See-through Society – transparency

Cleaning Up

Chuka Umuna, the Shadow Business Secretary, recently called for companies in the UK to declare their tax payments to Her Majesty’s Revenue and Customs (HMRC). This followed the widely reported, bad publicity surrounding the minimal tax payments made in the UK by Amazon, Google, Starbucks and many others. Whilst not wishing to name and shame, he believes that all companies should glory in the tax they pay. Justin King, head of Sainsbury’s, one of the big four food retailers in the UK, made a similar statement, suggesting that consumers could make change happen through their custom. International Corporations have been cleaning up by transferring their tax liabilities to low tax regimes and tax havens – they can virtually choose where to pay tax.

Nick Clegg, the leader of the Liberal Democrats and Deputy Prime Minister, states in his most recent letter to LibDem members: “The idea of combining a strong economy with a fair and transparent society is something that will also be seen in an international context this year when we host the G8 in Northern Ireland.”

Transparency is becoming the mantra of the well-meaning in society and many would say “about time, too”. While not the answer to all of societies’ ills, it is a precursor to re-directing society towards solving some of the greatest problems we have – because transparency of key information allows people (civil society) to make informed decisions – either on their own (through the marketplace) or through their government.

Sweeping away the leaves

For years, organisations like Transparency International have campaigned for dramatic improvements in the way governments, publicly owned organisations and companies provide important information. The danger with secrecy (and the UK remains a very secretive country) is that beneath the opacity of information lie secrets that those with vested interests wish to keep hidden. Whilst secrecy is always claimed by Governments to benefit all of us where they wish to enforce it, the evidence is usually to the contrary. The benefits of secrecy accrue to vested interests and results in economic mismanagement at best – at worst, in countries which are, for example, resource-rich and economically poor, it leads to mass corruption, impoverishment of the mass of people, illness and suffering.

Economics and economies thrive on the open availability of good information and only monopolies thrive on secrecy. It is only when information is made available that proper judgments can be made by the mass of participants in the marketplace.  In a world population of billions, markets can only work where information is not controlled from the top down. Stockmarkets and financial markets depend on the freest possible flow of information to the widest audience and there has been a progressive move towards freer access to information along with the spread of technology that enables it to be used. The driving force is the same human one that drives freedom and democracy. There is an inherent motor behind individual freedom and the right to self-govern and the same motor drives transparency because it is with transparency that the potential can be seen and with transparency that informed decisions can be made.

Transparency is not closing your eyes when the wind blows

In the UK, a nation that always appears to be governed by a conservative mindset where change is difficult, where the Official Secrets Act dominates, where GCHQ and CCTV appear ubiquitous, where the challenge to maintain a fairness between an open society and a society that bears down on terrorism often seems so far weighed in the latter’s direction, the motor for transparency often seems to be running in neutral. Conservatism (especially in England) means keeping things the same and with direction from the centre. This often means that vested interests operating from the centre or with the centre will disallow the move towards more openness. The Labour government provided a Freedom of Information Act, for example, to the chagrin of its then leader, Tony Blair., who was and remains a centrist. In a sense the provision of the Act was odd, because Labour remains as much a centrist party as the Conservatives. Nevertheless, the human motor for more transparency was stronger than the urge to opacity in this case – even if the Act is not itself allowing the freedoms desired.

Yet, it was a step towards a more open society and towards transparency that many countries would relish. A free press (the subject of so much discussion following and before Leveson) has helped to unearth the secrecy in banking, for example, that has plagued the UK for centuries. Manipulation of LIBOR, money laundering, sub-prime casino banking and support for tax havens may have helped to make London a key banking centre but it did not insulate the UK from the collapse in 2007 – it made it far worse – and “only when the tide goes out do you discover who was swimming naked” (Warren Buffet commenting on naked transparency). Sometimes, opening our eyes hurts.

Nothing to Hide?

