There’s no news like bad news…

It’s interesting to note the contrasting reactions of the British press to the Dubai World debt freeze and yesterday’s $10 billion bail-out. The debt-freeze was front page news and opinion fodder for several days; the bail-out and timely repayment of the sukuk are rapidly relegated to the business pages. Indeed, the word ‘Dubai’ doesn’t appear at all on the Daily Telegraph landing page right now. I find this lack of attention interesting given that we were apparently on the verge of catastrophe a few weeks ago.

Could that be because a number of opinion writers have been made to look a tad silly? Or perhaps because the story doesn’t fit neatly into the simplistic ‘rise-and-fall’ narrative they’ve been so busy constructing?

Who left the lefties in charge?

 It may be petty of me, but I’m slightly amused by this news:

Guardian News & Media, publisher of The Guardian and The Observer, is expected to announce this week how many jobs are being axed in the latest round of cuts at the troubled newspaper group.

Up to 100 staff from the company’s 900-strong commercial and advertising department will be made redundant in the latest attempt to stem losses which currently run at £100,000 per day. Most of those affected have already been told their fate, but the deadline for the company to confirm individual redundancies passes today. (…) But there are already predictions that the job cuts will not be enough to return the company to profit following a disastrous year in which revenues have fallen by £33m.

Industry analysts have said the company needs a “root and branch” restructuring programme, with a much bigger reduction in staff numbers, if it is to have any hope of returning to profit, while Carolyn McCall, the chief executive of parent company Guardian Media Group (GMG), has already said losses at the newspapers are “not sustainable at their current levels”.

(It’s interesting how much of this description also applies to the country that The Guardian’s favourite political party has been governing for the last 12 years.)

There are signs that 2010 could be even worse than 2009. A change in Government after next year’s general election is likely to be disastrous for the Guardian’s revenue from public sector job adverts, on which it has long depended, as the Conservatives have strongly hinted they will save money by moving much of the advertising online.

GNM, which is heavily unionised, is owned by the Scott Trust, a charitable institution set up in 1936, and has never imposed compulsory redundancies on its editorial staff, resulting in what one insider described as “bed blockers” clinging on to highly-paid jobs.

The Scott Trust recently varied its agreement with editorial staff to allow compulsory redundancies “in dire economic circumstances”.

In August GMG reported that it had lost £89.8m, compared with a profit of £306.4m the previous year, though the 2008 profits were inflated by the one-off proceeds of selling 49.9pc of Trader Media Group, publisher of Auto Trader.

To quote Fawlty Towers, there’s enough material here for an entire conference, but I suppose that’s what happens when you try to run a business in line with even vaguely socialist principles: inefficiency; dead wood; and unsustainable dependence upon private and public subsidy. It is really quite delicious that George Monbiot’s eco-rants and Seamus Milne’s socialist clap-trap are partly funded by the profits made by the thoroughly environmentalist and Marxist-Leninist Auto Trader. What is less amusing is the effective taxpayer subsidy of The Guardian:

The Guardian currently dominates this market and, according to research by Reed Personnel Services, advertises two-thirds of public sector jobs. Its Wednesday Society section carries more than 30 pages of job ads each week, which could effectively disappear if the Tories got into power. The move would also hit titles such as Third Sector, Young People Now and Regeneration & Renewal, published by Brand Republic owner, Haymarket Publishing.

There’s more:

The government is being criticised for placing the majority of its recruitment advertising for public sector jobs with left-wing newspaper The Guardian.

A study by Nielsen Media Research showed that 26,175 out of 42,914 public sector jobs placed in national newspapers between January and September were advertised in The Guardian.

(…)

The government’s relationship with the Society supplement is already being closely watched by Labour critics, because the publisher is Benjamin Wegg-Prosser, former special adviser to Peter Mandelson, when he was a cabinet minister. Wegg-Prosser’s role, however is not an editorial one.

The COI Communications department handles advertising for public sector jobs and is responsible placing all 42,914 jobs. The 26,175 ads it places with The Guardian compares with Scotland’s Sunday Herald in second place with 7,586 ads and ethnic minority newspaper The Voice with 2,719. The Times newspaper takes 1,269, plus 1,255 in The Times Education Supplement and 802 in the Sunday Times. The Guardian’s rate card price for a full-page colour ad is £10,762, and a black-and-white page £7,762.

The Guardian has dismissed the criticism and called it unfounded. The paper pointed out that any talk of collusion with the current government was ridiculous and showed a lack of understanding of how the recruitment market, and the government’s involvement in it, worked.

