 percent in January, the European Union’s statistics office in Luxembourg said today. The February reading is the highest since May 2006 and exceeded the 8.3 percent rate economists forecast, according to the median of 23 estimates in a Bloomberg News survey. The January figure was revised higher from 8.2 percent reported on Feb. 27.


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SOV CDS Indicative Level


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SOV CDS Indicative Levels

Country 5yr CDS/10yr CDS Change Curve Euro/USD
Austria 242/262 -5 -20/-5 8/18
Belgium 137/147 -3 -10/-2 6/12
Finland 78/88 -2 -3/0 4/9
France 83/93 -5 -4/0 5/10
Germany 80/90 -3 -4/0 5/10
Greece 240/265 unch -25/-8 9/20
Ireland 330/360 -10 -30/-10 10/22
Italy 184/194 -5 -12/-2 7/11
Netherland 122/130 unch -8/0 5/12
Norway 53/65 unch -2/2 n/a
Portugal 125/138 -4 -12/0 8/14
Spain 140/153 -2 -8/-1 8/14
Sweden 136/152 -3 -8/-1 n/a
UK 142/158 -5 -8/-2 6/12
US 85/98 -3 -4/0 3/6


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SOV CDS Indicative Level


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Starting this week off higher as equity markets sag.

Systemic risk in the eurozone remains elevated.

Wide spreads in the US, UK, Sweden, etc. show markets misunderstand the risks of governments with their own non-convertible currency and floating FX policy.

SOV CDS Indicative Levels

Country 5yr CDS/10yr CDS Change Curve Euro/USD
Austria 260/278 +5 -20/-5 8/16
Belgium 142/156 +5 -10/-2 4/11
Finland 85/95 +3 -3/0 4/9
France 91/98 +3 -4/0 4/9
Germany 88/94 +3 -4/0 5/9
Greece 260/272 unch -25/-8 8/15
Ireland 348/368 unch -30/-10 8/18
Italy 195/205 unch -12/-2 7/10
Netherland 127/134 unch -8/0 5/12
Norway 55/65 +5 -2/2 n/a
Portugal 133/143 unch -12/0 7/12
Spain 150/155 unch -8/-1 7/12
Sweden 140/155 unch -8/-1 n/a
UK 152/162 unch -8/-2 6/12
US 88/98 unch -4/0 3/6


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The blunder of allowing private prisons


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Thanks,

Heard about this a few weeks ago and thought it would get more press- sad state of affairs when it doesn’t.

Privatizing prisons is a mistake.

Prison labor was banned for the same reason- you don’t want to give ‘the system’ a monetary incentive to incarcerate.

This is a major blunder that needs immediate Congressional action.

The Proceeds of Crime

by George Monbiot

Mar 3 (The Guardian) — It’s a staggering case; more staggering still that it has scarcely been mentioned on this side of the ocean. Last week two judges in Pennsylvania were convicted of jailing some 2000 children in exchange for bribes from private prison companies.

Mark Ciavarella and Michael Conahan sent children to jail for offences so trivial that some of them weren’t even crimes. A 15 year-old called Hillary Transue got three months for creating a spoof web page ridiculing her school’s assistant principal. Mr Ciavarella sent Shane Bly, then 13, to boot camp for trespassing in a vacant building. He gave a 14 year-old, Jamie Quinn, 11 months in prison for slapping a friend during an argument, after the friend slapped her. The judges were paid $2.6 million by companies belonging to the Mid Atlantic Youth Services Corp for helping to fill its jails(1,2,3). This is what happens when public services are run for profit.

It’s an extreme example, but it hints at the wider consequences of the trade in human lives created by private prisons. In the US and the UK they have a powerful incentive to ensure that the number of prisoners keeps rising.

The United States is more corrupt than the UK, but it is also more transparent. There the lobbyists demanding and receiving changes to judicial policy might be exposed, and corrupt officials identified and prosecuted. The UK, with a strong tradition of official secrecy and a weak tradition of scrutiny and investigative journalism, has no such safeguards.

The corrupt judges were paid by the private prisons not only to increase the number of child convicts but also to shut down a competing prison run by the public sector. Taking bribes to bang up kids might be novel; shutting public facilities to help private companies happens – on both sides of the water – all the time.

