An ill-wind is blowing over Pakistan

Najam Sethi in The Friday Times

Prime Minister Nawaz Sharif and his allies are making decidedly ominous statements. While announcing a relief package for the agricultural sector, Mr Sharif suddenly veered off his subject at the Convention Centre in Islamabad and started talking of “those who would like to overthrow the government and rule directly themselves”, followed by a couple of similar sentences meaning similar things.

If this statement wasn’t oblique enough, he then spoke of how neither he nor his family was using state resources to line their pockets. Indeed, he added, “all our personal expenditures come from our own personal resources and there cannot even be a whiff of corruption attached to us”. The linking of “corruption” with an intervention against the government has clinched the suspicion that Mr Sharif believes that sections of the military establishment are still out to “get him” and his government. This time, it is suspected, by initiating action against allegedly corrupt elements in the PMLN federal and Punjab provincial governments as they have done in Sindh against the PPP government by effectively taking over the reins of power in the NAB and FIA.

Mr Sharif’s ANP ally, Asfandyar Wali Khan, was more forthright. When asked if he foresaw a military intervention by year’s end – because of carefully planted stories of GHQ’s anger at the continuing corrupt practices of ruling politicians – he warned that “if, God forbid, such an intervention were to occur, it would lead to the break up of Pakistan”. Stronger words on the subject have not been uttered nor such a bleak scenario publicly articulated.

For an explanation, we need only to look at the recent behaviour of the one political leader who is desperately seeking a short cut to power on the back of the military: Imran Khan. His dharna last year was based on the theory of the third umpire putting an end to Nawaz Sharif’s innings and paving the way for Imran Khan’s entry into Islamabad. This is now an established fact. Several credible reports of the involvement of the then ISI chief, Lt Gen Zaheer ul Islam, in this conspiracy are circulating in the media. But Imran Khan’s failure hasn’t deterred him.

Now Khan is threatening to forcibly eject the four provincial election commissioners from office – they hold constitutional positions and cannot be ousted under any circumstances short of resigning themselves — by staging a mass rally in front of the ECP’s office in Islamabad despite a ban on such rallies in the capital. He is also defying the code of conduct of the ECP forbidding government and opposition leaders from canvassing on behalf of their candidates in local elections in the Punjab. He successfully challenged the ECP decision in the Lahore High Court. But the ECP has obtained a stay from the Supreme Court and ordered the Chief Secretaries and IGPs of all the provinces to ensure strict implementation of the ECP’s code of conduct. The PMLN has said it will abide by the law. But Imran Khan has said he won’t because he considers the law illegal. So the stage is being set for violent clashes between the PTI and the Punjab and Islamabad administrations of the PMLN.

If Imran Khan can create violent disturbances in Punjab or Islamabad during the local elections in October-November, we may expect to witness a repeat dharna-type performance that attempts to draw the military into the fray. The PTI has plastered over 20,000 banners in Lahore’s NA 122 with candidate Aleem Khan’s picture alongside that of the army chief General Raheel Sharif. And Imran Khan has publicly called upon the Rangers and the military establishment to carry out accountability of corrupt politicians and bureaucrats in Punjab, a demand that is clearly unconstitutional.

Finally, a rather sinister development is already making waves in the media. This is the question of whether or not Gen Raheel Sharif deserves an extension in service before he retires at the end of next year – “for doing such a great job as the saviour of Pakistan against the scourge of terrorism and corruption” – unlike his predecessor General Kayani. It may be recalled that in the latter months of his first tenure, Gen Kayani destabilized the PPP government on at least two occasions even as a debate about his extension was raging the media.

General Raheel Sharif is a soldier’s soldier. It is inconceivable that he and his lieutenants are involved in destabilizing the PMLN government or that he is maneuvering to seek an extension in tenure. But there is no doubt that an ill will is blowing in the direction of Islamabad and none other than Imran Khan is huffing and puffing again to bring the house down.

PM Nawaz Sharif is rightly sensitive to Intel data that has led him to allude to another dharna-type conspiracy in the offing. We should know how the game is unfolding by observing Imran Khan’s course of action.