One example of eye strain concerns the opacity of the banks and their cozy relationship with Government (not just in the UK). The secrecy allied to the special relationship has hindered the UK to an intolerable degree. Under Nigel Lawson (one of Margaret Thatcher’s Chancellors) the post-manufacturing society was hailed as the future as banks gained more freedoms and we all kept our eyes closed. Yet, we now see Germany as Europe’s economic motor because of its manufacturing prowess and the revitalization of the British motor industry (although hardly any it owned by Brits) is now lauded much louder than our “success” in financial services. The illusion of banking remains, though – as a key driver of the economy rather than what it really is – a provider of services that should assist the real economy. And the illusion has been propped up by a lack of real transparency which enables banking to remain a secret society.

Transparency is the ability to be strong enough to reveal information because there is nothing to hide. The true strength of transparency is the confidence that it portrays. So, the opportunity for companies and Governments to be open, to be transparent, only exists where there is not much to hide. Clearly, international companies that are paying virtually no corporation tax on sizeable UK earnings have something to hide; clearly, those (companies and individuals) who put money into offshore tax havens or to secrecy jurisdictions may have something to hide.

If banks and individuals had nothing to hide, Wegelin, the oldest Swiss bank, which is closing as a result of its plan to take on all the clients of Swiss banks that had decided to be more transparent with the US authorities over tax evasion would still be open for business. Their clients, who wished anonymity, made their way to Wegelin – which had been founded in 1741. They knew they were doing wrong and Wegelin knew the same – and the bank is closing after a hefty fine from US regulators and after 271 years. Secrecy was in the bank’s DNA – it could not evolve to the realities just beginning to dawn in the 21st Century. It became extinct.

So, lack of transparency in a world with eyes opening can be also hurt and be expensive and the US executive is now proving to be vigilant on  behalf of transparency on a world-wide basis – as is the US Congress which passed legislation in 2010 called Dodd-Frank. Part of this related to section 1504 which requires extractive industry companies registered with the SEC (Security and Exchange Commission) to disclose their revenues and taxes paid on a country by country basis worldwide. This includes all companies registered on the NYSE no matter where they are based. The EU looks to be following this example so that the people of resource-rich, economically poor countries will know how much money their precious natural resources raise in annual income and then can follow through what their Governments do with that money.

However, the American Petroleum Institute and the US Chambers of Commerce (vested interests if ever there were) are trying to fight back and have initiated a law suit in the US to nullify section 1504

How curious that libertarians fight on behalf of secrecy – the proponents of a free market arguing against a main tenet of economics – free information.

Battle lines are being drawn – the light and the dark.

21st Century Schizoid Man, King Crimson’s take on Spiro Agnew, was written in 1969 but the 21st Century does even now witness such schizoid tendencies characterized by corporate and governmental secretiveness, emotional coldness and apathy that typifies the illness. The lack of openness is world-wide and exhibited by the Chinese authorities’ suppression of its Southern Weekly newspaper when an editorial criticizing Chinese leadership was thrown out and one supporting the leadership was superimposed. Anyone reading Martin Jacques book “When China Rules the World” would not be surprised at the suppression. It characterizes the central leadership of this “civilization state” but Jacques argues that we see it too much with western eyes. But, what if we in the West are right and democratic freedom and openness are the motors that drive our human endeavours? What if the Chinese have, for 2,000 years, actually got it wrong. As China grows stronger, the move away from freedom for information will intensify and Chambers of Commerce will battle against laws for transparency that they will argue provides Chinese firms with advantages. This is a battle that has to be fought world-wide.

Our pursuit of progressively greater freedom (whether press freedom, open markets, democracies, freedom of speech) and equality (of race, religion (or non-religion, sex, sexual orientation and more) appears to be the real motor rather than the schizoid tendencies of the centrist control of monopolies, dictators, and vested interests. Transparency is a hugely important base upon which this basic human drive can persist. In a post-2007 world where the risk is that wealth is being driven to the top 1%, the drive for transparency is fundamental.

