Aurelia Butler

LONDON (Reuters) -Bank of England Deputy Governor Dave Ramsden said on Thursday that the rate at which the central bank reduces its holdings of government bonds was more likely to increase than decrease, as it unwinds its quantitative easing programme.The BoE is currently reducing its government bond holdings by 80 billion pounds ($101 billion) per year, after buying 875 billion pounds of gilts to stimulate the economy between 2009 and 2021. The BoE’s Monetary Policy Committee will review the pace of this reduction in September.”There’s potential for us to go up a little bit. I don’t see us going down given the experience of the first year (of quantitative tightening),” Ramsden, who oversees the BoE’s balance sheet, told lawmakers from parliament’s Treasury Committee.The BoE’s reduces its holdings through a mix of outright sales and not reinvesting the proceeds of gilts which mature.Asked how the BoE had decided to reduce gilt holdings at a rate of 80 billion pounds per year, Deputy Governor Ben Broadbent said active sales of around 10 billion pounds per quarter on top of around 10 billion pounds per quarter for naturally maturing gilts felt “about right”.”Anything more than 100 (billion pounds per year), our markets people said that might risk disturbing market liquidity,” Broadbent said about last year’s decision to reduce gilt holdings during the 12 months to September 2023.The volume of gilts due to mature varies significantly from year to year.($1 = 0.7923 pounds) More

1. “We will not default”President Biden sounded a cautiously bullish tone on the ongoing negotiations over raising the $31.4 borrowing limit, saying that top-level members of Congress have agreed that the country “will not default.”Biden also confirmed that he would indeed trim his trip abroad this week to arrive back in Washington on Sunday to help hammer out a deal. House Speaker Kevin McCarthy, who has been at the forefront of the discussions as one of the key Republican leaders in Congress, told reporters that it is “doable” to forge an agreement by the time Biden returns this weekend.For now, a formal resolution has yet to emerge, with both sides at odds over spending plans. Time is of the essence: Officials have estimated that the federal government could run out of money to pay its debts as soon as June 1.U.S. stock futures edged slightly higher on Thursday as investors maintained guarded optimism for the outcome of the talks. At 04:49 ET (08:49 GMT), the Dow futures contract was up 25 points or 0.07%, S&P 500 futures traded 5 points or 0.14% higher, and Nasdaq 100 futures climbed 20 points or 0.15%.2. Biden in JapanBiden has arrived in Japan for a meeting with leaders from the Group of Seven leading democracies, with pressing global issues like the war in Ukraine and strained relations with China among the biggest topics on the table.However, the debt ceiling negotiations back home will also likely still be a major focus at the gathering in Hiroshima, which is due to begin on Friday. Economists have warned that a U.S. default would not only impact the world’s largest economy but have far-reaching consequences abroad.A White House official told Reuters that Biden will hold a news conference on Sunday before he heads back to Washington.3. Walmart to release earningsWalmart (NYSE:WMT) is set to report its quarterly results on Thursday, rounding out a week of earnings that have provided a peek into the state of the retail industry and the health of the U.S. consumer.The budget big-box chain faces a challenge to keep prices low even as inflationary pressures threaten to push up input costs, according to Investing.com’s Damian Nowiszewski.According to DataWeave statistics, which analyzed prices from early 2022 to February 2023, Walmart’s average prices for a selected basket of nearly 600 products rose by just 3%. This would come in under both the average inflation rate and Walmart’s closest competitors, Nowiszewski noted.Rivals Target (NYSE:TGT) and Home Depot (NYSE:HD) have already posted their latest figures this week. Both firms unveiled sales that missed Wall Street estimates as high inflation convinced many shoppers to rein in non-essential spending.4. Fresh U.S. jobs, housing dataInvestors will have chance to parse through new data on Thursday that could give further definition to the outlook for both the U.S. labor and housing markets.Weekly initial jobless claims are projected to edge down by 254,000 after they touched a year-and-a-half high of 264,000 in the week ended on May 6.Meanwhile, existing home sales are expected to fall to a seasonally adjusted rate of 4.30 million in April, although elevated mortgage rates – a drag on homebuying activity in the prior month – are starting to show signs of easing.The numbers may give clues into how the Federal Reserve’s aggressive interest rate hiking campaign to corral inflation has impacted demand for labor and housing. The Fed raised borrowing costs by 25 basis points at its most recent policy meeting, but expectations remain that the U.S. central bank may push pause on its tightening cycle at its next gathering in June.5. Oil inches lower amid debt ceiling discussionsOil prices dipped on Thursday, paring back some of the previous session’s gains, as traders eyed the potential outcome of the debt limit negotiations in Washington.By 04:50 ET, U.S. crude futures traded 0.45% lower at $72.50 a barrel, while the Brent contract edged down by 0.49% to $76.58 per barrel.Crude prices rallied over 3% on Wednesday on hopes that a deal to raise the U.S. debt limit could shortly be reached, adding to the news of a drop in U.S. gasoline inventories due to demand surging to its highest levels since 2021. More

