Showing posts with label lobbying. Show all posts
Showing posts with label lobbying. Show all posts
Sunday, 3 December 2023
Friday, 21 July 2023
A Level Economics 67: Causes of Government Intervention Failure
Government interventions to correct market failures can sometimes lead to government failure, where the intended policy objectives are not achieved or result in unintended negative consequences. Here are some common causes of government failure when intervening in markets:
- Information Asymmetry: Government policymakers may lack complete information about the complexities of the market or fail to accurately predict the future consequences of their interventions. This information asymmetry can lead to poorly designed policies that do not effectively address the market failure.
Example: If the government implements a subsidy program to encourage the adoption of a new renewable energy technology without fully understanding the long-term costs and benefits, it could result in inefficient allocation of resources and unintended financial burdens.
- Regulatory Capture: Sometimes, the regulatory agencies responsible for overseeing market interventions may become subject to regulatory capture, where they develop a close relationship with the industries they are supposed to regulate. This can lead to policies that favor the interests of powerful industry players rather than promoting the public good.
Example: In the financial sector, regulatory capture may occur if regulators develop cozy relationships with banks and financial institutions, leading to weak oversight and inadequate regulation of risky financial practices.
- Political Interests and Lobbying: Government interventions can be influenced by political interests and lobbying efforts from various stakeholders. This can result in policies that cater to the interests of specific groups rather than addressing the market failure in a fair and equitable manner.
Example: If a powerful agricultural lobby influences the government's agricultural subsidy policies, the subsidies may disproportionately benefit large agribusinesses rather than smaller family farms.
- Unintended Consequences: Government interventions can have unintended consequences that undermine the original objectives. Policies that may appear beneficial in theory can lead to negative outcomes in practice.
Example: Rent control laws intended to make housing more affordable may reduce the incentive for landlords to maintain their properties, leading to a decline in the quality and availability of rental housing.
- Administrative Inefficiencies: Government programs can suffer from administrative inefficiencies, including bureaucratic red tape and delays in implementation. This can hinder the effectiveness of the intervention and result in resource misallocation.
Example: If a government program aimed at providing financial assistance to small businesses involves complex application procedures and lengthy approval processes, it may fail to reach those in need of assistance promptly.
- Budget Constraints: Government interventions often require substantial funding. If resources are limited or misallocated, the effectiveness of the intervention may be compromised.
Example: A government-sponsored job training program may have limited success if the budget is insufficient to cover the costs of adequate training and support services for participants.
Conclusion:
Government interventions to correct market failures are essential, but they can lead to government failure if not carefully designed and implemented. Policymakers need to consider the potential causes of government failure, assess the risks, and continually evaluate the effectiveness of their interventions. Transparency, accountability, and evidence-based decision-making are critical to minimizing the risks of government failure and ensuring that interventions achieve their intended objectives without creating unintended negative consequences.
Friday, 3 February 2017
How corporate dark money is taking power on both sides of the Atlantic
George Monbiot in The Guardian
It took corporate America a while to warm to Donald Trump. Some of his positions, especially on trade, horrified business leaders. Many of them favoured Ted Cruz or Scott Walker. But once Trump had secured the nomination, the big money began to recognise an unprecedented opportunity.
Trump was prepared not only to promote the cause of corporations in government, but to turn government into a kind of corporation, staffed and run by executives and lobbyists. His incoherence was not a liability, but an opening: his agenda could be shaped. And the dark money network already developed by some American corporations was perfectly positioned to shape it. Dark money is the term used in the US for the funding of organisations involved in political advocacy that are not obliged to disclose where the money comes from. Few people would see a tobacco company as a credible source on public health, or a coal company as a neutral commentator on climate change. In order to advance their political interests, such companies must pay others to speak on their behalf.
Soon after the second world war, some of America’s richest people began setting up a network of thinktanks to promote their interests. These purport to offer dispassionate opinions on public affairs. But they are more like corporate lobbyists, working on behalf of those who fund them.
We have no hope of understanding what is coming until we understand how the dark money network operates. The remarkable story of a British member of parliament provides a unique insight into this network, on both sides of the Atlantic. His name is Liam Fox. Six years ago, his political career seemed to be over when he resigned as defence secretary after being caught mixing his private and official interests. But today he is back on the front bench, and with a crucial portfolio: secretary of state for international trade.
In 1997, the year the Conservatives lost office to Tony Blair, Fox, who is on the hard right of the Conservative party, founded an organisation called The Atlantic Bridge. Its patron was Margaret Thatcher. On its advisory council sat future cabinet ministers Michael Gove, George Osborne, William Hague and Chris Grayling. Fox, a leading campaigner for Brexit, described the mission of Atlantic Bridge as “to bring people together who have common interests”. It would defend these interests from “European integrationists who would like to pull Britain away from its relationship with the United States”.
Atlantic Bridge was later registered as a charity. In fact it was part of the UK’s own dark money network: only after it collapsed did we discover the full story of who had funded it. Its main sponsor was the immensely rich Michael Hintze, who worked at Goldman Sachs before setting up the hedge fund CQS. Hintze is one of the Conservative party’s biggest donors. In 2012 he was revealed as a funder of the Global Warming Policy Foundation, which casts doubt on the science of climate change. As well as making cash grants and loans to Atlantic Bridge, he lent Fox his private jet to fly to and from Washington.
Another funder was the pharmaceutical company Pfizer. It paid for a researcher at Atlantic Bridge called Gabby Bertin. She went on to become David Cameron’s press secretary, and now sits in the House of Lords: Cameron gave her a life peerage in his resignation honours list.
Trade secretary Liam Fox. Photograph: Daniel Leal-Olivas/AFP/Getty Images
In 2007, a group called the American Legislative Exchange Council (Alec) set up a sister organisation, the Atlantic Bridge Project. Alec is perhaps the most controversial corporate-funded thinktank in the US. It specialises in bringing together corporate lobbyists with state and federal legislators to develop “model bills”. The legislators and their families enjoy lavish hospitality from the group, then take the model bills home with them, to promote as if they were their own initiatives.
Alec has claimed that more than 1,000 of its bills are introduced by legislators every year, and one in five of them becomes law. It has been heavily funded by tobacco companies, the oil company Exxon, drug companies and Charles and David Koch – the billionaires who founded the first Tea Party organisations. Pfizer, which funded Bertin’s post at Atlantic Bridge, sits on Alec’s corporate board. Some of the most contentious legislation in recent years, such as state bills lowering the minimum wage, bills granting corporations immunity from prosecution and the “ag-gag” laws – forbidding people to investigate factory farming practices – were developed by Alec.
To run the US arm of Atlantic Bridge, Alec brought in its director of international relations, Catherine Bray. She is a British woman who had previously worked forthe Conservative MEP Richard Ashworth and the Ukip MEP Roger Helmer. Bray has subsequently worked for Conservative MEP and Brexit campaigner Daniel Hannan. Her husband is Wells Griffith, the battleground states director for Trump’s presidential campaign.
Among the members of Atlantic Bridge’s US advisory council were the ultra-conservative senators James Inhofe, Jon Kyl and Jim DeMint. Inhofe is reported to have received over $2m in campaign finance from coal and oil companies. Both Koch Industries and ExxonMobil have been major donors.