 

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.

VW is further evidence that global business has become a law unto itself

Will Hutton in The Guardian

A well-functioning capitalism has, and will always need, multiple and powerfully embedded checks and balances – not just on its conduct but on how it defines its purpose. Sometimes those checks are strong, uncompromised unions; sometimes tough regulation; sometimes rigorous external shareholders; sometimes independent non-executive directors and sometimes demanding, empowered consumers. Or a combination of all of the above.

CEOs, company boards and their cheerleaders in a culture which so uncritically wants to be pro-business do not welcome any of this: checks and balances get in the way of “wealth generation”. They are dismissed as the work of liberal interferers and apostles of the nanny state.

Germany’s economy has been a good example of how checks and balances work well. But the existential crisis at Volkswagen following its systematic cheating of US regulators over dangerous diesel exhaust emissions shows that any society or company forgets the truth at its peril.

Volkswagen abused the system of which it was part. It became an autocratic fiefdom in which environmental sustainability took second place to production – an approach apparently backed by the majority family shareholder, with no independent scrutiny by other shareholders, regulators, directors or consumers. Even its unions became co-opted to the cause. Worse, the insiders at the top paid themselves, ever more disproportionately, in bonuses linked to metrics that advanced the fiefdom’s interests. But they never had to answer tough questions about whether the fiefdom was on the right track. The capacity to ignore views other than your own, no external sanction and the temptation for boundless self-enrichment can emerge in any capitalism – and when they do the result is toxic. VW, facing astounding fines and costs, may pay with its very existence.

So why did a company with a great brand, passionate belief in engineering excellence and commitment to building great cars knowingly game the American regulatory system, to suppress measured emissions of nitrogen dioxide to a phenomenal degree? Plainly, there were commercial and production benefits. It could thus sell the diesel engines it manufactured for Europe in the much tougher regulatory environment – at least for diesel – of the US and challenge Toyota as the world’s largest car manufacturer. Directors, with their bonuses geared to growth, employment and profits, could become very rich indeed.
Nor did the risks seem so outlandish. It was an open secret that car emission tests are artificial constructs, with special tyres, lubricants and measures to reduce car weight and air drag all allowed with the connivance of the regulators. To create a special piece of software that closed down nitrogen dioxide emissions during a test must have seemed to the executives involved only an extension of this artificiality. In any case, regulations are for busybodies, especially in areas as controversial as climate change and air quality. The software ruse was merely taking the game of cat and mouse between regulator and car maker to another level.

Former CEO Martin Winterkorn, who resigned last week over the scandal, claims he knew nothing of what was going on, blaming a few unnamed executives for making a catastrophic error of judgment. Winterkorn was the consummate German engineer, knowing every dimension of engine performance; if he did not know how the dirty diesel engines of some popular VW brands were successfully passing US emission tests it was only because he chose not to ask. He did not need to. He had the backing of the Porsche family, who own just over 50% per cent of VW’s shares and who agree to vote as a block; the support too of the state of Saxony with a further 20% per cent –and of union members on the supervisory board. Winterkorn could run a company of 600,000, as Süddeutsche Zeitungremarked, as if it were North Korea.

VW is about production and jobs which trumps concerns about environmental sustainability – a culture than unites unions as much as the Porsche family. And Winterkorn was its standardbearer, leading the charge against the tightening of EU emission regulations – urging weaker targets and a longer timetable. Despite a vast R and D budget, VW is far from a leader in the electrical car or hybrid market. Mr Winterkorn’s bonuses were based on his capacity to deliver production, jobs and profits: environmental sustainability or engaging with wider stakeholders did not get a look-in.

Make your god the share price, as so many British and US companies do, and you create one basket of problems – under-investment, excess deal-making and cutting corners. Abuse the stakeholder system, as did VW, and make your god production on any terms, damning the concerns of outsiders as irrelevant, and your end can be equally grisly. Capitalism, in short, may have boundless creative and innovative energy – but it also has boundless ways to go wrong. Intriguingly, recent work by a group of researchers at Harvard and the London Business School compared 90 American companies that took sustainability seriously with 90 who did not. Over 18 years the 90 committed to sustainability delivered annual financial returns 4.8% higher than the other 90.

