Showing posts with label liability. Show all posts
Showing posts with label liability. Show all posts
Friday, 27 August 2021
Sunday, 20 June 2021
Saturday, 27 June 2020
Waking up to the realities of racism in the UK
Gary Younge in The FT
Every now and then much of Britain discovers racism in much the same way that teenagers discover sex. The general awareness that it is out there collides with the urgent desire to find out where. People talk about it endlessly and carelessly, unsure of what to say or think or whether they are doing it right. They have lots of questions but, even if they did know whom to ask, they would be too crippled by embarrassment to reveal their ignorance. Everyone has an opinion but only a few have any experience. The interest never goes away, though its intensity wanes as they explore other things.
The trouble is not everyone gets to move on. Black people, and other minorities, do not have the luxury of a passing interest in racism. It is their lived reality. A YouGov poll of black, Asian and minority ethnic Britons surveyed over the past two weeks reveals the extent to which prejudice and discrimination is embedded in society.
It found that two-thirds of black Britons have had a racial slur directly used against them or had people make assumptions about their behaviour based on their race. Three-quarters have been asked where they’re “really from”. (When I once told a man I was born in Hitchin, he asked, “Well where were you from before then?”).
More than half say their career development has been affected because of their race, or that they have had people make assumptions about their skills based on their race; 70 per cent believe the Metropolitan police is institutionally racist; and the proportion of black people who have been racially abused in the workplace (half) is almost the same proportion as those who have been abused in the street.
Little wonder then that two-thirds of black people polled think there is still a “great deal” of racism nowadays. This is not a substantial difference from the three-quarters who say they think there was a great deal around 30 years ago.
As the public gaze shifts from the Black Lives Matter protests, these experiences will endure. They may be tempered by greater sensitivity; but heightened consciousness alone will not fix what ails us. The roots are too deep, the institutions too inflexible, the opportunism too prevalent and the cynicism too ingrained to trust the changes we need to goodwill and greater understanding alone.
I applaud the proliferation of reading lists around issues of race and the spike in sales for the work of black authors — people could and should be better informed. But we did not read our way into this and we won’t read our way out. The racism we are dealing with isn’t a question of a few bad apples but a contaminated barrel. It’s a systemic problem and will require a systemic solution.
This is a crucial moment. The nature of the protests thus far has been primarily symbolic — targeting statues and embassies, taking a knee and raising a fist. That ought not to be dismissed. Symbols should not be disregarded as insubstantial. They denote social value and signify intent. But they should not be mistaken for substance either, lest this moment descend into a noxious cocktail of posturing and piety.
Concrete demands do exist. All Black Lives UK, for example, has called for the scrapping of section 60, which gives the police the right to stop and search, and the abolition of the Met police’s gangs’ matrix, an intelligence tool that targets suspected gang members. It also wants measures to address health disparities, particularly relating to black women and mental health, and the implementation of reviews that already exist, including the Lammy Review (on racial disparities in the criminal justice system), the Timpson Review (on school exclusions), and the McGregor-Smith review (race in the workplace).
But the only demand that has cut through has been the push for the education system to more accurately reflect our colonial past and diversity. The poll finds this has the support of 81 per cent of black people — the same percentage that approved of removing a statue of the slave trader Edward Colston in Bristol. (Far from wishing to “photo shop” our cultural landscape, as the prime minister claims, they want their kids to learn more about it. They just don’t want the villains put on a pedestal.)
This is great, as far as it goes but, given the size of the constituency that has been galvanised in the past few weeks and the awareness that’s been raised, it doesn’t go nearly far enough.
The solemn declarations of intent and solidarity that flooded from corporations and governments will leave us drowned in a sea of racial-sensitivity training unless they are followed up by the kind of thoroughgoing change and investment that seeks to genuinely tackle inequalities in everything from housing and education to recruitment, retention and promotion. That costs money and takes guts; it means challenging power and redistributing resources; it requires reckoning with the past and taking on vested interests.
“When people call for diversity and link it to justice and equality, that's fine,” the black radical Angela Davis once told me. “But there’s a model of diversity as the difference that makes no difference, the change that brings about no change.”
The governing body of Oxford university’s Oriel College did not resolve to take down its statue of Cecil Rhodes because they suddenly realised that he was a colonial bigot. They did so because it had become more of a liability to keep it up than to take it down. Similarly, it was not new information about police killings that prompted the National Football League in America to change its position on taking a knee. They did that because the pressure was too great to resist. We have to keep that pressure up, albeit in different ways.
“If there is no struggle there is no progress,” argued the American abolitionist, Frederick Douglass. “Power concedes nothing without a demand. It never did and it never will.”
Every now and then much of Britain discovers racism in much the same way that teenagers discover sex. The general awareness that it is out there collides with the urgent desire to find out where. People talk about it endlessly and carelessly, unsure of what to say or think or whether they are doing it right. They have lots of questions but, even if they did know whom to ask, they would be too crippled by embarrassment to reveal their ignorance. Everyone has an opinion but only a few have any experience. The interest never goes away, though its intensity wanes as they explore other things.
The trouble is not everyone gets to move on. Black people, and other minorities, do not have the luxury of a passing interest in racism. It is their lived reality. A YouGov poll of black, Asian and minority ethnic Britons surveyed over the past two weeks reveals the extent to which prejudice and discrimination is embedded in society.
It found that two-thirds of black Britons have had a racial slur directly used against them or had people make assumptions about their behaviour based on their race. Three-quarters have been asked where they’re “really from”. (When I once told a man I was born in Hitchin, he asked, “Well where were you from before then?”).
More than half say their career development has been affected because of their race, or that they have had people make assumptions about their skills based on their race; 70 per cent believe the Metropolitan police is institutionally racist; and the proportion of black people who have been racially abused in the workplace (half) is almost the same proportion as those who have been abused in the street.
Little wonder then that two-thirds of black people polled think there is still a “great deal” of racism nowadays. This is not a substantial difference from the three-quarters who say they think there was a great deal around 30 years ago.