Kyl, now retired, is currently acting as the “sherpa” guiding Jeff Sessions’s nomination as Trump’s attorney general through the Senate. Jim DeMint resigned his seat in the Senate to become president of the Heritage Foundation – the thinktank founded with a grant from Joseph Coors of the Coors brewing empire, and built up with money from the banking and oil billionaire Richard Mellon Scaife. Like Alec, it has been richly funded by the Koch brothers. Heritage, under DeMint’s presidency, drove the attempt to ensure that Congress blocked the federal budget, temporarily shutting down the government in 2013. Fox’s former special adviser at the Ministry of Defence, an American called Luke Coffey, now works for the foundation.
Former Arizona senator Jon Kyl. Photograph: Saul Loeb/AFP/Getty Images
The Heritage Foundation is now at the heart of Trump’s administration. Its board members, fellows and staff comprise a large part of his transition team. Among them are Rebekah Mercer, who sits on Trump’s executive committee; Steven Groves and Jim Carafano (State Department); Curtis Dubay (Treasury); and Ed Meese, Paul Winfree, Russ Vought and John Gray (management and budget). CNN reports that “no other Washington institution has that kind of footprint in the transition”.
Trump’s extraordinary plan to cut federal spending by $10.5tn was drafted by the Heritage Foundation, which called it a “blueprint for a new administration”. Vought and Gray, who moved on to Trump’s team from Heritage, are now turning this blueprint into his first budget.
This will, if passed, inflict devastating cuts on healthcare, social security, legal aid, financial regulation and environmental protections; eliminate programmes to prevent violence against women, defend civil rights and fund the arts; and will privatise the Corporation for Public Broadcasting. Trump, as you follow this story, begins to look less like a president and more like an intermediary, implementing an agenda that has been handed down to him.
In July last year, soon after he became trade secretary, Liam Fox flew to Washington. One of his first stops was a place he has visited often over the past 15 years: the office of the Heritage Foundation, where he spoke to, among others, Jim DeMint. A freedom of information request reveals that one of the topics raised at the meeting was the European ban on American chicken washed in chlorine: a ban that producers hope the UK will lift under a new trade agreement. Afterwards, Fox wrote to DeMint, looking forward to “working with you as the new UK government develops its trade policy priorities, including in high value areas that we discussed such as defence”.
How did Fox get to be in this position, after the scandal that brought him down in 2011? The scandal itself provides a clue: it involved a crossing of the boundaries between public and private interests. The man who ran the UK branch of Atlantic Bridge was his friend Adam Werritty, who operated out of Michael Hintze’s office building. Werritty’s work became entangled with Fox’s official business as defence secretary. Werritty, who carried a business card naming him as Fox’s adviser but was never employed by the Ministry of Defence, joined the secretary of state on numerous ministerial visits overseas, and made frequent visits to Fox’s office.
By the time details of this relationship began to leak, the charity commission had investigated Atlantic Bridge and determined that its work didn’t look very charitable. It had to pay back the tax from which it had been exempted (Hintze picked up the bill). In response, the trustees shut the organisation down. As the story about Werritty’s unauthorised involvement in government business began to grow, Fox made a number of misleading statements. He was left with no choice but to resign.
When Theresa May brought Fox back into government, it was as strong a signal as we might receive about the intentions of her government. The trade treaties that Fox is charged with developing set the limits of sovereignty. US food and environmental standards tend to be lower than Britain’s, and will become lower still if Trump gets his way. Any trade treaty we strike will create a common set of standards for products and services. Trump’s administration will demand that ours are adjusted downwards, so that US corporations can penetrate our markets without having to modify their practices. All the cards, post-Brexit vote, are in US hands: if the UK doesn’t cooperate, there will be no trade deal.
May needed someone who is unlikely to resist. She chose Fox, who has become an indispensable member of her team. The shadow diplomatic mission he developed through Atlantic Bridge plugs him straight into the Trump administration.
Long before Trump won, campaign funding in the US had systematically corrupted the political system. A new analysis by US political scientists finds an almost perfect linear relationship, across 32 years, between the money gathered by the two parties for congressional elections and their share of the vote. But there has also been a shift over these years: corporate donors have come to dominate this funding.
By tying our fortunes to those of the United States, the UK government binds us into this system. This is part of what Brexit was about: European laws protecting the public interest were portrayed by Conservative Eurosceptics as intolerable intrusions on corporate freedom. Taking back control from Europe means closer integration with the US. The transatlantic special relationship is a special relationship between political and corporate power. That power is cemented by the networks Liam Fox helped to develop.
In April 1938, President Franklin Roosevelt sent the US Congress the following warning: “The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism.” It is a warning we would do well to remember.
It took corporate America a while to warm to Donald Trump. Some of his positions, especially on trade, horrified business leaders. Many of them favoured Ted Cruz or Scott Walker. But once Trump had secured the nomination, the big money began to recognise an unprecedented opportunity.
Trump was prepared not only to promote the cause of corporations in government, but to turn government into a kind of corporation, staffed and run by executives and lobbyists. His incoherence was not a liability, but an opening: his agenda could be shaped. And the dark money network already developed by some American corporations was perfectly positioned to shape it. Dark money is the term used in the US for the funding of organisations involved in political advocacy that are not obliged to disclose where the money comes from. Few people would see a tobacco company as a credible source on public health, or a coal company as a neutral commentator on climate change. In order to advance their political interests, such companies must pay others to speak on their behalf.
Soon after the second world war, some of America’s richest people began setting up a network of thinktanks to promote their interests. These purport to offer dispassionate opinions on public affairs. But they are more like corporate lobbyists, working on behalf of those who fund them.
We have no hope of understanding what is coming until we understand how the dark money network operates. The remarkable story of a British member of parliament provides a unique insight into this network, on both sides of the Atlantic. His name is Liam Fox. Six years ago, his political career seemed to be over when he resigned as defence secretary after being caught mixing his private and official interests. But today he is back on the front bench, and with a crucial portfolio: secretary of state for international trade.
In 1997, the year the Conservatives lost office to Tony Blair, Fox, who is on the hard right of the Conservative party, founded an organisation called The Atlantic Bridge. Its patron was Margaret Thatcher. On its advisory council sat future cabinet ministers Michael Gove, George Osborne, William Hague and Chris Grayling. Fox, a leading campaigner for Brexit, described the mission of Atlantic Bridge as “to bring people together who have common interests”. It would defend these interests from “European integrationists who would like to pull Britain away from its relationship with the United States”.
Atlantic Bridge was later registered as a charity. In fact it was part of the UK’s own dark money network: only after it collapsed did we discover the full story of who had funded it. Its main sponsor was the immensely rich Michael Hintze, who worked at Goldman Sachs before setting up the hedge fund CQS. Hintze is one of the Conservative party’s biggest donors. In 2012 he was revealed as a funder of the Global Warming Policy Foundation, which casts doubt on the science of climate change. As well as making cash grants and loans to Atlantic Bridge, he lent Fox his private jet to fly to and from Washington.
Another funder was the pharmaceutical company Pfizer. It paid for a researcher at Atlantic Bridge called Gabby Bertin. She went on to become David Cameron’s press secretary, and now sits in the House of Lords: Cameron gave her a life peerage in his resignation honours list.
Trade secretary Liam Fox. Photograph: Daniel Leal-Olivas/AFP/Getty Images
In 2007, a group called the American Legislative Exchange Council (Alec) set up a sister organisation, the Atlantic Bridge Project. Alec is perhaps the most controversial corporate-funded thinktank in the US. It specialises in bringing together corporate lobbyists with state and federal legislators to develop “model bills”. The legislators and their families enjoy lavish hospitality from the group, then take the model bills home with them, to promote as if they were their own initiatives.