LAKE CHARLES, La. (Reuters) – In Washington, Republican U.S. Representative Clay Higgins has been a vocal advocate for spending cuts. Back home in Louisiana, it’s a different story.The cowboy-hat wearing conservative regularly highlights federal funding for hospitals, bridges and ports in his district, while voting against the spending bills that include them as “unsustainable” and “socialist garbage.”Now as Republicans in Congress press Democratic President Joe Biden to accept trillion-dollar spending cuts to avert a debt default that could come as soon as June 1, Higgins must balance his small-government ideals with the needs of his constituents.While Higgins easily won re-election in his solidly Republican district last year, his constituents rely heavily on federal dollars, especially after severe storms in 2020.”I know so many people that need assistance,” said Roy Willis, 79, one of roughly 200 homeowners in Higgins’ district who received grants to repair storm damage to their properties. A Reuters analysis of federal expenditure data found that Republican-leaning states like Louisiana stand to lose more than Democratic-leaning states under the spending cuts backed by House Republicans.States that voted for Republican President Donald Trump got on average $2.12 in federal expenditures, covering everything from pension payments to military contracts, for every dollar paid in tax in the 2020 fiscal year, according to the analysis, which used figures collected by the New York State Controller. States that voted for Biden got $1.79 for every dollar paid.Louisiana, among the poorest states, did even better, receiving $2.62 for every dollar paid. With 47% of state revenue coming from Washington in 2021, Louisiana was second only to Alaska in its reliance on federal funds, according to a Reuters analysis of Census data. Representative Garret Graves, who represents a district next to Higgins, is the Republicans’ lead negotiator in debt-ceiling talks with Biden.Representative Steve Scalise, the No. 2 House Republican, oversaw the passage last month of the party’s debt-ceiling proposal, which would cut over $4.8 trillion in spending in return for raising the $31.4 trillion debt cap.As a member of the hard-right Freedom Caucus, Higgins was an early advocate for dramatic spending cuts, many of which ended up in the House bill.In a prepared statement, Higgins said he is working to help his constituents and reduce the size of the federal government.     “While devoting myself to restoring fiscal sanity in Congress, I am a practical man and I follow the rules of Congress as I serve my constituents,” he said in a prepared statement. He declined to be interviewed.But in Higgins’ district, a stretch of swamp and petrochemical plants that includes the city of Lake Charles, local leaders said they are looking for more money, not less.The Republican plan does not specify program cuts, but local leaders have plenty of suggestions about what should be spared the budget axe: roads and bridges, according to Republican Mayor Nic Hunter. Stormwater drainage and child care assistance, according to state Representative Wilford Carter Sr., a Democrat. Affordable housing and job training, according to the local business association. Harbor dredging, according to port officials. Air-conditioning subsidies and other safety-net programs, according to a regional administrator. “Nobody’s talking about cuts,” said Carter. “They call me about we need this project, or that project.”HURRICANE AFTERMATHLake Charles was flattened by Hurricane Laura in August 2020, followed by Hurricane Delta that October, and a winter storm and spring flood the following year.Laura destroyed cranes and docks at the port, which ships liquid natural gas, chemicals, rice and other products. The storm destroyed half of the city’s mature trees, derailed freight cars and caused a chemical fire. The city’s population dropped 5%. School enrollment is still down roughly 20% from pre-storm levels, and tattered blue tarps cling to many rooftops.Willis’ home was damaged when a tree came down in the first storm. He hopes the spending cuts backed by Higgins won’t affect local efforts to provide affordable housing. “I’d say to him, keep on fighting to keep these programs going. There are so many people that are in the same position I was,” Willis said.Congress did not approve rebuilding aid for the region until more than a year after Laura, an unusually long delay that some pin on their representatives in Washington.Only $32.5 million in federal rebuilding aid has arrived so far, according to the Louisiana Office of Community Development, out of $3.1 billion approved for the state.”Our federal delegation could have done a better job,” said Bryan Beam, administrator for Calcasieu Parish Police Jury, the regional governing body.A former sheriff’s deputy, Higgins built a reputation as a tough-talking “Cajun John Wayne” before winning election in 2016. On social media he has dived into the culture wars, tweeting that Biden is pursuing a “Satanic agenda” on religious issues, and referring to public libraries as “liberal grooming centers.”When it comes to spending, Higgins has been a solid “no” in Washington. He voted against the 2021 infrastructure package, saying that it contained too many green-energy incentives. “It’s a losing deal,” he said at the time.He voted against the last two bills that fund annual government operations, although they included $50 million for projects in his district and a proposal he wrote to expand veterans’ health care, which is estimated to cost $70 million over the next five years.Meanwhile, Higgins’ office keeps a detailed timeline of his efforts to secure disaster aid and funding for a new freeway bridge, and issues a steady stream of press releases about federal awards in his district.Mitch Landrieu, a Democratic former Louisiana lieutenant governor who now oversees implementation of Biden’s infrastructure law, said the state’s conservative-leaning leaders have often criticized the federal government while also trying to secure its help.In Lake Charles, some local officials praise Higgins for pressuring the Federal Emergency Management Agency to release money for school repairs after the hurricane; securing $3 million in last year’s government spending bill to weatherproof two local hospitals; and shaking loose an extra $9 million to build a holding pen for the muck dredged up from the channel that connects the port to the Gulf of Mexico.”He’s been extremely helpful,” said Channing Hayden, the port’s director of navigation, who credited Higgins for protecting roughly $50 million a year for the dredging operations.Many local leaders are reluctant to criticize Higgins, who said in his statement to Reuters that he might publicly name the local governments that had not worked with him to secure aid. For some local residents, Higgins’ push for spending cuts in the face of so much need remains incomprehensible.Diana Reynolds’ home has been uninhabitable since Hurricane Laura, with black mold crawling up exposed wall studs. She would have liked to sell her house to the government under a federally funded plan that buys up houses to create a green space to soak up flood waters — but she said was told the funding has run out. “It’s almost like we’ve been forgotten about by the system. The government has failed us,” she said. More