As the public gaze shifts from the Black Lives Matter protests, these experiences will endure. They may be tempered by greater sensitivity; but heightened consciousness alone will not fix what ails us. The roots are too deep, the institutions too inflexible, the opportunism too prevalent and the cynicism too ingrained to trust the changes we need to goodwill and greater understanding alone.
I applaud the proliferation of reading lists around issues of race and the spike in sales for the work of black authors — people could and should be better informed. But we did not read our way into this and we won’t read our way out. The racism we are dealing with isn’t a question of a few bad apples but a contaminated barrel. It’s a systemic problem and will require a systemic solution.
This is a crucial moment. The nature of the protests thus far has been primarily symbolic — targeting statues and embassies, taking a knee and raising a fist. That ought not to be dismissed. Symbols should not be disregarded as insubstantial. They denote social value and signify intent. But they should not be mistaken for substance either, lest this moment descend into a noxious cocktail of posturing and piety.
Concrete demands do exist. All Black Lives UK, for example, has called for the scrapping of section 60, which gives the police the right to stop and search, and the abolition of the Met police’s gangs’ matrix, an intelligence tool that targets suspected gang members. It also wants measures to address health disparities, particularly relating to black women and mental health, and the implementation of reviews that already exist, including the Lammy Review (on racial disparities in the criminal justice system), the Timpson Review (on school exclusions), and the McGregor-Smith review (race in the workplace).
But the only demand that has cut through has been the push for the education system to more accurately reflect our colonial past and diversity. The poll finds this has the support of 81 per cent of black people — the same percentage that approved of removing a statue of the slave trader Edward Colston in Bristol. (Far from wishing to “photo shop” our cultural landscape, as the prime minister claims, they want their kids to learn more about it. They just don’t want the villains put on a pedestal.)
This is great, as far as it goes but, given the size of the constituency that has been galvanised in the past few weeks and the awareness that’s been raised, it doesn’t go nearly far enough.
The solemn declarations of intent and solidarity that flooded from corporations and governments will leave us drowned in a sea of racial-sensitivity training unless they are followed up by the kind of thoroughgoing change and investment that seeks to genuinely tackle inequalities in everything from housing and education to recruitment, retention and promotion. That costs money and takes guts; it means challenging power and redistributing resources; it requires reckoning with the past and taking on vested interests.
“When people call for diversity and link it to justice and equality, that's fine,” the black radical Angela Davis once told me. “But there’s a model of diversity as the difference that makes no difference, the change that brings about no change.”
The governing body of Oxford university’s Oriel College did not resolve to take down its statue of Cecil Rhodes because they suddenly realised that he was a colonial bigot. They did so because it had become more of a liability to keep it up than to take it down. Similarly, it was not new information about police killings that prompted the National Football League in America to change its position on taking a knee. They did that because the pressure was too great to resist. We have to keep that pressure up, albeit in different ways.
“If there is no struggle there is no progress,” argued the American abolitionist, Frederick Douglass. “Power concedes nothing without a demand. It never did and it never will.”
Thursday, 18 January 2018
Four lessons the Carillion crisis can teach business, government and us
Larry Elliott in The Guardian
Carillion’s collapse was capitalism in action. Profits are the reward for taking risks, and sometimes the risks materialise. Carillion’s problem was not that its profits were too high, but that they were too low when things started to go wrong. In a free-market system, it’s that simple.
Except that it isn’t quite that simple in this case, because much of Carillion’s work was for the government: building roads and hospitals, running prisons, providing school meals. Whitehall didn’t want the company to go bust, so bunged it a few new contracts when it was already in trouble in the hope that something would turn up. Instead, Carillion staggered on for six months as a zombie company before the banks pulled the plug.
What’s more, the directors of the company took steps to shield themselves from financial risk. The Institute of Directors – which strongly believes in free markets and the profit motive – described a 2016 change to pay policy that made it harder to claw back bonuses as “highly inappropriate”, which of course it was. The company’s workforce, its subcontractors and its pensioners have not been so fortunate.
PFI has been an attempt to prove that it is possible to get world-class public services on the cheap. This is a delusion
Jeremy Corbyn says the demise of Carillion is a watershed moment, and he could well be right. The reputation of business is already at a low ebb and the Carillion saga has everything to get the public fired up: mismanagement, dividends for shareholders and boardroom fat-cattery leading to job losses, pension cuts and more expensive public services. Voter resistance to local councils taking previously outsourced services back in house is likely to be minimal.
The time has come to have a hard look at the private finance deals that have been the vehicle of political choice for delivering infrastructure projects – and, increasingly, public services – for the past quarter of a century. Public-private partnerships started as an accounting wheeze in John Major’s government when it needed a way to prevent spending on capital investment boosting high borrowing built up in the early 90s recession.
‘Gordon Brown (left), chancellor under Tony Blair (right), needed to find a way of building new schools and hospitals promised in opposition.’ Photograph: WPA Pool/Getty Images
But the Conservatives became less wedded to them when an improving economy led to an improvement in the public finances as the 90s wore on. It was Labour’s arrival in office in 1997 that gave private finance a new lease of life. Gordon Brown, Tony Blair’s chancellor, pledged to stick to the tough spending targets inherited from the Tories for two years, but still needed to find a way of building the new schools and hospitals promised in opposition. PFI (the private finance initiative ) – under which the private sector would pay for a new project up front and be paid back by the government over the coming decades – was the answer.
PFI, essentially a live-now pay-later approach, was always an expensive way to fund infrastructure, and the private sector did well out of them.
Life became a lot tougher after 2010, when the coalition government decided its first priority was to reduce a budget deficit at 10% of GDP. Spending on infrastructure was cut, and private sector contractors such as Carillion found Whitehall more miserly when negotiating contracts. Local government, which bore the brunt of government spending cuts, came under pressure to outsource services to save money.