Leveson – 2000 pages for the 19th Century

A couple of weeks ago, I posted:  Selling Off the Fourth Estate – which attempted to outline the momentous problems impacting the print media. These problems centre around the rapid growth of online media, blogs, Twitter and the rest which make for competition in our snap-shot age.

Along comes Leveson and ignores it all! Not just my blog – which as part of the online circus will never get his attention but the whole of the internet. As James Ball writes in the Guardian: quoting Leveson first,

“[T]he internet does not claim to operate by any particular ethical standards, still less high ones. Some have called it a ‘wild west’ but I would prefer to use the term ‘ethical vacuum’,” it reads. “[T]he internet does not claim to operate by express ethical standards, so that bloggers and others may, if they choose, act with impunity.”

The report then suggests there is a “qualitative difference” between seeing, for example, pictures posted online versus on the front page of a national newspaper, noting “people will not assume that what they read on the internet is trustworthy or that it carries any particular assurance or accuracy”.

So, Leveson seeks to wrap up the online media in statutory rope with Ofcom as the judge and jury while ignoring the fact that the print media is dying an agonising death already at the hands of the internet as he reacts (maybe over-reacts) to the public call for action.

Public reaction in the UK is understandably violent against the phone hacking and over-intrusiveness of the press in key cases such as the McCanns and Christopher Jefferies. The desire to tame the press is not new – it has been the case for centuries. But, the real harm has been done recently by the internet and the freedom to publish on it which has taken much of the business of publishing away from the printed media.

There are many articles written about the likely death of print media and anyone who talks to journalists will know that they now operate in a silo that is getting smaller and smaller. Leveson has missed the opportunity and the UK has missed the argument. Appointing a judge to rule on the press was undoubtedly going to lead to a legal framework rather than any new understanding of what investigative journalism is all about. Leveson is a lawyer and the legal profession (which also makes up so much of our leadership in the UK) does not have the ability to “judge” society’s ills. They make law and judge on whether the law has been broken – lawyers are real dangers when they try to set the standards or try to understand what ails society.

So, the mistake in appointing a lawyer / judge is now apparent. The print media’s death will merely be hastened if a statutory rope is tied around it. The Fourth Estate – the crucial monitor of our executive, legislature and legal processes (as well as of society) – will be hastened towards the unregulated and “wild west” of the internet. This is happening anyway as more of us publish on it and more decide to give up regular reading of newspapers and weeklies. Analysis is being eroded and headline journalism (just one click away) is gaining momentum.

Leveson is completely out of date on this and ignorance is not a virtue. While TV and radio have managed to compete (so far), it has also suffered. Many online visual and audio news facilities exist and the number of options grow daily. But, TV and radio are not highly analytical. Even in a one-hour documentary, they scratch the surface. The cost of TV remains high and the options to this are considerable.

This means that printed media and its funding remain important and its ability to compete with the internet is so important. Leveson (and the government that appointed them) have missed a key point.

What next? This Government has already stated (through Cameron and Hague) that they are less keen to enact the key Leveson requirements (a legally enforceable press act) than others. This is good even if it infuriates public feeling on this, while gaining support from  Liberty, PEN and many other press freedom groups. What remains a problem is the notion of “press barons” and the difficulty of too much power in the Fourth Estate being held by too few people or organisations.

This and an understanding of the way that the internet is re-shaping the press and how both influence decision-making (at all levels) are the key questions that the “press” has to face. The law as it stands in this country and our desire for the freedom of the press so that it can rail against hypocrisy and totalitarian doctrines of the centre are at the core of our society. The printed press should work to get its act together – the market it attempts to steal by printing lies and which has resulted in the demise of the News of the World and potential court cases against senior management in the industry is already turning against it and to the internet. Government should focus on the twin issues of print press centralism (too few owners) and funding of the printed press and the rise of onilne media.

The UK deserved better than a blinkered 2,000 page report by Leveson that, despite its huge page count, was prepared to spend one page on the internet – the main reason for the drive for circulation that has driven papers like NotW to scandal and illegality.