Alec has claimed that more than 1,000 of its bills are introduced by legislators every year, and one in five of them becomes law. It has been heavily funded by tobacco companies, the oil company Exxon, drug companies and Charles and David Koch – the billionaires who founded the first Tea Party organisations. Pfizer, which funded Bertin’s post at Atlantic Bridge, sits on Alec’s corporate board. Some of the most contentious legislation in recent years, such as state bills lowering the minimum wage, bills granting corporations immunity from prosecution and the “ag-gag” laws – forbidding people to investigate factory farming practices – were developed by Alec.
To run the US arm of Atlantic Bridge, Alec brought in its director of international relations, Catherine Bray. She is a British woman who had previously worked forthe Conservative MEP Richard Ashworth and the Ukip MEP Roger Helmer. Bray has subsequently worked for Conservative MEP and Brexit campaigner Daniel Hannan. Her husband is Wells Griffith, the battleground states director for Trump’s presidential campaign.
Among the members of Atlantic Bridge’s US advisory council were the ultra-conservative senators James Inhofe, Jon Kyl and Jim DeMint. Inhofe is reported to have received over $2m in campaign finance from coal and oil companies. Both Koch Industries and ExxonMobil have been major donors.
Kyl, now retired, is currently acting as the “sherpa” guiding Jeff Sessions’s nomination as Trump’s attorney general through the Senate. Jim DeMint resigned his seat in the Senate to become president of the Heritage Foundation – the thinktank founded with a grant from Joseph Coors of the Coors brewing empire, and built up with money from the banking and oil billionaire Richard Mellon Scaife. Like Alec, it has been richly funded by the Koch brothers. Heritage, under DeMint’s presidency, drove the attempt to ensure that Congress blocked the federal budget, temporarily shutting down the government in 2013. Fox’s former special adviser at the Ministry of Defence, an American called Luke Coffey, now works for the foundation.
Former Arizona senator Jon Kyl. Photograph: Saul Loeb/AFP/Getty Images
The Heritage Foundation is now at the heart of Trump’s administration. Its board members, fellows and staff comprise a large part of his transition team. Among them are Rebekah Mercer, who sits on Trump’s executive committee; Steven Groves and Jim Carafano (State Department); Curtis Dubay (Treasury); and Ed Meese, Paul Winfree, Russ Vought and John Gray (management and budget). CNN reports that “no other Washington institution has that kind of footprint in the transition”.
Trump’s extraordinary plan to cut federal spending by $10.5tn was drafted by the Heritage Foundation, which called it a “blueprint for a new administration”. Vought and Gray, who moved on to Trump’s team from Heritage, are now turning this blueprint into his first budget.
This will, if passed, inflict devastating cuts on healthcare, social security, legal aid, financial regulation and environmental protections; eliminate programmes to prevent violence against women, defend civil rights and fund the arts; and will privatise the Corporation for Public Broadcasting. Trump, as you follow this story, begins to look less like a president and more like an intermediary, implementing an agenda that has been handed down to him.
In July last year, soon after he became trade secretary, Liam Fox flew to Washington. One of his first stops was a place he has visited often over the past 15 years: the office of the Heritage Foundation, where he spoke to, among others, Jim DeMint. A freedom of information request reveals that one of the topics raised at the meeting was the European ban on American chicken washed in chlorine: a ban that producers hope the UK will lift under a new trade agreement. Afterwards, Fox wrote to DeMint, looking forward to “working with you as the new UK government develops its trade policy priorities, including in high value areas that we discussed such as defence”.
How did Fox get to be in this position, after the scandal that brought him down in 2011? The scandal itself provides a clue: it involved a crossing of the boundaries between public and private interests. The man who ran the UK branch of Atlantic Bridge was his friend Adam Werritty, who operated out of Michael Hintze’s office building. Werritty’s work became entangled with Fox’s official business as defence secretary. Werritty, who carried a business card naming him as Fox’s adviser but was never employed by the Ministry of Defence, joined the secretary of state on numerous ministerial visits overseas, and made frequent visits to Fox’s office.
By the time details of this relationship began to leak, the charity commission had investigated Atlantic Bridge and determined that its work didn’t look very charitable. It had to pay back the tax from which it had been exempted (Hintze picked up the bill). In response, the trustees shut the organisation down. As the story about Werritty’s unauthorised involvement in government business began to grow, Fox made a number of misleading statements. He was left with no choice but to resign.
When Theresa May brought Fox back into government, it was as strong a signal as we might receive about the intentions of her government. The trade treaties that Fox is charged with developing set the limits of sovereignty. US food and environmental standards tend to be lower than Britain’s, and will become lower still if Trump gets his way. Any trade treaty we strike will create a common set of standards for products and services. Trump’s administration will demand that ours are adjusted downwards, so that US corporations can penetrate our markets without having to modify their practices. All the cards, post-Brexit vote, are in US hands: if the UK doesn’t cooperate, there will be no trade deal.
May needed someone who is unlikely to resist. She chose Fox, who has become an indispensable member of her team. The shadow diplomatic mission he developed through Atlantic Bridge plugs him straight into the Trump administration.
Long before Trump won, campaign funding in the US had systematically corrupted the political system. A new analysis by US political scientists finds an almost perfect linear relationship, across 32 years, between the money gathered by the two parties for congressional elections and their share of the vote. But there has also been a shift over these years: corporate donors have come to dominate this funding.
By tying our fortunes to those of the United States, the UK government binds us into this system. This is part of what Brexit was about: European laws protecting the public interest were portrayed by Conservative Eurosceptics as intolerable intrusions on corporate freedom. Taking back control from Europe means closer integration with the US. The transatlantic special relationship is a special relationship between political and corporate power. That power is cemented by the networks Liam Fox helped to develop.
In April 1938, President Franklin Roosevelt sent the US Congress the following warning: “The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism.” It is a warning we would do well to remember.
Thursday, 24 November 2016
Whatever you think of him, Donald Trump is right on TPP and TTIP
Youssef El-Gingihy in The Independent
In a YouTube video of policy proposals released this week, President-elect Trump announced that the US would withdraw from the Trans-Pacific Partnership. This trade agreement encompasses the major economies of the Pacific Rim with the notable exclusion of China. Other policies included a hodge-podge of climate change denial through promoting fracking and coal, deregulation, infrastructure spending and measures against corporate lobbying.
There are mounting concerns about xenophobia following Trump's victory. The appointments of Breitbart's Stephen Bannon as chief strategist, the anti-immigration Jeff Sessions as attorney general, Mike Pompeo as CIA director (in favour of bulk data collection) and General Michael Flynn as national security advisor would appear to reinforce Trump's targeting of Hispanics, Muslims and other minorities.
Yet amid all this soul-searching, the key question liberals should be asking is why authoritarian nationalism is spreading across the West. The answer is relatively simple. Neoliberal globalisation has left millions behind both in the advanced economies and the global south over several decades. Wealth has been siphoned to the top. The economic fallout post-2008 has seen inequality widening, with many falling into poverty. The effects of austerity on southern Europe are a social catastrophe.
The liberal and social democratic parties previously representing working-class constituents have abandoned them and are captured by corporate power. The Democratic party under the Clintons and Obama as well as New Labour under Blair and Brown were emblematic of this process. The result has seen millions of voters turn to candidates positioning themselves as anti-establishment. Hence the success of the SNP, Ukip, Brexit and now Trump.