In order to deliver sustainability they had to organise themselves around a core purpose, and then embed checks and balances to keep themselves honest. They shaped the way they were governed to open up to outside stakeholders with whom they checked their strategy. Their reporting measures embraced many metrics beyond share price and they rewarded directors for meeting them. Sustainability was a route to more open governance and rounded strategy – and it delivered.

VW did not believe in this any more than the British government does, now steadily rolling back “green crap” and efforts to promote sustainability as “anti-enterprise”. Transport secretary Patrick McLoughlin, under fire for doing nothing when he was sent the same damning report as the Americans 11 months ago, will have known that in Tory terms there would be no rewards for being cast as a bleeding-heart green. Enterprise is about getting regulators off car-makers’ backs and disempowering meddling stakeholders, especially trade unions.

Yet nor is it right in Corbynesque style to damn capitalism with a reflex call for stronger unions and public ownership. The government of Saxony and union members of VW’s supervisory board proved ineffective whistleblowers. They were not sufficiently interested in human betterment or the fatal consequences of excess nitrogen dioxide emissions. They just wanted jobs at any cost. Checks and balances alone don’t work: they have to be animated by an honest acceptance of mutual responsibility between firms and society – a moral ethic that must inform unions, regulators, shareholders and systems of corporate governance alike. VW lost the plot. But so, in a more profound way, have both the apologists and critics of western capitalism.

Bomb both sides in Syria and we’ll fix the country in a jiffy

We could also bomb Hell, and within a month the residents would say ‘We were better off under Satan’

Mark Steel in The Independent


Some people get confused by events in Syria, but they’re not that complicated. Quite simply, we need to bomb somewhere or other out there, like we should have done two years ago. Back then we should have dropped bombs to support the Isis rebels fighting against the evil Assad. But as we didn’t bother, we now need to put that right by bombing the Isis rebels, and protecting Assad.

Because if only we had bombed Assad back then, it would be much easier to bomb Isis and their allies now, as we would be one of their allies so we could bomb ourselves. And we could do that without the fuss of going all the way to Syria, which would cut down on carbon emissions as well.

Also, we could ask Isis if they had any bombs left over that we had given them, “as we need them back to bomb you please”.

The change has happened because back then, you may recall, Assad was so unspeakably evil he had gassed his own people. But now we have decided we support Assad so I suppose we have found out the gas wasn’t so much a chemical weapon as a Syrian version of Febreze, that has left Aleppo with an alluring scent of lemon.

Former UN Secretary-General Kofi Annan warned against bombing, saying “Syria is not Libya, it won’t implode but explode beyond its borders.” So that might not be too cheery, if he is saying things will not necessarily go as smoothly as they have turned out in Libya.

If you were really fussy, you could look for another example of a western invasion in the Syria/Iraq region in the recent past, and find out how well that went. But where we went wrong in Libya and Iraq, is we only bombed one side.

This is the sort of pacifist behaviour that causes the trouble. We should have bombed all the different sides, to make sure we annihilate the right people.

Sometimes we have tried this to a certain extent, so at different times we have armed Assad and Gaddafi and Saddam and Bin Laden and then bombed them for using the bombs we had sold them. But it is not organised properly and leaves the poor sods confused.

Instead of supporting Arab dictators for 20 years, then opposing them for three, and then supporting them again, we should arrange it on a rota system. We could bomb them on Mondays, Wednesdays and Fridays, bomb their opponents on Tuesdays, Thursdays and Saturdays, and leave Sundays for US construction companies to make some money rebuilding the stuff we have bombed, so there is something new to bomb.