Austerity and PFI was an unhappy marriage. To be sure, taxpayers saved money by getting the private sector to provide services more cheaply. But savings came at a price. Prisoners turned up late for court appearances; schools were built to a lower specification; PFI contractors cut corners to save money whenever they could because the bids put in to win contracts were barely enough to cover their costs. This was a race to the bottom, and Carillion won it.
George Osborne, who masterminded the coalition’s austerity strategy, says the problem was a failure to use more small- and medium-sized companies instead of relying on the big beasts. This is absurd: only large outfits could contemplate taking on large PFI contracts. And in many cases, multifaceted companies such as Carillion used profits from one sector to subsidise losses elsewhere in their portfolios.Q&A
How are you being affected by the Carillion liquidation crisis?Show
There are lessons to be learned from Carillion’s collapse, but the idea that SMEs should be building billion-pound hospitals is not one of them. Lesson one is that governments can have austerity or they can have PFI, but not both together. For the past eight years, it has been possible for the state to borrow for long periods at historically low interest rates. This would have been – and still is – a more cost-effective way of financing big infrastructure projects.
London libraries assess impact of Carillion collapse
Lesson two is that the state is not well equipped to manage big infrastructure projects. There are plenty of examples – the abandonment of the NHS IT project at a cost of £12bn, for example – of official incompetence. Whitehall’s handling of Carillion has left a lot to be desired. No matter what Labour says, the private sector will inevitably have a big role in the delivery of major projects. Even under a Corbyn-led government, there would inevitably be a role for it.
Given that, lesson three is the need to rethink company law. Trade unions felt the full force of the law when they were deemed to have acted badly in the late 70s and 80s; a similar approach for corporate wrongdoing is long overdue. It might simply mean enforcing existing laws more strongly, but the step that would send a shiver through boardrooms would be the end of limited liability for directors of limited companies. Limited liability is supposed to encourage entrepreneurship. In Carillion’s case it seems to have created moral hazard.
The final lesson is for the public. PFI has been an attempt to prove that it is possible to get world-class public services on the cheap. This is a delusion. If we want world-class public services, one way or another they will have to be paid for.
Carillion’s collapse was capitalism in action. Profits are the reward for taking risks, and sometimes the risks materialise. Carillion’s problem was not that its profits were too high, but that they were too low when things started to go wrong. In a free-market system, it’s that simple.
Except that it isn’t quite that simple in this case, because much of Carillion’s work was for the government: building roads and hospitals, running prisons, providing school meals. Whitehall didn’t want the company to go bust, so bunged it a few new contracts when it was already in trouble in the hope that something would turn up. Instead, Carillion staggered on for six months as a zombie company before the banks pulled the plug.
What’s more, the directors of the company took steps to shield themselves from financial risk. The Institute of Directors – which strongly believes in free markets and the profit motive – described a 2016 change to pay policy that made it harder to claw back bonuses as “highly inappropriate”, which of course it was. The company’s workforce, its subcontractors and its pensioners have not been so fortunate.
PFI has been an attempt to prove that it is possible to get world-class public services on the cheap. This is a delusion
Jeremy Corbyn says the demise of Carillion is a watershed moment, and he could well be right. The reputation of business is already at a low ebb and the Carillion saga has everything to get the public fired up: mismanagement, dividends for shareholders and boardroom fat-cattery leading to job losses, pension cuts and more expensive public services. Voter resistance to local councils taking previously outsourced services back in house is likely to be minimal.
The time has come to have a hard look at the private finance deals that have been the vehicle of political choice for delivering infrastructure projects – and, increasingly, public services – for the past quarter of a century. Public-private partnerships started as an accounting wheeze in John Major’s government when it needed a way to prevent spending on capital investment boosting high borrowing built up in the early 90s recession.
‘Gordon Brown (left), chancellor under Tony Blair (right), needed to find a way of building new schools and hospitals promised in opposition.’ Photograph: WPA Pool/Getty Images
But the Conservatives became less wedded to them when an improving economy led to an improvement in the public finances as the 90s wore on. It was Labour’s arrival in office in 1997 that gave private finance a new lease of life. Gordon Brown, Tony Blair’s chancellor, pledged to stick to the tough spending targets inherited from the Tories for two years, but still needed to find a way of building the new schools and hospitals promised in opposition. PFI (the private finance initiative ) – under which the private sector would pay for a new project up front and be paid back by the government over the coming decades – was the answer.
PFI, essentially a live-now pay-later approach, was always an expensive way to fund infrastructure, and the private sector did well out of them.
Life became a lot tougher after 2010, when the coalition government decided its first priority was to reduce a budget deficit at 10% of GDP. Spending on infrastructure was cut, and private sector contractors such as Carillion found Whitehall more miserly when negotiating contracts. Local government, which bore the brunt of government spending cuts, came under pressure to outsource services to save money.
Austerity and PFI was an unhappy marriage. To be sure, taxpayers saved money by getting the private sector to provide services more cheaply. But savings came at a price. Prisoners turned up late for court appearances; schools were built to a lower specification; PFI contractors cut corners to save money whenever they could because the bids put in to win contracts were barely enough to cover their costs. This was a race to the bottom, and Carillion won it.
George Osborne, who masterminded the coalition’s austerity strategy, says the problem was a failure to use more small- and medium-sized companies instead of relying on the big beasts. This is absurd: only large outfits could contemplate taking on large PFI contracts. And in many cases, multifaceted companies such as Carillion used profits from one sector to subsidise losses elsewhere in their portfolios.Q&A
How are you being affected by the Carillion liquidation crisis?Show
There are lessons to be learned from Carillion’s collapse, but the idea that SMEs should be building billion-pound hospitals is not one of them. Lesson one is that governments can have austerity or they can have PFI, but not both together. For the past eight years, it has been possible for the state to borrow for long periods at historically low interest rates. This would have been – and still is – a more cost-effective way of financing big infrastructure projects.