Free trade agreements are at the heart of the matter. Negotiations have taken place behind closed doors with corporate lobbyists. Transparency has been minimal. It is exactly this kind of undemocratic, technocratic managerialism which is prompting a backlash against elites. It is the same technocratic managerialism that saw the troika of the European Central Bank, the European Commission and the IMF impose unrelenting misery on southern Europe, rendering Greece as expendable. The troika even issued memoranda to be rubber-stamped by national parliaments.
Both the EU-US trade agreement, or Transatlantic Trade and Investment Partnership (TTIP), and the Trans-Pacific Partnership (TPP) are sold as reducing barriers to trade through harmonisation of regulations thus increasing growth. But harmonisation effectively means a race to the bottom with the lowest common denominator regulations being adopted. In fact, there are not many barriers left and the question is more of how growth is distributed. It is now clear that trickle-down economics is a myth.
Trump has stated that he is against TTIP and TPP, and may even reverse the North American Free Trade Agreement (Nafta). Many people do not understand what these trade agreements mean so let me spell it out. They promote trade liberalisation. This essentially means opening up public services to corporate takeover. They would likely make public or state ownership difficult. They would restrict the financial tools available to countries to regulate banks. They would also limit their ability to impose capital controls.
They would lock in privatisation through Investor-State Dispute Settlement clauses. This means that multinational corporations could sue governments if they took steps that harm their profits or even the future expectation of profits. This would take place through private, secretive courts rather than the normal law courts. In fact, precedents have already seen tens of countries sued by corporations for measures taken in the public interest.
The NHS is a good example. It is currently being privatised, paving the way for a private health insurance system. TTIP would mean that if a future UK government took steps to reverse this then they might well be sued. In effect, this acts as a deterrent against government actions harming corporate interests. This would apply not just to healthcare but to all public services, from education and broadcasters such as the BBC to public transport and utilities.
These trade agreements would also enforce enclosure of the commons through intellectual property rights. So drug patents would be extended to combat cheaper generic medicines. Patenting of the human genome would be enforced. Farmers might have to buy seeds from corporations. I don’t know about you, but that sounds like a dystopian world to me.
Neoliberal globalisation is not some irresistible force of nature. Economic protectionism may not exactly be progressive but the current status quo of wage stagnation and falling living standards is unsustainable. If steps are not taken to remedy the damaging effects of neoliberalism then the backlash will only intensify, likely leading to rising nationalism, fascism and global conflict.
In a YouTube video of policy proposals released this week, President-elect Trump announced that the US would withdraw from the Trans-Pacific Partnership. This trade agreement encompasses the major economies of the Pacific Rim with the notable exclusion of China. Other policies included a hodge-podge of climate change denial through promoting fracking and coal, deregulation, infrastructure spending and measures against corporate lobbying.
There are mounting concerns about xenophobia following Trump's victory. The appointments of Breitbart's Stephen Bannon as chief strategist, the anti-immigration Jeff Sessions as attorney general, Mike Pompeo as CIA director (in favour of bulk data collection) and General Michael Flynn as national security advisor would appear to reinforce Trump's targeting of Hispanics, Muslims and other minorities.
Yet amid all this soul-searching, the key question liberals should be asking is why authoritarian nationalism is spreading across the West. The answer is relatively simple. Neoliberal globalisation has left millions behind both in the advanced economies and the global south over several decades. Wealth has been siphoned to the top. The economic fallout post-2008 has seen inequality widening, with many falling into poverty. The effects of austerity on southern Europe are a social catastrophe.
The liberal and social democratic parties previously representing working-class constituents have abandoned them and are captured by corporate power. The Democratic party under the Clintons and Obama as well as New Labour under Blair and Brown were emblematic of this process. The result has seen millions of voters turn to candidates positioning themselves as anti-establishment. Hence the success of the SNP, Ukip, Brexit and now Trump.
Free trade agreements are at the heart of the matter. Negotiations have taken place behind closed doors with corporate lobbyists. Transparency has been minimal. It is exactly this kind of undemocratic, technocratic managerialism which is prompting a backlash against elites. It is the same technocratic managerialism that saw the troika of the European Central Bank, the European Commission and the IMF impose unrelenting misery on southern Europe, rendering Greece as expendable. The troika even issued memoranda to be rubber-stamped by national parliaments.
Both the EU-US trade agreement, or Transatlantic Trade and Investment Partnership (TTIP), and the Trans-Pacific Partnership (TPP) are sold as reducing barriers to trade through harmonisation of regulations thus increasing growth. But harmonisation effectively means a race to the bottom with the lowest common denominator regulations being adopted. In fact, there are not many barriers left and the question is more of how growth is distributed. It is now clear that trickle-down economics is a myth.
Trump has stated that he is against TTIP and TPP, and may even reverse the North American Free Trade Agreement (Nafta). Many people do not understand what these trade agreements mean so let me spell it out. They promote trade liberalisation. This essentially means opening up public services to corporate takeover. They would likely make public or state ownership difficult. They would restrict the financial tools available to countries to regulate banks. They would also limit their ability to impose capital controls.
They would lock in privatisation through Investor-State Dispute Settlement clauses. This means that multinational corporations could sue governments if they took steps that harm their profits or even the future expectation of profits. This would take place through private, secretive courts rather than the normal law courts. In fact, precedents have already seen tens of countries sued by corporations for measures taken in the public interest.
The NHS is a good example. It is currently being privatised, paving the way for a private health insurance system. TTIP would mean that if a future UK government took steps to reverse this then they might well be sued. In effect, this acts as a deterrent against government actions harming corporate interests. This would apply not just to healthcare but to all public services, from education and broadcasters such as the BBC to public transport and utilities.
These trade agreements would also enforce enclosure of the commons through intellectual property rights. So drug patents would be extended to combat cheaper generic medicines. Patenting of the human genome would be enforced. Farmers might have to buy seeds from corporations. I don’t know about you, but that sounds like a dystopian world to me.
Neoliberal globalisation is not some irresistible force of nature. Economic protectionism may not exactly be progressive but the current status quo of wage stagnation and falling living standards is unsustainable. If steps are not taken to remedy the damaging effects of neoliberalism then the backlash will only intensify, likely leading to rising nationalism, fascism and global conflict.
Wednesday, 13 April 2016
I'm the real-life Gordon Gekko and I support Bernie Sanders
Asher Edelman in The Guardian
The potential for a depression looms on the horizon. The Vermont senator is the only candidate who can stop banks from spiraling out of control again
The potential for a depression looms on the horizon. The Vermont senator is the only candidate who can stop banks from spiraling out of control again
‘Bernie Sanders is the only independent candidate who escapes the malaise of being bought.’ Photograph: Allstar Picture Library
Banking is the least understood, and possibly most lethal, of all the myriad issues at stake in this election. No candidate other than Bernie Sanders is capable of taking the steps necessary to protect the American people from a repeat of the recent debacle that plunged the nation into a recession from which we have not recovered.
The potential for a depression looms heavily on the horizon. As a trained economist who has spent more than 20 years on Wall Street – and one of the models for Gordon Gekko’s character – I know the financial system is in urgent need of regulation and responsibility. Yet Hillary Clinton is beholden to the banks for their largesse in funding her campaign and lining her pockets. The likelihood of any Republican candidate taking on this key issue is not even worthy of discussion.