Marcello Minenna is an economist serving as technical assessor for the Calabria region, adjunct professor of financial econometrics and empirical finance at the Università Telematica San Raffaele, and columnist at Il Sole 24 Ore. Opinions expressed are strictly personal.Our readers largely know that Italy’s public debt burden is very high, both in absolute terms and in its debt-to-GDP ratio. But this ignores a significant amount of the debt landscape: when private non-financial debt is included, Italy doesn’t seem nearly as burdened. To set the stage, we should first take a look at how public debt has evolved over time in the EU. Public and private debtFor our purposes today we will compare the four largest eurozone economies — and Greece, with its historically high debt burden and recent signs of a turnround — using BIS data on the market value of private and public debt. European countries’ debt-to-GDP ratios mostly rose between 2008 and 2022, with Germany serving as an exception:

As shown above, debt-to-GDP ratios have decreased since February 2021. This decline has been global, as documented by the IFF, and is attributable to a couple of different factors. First, there’s been an increase in GDP connected to the post-pandemic resumption of economic activities and international trade. Seconds, governments have relied less on debt issuance for funding since the end of the Covid-19 crisis.And while the chart above shows that Italy’s public debt level remains high relative to its peers, there are other ways to evaluate a country’s indebtedness. When private nonfinancial debt is taken into account, Italy’s debt levels stands at considerably lower levels than many of its major European counterparts. Families in Italy, for example, have a lower debt burden than any of our comparison countries:

Italy also stands out for its relatively low levels of indebtedness among non-bank corporations:

Low aggregate debt, high sovereign ratesIn fact, if we combine public debt and non-financial private sector debt and then compare them to GDP, Italy has the second-lowest debt burden of the group, right behind Germany:

That is something to take into consideration, since a high level of private debt might contribute to financial instability. This was the case for Iceland, where, just before the 2008 economic crisis, the private-debt-to-GDP ratio reached a ratio of 450 per cent. The analogies do not end here, since that crisis hit hard when interest rates started to rise. (While Iceland’s financial sector was the source of its problems, the 2008-09 crisis showed that many governments aren’t willing to let their banks fail, giving them semi-public status.) Yet even with its relatively low aggregate non-bank debt levels, Italy’s sovereign yields remain high. Italy’s average 10-year bond yield is the highest of the bunch, at 4.45 per cent to Greece’s 4.42 per cent:

One could argue that investors’ expectations are affected more by the EU’s regulatory supervision than by macroeconomic conditions. From this perspective, Italy appears to be disadvantaged by a regulatory system that has far too sharp a focus on public debt-to-GDP ratios, while underestimating or ignoring other parameters. One potential useful parameter neglected by EU regulatory supervision is the non-financial private sector debt-to-GDP ratio. Eurostat’s monitor of macroeconomic imbalances prescribes that ratio remain below 133 per cent, while the comparable threshold for a country’s public-debt-to-GDP ratio is 60 per cent. Another parameter ignored by EU regulatory supervision is the measure of trade balances. Germany, for its part, spent years with a trade surplus greater than the 6-per-cent regulatory threshold set by Eurostat, and its trade surplus hovered above or right around that level from 2012 until 2021:

Changing convergence criteriaOne benefit of basing convergence rules on measurements of public debt is that EU member governments have direct control over their own borrowing. With private-debt monitoring, governments’ relationships with borrowers and investors are subject to market rules, only mediated through government economic-policy actions.Nevertheless, it might be necessary to reconsider and supplement the standard measurements in the review of the convergence criteria expected in the next few months. That review will take into account the exogenous variables that have affected the EU in the recent past (eg, the pandemic, war) or will affect it in the near future (climate change, immigration flows) and their consequences on the real economy (ie, inflationary pressures, levels of employment, and a need for structural investments). Officials may want to consider private debt levels as well.For example, we can expect that a low level of private-sector debt and/or a high level of private savings are likely to contribute to the system’s stability, and, therefore, such phenomena must be considered by public debt management regulations.A recent study shows that, since 1950, only on one occasion a reduction of public debt went hand in hand with a reduction of private sector debt.These findings might be explained considering that a higher private debt exposure might have boosted the economy, consequently increased tax revenue and reducing the automatic stabilisers expenditure ratio. Alternatively, the stronger fiscal discipline directed to reduce public debt might have drained resources from the private sector and pushed companies and families to a higher debt exposure.In any case, data collected over the past 70 years shows that if the private sector does not increase its debt exposure, it is unlikely that EU countries will be able to achieve a significant reduction of the public debt-to-GDP ratio.In Italy, the public debt-to-GDP ratio has increased since 2008. This continued until the end of the pandemic. In contrast, private debt data shows a slowing growth since July 2009, followed by a less than proportional decline that started at the end of 2012, except for a temporary surge during the pandemic:

Italian families’ total wealth (if we also consider real estate, net of liabilities) is over €10tn. During 2021, Italian families’ net wealth was the highest in Europe, at 8.7 times their disposable income (France: 8.6; Germany: 8.8).Nevertheless, the Italian savings rate, which has been the highest in the developed world for a long time, has been falling for at least two decades. But there has been a trend reversal with the start of the pandemic:

This is not surprising. In a climate of uncertainty, individuals are less likely to consume, and more likely to allocate a part of their income to savings. That’s exactly what happened between January 2020 and September 2021, when families’ financial wealth increased by €334bn, with the greater part of it deposited in bank accounts.In 2004, Italians saved about 15 per cent of their yearly income, an average savings rate only surpassed by Germany and Belgium and higher than the broader eurozone’s. Today’s situation is quite different. It is estimated that Italian families save on average just 10 per cent of their yearly income, the lowest in Italian history, while the eurozone averages 14 per cent. There is a widening gap between the savings rates of Italian families and German families.After the pandemic, both private debt and families’ savings rates increased in Italy: that’s a clear indicator of an increase in social inequalities. In other words, the poorest individuals and those who suffered a decrease in income took debt to maintain their standard of living, while, the richest individuals invested even more.Savings, debt exposure, salaries and social inequalitiesItalians’ ongoing impoverishment is confirmed by the results of a study conducted by the International Labour Organization, or ILO: at purchasing power parity (PPP), the Germans and the French receive higher salaries today than they did in 2008, while Italians’ salaries decreased by 12 per cent:

It is important to stay mindful of the challenges faced by Italy in its efforts to reduce the gap with the other Eurozone countries in terms of real income. The safest way to do that, and to strengthen the eurozone and EU in the process, is to review convergence policies that are far too focused on public debt alone. More

The debt ceiling bill Republicans have passed in the House and Democrat Biden’s 2024 budget are far apart in terms of spending, taxes and other measures. But a vague outline of what may be in a deal, and what will not, has slowly begun to take shape.WORK REQUIREMENTS Republicans are demanding tougher work requirements for some federal aid programs, like SNAP food assistance. This has raised concerns among Democrats that low-income Americans would suffer. Biden on Wednesday said he is open to some added work requirements in limited cases “but not anything of consequence.” He has ruled out changes in particular to Medicaid and TANF (Temporary Assistance for Needy Families) programs.PERMITTING CHANGES A compromise is possible on reforming the process for energy permits and White House officials say it is being actively discussed. The White House has called on Congress to pass permitting legislation that would help speed up clean energy and fossil fuel projects. Republicans have made permitting reform a priority.NO NEW TAXES?Biden told reporters Tuesday, after meeting with McCarthy in the Oval Office, that Republicans are opposed to raising more tax revenues as a way to pay for government programs. White House officials say they have brought up proposals like increasing taxes on the wealthy and closing tax loopholes for the oil and pharmaceutical industries, but Republicans have rejected the ideas.SPENDING CUTS The two sides remain far apart on where to cut spending in the federal budget. A House Republican bill would cut 2024 U.S. discretionary spending back to the 2022 level of $1.664 trillion and limit subsequent annual increases to 1% for a decade. The White House’s 2024 budget request proposes $1.9 trillion in discretionary spending – a 9.4% increase followed by annual increases averaging 1% over a decade. The discretionary spending proposals would add $2.23 trillion to deficits over 10 years, offset by tax increases.The White House has for the most part ruled out Republican spending cuts. But Republicans are insistent that any debt ceiling deal will have to including spending cuts, and negotiations continue on this front.FUTURE CAPS? Republicans would like to cap federal spending for 10 years. The White House has countered with a proposal for capping spending for two years. More