London libraries assess impact of Carillion collapse
Lesson two is that the state is not well equipped to manage big infrastructure projects. There are plenty of examples – the abandonment of the NHS IT project at a cost of £12bn, for example – of official incompetence. Whitehall’s handling of Carillion has left a lot to be desired. No matter what Labour says, the private sector will inevitably have a big role in the delivery of major projects. Even under a Corbyn-led government, there would inevitably be a role for it.
Given that, lesson three is the need to rethink company law. Trade unions felt the full force of the law when they were deemed to have acted badly in the late 70s and 80s; a similar approach for corporate wrongdoing is long overdue. It might simply mean enforcing existing laws more strongly, but the step that would send a shiver through boardrooms would be the end of limited liability for directors of limited companies. Limited liability is supposed to encourage entrepreneurship. In Carillion’s case it seems to have created moral hazard.
The final lesson is for the public. PFI has been an attempt to prove that it is possible to get world-class public services on the cheap. This is a delusion. If we want world-class public services, one way or another they will have to be paid for.
Friday, 12 December 2014
Change the law on limited liability to control boardroom greed
Boardroom greed: how to bring an errant multinational to heel
Changing the law on limited liability is the nuclear option, but it could force errant firms to repent
Roll the clock back 36 years. It is December 1978 and the so-called winter of discontent is in its early stages. Over the next couple of months the papers will be full of stories about rubbish piling up in the streets and of cancer patients failing to receive treatment. Britain is gripped by widespread industrial action, but public support for strikes is crumbling.
A few months later, in May 1979, a new government arrives in power. Despite failed attempts in the recent past, it decides that something must be done to curb the power of organised labour. Self-regulation has failed, the administration of Margaret Thatcher decides. It is time to use the power of the state to end abuses.
Bit by bit over the next decade the trade unions are systematically weakened. When it comes to the crunch they are not nearly as powerful as they think they are.
So what is the difference between the trade unions in the 1970s and the big corporations today? If anything, the banks, the multinational tech companies and the giants of the energy sector are even more powerful than the unions were four decades ago. And like the unions of yesteryear, business has had opportunities to put its own house in order – and spurned them. For the union general secretary telling Harold Wilson or Jim Callaghan what his members will and will not wear, read the chief executive thumbing his nose at David Cameron or George Osborne.
Meanwhile, the list of corporate scandals is getting longer. We’ve had horsemeat passed off as beef; the rigging of the foreign exchange market; the mis-selling of payment protection insurance; aggressive tax avoidance through webs of offshore shell companies; sweetheart deals between multinationals and Luxembourg. Only yesterday, the Financial Conduct Authority said some pension companies were screwing pensioners by failing to provide them with the best deals on offer.
Meanwhile, the Federation of Small Businesses said a fifth of its member companies had been subject to the bullying demands of big corporations, with many pushed to breaking pointas a result.
Make no mistake, the scandals are damaging. After a parliament marked by times of austerity and falling living standards, trust in executives to do anything but look after their own selfish interests is at a low ebb. Energy companies and banks are as popular with the public as the trade unions were during the winter of discontent. A government that decided to curb corporate power would not lack support from the voters. Osborne’s “Google tax” on the diverted profits of multinationals was the single most popular policy in last week’s autumn statement.
There are, though, differences between now and 1979. One is that the big multinational companies are more powerful than the trade unions were. Another is that Thatcher had a clear idea about what she wanted, whereas today there is no real blueprint for reform.
All this week the Guardian has been trying to fill that vacuum. Our series on taming corporate power is designed to explode the myth that there is nothing that could be done to affect boardroom behaviour. It’s not the ideas that are lacking, it’s the political will to persevere with a process that will be long and difficult.
Step number one should be to use the existing powers of the state, which even in this era of globalisation and footloose capital are considerable. Ministers can break up monopolies, insist that the investment arms of banks are severed from their retail operations and force companies to pay a living wage when they receive public contracts. They should use these powers and add to them. Pharmaceutical companies have to prove that any new drugs they market will not harm the public; the same test should be applied to new products developed by the financial sector.
Step number two involves redressing the imbalance of power between capital and labour. Those troubled by the growing gap between rich and poor, or by the relentless squeeze on wages since the recession, need look no further for an explanation than the decline in trade union power. Evidence shows that those workers still covered by collective agreements earn higher wages, so one possible reform would be to set up new tripartite bodies for wage bargaining in certain sectors, such as contract cleaning.
A future Labour government could also do worse than to dust down the Bullock report from 1977, which called for greater employee participation in the running of companies, for the need to build trust within organisations and for the desirability of Britain learning from the industrial models of other European countries, Germany in particular. This might be done voluntarily, with companies offered the incentive of lower corporation tax for each worker representative on the board, or by statute.
Lower corporation tax is, of course, hardly an incentive for those companies that are paying virtually no corporation tax in the first place. Osborne is rightly frustrated that some multinationals do billions of pounds of business in the UK but still declare nugatory profits, despite the steady reduction in corporation tax. So, step number three involves ensuring that companies pay what is due. The key here is for governments to insist on country-by-country reporting by the Googles and Amazons of this world, because this would ensure that all multinationals would have to declare the countries in which they operated, what the company is called in each location, its financial performance in each country it does business (including inter-company trade), and how much tax it pays to each government. Companies would have to abide by an international financial reporting standard and provide information for all tax jurisdictions. Shining a light on the murkier activities of multinational companies is vital.
Finally, there’s the nuclear option: stripping companies of the protection provided by limited liability. The owners, the shareholders and those running companies wield enormous power but don’t bear full responsibility for their actions because their liability is limited to the size of their investment in a company or partnership. But limited liability is a privilege not a right, and in return for granting it society should get something back in return. The argument the Thatcher government used when it said employers could sue unions for damages caused by strikes was that there was no such thing as a something-for-nothing world, and the same argument applies to companies.
The deal should be that companies get the protection limited liability provides in return for looking after all their stakeholders: the workers they employ, the customers they serve, the companies that form their supply chains, the taxpayers who pay for the transport infrastructure and the education system that businesses require. The deal should not be limited liability in return for boardroom greed, running rings round the taxman and breaking the law.
