Scotland and the UK’s Democratic Deficit

It was Bogdanov who coined the phrase “the Dictatorship of Democracy” to describe one of the options for a post-Imperialist Russia. It was Mao Zedong who used the term “Democratic Dictatorship” to Orwellianise the role of the Chinese people to attack the Imperialist spirit of Chiang Kai-Shek.

It may be harsh to turn this phrase on to the UK, but the current referendum in Scotland is showing that there is certainly a Democratic Deficit that being used to characterize why Scotland is turning towards independence (or at the least more devolution) and why English regions and Wales are now excited by the prospect of real, permanent and growing change.

The UK has always had a centralized system of government. Based on English and Scottish monarchic government, the gradual transfer of power to a London-based Parliament composed of the Commons and the Lords testifies to the history of nations that willed government to the centre.

Regional challenges have, over the years, been destroyed – at least until recently. Nothing signified this more than Margaret Thatcher’s destruction of the Greater London Council in 1986 after Labour had won the elections and the Conservative Government could no longer stand its independence. The reinvigoration of London in its new formation – under both Labour and Conservative Mayors – served to provide a key opportunity to test whether the political centre could resist.

Devolution in Scotland and Wales (and the cross-party and cross-religion agreements in Northern Ireland) has been seen as the centre’s evolutionary resistance to change. It was not until the Scotland Act 1998 (just 16 years ago) that devolution was allowed there – having failed in the 1970’s because those in favour of devolution counted to less than 40% of those eligible to vote.

Partly because of the system of elections in the UK (which are first-past-the-post), Governments in the UK have tended to be elected with small percentages of the national vote (around 40%). As a result, the largest minorities gain the majority of the seats (except on rare occasions such as in 2010) and form the Government. This means that regions and nations such as Scotland and Wales may be governed by parties and ideals completely at odds with their own leanings.

For Scotland and Wales, this has been especially galling as they are both, in recent years, anti-Conservative. Whatever they stand for, the Conservatives are not seen in either country as their own. In England, the same can be said for many areas – the South-West (Liberal-leaning), Midlands and North (Labour). It is the south of England (centred around the highly prosperous heartland of London) that dominates national thought and population. Interestingly, London itself is not a Conservative heartland with a tendency towards social democratic ideals, but the outer London Boroughs and the rest of the South-East are dominated by Tory blue.

Democractic Deficit

Centralisation of power is the norm in the UK. The Centre makes all the decisions and regions (outside of Scotland) have modest powers. Most local authorities have decision-making authority over budgets for street lighting, refuse collection, local social care, local policing and similar but the assault on education and on local authority funding from the centre has been fierce in recent years and strengthened the stranglehold of Central Government. Education is a good example. The vast majority of state secondary schools are now Academies – outside of local control and reporting directly to the Secretary of State for Education. There is argument on both sides, but the centering of power into the Department for Education shows itself as part of a default mechanism in England. In Scotland and Wales, this has not occurred.

For Scots, the desire for change has been in evidence since the failed referendum in 1979. The recent debates on Independence focus on the “Yes” position as positive and the “No” position as negative (even if it is named “Better Together” the argument of this position has been entirely negative). David Cameron may have punctured the UK by allowing the referendum to be characterised in this way and none of the UK parties have been able to capture the essence of what positively makes the UK worth having apart from a nod to tradition and the past.

The reality, though, is not much different. Scots do not see the Conservative Party as relevant to them and while devolution has provided much decision-making power, the voice of the UK, spoken through Cameron and his ministers, is a daily reminder of the downside of Unionism. That voice speaks from elsewhere.

Before Cameron was Brown and Blair. Blair was characterized by centrist governance, dogma and, although leading Labour, was still seen to represent a distant (by miles and ideas) government. Brown was so dogged by problems (international finance and personal) that despite being Scottish, he fared no better. He was also a “died in the wool” centrist.

This has meant that the desire for self-government is also a desire for real “voice” – one that inspires people. Most Scots are no longer inspired by politicians that they see as remote in terms of distance and in terms of policies. Around half the Scots may well vote that way on 18th September.

