The Financial Pages: What the leading financial papers’ leading editorials have to say.

Workers in a Chinese spark plug factory. Photo credit: abarndweller.

The Financial Times’s editorial page encouraged labour reforms in China; an overhaul of the way finance uses credit ratings agencies; and gave the thumbs up to Vincent Cable.

China’s workers are in revolt, striking and, rather more extremely, committing suicide. Is this the end of cheap labour in the country? Probably not, said the Financial Times. But the country is changing. Now it needs some reforms to match these changes. “The remarkably low share of wages and salaries in GDP makes China the most ‘capitalist’ large economy in history. Until this is reversed, the much-desired shift to a consumption-driven economy cannot occur.”

How to solve the problem of the failing credit ratings agencies?, asked the Financial Times. The answer is less to change the raters directly than the way the financial system uses them. “The only viable solution is for capital requirement rules to move away from ratings towards greater use of plain leverage caps.” Combine this with increased incentives for managers to avoid risk and you may have the answer: “This would greatly diminish the CRAs’ role and make their failures and conflicts of interest of less concern.”

Vince Cable’s “debut in his new role looks promising,” said the Financial Times. Cable supports enterprise, wants to cut red tape and, crucially, has a more market-led approach to industrial policy than did his predecessor, Lord Mandelson. The paper quibbled with certain aspects of Cable’s philosophy, particularly his desire to separate retail from investment banking, but gave the new Business Secretary the general thumbs up: “He recognises that the state cannot be entirely hands-off, but – as one would expect from an accomplished ballroom dancer – he has shown sound judgment about where it should put its hands.”

The Wall Street Journal’s leading editorial warned that Turkey’s flirtation with “neighboring despots” needs to be swiftly halted.

As more facts come to light about the passengers and sponsors of the Gaza-bound aid flotilla intercepted by Israel on Monday, the “more it seems clear that [Turkish] Prime Minister Recep Tayyip Ergodan’s government . . . must be held to account.” The Wall Street Journal expressed little faith in the UN to agree with this and demanded a “full explanation” from Turkey about its relationship with the IHH: the Istanbul-based Islamic “charity” (these were the Journal’s inverted commas) helping to fund the flotilla mission. The paper underlined the IHH’s links with Hamas and also noted evidence of Turkey’s decade-long knowledge of the IHH’s links with terrorism. “That attitude conforms with the general pattern of Mr. Erdogan’s foreign policy,” said the Wall Street Journal. And this should concern the Obama Administration even more than it does Jerusalem.

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