The recession of 2007-2016, and the persistent transfer of wealth from the 80% to the 1% is, mostly the result of banking irresponsibility precipitated by the repeal of the Glass-Steagall Act in 1999. The law separated commercial banking (responsible for gathering and conservatively lending out funds) from investment banking (more speculative activities).
A new culture emerged that rewarded bankers for return on equity rather than sound lending practices. The wild west of risk-taking, staked on depositors’ money, became the best sport in town. Why not? If management won, they got rich. When they lost, the taxpayer took on the responsibility. If that sounds like a good wager, it was (and is).
The only problem is what happens when the music ends. Debt-to-capital ratios for investment banking functions rose from 12:1 to 30:1. Options on derivatives on other derivatives increased that leverage many fold. Self-regulation became the rule and, lo and behold, in 2008: crash. America and the world were nailed by a fastball from which the bottom 80% of the American population has yet to recover.
Remarkably, today the derivatives positions held by the large banks approach 10 times those of 2007-2008. In four banks alone, they exceed the GDP of the entire world. This is the interesting consequence when unchecked risk management rests in bankers’ hands.
When Clinton repealed Glass-Steagall, it was the culmination of the largest ever lobbying effort by the banking community to that date, $300m spent to convince Congress that Clinton, aided by Robert Rubin (US treasurer, previously with Goldman Sachs) and Alan Greenspan, a Milton Friedman-style supply-side economist, that the restraints on speculation should be removed. The banking community’s gratitude was and is unending. Who can blame them?
Wait, there’s more. After the collapse of 2008, the Federal Reserve invested more than $15tn to save the banks under the guise of monetary stimulation. At the same time, little or no funds were channeled to the needs of the American people. Yet today we face another crisis of liquidity. This time Europe will break first, followed by their highly leveraged US colleagues. Meanwhile, the bottom 80% of Americans remain mired in a recession, having seen no increase in their incomes during the last 20 years.
Poverty is at its highest level since the 1930s (in some areas of the country, higher). More than 30% of all children live with families subsisting below the poverty level. Employment is at a new all-time low (the percentage of employed persons is at about 49%, having been at more than 52% prior to 2008).
The average American is entitled to more. Only Bernie Sanders is committed to honest solutions to these problems. The way to avert the next banking crisis is the most clear. Assuming a Republican Congress, which would prevent the reinstatement of Glass-Steagall, Bernie has only to turn to regulation and responsibility.
Dodd-Frank provides the necessary structure with which to begin. Enforce it. Put teeth into bank regulation. Determine the acceptable level of risk at which banks can operate. Make management, not underlings or stockholders, responsible for violating the law. Encourage the Justice Department to be clear in seeking appropriate penalties for financial crimes in large institutions, not by fines alone but by the prosecution of those executives responsible.
Split up the banks that are speculating with depositor and government funds. Investment banks are supposed to risk investors’ money but commercial banks should return to lending fairly and carefully to help create a foundation for future growth. Bernie Sanders is the only independent candidate who escapes the malaise of being bought. He is paid for by the people and represents their interests. And you can take that to the bank.
Banking is the least understood, and possibly most lethal, of all the myriad issues at stake in this election. No candidate other than Bernie Sanders is capable of taking the steps necessary to protect the American people from a repeat of the recent debacle that plunged the nation into a recession from which we have not recovered.
The potential for a depression looms heavily on the horizon. As a trained economist who has spent more than 20 years on Wall Street – and one of the models for Gordon Gekko’s character – I know the financial system is in urgent need of regulation and responsibility. Yet Hillary Clinton is beholden to the banks for their largesse in funding her campaign and lining her pockets. The likelihood of any Republican candidate taking on this key issue is not even worthy of discussion.
The recession of 2007-2016, and the persistent transfer of wealth from the 80% to the 1% is, mostly the result of banking irresponsibility precipitated by the repeal of the Glass-Steagall Act in 1999. The law separated commercial banking (responsible for gathering and conservatively lending out funds) from investment banking (more speculative activities).
A new culture emerged that rewarded bankers for return on equity rather than sound lending practices. The wild west of risk-taking, staked on depositors’ money, became the best sport in town. Why not? If management won, they got rich. When they lost, the taxpayer took on the responsibility. If that sounds like a good wager, it was (and is).
The only problem is what happens when the music ends. Debt-to-capital ratios for investment banking functions rose from 12:1 to 30:1. Options on derivatives on other derivatives increased that leverage many fold. Self-regulation became the rule and, lo and behold, in 2008: crash. America and the world were nailed by a fastball from which the bottom 80% of the American population has yet to recover.
Remarkably, today the derivatives positions held by the large banks approach 10 times those of 2007-2008. In four banks alone, they exceed the GDP of the entire world. This is the interesting consequence when unchecked risk management rests in bankers’ hands.
When Clinton repealed Glass-Steagall, it was the culmination of the largest ever lobbying effort by the banking community to that date, $300m spent to convince Congress that Clinton, aided by Robert Rubin (US treasurer, previously with Goldman Sachs) and Alan Greenspan, a Milton Friedman-style supply-side economist, that the restraints on speculation should be removed. The banking community’s gratitude was and is unending. Who can blame them?
Wait, there’s more. After the collapse of 2008, the Federal Reserve invested more than $15tn to save the banks under the guise of monetary stimulation. At the same time, little or no funds were channeled to the needs of the American people. Yet today we face another crisis of liquidity. This time Europe will break first, followed by their highly leveraged US colleagues. Meanwhile, the bottom 80% of Americans remain mired in a recession, having seen no increase in their incomes during the last 20 years.
Poverty is at its highest level since the 1930s (in some areas of the country, higher). More than 30% of all children live with families subsisting below the poverty level. Employment is at a new all-time low (the percentage of employed persons is at about 49%, having been at more than 52% prior to 2008).
The average American is entitled to more. Only Bernie Sanders is committed to honest solutions to these problems. The way to avert the next banking crisis is the most clear. Assuming a Republican Congress, which would prevent the reinstatement of Glass-Steagall, Bernie has only to turn to regulation and responsibility.
Dodd-Frank provides the necessary structure with which to begin. Enforce it. Put teeth into bank regulation. Determine the acceptable level of risk at which banks can operate. Make management, not underlings or stockholders, responsible for violating the law. Encourage the Justice Department to be clear in seeking appropriate penalties for financial crimes in large institutions, not by fines alone but by the prosecution of those executives responsible.
Split up the banks that are speculating with depositor and government funds. Investment banks are supposed to risk investors’ money but commercial banks should return to lending fairly and carefully to help create a foundation for future growth. Bernie Sanders is the only independent candidate who escapes the malaise of being bought. He is paid for by the people and represents their interests. And you can take that to the bank.
Sunday, 27 September 2015
The Observer view on corporate cheats
“If only everything in life was as reliable as a Volkswagen” ran the slogan of one of VW’s most iconic ad campaigns. Last week’s revelations that VW deliberately and illegally cheated emissions tests will rightly do irreparable damage to a global brand that has traded off its reputation for quality and reliability.
The way this has played out on both sides of the Atlantic raises two critical and related questions about corporate accountability. First, VW is only the latest in a series of global corporates to be caught breaking the law, a sure sign that, even where regulations exist, they are often not fit for purpose. Second, VW’s law-breaking has highlighted the extent to which powerful industry lobbying has watered down European testing to the extent it can be manipulated without illegal action, and at terrible cost. Air pollution accounts for some 50,000 premature deaths a year in the UK – three times as many as liver disease. But in the face of corporate lobbying, EU and government efforts to address it have been utterly inadequate.
