What do Hillsborough, Lance Armstrong, Jimmy Saville, Lady Butler-Sloss and the Institute of Economic Affairs have in common?
The United Kingdom is a relatively congenial place to live. It is fairly tolerant, generally law abiding and relatively non-violent, with the expression of extreme views really not very welcome. UK is like its weather: far from perfect but relatively moderate. And yet! That very tolerance permits of exploitation, so long as it is not too explicit, overt and extreme. Such a system is surely worth conserving and defending.
At the original inquest on the 96 football fans who died 25 years ago at Hillsborough, the coroner wrongly recorded a verdict of accidental death. Twenty years on, and only due to the heroic persistence of relatives of those who died, the police and all public agencies were required to release all relevant documents. Police files were found to have been systematically doctored (116 alterations to statements) so as to absolve the police from blame and suggest some Liverpool fans were responsible, a point forcibly picked up by the Murdoch owned Sun newspaper. In 2012, the original inquest verdicts were quashed and new inquests ordered, and apologies were offered all round from the Prime Minister, the local Police, the Football Association and the then editor of the Sun. The legal process rumbles on (http://hillsboroughinquests.independent.gov.uk/) at huge expense to ensure the system will be seen to at least make nominal improvements for any future Hillsborough disasters.
Continue reading Defending the System
David Cameron has recently claimed to know a thing or two about economics. So why is he surprised the privately owned ‘big six’ energy providers appear, as Ed Milliband put it, to be “ripping off” consumers? It’s not that they are particularly evil, unethical or exploitative, but that they are dominated by the same economic ideology which led the Thatcher government to privatise gas and electricity in the first place and which Cameron claims to understand. And that same ideology dictates that it is the legal duty of those private companies to maximise shareholder wealth. Such maximisation necessarily involves them in taking decisions which result in the disadvantage of parties other than shareholders, including, as far as they feel is judicious, their customers. So why is Cameron ‘disappointed’?
It is the ideology of Milton Friedman, simplistic populariser of the neoliberal belief. A cornerstone of the ideology is Friedman’s “empirical generalisation that it costs the state twice as much to do anything as it costs private enterprise, whatever it is.” The message was often stated. That particular quote is from a lecture Friedman gave to the Institute of Economic Affairs, free market think tank lobbyists, much loved by Margaret Thatcher, some 18 months after she had become leader of the Conservatives. The only supporting evidence offered by Friedman was that his son had pointed it out to him. If it turned out not to be true the basic justification for privatisation would be shown as quite spurious.
Continue reading Why the ‘big six’ energy suppliers are “ripping off” consumers
Though celebrations have been a little muted, the fifth anniversary of Lehman’s demise should not be allowed to pass without remark. The imponderables of Armageddon, financial melt-down and economic catastrophe seem to have been avoided for the time being at least. The masses may continue in poverty, with huge numbers unemployed, but the Bob Diamonds are OK, and some valuable lessons have been learned.
The banks should obviously not be allowed to sell sub-prime mortgages or other derivative securities whose risk is deliberately obscured. Government agencies should not be allowed to support the loans for such purchases. Banks should clearly be reduced in size to less than too big to fail and be required to carry sufficient capital to make them safe to carry the risks they incur. They should not be allowed to trade on their own behalf with other people’s money. The fundamental ingredients of financial derivative assets must be clearly stated so their riskiness can be assessed, or their sale made illegal. Financial transactions should be subject at least to a nominal tax to reduce automated ultra-fast transactions, and help rebalance the economy from the derivative to the real. Ratings agencies, auditors and regulators must be legally liable for the reasonable truth of their various statements of approval.
Continue reading Lehman Brothers’ Bankruptcy Celebrations
The Parliamentary Commission on Banking Standards published its 571 pages and its chairman, Tory MP Andrew Tyrie, hopes ‘the higher standards it advocates will help revive the banking sector and the UK generally’. ‘This is not,’ he assures us, ‘a bank bashing report.’ Indeed so. It is as supportive of banking, the City and its financial activities as such a report could be, while talking the language of reproof and proper correction. Its disapproval of massive bonuses, especially those being paid for failure, is given full voice. But proposed substantive action is limited. The extension of deferred bonus payments with easier “clawback”, seems unlikely to make much difference.