The Wall Street Journal has shown how, as a result of lobbying by the operators, private jails in Mississippi and California are being paid for non-existent prisoners(4,5). The prison corporations have been guaranteed a certain number of inmates. If the courts fail to produce enough convicts, they get their money anyway. This outrages taxpayers in both states, which have cut essential public services to raise these funds. But there is a simple means of resolving this problem: you replace ghost inmates with real ones. As the Journal, seldom associated with raging anti-capitalism, observes, “prison expansion [has] spawned a new set of vested interests with stakes in keeping prisons full and in building more. … The result has been a financial and political bazaar, with convicts in stripes as the prize.”(6)

Even as crime declines, law-makers are pressed by their sponsors to increase the rate of imprisonment. The US has, by a very long way, the world’s highest proportion of people behind bars: 756 prisoners per 100,000 people(7), or just over 1% of the adult population(8). Similarly wealthy countries have around one-tenth of this rate of imprisonment.

Like most of its really bad ideas, the last Conservative government imported private jails from the US. As Stephen Nathan, author of a forthcoming book about prison privatisation in the UK, has shown, the notion was promoted by the Select Committee on Home Affairs, which in 1986 visited prisons run by the Corrections Corporation of America. When the corporation told them that private provision in the US improved prison standards and delivered good value for money, the committee members failed to check its claims. They recommended that the government should put the construction and management of prisons out to tender “as an experiment”(9).

Encouraged by the committee’s report, the Corrections Corporation of America set up a consortium in Britain with two Conservative party donors, Sir Robert McAlpine Ltd and John Mowlem & Co, to promote privately financed prisons over here. The first privately-run prison in the UK, Wolds, was opened by the Danish security company Group 4 in 1992. In 1993, before it had had a chance to evaluate this experiment, the government announced that all new prisons would be built and run by private companies.

The Labour party, then in opposition, was outraged. John Prescott promised that “Labour will take back private prisons into public ownership – it is the only safe way forward.”(10) Jack Straw stated that “it is not appropriate for people to profit out of incarceration. This is surely one area where a free market certainly does not exist”. He too promised to “bring these prisons into proper public control and run them directly as public services.”(11)

But during his first seven weeks in office, Jack Straw renewed one private prison contract and launched two new ones. A year later he announced that all new prisons in England and Wales would be built and run by private companies, under the private finance initiative (PFI). Today the UK has a higher proportion of prisoners in private institutions than the US(12). This is the only country in Europe whose jails are run on this model.

So has prison privatisation here influenced judicial policy? As we discovered during the recent lobbying scandal in the House of Lords, there’s no way of knowing. Unlike civilised nations, the UK has no register of lobbyists; we are not even entitled to know which lobbyists ministers have met(13). But there are some clues. The former home secretary, John Reid, previously in charge of prison provision, has become a consultant to the private prison operator G4S(14). The government is intending to commission a series of massive Titan jails under PFI. Most experts on prisons expect them to be disastrous, taking inmates further away from their families (which reduces the chances of rehabilitation) and creating vast warrens in which all the social diseases of imprisonment will fester. Only two groups want them built: ministers and the prison companies: they offer excellent opportunities to rack up profits. And the very nature of PFI, which commits the government to paying for services for 25 or 30 years whether or not they are still required creates a major incentive to ensure that prison numbers don’t fall. The beast must be fed.

And there’s another line of possible evidence. In the two countries whose economies most resemble the UK’s – Germany and France – the prison population has risen quite slowly. France has 96 inmates per 100,000 people, an increase of 14% since 1992. Germany has 89 prisoners per 100,000: 25% more than in 1992 but 9% less than in 2001. But the UK now locks up 151 out of every 100,000 inhabitants: 73% more than in 1992 and 20% more than in 2001(15). Yes our politicians have barely come down from the trees, yes we are still governed out of the offices of the Daily Mail, but it would be foolish to dismiss the likely influence of the private prison industry.

This revolting trade in human lives creates a permanent incentive to lock people up; not because prison works; not because it makes us safer, but because it makes money. Privatisation appears to have locked this country into mass imprisonment.


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