Otherwise we are left with the predicament Tony Blair finds himself in. He complains that we didn’t bomb Assad two years ago. But, in 2002, Blair invited Assad to stay at Buckingham Palace and praised his modernising outlook. If he had used my suggested system, he could have grovelled to him on Thursday, then bombed him in his bedroom on Friday. I’m sure the Queen wouldn’t have minded sleeping on a mate’s settee for a couple of weeks while builders repaired the damage.

The silly thing is, it’s now claimed there are secret units of the IRA – who have kept their weapons against the rules of the peace process. It would have kept them out of mischief if they had been asked to bomb Blair’s pals such as Assad and Gaddafi, as long as they did it on one of the agreed days, and it would have strengthened the Northern Ireland peace process as well.

There could also be a surprise element to which side we bomb, with vast commercial potential. Instead of the same predictable places popping up, there should be an international body that chooses the venue, with Sepp Blatter opening an envelope to reveal “next year the place we have to bomb as we can’t just do nothing is… Finland”.

Then, whenever someone suggests bombing Finland will make things worse, columnists and politicians and blokes in pubs can shout “well, we can’t do NOTHING”.

This argument, that we can’t do NOTHING, is powerful and well thought through, because it’s clear from Western military interventions in the Middle East that no matter how bad the situation is before we go there, we manage to make it worse. This must have taken immense planning in Libya, but was worth it because everyone seems to agree that most of the country looks back on their days under the foul, despotic, murderous tyranny of Gaddafi with a dreamy nostalgic affection.

We could bomb Hell, and within a month the residents would say “We were better off under Satan. At least he kept the demons under some sort of control.”

Maybe the problem is we are not entirely trusted. This goes to show what a touchy people they are out there. We do all we can to support the spread of democracy by arming the royal family of Saudi Arabia and the Amir of Kuwait and the honourable folk who rule Qatar, and go out of our way to support people with titles such as “Mighty Wizard of Eternal Vengeance and Holy uber-King who can make up laws as he goes along, Divinely Grand Swisher of the Majestic Whip and his Million Wives of Bahrain”, and the little sods still doubt our honourable intentions.

But now there is an even more urgent reason to back the bombing of somewhere or other, which is we must do it for the refugees. The Sun newspaper, in particular, has been running a campaign that we “Do it for Aylan”, the three-year-old lad who was drowned as his family fled from the horrors of Isis.

I suppose they must have spoken to Aylan’s family, who would have told The Sun that bombing somewhere or other is exactly what he would have wanted.

The Volkswagen scandal reveals the corruption of the Left's regulation dreamworld

Liberal, competitive capitalism is the opposite of the law of the jungle because it depends on rules. Those who transgress must be swiftly punished.


Allister Heath in The Telegraph


If I were Jeremy Corbyn, I would be thanking my lucky stars for the scandal that threatens to engulf parts of the car industry. Nothing is more guaranteed to galvanise the Left-wing cause than a corporate conspiracy – and the VW diesel affair, which reads like the script of a Hollywood movie, ticks all of the boxes. Lies, secret computer technology programmed to fool the authorities, a deliberate breach of environmental regulations by a rapacious corporation: it’s all there, and crying out for the full George Clooney treatment.

Fortunately, this latest blow to the reputation of big business won’t be enough to rescue the doomed Labour leader. But those of us who support capitalism must lead condemnations of VW’s egregious behaviour, and explain clearly that a functioning free market implies a scrupulous adherence to the rule of law.

What is most damning about this scandal is that an almost identical deception had already been uncovered. In October 1998 the US Department of Justice and Environmental Protection Agency fined seven heavy-duty diesel engine makers for equipping their engines with an older version of “defeat devices” – just like in the VW scandal, software designed to detect and trick the official tests. The automotive industry must be forced to change its ways. It must become truly transparent, and there needs to be a crackdown on abuse.

It is vital that free-marketers explain again and again that proper liberal, competitive capitalism is the exact opposite of the law of the jungle or of a Hobbesian free for all: it is a remarkably disciplined system. Individuals are encouraged to pursue their self-interest; but unlike in a kleptocracy, they can’t force anybody to trade with them and must respect the sanctity of private property rights, contracts and the legal system.