The Bank of England is holding a “Festival of Mistakes” this week, celebrating lessons learnt from financial disasters of the distant past. Some would argue that they, and their counterparts at other central banks, should focus on more recent errors. Advanced economies are experiencing the most acute — and most enduring — outbreak of inflation for a generation. Yet almost all rate-setters failed to spot the degree to which price pressures would ratchet up — and stick around, despite record amounts of monetary and fiscal stimulus. Most of the Federal Reserve’s rate-setters failed to foresee that inflation would ever rise, and then overestimated the speed of its decline. Economists at the BoE and the European Central Bank underestimated the scale and persistence of inflation. Across the world, poor forecasts have contributed to central bankers failing to do their main job: maintaining price stability. The failure to spot inflation has not only left central bankers risking financial instability by having to raise rates far faster than usual but threatened the credibility of institutions that rely on trust to steer the economy towards sustainable growth. Stephen King, senior economic adviser to HSBC, blames their collective failure on rate-setters relying too much on their own capacity to control the public’s expectations of what will happen to prices in the future. In normal times, the rules that govern companies’ decisions on pricing and workers’ demands for wage rises can be influenced by central bankers’ own inflation targets of around 2 per cent. But what forecasts failed to show was that those rules only hold when inflation is broadly stable. Once price pressures soar — and stay high — people begin to believe that “the central bank is now talking nonsense”. Scepticism abounds, and recent inflation readings come to matter more than central banks’ insistence that their policies can quell price pressures.

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The reputational hit from their failure to foresee inflation has left central banks having to raise rates aggressively — by up to 75 basis points in single policy votes — to convince investors and the public of their commitment to low inflation.In some quarters, it has also led to soul-searching. The ECB issued a mea culpa for its underestimate of inflation and has promised to focus more on underlying inflation rather than forecasting models in future. The IMF has also talked openly about its forecasting “misjudgments” — although this candour did not appear in any of its flagship reports. The BoE has been more combative, arguing that its mistakes owed little to errors in how it devises its forecasts and were instead the result of big shocks such as the war in Ukraine, which it could not have predicted.While other organisations have been less defensive, economists elsewhere caution that the public should focus less on whether or not projections turn out to be correct. That, they argue, is impossible and the public should focus more on whether the projections say something insightful about the economy at this point in time. Richard Hughes, who heads the UK’s independent fiscal watchdog, the Office for Budget Responsibility, acknowledged the failure to spot the build-up of price pressures was — along with underestimating the decline in productivity growth since the global financial crisis — one of “two big macro forecasting errors” made in recent decades. However, forecasts remained, he said, “the best understanding of the future, conditional on your knowledge of the present”. He highlighted the similarity between these predictions and financial market pricing, which also moves as the facts change. “[Markets are] ‘reacting to news’, while [we] ‘got it wrong’,” Hughes said. Alexandra Dimitrijevic, global head of research and development at Standard & Poor’s, the credit rating agency, said the purpose of forecasts was not to get the numbers right to the last decimal point but “to look at the narrative, the direction and the risks”. “By definition a forecast is never right. The question is whether it is useful,” added Dimitrijevic. Clare Lombardelli, the new chief economist at the OECD, noted that dire predictions of a bleak winter across Europe were based on assumptions for the weather that, by luck, was warmer than normal — meaning gas storage, and therefore economic growth, held up. Daniel Leigh, who heads the team that produces the IMF’s World Economic Outlook — which includes projections for each of the fund’s 192 member countries — said that failing to predict major economic trends did not mean forecasters were clueless. Even if they turned out to be incorrect, officials and ministers still found the fund’s projections useful, he said, because they gave a sense of scale and explained the likely ripple effects of global trends. “The priority is to give decision makers a sense of what to expect, but also the risks, so that they can take the steps needed,” said Leigh.However, others are less sympathetic. Mohamed El-Erian, president of Queens’ College, Cambridge, and an adviser to Allianz, has said the Federal Reserve’s original forecast that high inflation would be “transitory” was “one of the worst calls in decades”.