“It was not an accident… a lot of work has gone into this,” was the verdict of John German of the International Council on Clean Transportation, the NGO that uncovered VW’s use of sophisticated software to flout US emissions tests. It’s a textbook case of predatory capitalism: a global business deliberately flouting regulations to harm the environment and cause unnecessary deaths in the name of profit.
The business community reacted with outrage when former Labour leader Ed Miliband condemned predatory businesses, accusing him of unfairly tarring the whole private sector with this brush. But each new corporate scandal makes this response more untenable. Scandals in banking, energy and food show that a serious misdemeanour at one global firm is often indicative of poor practice across a whole industry. Other car firms have already been found guilty of illegally manipulating tests, albeit not on the scale of VW.
The common lesson from these scandals is that capitalism is neither inherently good nor inherently evil. But unless they are rooted out, poor cultures that permit bad individual behaviour can and will develop in businesses. Companies such as VW employ the equivalent of a small city’s worth of people: in a company that size, there may well be employees with criminal tendencies. What’s critical is whether company cultures root out these bad apples, or whether they allow them to set in train a corporate race to the bottom. This is not an insight limited to business: the MP expenses scandal and widespread doping in athletics show what happens when people feel able to police themselves.
The financial crisis should have served as a warning of how imperfect our regulatory systems are at rooting out criminal practices within business. But the debate about reforms to corporate accountability has not been commensurate with the scale of the challenge. This is partly because there are no easy solutions. There is a consensus that regulators need to focus more on firm cultures, but little understanding about what an effective approach might look like. Greater personal liability undoubtedly has a role to play, but is no magic fix, as poor organisational cultures can encourage people to take risks regardless of the consequences.
The German system of corporate governance – often held up as an exemplar for its employee representation – has failed to prevent scandals afflicting big German companies such as Siemens, Deutsche Bank and Deutsche Telecom: a system designed to work for modestly sized, community-rooted businesses has not worked in holding global giants to account. But corporate governance is an imperfect lever through which to try to change corporate culture.
The VW case shows how a relatively small NGO running independent tests was eventually able to get US – if not European – regulators to take action. It demonstrates how independent civil society organisations can play an important role in holding corporates to account: but to do so, they need to be properly resourced.
This is particularly true given the way in which global companies have wielded their huge power to get regulations watered down, perhaps the most shocking aspect of how this has played out in Europe.
Air quality is a serious killer. But addressing it is easier than other public health challenges because it relies more heavily on changing corporate than individual behaviour. It is much more localised than climate change policy: unlike with carbon emissions, action to improve air quality in the UK overwhelmingly benefits the UK. Yet the immense lobbying power of the German car industry has knocked air quality down the agenda both in Brussels and Westminster. As a result, EU emissions tests are far laxer than in the US. There are even legal loopholes that allow car manufacturers to use the type of software that VW was found to be using in the US.
The European Commission and the government have both been warned about the implications: some diesel cars that have passed European laboratory tests have been found to be producing seven times the legal limit of nitrogen oxide emissions. But as reported by this paper today, the government has been seeking to block EU legislation to toughen up emissions tests. And it has ignored European legal limits for nitrogen dioxide levels altogether. It has taken a legal case by the NGO Client Earth to force Defra even to consult on proposals to reduce air pollution, proposals that experts believe fall far short of what’s needed. The scale of government inaction in the face of heavy industry lobbying is staggering even in relation to other public health challenges such as obesity and smoking.
As well as tougher European vehicle testing and a properly resourced plan from government to improve air quality, there needs to be a more holistic approach to environmental policy. Diesel has been promoted as a greener alternative to petrol as a result of its lower carbon emissions, but it performs much worse on air quality. There are similar issues with biomass. Yet climate change policy sits with the department of energy and climate change, while air quality is the responsibility of Defra.
VW’s behaviour has had terrible consequences for global human health. It is only the latest warning that business regulation remains unfit for purpose, and a powerful reminder that corporate lobbying has too often stopped governments taking action to prevent avoidable human suffering. It must not take another corporate scandal on this scale to get governments to act.
The way this has played out on both sides of the Atlantic raises two critical and related questions about corporate accountability. First, VW is only the latest in a series of global corporates to be caught breaking the law, a sure sign that, even where regulations exist, they are often not fit for purpose. Second, VW’s law-breaking has highlighted the extent to which powerful industry lobbying has watered down European testing to the extent it can be manipulated without illegal action, and at terrible cost. Air pollution accounts for some 50,000 premature deaths a year in the UK – three times as many as liver disease. But in the face of corporate lobbying, EU and government efforts to address it have been utterly inadequate.
“It was not an accident… a lot of work has gone into this,” was the verdict of John German of the International Council on Clean Transportation, the NGO that uncovered VW’s use of sophisticated software to flout US emissions tests. It’s a textbook case of predatory capitalism: a global business deliberately flouting regulations to harm the environment and cause unnecessary deaths in the name of profit.
The business community reacted with outrage when former Labour leader Ed Miliband condemned predatory businesses, accusing him of unfairly tarring the whole private sector with this brush. But each new corporate scandal makes this response more untenable. Scandals in banking, energy and food show that a serious misdemeanour at one global firm is often indicative of poor practice across a whole industry. Other car firms have already been found guilty of illegally manipulating tests, albeit not on the scale of VW.
The common lesson from these scandals is that capitalism is neither inherently good nor inherently evil. But unless they are rooted out, poor cultures that permit bad individual behaviour can and will develop in businesses. Companies such as VW employ the equivalent of a small city’s worth of people: in a company that size, there may well be employees with criminal tendencies. What’s critical is whether company cultures root out these bad apples, or whether they allow them to set in train a corporate race to the bottom. This is not an insight limited to business: the MP expenses scandal and widespread doping in athletics show what happens when people feel able to police themselves.
The financial crisis should have served as a warning of how imperfect our regulatory systems are at rooting out criminal practices within business. But the debate about reforms to corporate accountability has not been commensurate with the scale of the challenge. This is partly because there are no easy solutions. There is a consensus that regulators need to focus more on firm cultures, but little understanding about what an effective approach might look like. Greater personal liability undoubtedly has a role to play, but is no magic fix, as poor organisational cultures can encourage people to take risks regardless of the consequences.
The German system of corporate governance – often held up as an exemplar for its employee representation – has failed to prevent scandals afflicting big German companies such as Siemens, Deutsche Bank and Deutsche Telecom: a system designed to work for modestly sized, community-rooted businesses has not worked in holding global giants to account. But corporate governance is an imperfect lever through which to try to change corporate culture.
The VW case shows how a relatively small NGO running independent tests was eventually able to get US – if not European – regulators to take action. It demonstrates how independent civil society organisations can play an important role in holding corporates to account: but to do so, they need to be properly resourced.
This is particularly true given the way in which global companies have wielded their huge power to get regulations watered down, perhaps the most shocking aspect of how this has played out in Europe.
Air quality is a serious killer. But addressing it is easier than other public health challenges because it relies more heavily on changing corporate than individual behaviour. It is much more localised than climate change policy: unlike with carbon emissions, action to improve air quality in the UK overwhelmingly benefits the UK. Yet the immense lobbying power of the German car industry has knocked air quality down the agenda both in Brussels and Westminster. As a result, EU emissions tests are far laxer than in the US. There are even legal loopholes that allow car manufacturers to use the type of software that VW was found to be using in the US.