A spokeswoman for The Guardian said: “So far this year, thousands of individual clients, with individual budgets, have advertised in Society Guardian. Those decisions are made independently and are based entirely on value for money and response rates. Those clients include Conservative and Liberal Democrat-controlled local authorities.”*

 Hmm. I’m not buying it, especially given that Mr. Wegg-Prosser eventually went from the Society Guardian to work with Tony Blair at No.10. (Looking at Mr. Wegg-Prosser’s Linked-In profile for some reason makes me think of Lord Turner’s ‘socially useless’ comment about the banking industry – not sure why.)

If it isn’t a conspiracy, it’s certainly a cock-up and a massive waste of public money. Needless to say, the Tories have already proposed the following:

The Conservative Party has promised to overhaul advertising for public sector jobs in a move that could potentially hit The Guardian newspaper.  Shadow chancellor George Osborne has vowed to move all public sector job ads from newspapers to a new official website if his party comes to power after the next general election.  This plan could result in newspapers, particularly The Guardian’s Wednesday Society section, losing around £790m spent by local and central government on job ads each year. The dedicated public sector website would only cost an estimated £5m.

If anything, £5 million is a bit on the high side when services like madgex exist, which provide a ready-made and scalable job board system that powers such notable online portals as, you guessed it, Guardian Jobs. It’s actually quite scandalous when you consider how much public money was unnecessarily diverted to subside The Guardian; no wonder they don’t fancy the idea of public sector cuts.

Oh well, I suppose at least The Guardian pays tax on any profits it makes out of all this. After all, its been pretty vociferous in its criticism of tax havens and those evil tax dodging corporations. 

Tax Justice campaigners had a small demonstration outside the Guardian’s offices today to protest at the hypocrisy of the Guardian campaigning for FTSE 100 companies to pay more corporation tax when, despite GMG making £300 million in profits last year, it paid none itself. GMG took advantage of a perfectly legal loophole to avoid paying taxes on the capital gains made on the sale of Auto Trader. Without exploiting the law they would have had to pay more than £50 million in tax!

(More on this hypocrisy here, here and here.)

The final insult from the newspaper that attacks the fat cats and their ‘rewards for failure’?

The newspapers have been in financial turmoil since the Guardian’s editor in chief, Alan Rusbridger, decided to move the papers from broadsheet to the current medium-sized Berliner format in 2005.

(…)

Despite the losses, Mr Rusbridger received an 11pc pay rise last year to £445,000.

(* – Apologies for the age of these articles. I tried in vain to find more up-to-date information. If anyone has more statistics on this let me know; however, I don’t think a great deal has changed, although one would imagine the number of public sector appointments might have fallen in the last year.)

Absolute Morons

Just when I thought that sober heads were beginning to prevail, The Times once again plumbs the depths of journalism with a truly daft article about Dubai. The headline in the print edition?

Bursting of the bubble leaves life in broken city state feeling like the last days of Rome

(…) Welcome to the modern equivalent of the last days of Rome. The failure of Dubai World, one of the Emirate’s flagship companies, to honour a debt due last month has rocked this city state to its foundations. By any conventional logic Dubai is now a busted flush.

This came as news to me I must say. I was blissfully unaware that Dubai was under threat from Germanic hordes to the North, or that we have developed a dangerous reliance on Barbarian mercenaries. I was also ignorant of the fact that the Roman Empire was so fatally undermined by the debts of its quasi-governmental investment company, Rome Universitas.

The article begins with yet another of those smug and self-congratulatory ‘word-pictures’ that seem to be mandatory when writing about Dubai. They don’t reach the pretentious depths of Johann (who could?), but it’s still fluff designed to mask the fact that there is no effective and coherent argument being made.

Superficially there has been no change to life here in the days since the failure to pay up triggered financial carnage but nowhere does superficial as convincingly as Dubai.

Let’s deconstruct this argument: we looked around and couldn’t really find any telling evidence that what happened the other week actually really changed anything. But Dubai is superficial and therefore what appears to be the case is not the case! Therefore, Dubai is about to collapse. QED

Gold star chaps, really impressive stuff.

The article then tries to support their claims with an expat case study and a few real estate related facts. I don’t deny that a lot of people got hit by the real estate or that this sector is going to take a long time to recover, but the market plunge began well over a year ago and has actually started to stabilise, so it hardly falls into the realm of news and predates the Dubai World situation. It does not support their notion that the Dubai World default has ‘rocked the city to its very foundations’, but is more indicative of the fact that the Dubai World default is actually a lagging indicator of the real estate crash and global credit crunch that are working themselves through. Their argument falls into the same trap as so many other journalists: the assumption that the Dubai economy consisted purely of real estate. What they fail to recognise is that the real estate boom was a very recent (albeit dramatic) phenomenon and that the city also serves as a trading, transport and commercial hub for the entire region. While the real estate boom attracted all the headlines, it was actually a negative and distorting influence on the traditional basis of the economy that undermined Dubai’s competitiveness. In the long run, the falling cost structures may actually make the city more attractive as a regional hub when compared to potential rivals.