He has argued that if the Fed had more closely examined evidence from businesses and the implications of its own actions, then it would have spotted the severity of the rise in inflation earlier. Lombardelli acknowledged that central banks faced an especially tricky task, as they must not only produce forecasts for inflation but set policy to influence price pressures two years from now.“What do you assume about the effects of policy if you’re the policymaker?” she said.That challenge is especially tough in an environment such as the present, when the after-effects of the pandemic and Russia’s invasion of Ukraine are hard to predict. El-Erian believes meeting it would prove difficult, particularly for the Fed. Central banks, especially in the US, had made major “one-sided” forecasting errors without acknowledging them. Those errors could be blamed on models “failing to keep up with significant structural change in the economy”, being too late to look at “micro data”, and groupthink. More

By his own estimate, Trevin Brownie has seen more than 1,000 people being beheaded.In his job, he had to watch a new Facebook video roughly every 55 seconds, he says, removing and categorising the most harmful and graphic content. On his first day, he recalls vomiting in revulsion after watching a video of a man killing himself in front of his three-year-old child.After that things got worse. “You get child pornography, you get bestiality, necrophilia, harm against humans, harm against animals, rapings,” he says, his voice shaking. “You don’t see that on Facebook as a user. It is my job as a moderator to make sure you don’t see it.”After a while, he says, the ceaseless horrors begin to affect the moderator in unexpected ways. “You get to a point, after you’ve seen 100 beheadings, when you actually start hoping that the next one becomes more gruesome. It’s a type of addiction.”Brownie is one of several hundred young people, most in their 20s, who were recruited by Sama, a San Francisco-based outsourcing company, to work in its Nairobi hub moderating Facebook content. A South African, he is now part of a group of 184 petitioners in a lawsuit against both Sama and Facebook owner Meta for alleged human rights violations and wrongful termination of contracts. The case is one of the largest of its kind anywhere in the world, but one of three being pursued against Meta in Kenya. Together, they have potentially global implications for the employment conditions of a hidden army of tens of thousands of moderators employed to filter out the most toxic material from the world’s social media networks, lawyers say. In 2020, Facebook paid out $52mn to settle a lawsuit and provide mental health treatment for American content moderators. Other cases filed by moderators in Ireland have sought compensation for alleged post-traumatic stress disorder.Mercy Mutemi and fellow counsel follow proceedings during a virtual pre-trial consultation last month. Should the Kenyan moderators’ case against Meta succeed, it could change working conditions in many more places © Tony Karumba/AFP/Getty ImagesBut the Kenyan cases are the first filed outside the US that seek to change through court procedures how moderators of Facebook content are treated. Should they succeed, they could lead to many more in places where Meta and other social media providers screen content through third-party providers, potentially improving conditions for thousands of workers paid comparatively little to expose themselves to the worst of humanity. Just as toiling on factory floors or inhaling coal dust destroyed the bodies of workers in the industrial age, say the moderators’ lawyers, so do those working on the digital shop floor of social media risk having their minds ruined.“These are frontline issues for this generation’s labour rights,” says Neema Mutemi, a lecturer at the University of Nairobi who is helping to publicise the case. Asked to respond to the allegations, Meta said it does not comment on ongoing litigation.Online harmsIn recent years, Meta has come under increasing pressure to moderate vitriol and misinformation on its platforms, which include Facebook, WhatsApp and Instagram. In Myanmar, it faced accusations that its algorithms amplified hate speech and that it failed to remove posts inciting violence against the Rohingya minority, thousands of whom were killed and hundreds of thousands of whom fled to Bangladesh.In India, experts claimed it failed to suppress misinformation and incitement to violence, leading to riots in the country, its largest single market. In 2021, whistleblower Frances Haugen leaked thousands of internal documents revealing the company’s approach to protecting its users, and told the US Senate the company prioritised “profit over safety”. Meta failed particularly to filter divisive content and protect users in non-western countries such as Ethiopia, Afghanistan and Libya, the documents showed, even when Facebook’s own research marked them “high risk” because of their fragile political landscape and frequency of hate speech. Former