The European Commission and the government have both been warned about the implications: some diesel cars that have passed European laboratory tests have been found to be producing seven times the legal limit of nitrogen oxide emissions. But as reported by this paper today, the government has been seeking to block EU legislation to toughen up emissions tests. And it has ignored European legal limits for nitrogen dioxide levels altogether. It has taken a legal case by the NGO Client Earth to force Defra even to consult on proposals to reduce air pollution, proposals that experts believe fall far short of what’s needed. The scale of government inaction in the face of heavy industry lobbying is staggering even in relation to other public health challenges such as obesity and smoking.
As well as tougher European vehicle testing and a properly resourced plan from government to improve air quality, there needs to be a more holistic approach to environmental policy. Diesel has been promoted as a greener alternative to petrol as a result of its lower carbon emissions, but it performs much worse on air quality. There are similar issues with biomass. Yet climate change policy sits with the department of energy and climate change, while air quality is the responsibility of Defra.
VW’s behaviour has had terrible consequences for global human health. It is only the latest warning that business regulation remains unfit for purpose, and a powerful reminder that corporate lobbying has too often stopped governments taking action to prevent avoidable human suffering. It must not take another corporate scandal on this scale to get governments to act.
Monday, 5 January 2015
How Jet Airways acquired monopoly power in privatised Indian civil aviation
Jitender Bhargava in The Business Standard
It is generally agreed that Indian aviation has failed to achieve the potential that the country offers. Whilst most have attributed the industry's lack of robustness to unclear government policies, high operational costs, and so on, few have ever cited the role of private Indian carriers in influencing policies.
Since such instances haven't been tabulated, one is oblivious to the scale of havoc caused. If quantified, the financial loss alone would run into crores of rupees besides the harm it has caused to the industry.
Perhaps the first instance of blatant interference in getting a policy tweaked was when the entry into the sector of the Tatas and Singapore Airlines was blocked in 1997. The revised policy ensured that no foreign airline could invest in an Indian carrier even while Kuwait Airways and Gulf Air owned a 20 per cent stake each in Jet Airways. The revised policy also gave Jet Airways time to buy back the stakes.
A couple of years later when Tata-Singapore Airlines submitted a proposal to acquire a 40 per cent stake in Air India, mischief was again in evidence. Singapore Airlines was forced to opt out of the race citing opposition. The intent was clear: an existing airline did not want a strong competitor in a rejuvenated Tata-Singapore Airlines-managed Air India. Imagine: if a Tata-Singapore Airlines-managed Air India had indeed become a reality, taxpayers wouldn't have had to fund the national carrier's bailout at a cost of Rs 30,000 crore. Air India, under the new management, would also have been an airline to contend with and not what it has become today.
In the previous decade, the government, with Praful Patel as the civil aviation minister, saw the introduction of an irrational 5/20 policy. This helped only one private airline at that time and barred others who did not possess five years of domestic flying experience and a fleet of 20 aircraft from taking to international skies. The current aviation minister, Ashok Gajapati Raju, is now seeking to do away with it. For that particular airline, this policy meant a lot. It could for some years reap the advantage of being India's only international airline besides Air India, whose ethnic traffic it could encroach upon to fill up its flights.
If crony capitalism has been beneficial for some, it has also unwittingly taken a toll of at least one airline. The 5/20 policy was a contributing factor in financially crippling Kingfisher. In his quest to fly internationally without waiting to complete the requisite five years, Vijay Mallya bought over Air Deccan, which was soon becoming eligible for international operations, at a price that defied logic. Kingfisher Airlines eventually perished under the weight of debt.
Air India was often "forced" to withdraw flights from certain sectors by citing "economical unviability". It wasn't a coincidence to see a private airline mount flights soon thereafter with market and passengers offered on a platter by the obliging national carrier.
No less intriguing has been studied silence of private airlines when seats were being recklessly doled out to foreign airlines though the policy was destined to harm them too, not just Air India. And today, we have the situation of Indian carriers failing to make a mark on the international routes with foreign airlines not only having been given a head-start but also a stranglehold on Indian market. The promoters of Indian carriers simply ignored the question of how their fund-starved carriers would compete on their home turf with mega global carriers bestowed with disproportionate quantum of seats and flights.
The way the Jet Airways-Etihad agreement was facilitated was yet another instance of external factors influencing a decision. The government granted 37,000 additional seats to Abu Dhabi, over and above the existing 13,000 seats, to help Etihad acquire a 24 per cent stake in Jet Airways.
Even though other Indian airlines and airports, notably private-run airports at Delhi and Mumbai, realised how the Jet-Etihad combination and the accompanying huge quantum of seats would take away their business and harm their long-term interests, they did nothing except voicing concerns to the civil aviation ministry.
As if no lessons were needed to be learnt for putting the sector on track, some carriers have, in fact, facilitated their political masters' wrongdoing. When Gulf countries sought additional seats, some Indian carriers at the slightest prodding gave it in writing that they needed additional seats. This helped build a case for doling out seats to foreign carriers while the records showed that the ministry was only acquiescing to the requests of Indian carriers. These carriers haven't used a single additional seat so far.
The mess that we witness today is thus not only a consequence of flawed government policies but also constant meddling and complicit silence of some Indian carriers. Do they deserve sympathy for the poor financial state of their airlines? Perhaps not, given the harm they have caused to the industry.
It is generally agreed that Indian aviation has failed to achieve the potential that the country offers. Whilst most have attributed the industry's lack of robustness to unclear government policies, high operational costs, and so on, few have ever cited the role of private Indian carriers in influencing policies.
Since such instances haven't been tabulated, one is oblivious to the scale of havoc caused. If quantified, the financial loss alone would run into crores of rupees besides the harm it has caused to the industry.
Perhaps the first instance of blatant interference in getting a policy tweaked was when the entry into the sector of the Tatas and Singapore Airlines was blocked in 1997. The revised policy ensured that no foreign airline could invest in an Indian carrier even while Kuwait Airways and Gulf Air owned a 20 per cent stake each in Jet Airways. The revised policy also gave Jet Airways time to buy back the stakes.
A couple of years later when Tata-Singapore Airlines submitted a proposal to acquire a 40 per cent stake in Air India, mischief was again in evidence. Singapore Airlines was forced to opt out of the race citing opposition. The intent was clear: an existing airline did not want a strong competitor in a rejuvenated Tata-Singapore Airlines-managed Air India. Imagine: if a Tata-Singapore Airlines-managed Air India had indeed become a reality, taxpayers wouldn't have had to fund the national carrier's bailout at a cost of Rs 30,000 crore. Air India, under the new management, would also have been an airline to contend with and not what it has become today.
In the previous decade, the government, with Praful Patel as the civil aviation minister, saw the introduction of an irrational 5/20 policy. This helped only one private airline at that time and barred others who did not possess five years of domestic flying experience and a fleet of 20 aircraft from taking to international skies. The current aviation minister, Ashok Gajapati Raju, is now seeking to do away with it. For that particular airline, this policy meant a lot. It could for some years reap the advantage of being India's only international airline besides Air India, whose ethnic traffic it could encroach upon to fill up its flights.