It doesn’t matter how big your company is or how rich you are: a pledge must be met; a product must deliver what it says on the tin; lies are never acceptable. Breaking the law must lead to pitiless prosecution; and selling customers a pup must result in litigation and thorough compensation.

Free markets are at once realistic about human nature – unlike naive Leftyism, they don’t assume that people are altruistic or self-policing – and civilising, in that they force people to adhere to strict norms of behaviour. As Milton Friedman put it in his famous libertarian theory of business ethics: “There is one and only one social responsibility of business ... to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

There will always be dishonesty, in all walks of life, in every industry and profession, in the public and private sector and in all economic and social systems. Yet humanity’s inherent fallibility, and the need for eternal vigilance, doesn’t invalidate the fact that free markets are the best possible system to create wealth and prosperity for all.

But while corporate scandals always force the political right onto the defensive, this particular story is just as bad, if not worse, for the Left-wing world-view. It shreds many of its favourite assumptions, highlights endless government and political failures and mercilessly exposes the flaws at the heart of the ridiculous virtue-signalling that has passed for environmental policy in recent years.

Take the nonsensical claim that the City of London is a cesspool of iniquity, home to a uniquely amoral tribe of adrenalin-junkies willing to lie and cheat whenever bending the rules is deemed to be a gamble worth taking. The truth is that no industry can claim moral superiority, and all are blighted by a tiny minority of rogues: even old-fashioned manufacturers in the supposedly gentler, law abiding industrial capitals of Old Europe can and do commit fraud, taking insane risks to pull the wool over regulators’ eyes. The anti-London euro-enthusiasts were wrong, once again.

Or consider another Left-wing shibboleth: the idea that Wall Street’s lobbying and influence means that it effectively controls the US political system. Yet the VW scandal reminds us that heavily unionised car manufacturers have traditionally been far better at getting their way, collecting handouts and bailouts and directing legislation. They have convinced politicians, especially in Germany, France and Brussels, to turn a blind eye to indefensible testing practices that would never be tolerated in any other industry.

What must be most galling to the Left is that VW is structured exactly in the way they would love every company to be. It is partly owned by a German state; the remainder of its ownership structure means that it is protected from a hostile takeover; and it has the sort of two-tier board structure beloved of the dafter corporate governance activists, complete with plenty of trade union representation. Yet it didn’t make a blind bit of difference. In the fraud stakes, the Anglo-American model of financial capitalism and the Germanic and Japanese models are one and the same. Once again, the euro-enthusiast belief that everything is always better in Europe has been spectacularly refuted.

Last but not least, the scandal has highlighted the gross hypocrisy of politically correct companies, as well as how the environmental agenda can backfire spectacularly. Industrial firms should be honest: if they don’t like green rules, or believe that meeting them would impose price hikes on their customers, they should say so, not loudly sign up and bask in the moral high ground while surreptitiously ignoring the rules.

As to the embrace of diesel as a supposedly cleaner alternative to petrol, it has been a disaster caused entirely by official error. Desperate to meet Kyoto Treaty carbon dioxide targets, the European Union decided in the late 1990s to bet the bank on diesel. This reduced CO2 but increased emissions of nitrogen dioxide and particulates, an own goal if ever there were one.

The idiocy of the policy, backed by German carmakers, but for which the Eurocrats must bear responsibility, is only now becoming apparent. Nobody emerges from this sorry saga with any credit.

It’s the British establishment that has a problem with democracy

The elite has little time for elections that deliver the wrong results. And Jeremy Corbyn’s was one of them

Seumas Milne in The Guardian


If there were any doubts that the British establishment has a problem with democracy, the last few days should have put them to rest. First there was the drama of the spurned Tory donor and piggate. Unsurprisingly, Michael Ashcroft’s revelation that the prime minister simulated oral sex with a dead pig as part of a student initiation ceremony has been the centre of attention.