Facebook employee and whistleblower Frances Haugen testified before the US Senate in 2021 that the company prioritised ‘profit over safety’ © Drew Angerer/Pool/ReutersIn the past few years, Meta has invested billions of dollars to tackle harms across its apps, recruiting about 40,000 people to work on safety and security, many contracted through third-party outsourcing groups such as Accenture, Cognizant and Covalen. An estimated 15,000 are content moderators. Outside the US, Meta works with companies in more than 20 sites around the world, including India, the Philippines, Ireland and Poland, who now help sift content in multiple foreign languages. In 2019, Meta requested that Sama — which had been working in Nairobi for several years on labelling data to train artificial intelligence software for clients including Meta and Tesla — take on the work of content moderation. It would be part of a new African hub, to focus on filtering African language content. Sama says it had never done this type of work previously. But its team on the ground supported taking on the work, which might otherwise have gone to the Philippines, out of a sense of responsibility to bring cultural and linguistic expertise to the moderation of African content. It set about hiring people from countries including Burundi, Ethiopia, Kenya, Somalia, South Africa and Uganda to come and work at its facilities in Nairobi. It was to prove a mistake. Within four years of starting content moderation, Sama decided to get out of the business, ending its contract with Facebook and firing some of the managers who had overseen the new work. Brownie, who had been recruited in 2019 in South Africa to work at the Nairobi hub, was among those given notice this January when Sama told its employees it would no longer be moderating Facebook content. “It is important work, but I think it is getting quite, quite challenging,” Wendy Gonzalez, Sama’s chief executive, tells the FT, adding that content moderation had only ever been 2 per cent of Sama’s business. “We chose to get out of this business as a whole.”Many of the moderators working in Kenya say the work leaves them psychologically scarred, plagued by flashbacks and unable to maintain normal social relations. “Once you have seen it you can’t unsee it. A lot of us now, we can’t sleep,” says Kauna Ibrahim Malgwi, a Nigerian graduate of psychology who started at Sama’s Nairobi hub in 2019 and moderated content in the Hausa language spoken across west Africa. She is now on antidepressants, she says. Cori Crider, a director at Foxglove, a London-based non-profit legal firm that is supporting former Sama moderators with their case, says moderators receive wholly inadequate protection from mental stress. Moderators in Nairobi this month voted to form a union — what their lawyer Mercy Mutemi says is the first of its kind in the world © Favier/Foxglove“Policemen who investigate child-abuse imagery cases have an armada of psychiatrists and strict limits on how much material they can see,” she says. But the counsellors employed by Sama on Meta’s behalf “are not qualified to diagnose or treat post-traumatic stress disorder,” she alleges. “These coaches tell you to do deep breathing and finger painting. They are not professional.”Sama says all the counsellors it employed had professional Kenyan qualifications. Meta argued that Kenya’s courts had no jurisdiction in the case. But on April 20, in what the moderators and their lawyers saw as a major victory, a Kenyan judge ruled that Meta could indeed be sued in the country. Meta is appealing. “If Shell came and dumped things off Kenya’s coast, it would be very obvious whether or not Kenya has jurisdiction,” says Mercy Mutemi, a Kenyan lawyer at Nzili and Sumbi Advocates, who is representing the moderators. “This is not a physical, tangible thing. This is tech. But the argument is the same. They’ve come here to do harm.”Working conditionsThe case of the 184 moderators is one of three lawsuits filed on behalf of content moderators by Mutemi’s law firm with Foxglove’s support. The first was lodged last year on behalf of Daniel Motaung, a South African moderator working in Nairobi, against both Sama and Meta. In that case too, a separate Kenyan judge dismissed Meta’s contention that Kenyan courts had no jurisdiction.Motaung alleges he was wrongfully dismissed after he tried to form a union to press for better pay and working conditions. He also claims to have been lured into the job under false pretences, unaware of exactly what it entailed. Sama disputes these claims, saying that content moderators were acquainted with the job during their hiring and training process, and that Motaung was sacked because he had violated the company’s code of conduct. “As far as the union being formed, we have policies in place for freedom of association,” says Gonzalez. “If a union was being formed, that is not a problem.”Content moderators recruited from outside Kenya were paid about Ks60,000 a month, including an expat allowance, equivalent to about $564 at 2020 exchange rates.