A much repeated complaint in the report, especially of people at the top, is the lack of personal responsibility and accountability. Those responsible for the decisions and behaviour which led to the sector’s failure have continued to be rewarded with massive bonuses and pensions. To address this the report recommends top appointments having to be authorised by the regulator who will identify specific responsibilities. Would that make any difference? Would the regulator have rejected the appointment of Fred Goodwin or Bob Diamond. Or any other likely incompetent?
Continue reading Banking Standards Apple Pie
How does a basic item of clothing, say a shirt, come into existence. Where does the cloth come from? And the colours or dyes, the buttons and thread, the machines that cut the fabric and the machines that stitch the bits together? And who dreamed up the designs and how did they get printed on the fabric? And what brought all these things together to produce the finished article? And how did it get distributed to people wanting such a shirt? The answer to all those questions is, of course, ‘the market’. No other form of economic organisation gets anywhere near that level of efficiency or provides a comparable degree of choice. All the tools of central planning and control of the former communist states, proved incapable of organising the production and distribution of shirts that people actually wanted to buy. That is the beauty and power of the market for something as simple as a shirt. For more complex products, and most products are, the competitive advantage of the market over any alternative, is far greater even than that.
The thing that makes the market so effective is competition: the existence of alternative suppliers of cloth, dyes, thread, machines and the rest. Without competition , the market would be no different from the central planning and control system. That failed not only because of its inherent inefficiency and proneness to bad decisions, but because the empowered bureaucracy was vulnerable to self-interested, even corrupt and illicit decision making. Monopolists are in exactly the same position: inefficient and vulnerable, and likely to take corrupt and predatory decisions to further their avowed aim of maximising shareholder wealth.
Continue reading Free Markets Controlled by the Unaccountables
David Cameron is following a long line of prime ministers claiming that British society is in moral decline and ‘broken’. The country has always been ‘going to the dogs’. Harold Macmillan suggested it all started when we stopped going to church on Sundays and so lost any regard for what he referred to as ‘Christian charity’. Three questions arise: Is it true? What is the cause? And what can be done about it?
The British system of social relationships between people, and the structure of social institutions and organisation which shape our association with others, are by and large fairly harmonious. Our daily experience of interactions with others, no matter the degree of difference between our ethnicity, gender, age, ability, or economic position, is generally based on mutual consideration and courtesy. Only among football crowds does consideration habitually give way to overt antagonism and even then it is almost invariably laced with humour. Rioting and looting is an exception, and the generous efforts of people in the clean-up operations confirmed the general rule: society is not broken. Yet.
Continue reading Who’s Breaking Society Now?
It seems impossible to ignore the Murdoch saga: the seedy old martinet, his chosen heir apparent and the family sycophants and hangers on, shades of the Duvaliers’ era in Haiti, or a dozen or more banana republic tyrants. The Murdochs are clearly prepared to be as ruthless and dishonest as it takes in pursuit of their own self-interest. Their dishonesty, now being revealed daily, was confirmed early on, for example, by Harold Evans, much respected editor of the Times, when the Murdochs took over. Assurances of continued editorial independence were made as a condition of the acquisition, but within a year ‘every guarantee had been broken’. Evans concluded that the Murdochs would ‘promise anything to gain control’. As they are doing now to gain control over BskyB.
The Murdochs’ utter ruthlessness is also being demonstrated daily by the continuing revelations of criminal activity sanctioned in their organisation, and not least by the abrupt closure of the News Of The World with the destruction of around 200 jobs, in some vain attempt to rescue vestiges of public respect for the family.
Continue reading The Long Term Impact of the Murdochs’ Disgrace