As Prem Sikka said in this series, any change to limited liability would be fiercely resisted. But even the suggestion of change would concentrate minds. Imagine, for example, that a future government set up a royal commission to look into the issue. Would this lead to companies treating their staff better and paying more tax? You bet it would.
Tuesday, 9 December 2014
Business giants walk off with our billions. No more something for nothing
The state has the powers to make business serve us better. A north London borough is leading the way
A few weeks ago, I had the disconcerting experience of sitting in a smart room full of clever people who sincerely held a silly idea. We had been gathered together by a big charity to discuss its research on inequality, and talk naturally turned to Britain’s free-market economy. Some praised the free market, others longed to reform it: all agreed it was central to the UK being one of the most unequal economies in the rich world.
The famous political philosopher worried whether the free market was eroding our ethics; the gentle wonk from a rightwing thinktank thought that tempering it would turn a dynamic economy into an arthritic one. The British people now saw themselves as free-marketeers, argued the strategist from a giant consultancy; try telling that to the Occupy protesters in Parliament Square, retorted the environmentalist at his elbow.
Economists, politicians, academics: all well read and well meaning. But what was this free market they each took for granted? It had nothing to do with the tap water in our glasses – that came from the local monopoly, Thames Water. Nor did it apply to the trains that delivered some of my fellow diners – many rail services face no direct competition.
And what about the lights and heating? Nearly three decades on from the start of liberalisation, 90% of the gas and electricity piped into our homes is still controlled by an oligopoly of six huge suppliers who contend for our custom by trying to bamboozle us with their tariffs.
Few conceits are more cherished by our political classes than the notion that this is a free-market economy. To the right it is what makes Britain great. For the left it is what they are up against. And for the rich it is what justifies their huge pay packets: after all, they have earned it.
When asked for his view of western civilisation, Gandhi said he thought it would be a very good idea. I feel much the same way about the free market: I’m genuinely curious to see what such a mythical beast looks like. But that term, however widely accepted and advertised, has little to do with today’s Britain. The economy most of us experience – everything from who collects our bins, to how we commute to work, to that new school attended by the kids – is often not a free market at all. Instead, it’s a bog of privately run monopolies; of public projects and services outsourced to businesses for years, even decades, at a time; and massive taxpayer subsidies handed to the corporate sector with fewer questions asked than of disabled people wondering where their living allowance has gone.
Grasp that, and the question of how to tame corporate power becomes easier to answer. If corporations rely on the public for a sizeable chunk of their revenues and power, then we should start asking what they are doing for us in return. Do businesses deserve the privileges given them by society?
You almost never hear this question from any politician. What you get instead is the kind of cant served up by David Cameron at last year’s Conservative conference: “It’s not the government that creates jobs. It’s businesses that get wages in people’s pockets, food on their tables, hope for their families and success for our country.”
Really? Cameron can’t be looking at the same economy as the rest of us. In Britain businesses take £85bn a year from the public in grants, subsidies, insurance schemes, preferential credit and government services. That’s the corporate welfare bill as totted up by Kevin Farnsworth, senior lecturer in social policy at the University of York, and he admits it’s on the conservative side. Add on the various subsidies for too-big-to-fail banks and you’re well in excess of a hundred billion. Nor does he include the most fundamental privilege society affords the investors in a business such as Tesco: that of limited liability, which means they only stand to lose the value of their shares, and no more. We could argue for limited liability, but let’s not pretend it’s anything less than a substantial underwriting of shareholder enterprises.
If it is business that gives, and government that takes, then how does Cameron account for privatisation and outsourcing? Take the farce that is the rail industry, where taxpayers stump up billions for the infrastructure and the upgrades, while tycoons such as Richard Branson and Brian Souter put in hardly any investment, and always have the option in hard times of walking away. That is what GNER did with the East coast mainline that the public had to step in and save – and which the government has justawarded to Branson and Souter.
The same wacky logic of low risk, low investment applies in outsourcing. G4S can’t provide the security for the Olympics, Serco can’t lay on the staff for an out-of-hours GP service in Cornwall – but never mind, both still get to bid and win more public sector work. Under this coalition the money spent on outsourcing has doubled to £88bn,creating a whole string of what Margaret Hodge at the public accounts committee calls “quasi-monopolies”.
The fashionable thing to say is that in a globalised economy states can’t keep up with businesses. That is to get the relationship the wrong way round. The reality is that states often give businesses their revenues and so their power. More than that: markets are created by states, who provide the infrastructure, the transports and the rule of law.
So let’s start asking businesses what they’ve done for us recently. If the state is going to subsidise the rail industry (and we will, until it’s eventually renationalised), ministers should insist not just on an intermittently punctual train service and a token contribution to the Treasury, but also better pay and conditions for staff, decent training, and a commitment to sourcing equipment in Britain.
This is what the Centre for Research in Socio-Cultural Change terms “social licensing” in its latest book, The End of the Experiment. The academics’ suggestions have been followed by one council in north London, Enfield. Officers and researchers sat down and worked out how much money its 300,000 residents sent the way of big businesses: 11 Tesco stores, for instance, provided the PLC with around £8m of its annual profit. And what did the area get back? Not very much, but the highlight included a community toilet scheme and some charitable giving from the supermarket’s corporate social responsibility department.
And so the council has started asking big businesses, such as utility firms, what they had done for Enfield recently. They’ve begun hassling banks to lend more to local businesses, the likes of British Gas to give more of their local work to local contractors with local staff – or run the risk of being named and shamed in the local press. It may sound small, but imagine if the same approach were taken by Holyrood or Cardiff – or by Westminster.
Monday, 8 December 2014
Taming corporate power: the key political issue of our age
Big business and its lobbyists have taken control of our politics. But there is an alternative. In the first of a new series, here’s how we can take on the fat cats
Does this sometimes feel like a country under enemy occupation? Do you wonder why the demands of so much of the electorate seldom translate into policy? Why parties of the left seem incapable of offering effective opposition to market fundamentalism, let alone proposing coherent alternatives? Do you wonder why those who want a kind and decent and just world, in which both human beings and other living creatures are protected, so often appear to be opposed by the entire political establishment?