The question of whether David Cameron lied about when he knew of the former Conservative treasurer and donor’s continuing non-dom tax status – meaning Ashcroft paid no tax in Britain on his overseas earnings – was dutifully raised by Labour and SNP MPs. Both Ashcroft and the Tories had promised he would take up permanent UK residence when he was given a peerage in 2000.

Revealed: the link between life peerages and party donations

 But the real scandal is that Ashcroft, like so many party donors before him, simply paid up and pocketed his unelected seat in parliament in return. His later argument with Cameron was apparently only about whether a “significant” government job was also included in the package for his £8m of donations. And the evidence suggests Cameron only dropped it because of embarrassment over the “non-dom” deceit.

But it’s not as if Ashcroft’s expectations were at all unreasonable, based on experience. Rewarding major donors with seats in parliament and jobs in government is a long-established British tradition. Statistical analysis has disposed of any vestigial doubt that this exchange is what is still going on. Among many others, John Nash, the venture capitalist with education and health interests, was given a peerage and a job as schools minister in 2013. David Sainsbury was made science minister in Tony Blair’s government after donating millions of pounds to the New Labour. Outrageously, but to no great surprise, government jobs and seats in the legislature are very much tradeable commodities in the mother of parliaments.

The second shaft of light thrown on the contempt for democracy among the British elite appeared at the weekend, when a “senior serving general” in the British army told the Sunday Times that the armed forces would take “direct action” and “mutiny” if Jeremy Corbyn were to become prime minister. “Fair means or foul”, the general reportedly declared, would be used to protect the country’s “security”.

At face value that is a threat of a coup against a future elected government and an attack on national security. Of course, the bluster of one unnamed general against the newly elected Labour leader is a long way from the reality of tanks on the streets, or even military insubordination against elected leaders. And the British military has in any case a long record of suppressing democracy around the world.

But the lack of official and media response to the kind of openly anti-democratic top-brass talk that’s not been heard in Britain since the 1970s – and would be denounced as treasonable anywhere else – is remarkable. The comments by the general were unacceptable and “not helpful”, was the most the Ministry of Defence could manage. Self-evidently, the general should be disciplined. But the government ruled out even an inquiry on the grounds that it would be “almost impossible” to identify the culprit among 100 serving generals.

It’s only necessary to imagine what would happen if a Muslim had threatened “direct action” against elected leaders to grasp the absurdity of the response. Add in the fact that the intelligence services have also said they will “restrict” information to Corbyn “or any of his cabinet” because of the opposition leader’s “detestation of Britain’s security services” – and it’s clear the problem unelected officials have with elected politicians who disagree with them goes far beyond the odd bilious general.

But political corruption and the implacable opposition of the spooks and military to progressive change are the traditional forms of anti-democratic politics, in Britain, as elsewhere. For the past generation it has been the corporate embrace, the revolving doors, the privatised contracts, the “free trade” treaties, European Union directives, and the removal of economics from democratic control under the neoliberal rules of the game that have set the boundaries of acceptable politics.

Since the 2008 crash the rejection of that broken economic model and the hollowed-out politics that reflects it has spread across the western world, now including Britain. Which helps explain why Cameron’s Conservatives have turned to the most retrograde measures to bring opposition to heel.

The most extreme of those is the trade union bill now going through parliament, which will not only effectively outlaw most strikes but will slash trade union funding of the Labour party by erecting an individualised postal hurdle, a form of which was last imposed in the aftermath of the General Strike of 1926. No such obligations will apply, needless to say, to the entirely undemocratic corporate funding of the Tory party.

But establishment resistance to a democratic mandate is also running at a high pitch inside the Labour party itself. The reaction of a string of Labour grandees to Corbyn’s landslide election – including of several of those brought into the new leader’s big-tent shadow cabinet – has been to denounce most of the platform he was elected on.

More than anything else, the established international and security policies of the state, from renewal of the Trident nuclear weapons system to support for any and every US military campaign across the Arab and Muslim world, are being treated as red lines out of bounds of democratic debate.