What else do they offer in support of the claim that Dubai is about to be looted by Visigoths?

The borrowed money has not just gone on property. A state-of-the-art metro train system, operated by Serco, opened amid much fanfare in September at a cost of $7.6 billion. At 9.30am on a Thursday the station at Dubai airport’s cavernous Terminal 3 is empty. The train into the city, capable of carrying more than 640 people, has 21 on board.

I wonder why they don’t mention anything about Terminal 3 itself? Might it be because it was busy and this wouldn’t fit the decline and fall theme? Usage of the metro station at the airport has been very low because of the bizarre restrictions placed on carrying luggage. Given that they went to the Mall of the Emirates, it’s odd that they don’t the mention the extremely busy metro station there, or take the time to google ‘dubai metro stats’ to get more meaningful information. Then again, that would be proper journalism I suppose.

Anyway, must go. There’s a chap called Alaric at the front door and he’s got some friends with him.

You leave Dubai for a few days…

It transpired that my brief Eid visit to Istanbul coincided perfectly with the eruption of the Dubai World debt furore. I was therefore able to while away the time at Dubai Airport last Friday by reading the anguished reporting of The Times on the issue. I continued to follow the story on the main news sites over the next few days; such was the frenzy of speculation and doom-mongering that I wondered if I was going to return home to find the dystopian vision of Simon Jenkins writ large, or that the entire populace had simply decided to give up and commit mass harakiri.

As our flight back took us over Dubai, I was therefore relieved to see that the buildings remained standing and that the city had neither been consumed by fire nor swallowed by the earth. My concerns were further alleviated when I discovered that the airport had not yet been occupied by a horde of desperate refugees with tear-stained faces and that the residents of our apartment building had yet to resort to cannibalism.

Sarcasm aside, it has certainly been an ‘interesting’ week or so for Dubai and there’s a PR advisor out there somewhere who needs a good kicking. The attempt to downplay the story by releasing the statement just before the Eid and Thanksgiving Holidays backfired spectacularly: the gaps in the story and general unavailability of clear facts meant that media was able to merrily pile in with rampant speculation to fill the vacuum, merrily stoking panic as they did so. The problem was exacerbated by the fact that so many decisions in this region take place behind closed doors and are veiled in secrecy, which meant that even the most august media organisations were largely reduced to playing guessing games and assuming the worst. It was always going to be difficult, but the timing and handling of the announcement turned it into a media maelstrom.

I have been heartened to see at least some damage control being exercised in the last few days, as well as some back-tracking in the international press with some much more professional and balanced articles appearing in the Guardian (here and here) and in the FT. (I would link to the FT article, but annoyingly they limit online access to articles. I think it was in Wednesday’s edition though if you are subscriber.) The first Guardian article is probably one of the most sensible I’ve read about Dubai in the international press (it’s not difficult), simply as a result of possessing some nuance, intelligence and perspective. The second article also has some merit in that the author seems to have at least tried to consider various points of view, but he can’t help lapsing into Guardianista silliness every now and again.

Some of the other more sensible commentary can be found here, here and here. If you are looking for foolish moralising and speculation, I invite you to read the latest offerings from Johann and Simon.  There is also this odd offering in The Times which is worth a read, even though I largely disagree with the author’s claims and conclusions. If time allows I will revisit these, but just in case I invite you to look at a superb response to and parody of Johann’s earlier previous piece on Dubai. If you want to remind yourself of how amusing it is for the British press to be damning other nations for living beyond their means and piling up unsustainable debt, this might serve the purpose and have British citizens googling “how to emigrate to Australia and Canada”.

This story still has a long way to run and dealing with the debt is going to be a long and difficult process. I hope that all the skeletons are out of the closet and if not, that they are in the very near future. I also think that there are going to be very serious questions asked of those financial institutions that lent the money in the first place as more details start to emerge. Arabian Business have a good comment piece on this issue.

I remember going to the UK in the 1980s and 1990s and the word ‘Dubai’ being met with a baffled look, sometimes followed by the question: “Isn’t that near Saudi?”. If nothing else, this has been a reminder that Dubai is now on the map, for good or ill. Its prominence means that it cannot avoid international media scrutiny, but has to try and make this exposure work for it rather than against it. Hopefully Dubai has now learnt just how fickle the press can be and will adapt accordingly. Perhaps it can now get back to generating some more positive headlines, starting with the opening of the Burj Dubai early next year.