If so, you have encountered corporate power – the corrupting influence that prevents parties from connecting with the public, distorts spending and tax decisions, and limits the scope of democracy. It helps explain the otherwise inexplicable: the creeping privatisation of health and education, hated by the vast majority of voters; the private finance initiative, which has left public services with unpayable debts; the replacement of the civil service with companies distinguished only by incompetence; the failure to re-regulate the banks and collect tax; the war on the natural world; the scrapping of the safeguards that protect us from exploitation; above all, the severe limitation of political choice in a nation crying out for alternatives.
There are many ways in which it operates, but perhaps the most obvious is through our unreformed political funding system, which permits big business and multimillionaires in effect to buy political parties. Once a party is obliged to them, it needs little reminder of where its interests lie. Fear and favour rule.
And if they fail? Well, there are other means. Before the last election, a radical firebrand said this about the lobbying industry: “It is the next big scandal waiting to happen ... an issue that exposes the far-too-cosy relationship between politics, government, business and money ... secret corporate lobbying, like the expenses scandal, goes to the heart of why people are so fed up with politics.” That, of course, was David Cameron, and he’s since ensured that the scandal continues. His Lobbying Act restricts the activities of charities and trade unions but imposes no meaningful restraint on corporations.
Ministers and civil servants know that if they keep faith with corporations in office they will be assured of lucrative directorships in retirement. As head of HMRC, the UK government’s tax-collection agency, Dave Hartnett oversaw some highly controversial deals with companies such as Vodafone and Goldman Sachs, apparently excusing them from much of the tax they seemed to owe. He now works for Deloitte, which advises companies such as Vodafone on their tax affairs. As head of HMRC he met one Deloitte partner 48 times.
Corporations have also been empowered by the globalisation of decision-making. As powers, but not representation, shift to the global level, multinational business and its lobbyists fill the political gap. When everything has been globalised except our consent, we are vulnerable to decisions made outside the democratic sphere.
The key political question of our age, by which you can judge the intent of all political parties, is what to do about corporate power. This is the question, perennially neglected within both politics and the media, that this week’s series of articles will attempt to address. I think there are some obvious first steps.
A sound political funding system would be based on membership fees. Each party would be able to charge the same fixed fee for annual membership (perhaps £30 or £50). It would receive matching funding from the state as a multiple of its membership receipts. No other sources of income would be permitted. As well as getting the dirty money out of politics, this would force political parties to reconnect with the people, to raise their membership. It will cost less than the money wasted on corporate welfare every day.
All lobbying should be transparent. Any meeting between those who are paid to influence opinion (this could include political commentators like me) and ministers, advisers or civil servants should be recorded, and the transcript made publicly available. The corporate lobby groups that pose as thinktanks should be obliged to reveal who funds them before appearing on the broadcast media; and if the identity of one of their funders is relevant to the issue they are discussing, it should be mentioned on air.
Any company supplying public services would be subject to freedom of information laws (with an exception for matters deemed commercially confidential by the information commissioner). Gagging contracts would be made illegal, in the private as well as the public sector (with the same exemption for commercial confidentiality). Ministers and top officials should be forbidden from taking jobs in the sectors they were charged with regulating.
But we should also think of digging deeper. Is it not time we reviewed the remarkable gift we have granted to companies in the form of limited liability? It socialises the risks that would otherwise be carried by a company’s owners and directors, exempting them from the costs of the debts they incur or the disasters they cause, and encouraging them to engage in the kind of reckless behaviour that caused the financial crisis. Should the wealthy authors of the crisis, such as RBS chief Fred Goodwin or Northern Rock’s Matt Ridley, not have incurred a financial penalty of their own?
We should look at how we might democratise the undemocratic institutions of global governance, as I suggested in my book The Age of Consent. This could involve dismantling the World Bank and the IMF, which are governed without a semblance of democracy, and cause more crises than they solve, and replacing them with a body rather like the international clearing union designed by John Maynard Keynes in the 1940s – whose purpose was to prevent excessive trade surpluses and deficits from forming, and therefore international debt from accumulating.
Instead of treaties brokered in opaque meetings (of the kind now working towards atransatlantic trade and investment partnership) between diplomats and transnational capital – which threaten democracy, the sovereignty of parliaments and the principle of equality before the law – we should demand a set of global fair trade rules. Multinational companies should lose their licence to trade if they break them.
Above all, perhaps, we need a directly elected world parliament, whose purpose would be to hold other global bodies to account. In other words, instead of only responding to an agenda set by corporations, we must propose an agenda of our own.
This is not only about politicians, it is also about us. Corporate power has shut down our imagination, persuading us that there is no alternative to market fundamentalism, and that “market” is a reasonable description of a state-endorsed corporate oligarchy.
We have been persuaded that we have power only as consumers, that citizenship is an anachronism, that changing the world is either impossible or best effected by buying a different brand of biscuits. Corporate power now lives within us. Confronting it means shaking off the manacles it has imposed on our minds.
Tuesday, 4 February 2014
Celebrities endorsing products also liable for misleading advertisements: Panel
The authorities are mulling provisions to ensure that celebrities endorsing products are also made liable for misleading advertisements.
NEW DELHI: If the skin whitening cream isn't as phenomenal as advertised or the hair oil not producing a lush mop as promised, you may soon be able to claim compensation not only from the advertisers, but from the celebrities endorsing the product.
The Central Consumer Protection Council(CCPC), under the chairmanship of minister K V Thomas, on Monday decided to set up a sub-committee to suggest strategies to deal with such advertisers. Among the concerns raised was peddling of products by celebrities.
"About 50% of the daylong conference was spent addressing ... the huge impact of misleading advertisements, particularly food items, hair oil and health products," said a CCPC member who attended the meeting in Kochi. "Even the celebrities must pay compensation in case there is a complaint," said Joseph Victor, a CCPC member.