That doesn’t reflect public opinion, let alone the views of Labour’s hugely expanded membership. The only way to bridge the gap between the bulk of Labour MPs, most of whom were selected under a tightly controlled New Labour regime, and the mandate of a leader elected by a runaway majority outside parliament is to give full rein to the party’s own democracy.

That process will start at next week’s Labour conference. But it could be bolstered, and Corbyn’s political authority strengthened, with a referendum of members and affiliated supporters on the main policies he campaigned on, from abolition of tuition fees to public ownership. It’s only by unleashing democracy, inside and outside the Labour party, that the anti-democratic backlash will be overcome.

'We knew we were going to be hit by a tsunami’: John McDonnell Interview

Source The Guardian

John McDonnell arrives with his shirt open at the neck. As the photographer sets up, he says: “I must put a tie on. I want to look respectable.” He rummages in his rucksack and draws out a tie of a very conservative deep blue. As he puts it on, the man who once declared his mission to be “generally fermenting the overthrow of capitalism” jokes: “I’m trying to look more like a central banker.”

This fellow veteran of the Bennite left is Jeremy Corbyn’s closest ally in a shadow cabinet that contains very few true friends of the new Labour leader.

The cartoonish version of his shadow chancellor is a belligerent, divisive, leftwing firebrand. He certainly has a history of incendiary rhetoric and he is unquestionably leftwing. He is not humourless and, if he can be abrasive, today he is doing his best to turn his most emollient face to the world.

He acknowledges that many senior Labour MPs were appalled by his appointment and influential trade union figures urged the Labour leader to make a less contentious choice. The rightwing press have raged against him even more than they have about the election of Corbyn himself. “It was a difficult decision for both him and me” and “we knew we were going to get a tsunami hit us.”

He is a man many love to hate. Why is that? He puts it partly down to “swimming against the tide” for all those decades when his brand of leftwing politics was despised and ignored by successive leaders of the Labour party. He reveals that his wife and family had their doubts about whether he should take it on: he had a mild heart attack two years ago. “I had warnings from them: ‘Come on, look, are you sure?’ But it had to be done.”

After many conversations with Corbyn, they concluded that they had to “ride the controversy” because it was essential that leader and shadow chancellor were as one on economic policy. “We didn’t want to go through a Blair–Brown era again where leader and chancellor are falling out all the time or what went on with Ed [Miliband] and Ed Balls. I think Jeremy’s point of view is ‘I’ve got to have someone who I one hundred percent trust.’ ”

The composition of the rest of the shadow cabinet, he argues, shows that they are not being militantly factional and are genuinely interested in having “a really broad-based team” representing all strands of Labour opinion. “As big a tent as we possibly can.” They started making overtures to people before it was announced that Corbyn had won and he is still appealing to some who quit the shadow cabinet for internal exile on the backbenches. He hopes that they will think again and cooperate on the development of policy. “I’m still having that conversation now with people to see if we can get them back into some role. I think we might be able to.”

Like who? “I would like Chuka [Umunna] to come back, desperately.” He mentions some more of those who have refused to serve. “Shabana Mahmood is a brilliant talent for the future. People like that I’d really like to get back. If we could get them back on board it will send a message that we really are a big tent.”

His friend’s debut week as leader has not been a smooth ride. Even sympathisers have been tearing out their hair over an often shambolic first seven days of unforced errors and forced U-turns which gifted a lot of ammunition to their many enemies in both the press and the Labour parliamentary party. McDonnell acknowledges that it has been “a bit rough” and puts the mistakes down to naivety. Whatever mutinous colleagues say to the contrary, he claims to be completely confident that his friend will lead Labour into the 2020 election.

His own appearance on Question Time involved two apologies. Once for saying that he wished he could have assassinated Margaret Thatcher – “an appalling joke”. And again for a notorious speech in which he commended the bravery and sacrifice of the IRA for using their bombs and bullets to bring “Britain to the negotiating table”. Some of the audience applauded his expression of regret. Others have found his explanation for the IRA speech – that he was praising them to try to sustain the peace process – utterly unconvincing. “I set up the all-party group on conflict prevention and conflict resolution. I chaired it,” he says, but acknowledges: “There’ll be some I’ll never convince.” Part of his problem with presenting himself as one of nature’s peacemakers is that he has a lot of form when it comes to suggesting political opponents should meet violent ends, talking about “lynching the bastard” in reference to the Tory Esther McVey and having “a recurring dream about garrotting Danny Alexander”.