If crony capitalism has been beneficial for some, it has also unwittingly taken a toll of at least one airline. The 5/20 policy was a contributing factor in financially crippling Kingfisher. In his quest to fly internationally without waiting to complete the requisite five years, Vijay Mallya bought over Air Deccan, which was soon becoming eligible for international operations, at a price that defied logic. Kingfisher Airlines eventually perished under the weight of debt.
Air India was often "forced" to withdraw flights from certain sectors by citing "economical unviability". It wasn't a coincidence to see a private airline mount flights soon thereafter with market and passengers offered on a platter by the obliging national carrier.
No less intriguing has been studied silence of private airlines when seats were being recklessly doled out to foreign airlines though the policy was destined to harm them too, not just Air India. And today, we have the situation of Indian carriers failing to make a mark on the international routes with foreign airlines not only having been given a head-start but also a stranglehold on Indian market. The promoters of Indian carriers simply ignored the question of how their fund-starved carriers would compete on their home turf with mega global carriers bestowed with disproportionate quantum of seats and flights.
The way the Jet Airways-Etihad agreement was facilitated was yet another instance of external factors influencing a decision. The government granted 37,000 additional seats to Abu Dhabi, over and above the existing 13,000 seats, to help Etihad acquire a 24 per cent stake in Jet Airways.
Even though other Indian airlines and airports, notably private-run airports at Delhi and Mumbai, realised how the Jet-Etihad combination and the accompanying huge quantum of seats would take away their business and harm their long-term interests, they did nothing except voicing concerns to the civil aviation ministry.
As if no lessons were needed to be learnt for putting the sector on track, some carriers have, in fact, facilitated their political masters' wrongdoing. When Gulf countries sought additional seats, some Indian carriers at the slightest prodding gave it in writing that they needed additional seats. This helped build a case for doling out seats to foreign carriers while the records showed that the ministry was only acquiescing to the requests of Indian carriers. These carriers haven't used a single additional seat so far.
The mess that we witness today is thus not only a consequence of flawed government policies but also constant meddling and complicit silence of some Indian carriers. Do they deserve sympathy for the poor financial state of their airlines? Perhaps not, given the harm they have caused to the industry.
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.
Thursday, 20 February 2014
Climate change deniers have grasped that markets can't fix the climate
The refusal to accept global warming is driven by corporate interests and the fear of what it will cost to try to stop it
'In the words of Nicholas Stern’s 2006 report, climate change is “the greatest market failure the world has ever seen”.' Photograph: Corbis
It's an unmistakable taste of things to come. The floods that have deluged Britain may be small beer on a global scale. Compared with the cyclone that killed thousands in the Philippines last autumn, the deadly inundations in Brazil or the destruction of agricultural land and hunger in Africa, the south of England has got off lightly.
But the message has started to get through. This is exactly the kind of disaster predicted to become ever more frequent and extreme as greenhouse gas-driven climate change heats up the planet at a potentially catastrophic rate. And it's exposed the David Cameron who wanted to "get rid of all the green crap" and who slashed flood defence spending by £100m a year as weak and reckless to his own supporters.
Of course there have been plenty of floods in the past, and it's impossible to identify any particular weather event as directly caused by global warming. But as the Met Office's chief scientist Julia Slingo put it, "all the evidence suggests that climate change has a role to play in it". With 4% more moisture over the oceans than in the 1970s and sea levels rising, how could it be otherwise?
If it weren't for the misery for the people at the sharp end, you might even imagine there was some divine justice in the fact that the areas hit hardest, from the Somerset Levels to the Thames valley are all Tory heartlands. It's the same with the shale gas fracking plans the government is so keen on: the fossil fuel drilling and mining so long kept away from the affluent is now turning up on their Sussex doorstep.
How do the locals feel that their government cut flood defences for the areas now swimming in water in the name of austerity, while one in four environment agency staff is being axed and the environment secretary, Owen Paterson, slashed his department's budget for adaptation to global warming by 40%?
Not too impressed, to judge by the polling. But then, paradoxically, Paterson is in fact a climate change denier in what was supposed to be "the greenest government ever", a man who refused to accept a briefing from the chief scientific adviser at the energy and climate change department, reckons there are benefits to global warming and thinks "we should just accept that the climate has been changing for centuries". Of course he's not alone among Conservatives in being what one of his cabinet colleagues called "climate stupid". The basic physics may be unanswerable, 97% of climate scientists agree that carbon emissions are dangerously heating up the planet, the Intergovernmental Panel on Climate Change warn it's 95% likely that most of the temperature rise since 1950 is due to greenhouse gases and deforestation, the risk of a global temperature rise tipping above 1.5–2C be catastrophic for humanity.
But the climate flat-earthers are having none of it. As a result, what should be a pressing debate about how to head off global calamity has been reframed in the media as a discussion about whether industrial-driven climate change is in fact taking place at all – as if it were a matter of opinion rather than science.
The impact of this phoney controversy during an economic crisis has been dramatic: in the US, the proportion of the population accepting burning fossil fuels drives climate change dropped from 71% to 44% between 2007 and 2011. In Britain, the numbers who believe the climate isn't changing at all rose from 4% to 19% between 2005 and 2013 (though the floods seem to be correcting that).
The problem is at its worst in the Anglo-Saxon world – which has also historically made the largest contribution to pumping carbon into the atmosphere. Take Australia, which is afflicted by longer and hotter heatwaves, drought and bushfires. Nevertheless, its rightwing prime minister Tony Abbott dismisses any link with climate change, which he described as crap, and has promised to repeal a carbon tax on the country's 300 biggest polluters. The move was hailed by his political soulmate, the Canadian prime minister and tar sands champion Stephen Harper, as an important message to the world. And in the US, climate change denial now has the Republican party in its grip.
What lies behind the political right's growing refusal to accept the overwhelming scientific consensus? There's certainly a strong tendency, especially in the US, for conservative white men to refuse to accept climate change is caused by human beings. But there shouldn't be any inherent reason why people who believe in social hierarchies, individualism and inequality should care less about the threat of floods, drought, starvation and mass migrations than anyone else. After all, rightwing people have children too.
Part of the answer is in the influence of some of the most powerful corporate interests in the world: the oil, gas and mining companies that have strained every nerve to head off the threat of effective action to halt the growth of carbon emissions, buying legislators, government ministers, scientists and thinktanks in the process. In the US, hundreds of millions of dollars of corporate and billionaires' cash (including from the oil and gas brothers Koch) has been used to rubbish climate change science. That is also happening on a smaller scale elsewhere, including Britain.
But climate change denial is also about ideology. Many deniers have come to the conclusion that climate change is some kind of leftwing conspiracy – because the scale of the international public intervention necessary to cut carbon emissions in the time demanded by the science simply cannot be accommodated within the market-first, private enterprise framework they revere. As Joseph Bast, the president of the conservative US Heartland Institute told the writer and campaigner Naomi Klein: for the left, climate change is "the perfect thing", a justification for doing everything it "wanted to do anyway".
When it comes to the incompatibility of effective action of averting climate disaster with their own neoliberal ideology, the deniers are absolutely right. In the words of Nicholas Stern's 2006 report, climate change is "the greatest market failure the world has ever seen".
The intervention, regulation, taxation, social ownership, redistribution and global co-operation needed to slash carbon emissions and build a sustainable economy for the future is clearly incompatible with a broken economic model based on untrammelled self-interest and the corporate free-for-all that created the crisis in the first place. Given the scale of the threat, the choice for the rest of us could not be more obvious.
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