Panel mulls measures to monitor ad claims
What seems to have moved the consumer affairs ministry is a direction from the MP high court to set up an ad monitoring panel as recommended by the Vibha Bhargava Commission. "An ad monitoring committee with proper budgetary support from the Centre may be set up to monitor the advertisements on regular basis... the committee will have the powers to (take) corrective actions and (impose) compensation," the CCPC said.
Sources said that the decision was taken unanimously by CCPC, which has members from central and state governments, besides representatives from consumer organizations and academicians. The sub-committee may be formed in less than a week and could submit its recommendations by February-end, sources said.
Some members told TOI the issue of southern superstar Mamootty endorsing products was discussed. "We have similar problems across the country. We have Shahrukh Khan or some other Hindi film star endorsing consumer items and they get huge payment for doing so. Misleading ads featuring such famous faces shown on TV even for a day serves the purpose of advertisers. We discussed how suo motu action can be taken against ads which have been withdrawn. Even the celebrities must pay compensation in case there is a complaint," said Joseph Victor, a CCPC member.
Another member, Ashim Sanyal, said he had raised the issue of monitoring ads, which are in huge numbers and across different modes and media. "We need to plan the mechanism for monitoring. The sub-committee will come out with directions and provisions to deal with the menace," he added. Lok Sabha MP Charles Dias, who also attended the meeting, told TOI that concerns were raised on manufacturers' ad spend, which is passed on to buyers. "Most of us felt that there should some sort of monitoring on how much is being spent on advertisements," he said.
The Central Consumer Protection Council(CCPC), under the chairmanship of minister K V Thomas, on Monday decided to set up a sub-committee to suggest strategies to deal with such advertisers. Among the concerns raised was peddling of products by celebrities.
"About 50% of the daylong conference was spent addressing ... the huge impact of misleading advertisements, particularly food items, hair oil and health products," said a CCPC member who attended the meeting in Kochi. "Even the celebrities must pay compensation in case there is a complaint," said Joseph Victor, a CCPC member.
Panel mulls measures to monitor ad claims
What seems to have moved the consumer affairs ministry is a direction from the MP high court to set up an ad monitoring panel as recommended by the Vibha Bhargava Commission. "An ad monitoring committee with proper budgetary support from the Centre may be set up to monitor the advertisements on regular basis... the committee will have the powers to (take) corrective actions and (impose) compensation," the CCPC said.
Sources said that the decision was taken unanimously by CCPC, which has members from central and state governments, besides representatives from consumer organizations and academicians. The sub-committee may be formed in less than a week and could submit its recommendations by February-end, sources said.
Some members told TOI the issue of southern superstar Mamootty endorsing products was discussed. "We have similar problems across the country. We have Shahrukh Khan or some other Hindi film star endorsing consumer items and they get huge payment for doing so. Misleading ads featuring such famous faces shown on TV even for a day serves the purpose of advertisers. We discussed how suo motu action can be taken against ads which have been withdrawn. Even the celebrities must pay compensation in case there is a complaint," said Joseph Victor, a CCPC member.
Another member, Ashim Sanyal, said he had raised the issue of monitoring ads, which are in huge numbers and across different modes and media. "We need to plan the mechanism for monitoring. The sub-committee will come out with directions and provisions to deal with the menace," he added. Lok Sabha MP Charles Dias, who also attended the meeting, told TOI that concerns were raised on manufacturers' ad spend, which is passed on to buyers. "Most of us felt that there should some sort of monitoring on how much is being spent on advertisements," he said.
Sunday, 4 November 2012
Unlimited Liability for Speculative Bankers
Bankers must be made to bear the cost of their reckless risk-taking
Separating retail and investment banking is not enough. Speculative banking needs to have unlimited liability
Lehman Brothers
employees leaving the Canary Wharf building in London, carrying their
possessions in boxes, aftert the bank collapsed in 2008. Photograph:
Graeme Robertson
Hot on the heels of the Libor scandal and money-laundering at HSBC and Standard Chartered Bank comes the allegation that Barclays Bank attempted to manipulate the US energy markets to make profits.
Of course, Barclays has no direct interest in buying or selling oil,
gas or electricity. Its aim is to make profits by betting on the price
changes, a process that often drives up the price of the underlying
commodity and forces ordinary people to pay sky-high prices.
This speculative activity is facilitated by complex financial instruments known as derivatives, described by investment guru Warren Buffett as "financial weapons of mass destruction". Behind the technical jargon lies a giant gambling machine, which bets on anything that can be priced. The hard cash needed to settle the outcome of the bets is always highly uncertain until the contracts mature, which could be 10 to 15 years in the future. And, like other bets, derivatives don't always pay off – as the cases of Nick Leeson at Barings and more recently Jérôme Kerviel at Société Générale exemplify.
The UK government claims that speculation will be curbed by a separation of investment banking from the retail side. This, it is claimed, will protect savers and taxpayers from the toxic effects of risky positions adopted by bankers. This policy will not work. Even after separation, investment banks will continue to use funds from retail banks, pension funds and insurance companies for their speculative activities. The speculators will continue to shelter behind limited liability and dump losses on to innocent bystanders. Unless the benefit of limited liability is removed from investment banks, their losses and reckless risks will inevitably be transferred to other sectors. The separation between retail and speculative operations needs to be accompanied by unlimited liability for investment banking, ensuring that those who take excessive risks are 100% liable for their mistakes.
Derivatives are central to the current economic crisis. In 2008, Lehman Brothers collapsed with 1.2 million derivatives contracts, which had a face value of nearly $39 trillion, though the economic exposure was considerably less. For nearly six years before its demise, almost all of the pre-tax profits at Bear Stearns came from speculative activities. It could not continue to pick winners indefinitely, and collapsed in 2008. It had shareholder funds of $11.8bn, debts of $384bn and a derivatives portfolio with a face value of $13.4 trillion. The derivatives gambles also brought down American International Group (AIG) – the world's largest insurer – and Washington Mutual. Then in October 2011, MF Global, a US brokerage firm that specialised in delivering trading and hedging solutions, filed for bankruptcy. It had nearly 3 million derivatives contracts with a notional value of more than $100bn.