He smiles: “I know.”

Where is that coming from? Liverpool, is his answer. “I’m from the north. You can take the boy out of the north but you can’t take the north out of the boy. I’m a plain speaker.”

Does the mellow version of McDonnell extend to having anything pleasant to say about the man he now shadows, George Osborne? “I’ve tried to get to a situation where you mature, where you don’t personalise your politics. But I go back to my constituency and you should come to my surgery some time, you’d sit down and weep. I have people begging me for a house. I’ve got families living in beds in sheds. Shanty places. So I think Osborne is cut off from the real world. I’m going to challenge him to come down to see them. What angers me is that they don’t have any understanding of the consequences of what they’re doing.”

This promises lively fireworks ahead when he clashes with a Tory chancellor he calls “immoral”. But to opponents within his own party, the message is relentless conciliation. A manifesto he wrote three years ago called for a tax raid on the wealthiest 10%, banning companies from paying their chief executives any more than 20 times the lowest wage, and a new top rate of tax set at 60%. But he says he is not going to dogmatically impose his ideas. What he will instead announce is policy commissions to investigate various areas and he hopes for participation from a wide range of opinion not just confined to the Labour party.

He wants to change the Bank of England’s target so that it considers not just inflation when setting interest rates, but also the effect on jobs, investment and inequality. One of his biggest and most hotly contested ideas is forcing the bank to print money to fund infrastructure projects: so-called “people’s quantitative easing”. The governor of the bank, Mark Carney, has suggested that this would so compromise its independence that he could not remain as its governor. Rather than upbraid Carney for straying into political partisanship, McDonnell mildly responds that he is “going to try to meet him as soon as possible”.

For the first time in many decades, Labour has a shadow chancellor committed to the nationalisation of some strategic industries. Polls suggest that taking the railways back into state control is popular with a majority. He is likely also to strike a chord when he describes the recent sales of shares in chunks of the Royal Mail and Royal Bank of Scotland as “complete rip-offs” that have left the taxpayer seriously short-changed.

What is perhaps most interesting in terms of his personal ideological development and the way in which debate has shifted over the decades is that he no longer advocates, as the left did back in the 1980s, a return to nationalisation across the board. BT was once a state company. Would he seek to bring it back into public ownership again? “Too late,” he says. “Love to but too late.”

Lack of voter faith in Labour’s economic competence lay at the heart of the party’s defeat back in May as it also did when they were thrown out of office in 2010. If the public did not trust Gordon Brown and Alistair Darling with the economy, nor Ed Miliband and Ed Balls, why are they going to trust Jeremy Corbyn and John McDonnell?

“They’re not going to have to trust me or Jeremy Corbyn or whatever. They’re going to have to trust the Labour party.”

He says he wants the membership, which grew during the leadership contest and has drawn in more Corbyn enthusiasts since the result, to get involved in policy making. This also hints at how he and Corbyn think they can mobilise support in the party as a counterweight to the hostility of the great majority of Labour MPs.

“We’ll go on the stump immediately after the party conference, get as many members out there as possible, in the same way that Jeremy went on the stump before. But the difference now will be not urging people to vote for us, it’ll be about urging people to get involved in the discussion. I think Labour MPs will be shocked at the way in which they will be engaged in a democratic process of determining our policies.”

His admirers say McDonnell is a serious thinker about a radically different way of approaching the economy. Asked which writers have most influenced him, he rattles off several names of contemporary, leftwing economists, but at the top of his list he places Karl Marx. ‘You can’t understand the capitalist system without reading Das Kapital. Full stop.’

He says this with a knowing twinkle. That is not an answer you would have got from any previous Labour shadow chancellor in living memory. Nor from any central banker.