Daniel Motaung, a South African moderator working in Nairobi, filed a lawsuit against Sama and Meta alleging he was fired for trying to form a union © Favier/Foxglove

Moderators typically worked a nine-hour shift, with an hour’s break, two weeks on days and two weeks on nights. After tax, they received an hourly wage of roughly $2.20.Sama says those wages were several times the minimum wage and equivalent to the salary received by Kenyan paramedics or graduate level teachers. “These are meaningful wages,” says Gonzalez. The data suggests the wages for expat workers are just over four times Kenya’s minimum wage, but Crider from Foxglove says she is not impressed: “$2.20 an hour to put yourself through repeated footage of murder, torture and child abuse? It’s a pittance.”Haugen, the Facebook whistleblower, said Motaung’s struggle for workers’ rights was the digital-era equivalent of previous struggles. “People fighting for each other is why we have the 40-hour work week,” she said, speaking at an event alongside Motaung in London last year. “We need to extend that solidarity to the new front, on things like content-moderation factories.”This month, moderators in Nairobi voted to form what their lawyers say is the first union of content moderators in the world. Motaung called the resolution “a historic moment”.The last of the three cases being heard in Kenya deals not with labour law, but with the alleged consequences of material posted on Facebook. It claims that Facebook’s failure to deal with hate speech and incitement to violence fuelled ethnic violence in Ethiopia’s two-year civil war which ended in November. Crider says the three cases are related because poor treatment of content moderators results directly in unsafe content being left to spread unchecked by Meta’s platforms. Abrham Meareg, the son of an Ethiopian academic shot dead after being attacked in Facebook posts, has brought a case against Meta over its alleged failure to deal with hate speech © FoxgloveOne of two plaintiffs, researcher Abrham Meareg, alleges that his father, a chemistry professor, was killed in Ethiopia’s Amhara region in October 2021 after a post on Facebook revealed his address and called for his murder. Abrham says he asked Facebook multiple times to remove the content, without success.Sama employed around 25 people to moderate content from Ethiopia in three languages — Amharic, Tigrinya and Oromo — at the time of a conflict that stirred ethnic animosity and may have claimed up to 600,000 lives. Lawyers are seeking the establishment of a $1.6bn victims’ fund and better conditions for future content moderators. Crucially, they are also asking for changes to Facebook’s algorithm to prevent this happening elsewhere in future. Lawyers say that to compete with other platforms, Facebook deliberately maximises user engagement for profit, which can help unsafe or hazardous content go viral.“Abrham is not an outlier or a one-off,” says Rosa Curling, a director at Foxglove. “There are endless examples of things being published on Facebook, [calls for people] to be killed. And then that, in fact, happening.” Curling says the quality of Facebook moderation in the Nairobi hub is affected by the working practices now being challenged in court. Gonzalez of Sama acknowledges that regulation of content moderation is deficient, saying the issue should be “top of mind” for social media company chiefs. “These platforms, and not just this one [Facebook] in particular, but others as well, are kind of out in the wild,” she says. “There need to be checks and balances and protections put in place.” Captive Ethiopian soldiers walk past cheering crowds in Mekele, capital of the Tigray region, in 2021. A court in Kenya was told that material posted on Facebook had fuelled ethnic violence during Ethiopia’s two-year civil war © Yasuyoshi Chiba/AFP/Getty ImagesWhile Meta contracts tens of thousands of human moderators, it is already investing heavily in their replacement: artificial intelligence software that can filter misinformation, hate speech and other forms of toxic content on its platforms. In the most recent quarter, it said that 98 per cent of “violent and graphic content” taken down was detected using AI. However, critics point out that the overwhelming amount of harmful content that remains online in places like Ethiopia is evidence that AI software cannot yet pick up the nuances required to moderate images and human speech.‘Not a normal job’As well as potentially setting legal precedent, the cases in Kenya offer a rare glimpse into the working lives of content moderators, who normally toil away in anonymity. The non-disclosure agreements they are required to sign, usually at the behest of contractors like Sama, forbid them from sharing details of their work even with their families. Gonzalez says this is to protect sensitive client data. Frank Mugisha, a former Sama employee from Uganda, has another explanation. “I’ve never had a chance to share my story with anyone because I’ve always been kept a dirty secret,” he says. Following the loss of their jobs, Sama employees from outside Kenya now face the possibility of expulsion from the country, though a court has issued an interim injunction preventing Meta and Sama from terminating the moderators’ contracts until a judgment is made on the legality of their redundancy. Still, several former Sama employees have not been paid since April, when the company terminated its contract with Meta, and face eviction for non-payment of rent. All the content moderators who spoke to the FT had signed non-disclosure agreements. But their lawyers said these did not prevent them from discussing their working conditions. Kenyan riot police monitor a demonstration by Facebook content moderators, who are involved in a redundancy case, outside Sama’s offices in Nairobi earlier this month © Daniel Irungu/EPA-EFEModerators from a range of countries across Africa were consistent in their criticisms. All said they had taken on the job without being properly informed about what it entailed. All complained of constant pressure from managers to work at speed, with a requirement to deal with each “ticket”, or item, in 50 or 55 seconds. Meta said that it does not mandate quotas for content reviewers, and said they “aren’t pressured to make hasty decisions”, though it said “efficiency and effectiveness” are important factors in the work.Malgwi, the Nigerian psychology graduate, is dismissive of what moderators allege is Facebook’s attempt to keep its distance by using third-party companies like Sama. “We log in every morning to Meta’s platform,” she says. “You see: ‘Welcome. Thank you for protecting the Meta community’.” Fasica Gebrekidan, an Ethiopian moderator who studied journalism at Mekelle university, got a job at Sama shortly after fleeing Ethiopia’s civil war in 2021. After learning she would be working indirectly for Meta, she thought “maybe I’m the luckiest girl in the world,” she says. “I didn’t expect dismembered bodies every day from drone attacks,” she adds. Until now, Gebrekidan has not spoken to anyone, shielding the nature of her work even from her mother. “I know what I do is not a normal job,” she says. “But I consider myself a hero for filtering all this toxic, negative stuff.” More