Despite these high-profile casualties, risk-hungry investment bankers remain undeterred. The face value of the global derivatives trade is about $1,200 trillion (£749 trillion). With a global GDP of $65-70 trillion, the world economy is not in a position to absorb even 0.1% ($1.2 trillion) of losses.
The UK's GDP is about £1.5 trillion. Just three UK banks – Barclays, HSBC and Royal Bank of Scotland (RBS) – alone have a derivatives portfolio, with a face value totalling nearly £100 trillion. Barclays leads the way with £43 trillion. It has recently reported a third-quarter loss of £47 million, but its balance sheet points to a more serious position. Barclays' last full-year accounts show assets of £1.56 trillion and capital of only £65bn, meaning that its gross leverage is nearly 24 times its capital base. A decline of just 4% in asset values would wipe out its entire capital. Barclays' balance sheet shows gross exposure to derivatives of £539bn, though the bank could argue that this is offset by hedges of £528bn, leaving a net exposure of £11bn. The difficulty is that the hedges, as Lehman Brothers, Bear Stearns and Northern Rock have learnt, do not necessarily work in the desired way and always depend on the position of the counter parties in a highly unpredictable environment.
Merely separating retail and investment banking will neither choke off nor contain the effects of toxic gambles, because speculative activities will affect other sectors of the economy. For any possibility of containing the crisis, speculative banking needs to have unlimited liability. Thus, if the bets go bad, bankers will personally need to bear the negative consequences. One of the tasks of the banking regulator should be to ensure that the size of the bets bears a reasonable relationship to the assets of the gamblers, so that cavalier bankers are not able to gamble more than they can lose. No retail bank, pension fund, insurance company or pension fund should be able to provide money to any investment bank without specific approval from its stakeholders.
The above reforms will help to reduce speculative activity and quarantine the negative effects of reckless gambling. They will also remind neoliberals that the freedom to speculate needs to be accompanied by responsibilities.
This speculative activity is facilitated by complex financial instruments known as derivatives, described by investment guru Warren Buffett as "financial weapons of mass destruction". Behind the technical jargon lies a giant gambling machine, which bets on anything that can be priced. The hard cash needed to settle the outcome of the bets is always highly uncertain until the contracts mature, which could be 10 to 15 years in the future. And, like other bets, derivatives don't always pay off – as the cases of Nick Leeson at Barings and more recently Jérôme Kerviel at Société Générale exemplify.
The UK government claims that speculation will be curbed by a separation of investment banking from the retail side. This, it is claimed, will protect savers and taxpayers from the toxic effects of risky positions adopted by bankers. This policy will not work. Even after separation, investment banks will continue to use funds from retail banks, pension funds and insurance companies for their speculative activities. The speculators will continue to shelter behind limited liability and dump losses on to innocent bystanders. Unless the benefit of limited liability is removed from investment banks, their losses and reckless risks will inevitably be transferred to other sectors. The separation between retail and speculative operations needs to be accompanied by unlimited liability for investment banking, ensuring that those who take excessive risks are 100% liable for their mistakes.
Derivatives are central to the current economic crisis. In 2008, Lehman Brothers collapsed with 1.2 million derivatives contracts, which had a face value of nearly $39 trillion, though the economic exposure was considerably less. For nearly six years before its demise, almost all of the pre-tax profits at Bear Stearns came from speculative activities. It could not continue to pick winners indefinitely, and collapsed in 2008. It had shareholder funds of $11.8bn, debts of $384bn and a derivatives portfolio with a face value of $13.4 trillion. The derivatives gambles also brought down American International Group (AIG) – the world's largest insurer – and Washington Mutual. Then in October 2011, MF Global, a US brokerage firm that specialised in delivering trading and hedging solutions, filed for bankruptcy. It had nearly 3 million derivatives contracts with a notional value of more than $100bn.
Despite these high-profile casualties, risk-hungry investment bankers remain undeterred. The face value of the global derivatives trade is about $1,200 trillion (£749 trillion). With a global GDP of $65-70 trillion, the world economy is not in a position to absorb even 0.1% ($1.2 trillion) of losses.
The UK's GDP is about £1.5 trillion. Just three UK banks – Barclays, HSBC and Royal Bank of Scotland (RBS) – alone have a derivatives portfolio, with a face value totalling nearly £100 trillion. Barclays leads the way with £43 trillion. It has recently reported a third-quarter loss of £47 million, but its balance sheet points to a more serious position. Barclays' last full-year accounts show assets of £1.56 trillion and capital of only £65bn, meaning that its gross leverage is nearly 24 times its capital base. A decline of just 4% in asset values would wipe out its entire capital. Barclays' balance sheet shows gross exposure to derivatives of £539bn, though the bank could argue that this is offset by hedges of £528bn, leaving a net exposure of £11bn. The difficulty is that the hedges, as Lehman Brothers, Bear Stearns and Northern Rock have learnt, do not necessarily work in the desired way and always depend on the position of the counter parties in a highly unpredictable environment.
Merely separating retail and investment banking will neither choke off nor contain the effects of toxic gambles, because speculative activities will affect other sectors of the economy. For any possibility of containing the crisis, speculative banking needs to have unlimited liability. Thus, if the bets go bad, bankers will personally need to bear the negative consequences. One of the tasks of the banking regulator should be to ensure that the size of the bets bears a reasonable relationship to the assets of the gamblers, so that cavalier bankers are not able to gamble more than they can lose. No retail bank, pension fund, insurance company or pension fund should be able to provide money to any investment bank without specific approval from its stakeholders.
The above reforms will help to reduce speculative activity and quarantine the negative effects of reckless gambling. They will also remind neoliberals that the freedom to speculate needs to be accompanied by responsibilities.
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