Democratising the “Democratic Deficit”

The dictatorship of democracy (that leads to the democratic deficit) by the largest minority is central to UK politics and has been throughout its history in a country that has a relatively benign and social population. Of course, this is not the case in Ireland – a special case. In the rest of the UK (Great Britain), the democratic deficit has not caused national strife since the Civil War in the 17th Century – where there was no democratic ideal even with Cromwell. Apart from skirmishes (such as over the poll tax under Margaret Thatcher), British people have been notably sanguine. There was no Freedom of Information until Tony Blair (and there are many exceptions to this) and ministerial privilege can overturn national accountability such as in the alleged corruption at BAe Systems in Saudi Arabia.

However, the Scots have slightly opened Pandora’s box. Out of this referendum may well come the opportunity to reduce the deficit at least. This has long been a Liberal tradition – blind-sided by the link with Social Democrats in the 1970’s – before the Liberal Democrats came into being. Liberalism was meant to enshrine the spirit of “localism” – against the centrist doctrines of Conservatives and Labour. This localism would have prized a federal Europe (EU) and been at the forefront of devolution for Scotland, Wales and the regions of England.

Devolving as much power as possible to the most local area possible reduces the Democratic Deficit. This is hated by traditional politicians because it loosens power. In a world where national politics is such a profession, it becomes harder to achieve. It is argued that local power begets local corruption – the type of prolonged power that means the same party stays in power for too long and becomes corrupted.

This means that the second pillar of Liberalism, voting by proportional representation, is needed to offset the potential for local dictatorships.

The people of the UK are not naturally inclined to shake up the centre and their desire to maintain first-past-the-post elections shows a desire for little change. It may be that the Scots show the way to change and a reduction in the Democratic Deficit whether they vote “Yes” or “No” on 18th September. It may be a big decision for the Scots – it it already a potential game changer for democracy in the whole of the potentially dis-United Kingdom.

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A Bermuda Triangle off the Black Sea

Russia, Ukraine and the Triangle of Mis-rule

 

Everyone knows of the Bermuda Triangle. Not many know of the mysterious area just off the coast of Ukraine that has also suffered a number of strange activities. Various disappearances have occurred in this area which some call the Black Sea’s Bermuda Triangle.

 

Others, not so swayed by superstition, also use a similar phrase to describe the politics of the area. In their paper, “the Black Sea and the Frontiers of Freedom”, Ronald Asmus and Bruce Jackson called that region “the Bermuda Triangle of western strategic studies”. It is an area of confusion, forever (or so it seems) bound up with the history of Russia.

 

Russia’s history is one of suffering and hardship. Its people are hardened by centuries of serfdom, relative poverty and rigid rule from the centre. It is also a history of power and control: from well before the first of the Tsars (Ivan IV) through to the Romanovs, via Lenin and the short-lived Communist regime to the present day. In the West, even after so many years, we misunderstand the core drivers behind the leadership and the people.

 

Russia changed dramatically after the 1905 Revolution and then the October Revolution of 1917 into the expensive experiment that was Communism. Marxist thought was “developed” through Lenin and Stalin into a model of dictatorship that, whilst a complete political change from before, continued the power to rule from the centre.

 

The fall of this elite in 1979 under Gorbachev was an opportunity to ally Russia with western thought on democracy and economics but the power of libertarian economics was too much. For a time, the rush for economic power was electrified across Russia as an elite (the Oligarchs) wrested the power of the economy from the State. The new gangster rule – hugely corrupt, murderous and allowing no opposition – took over from the endemically corrupt regimes that began with Stalin and his underlings.

 

Yeltsin enabled this robbery and corruption by his lethargy and inability to rule a people that prided itself on central control. The West, misunderstanding the rigours of power in Russia, stood by hoping that the new economic opportunities would, somehow, generate a desire for democracy. But, market economics does not need democracy to survive (viz. China) and the Russian economy was not becoming a market economy but a new kind of centrist yet libertarian economy: one that was predominantly corrupt (hugely corrupt) and where individual centres of economic power (whether oligarchs or regional centres) dominated. This new economy was, for a time, the true government of Russia.

 

The Triangle of Mis-Rule in Russia

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Vladimir Putin came on to the scene relatively late but enshrines the old order of (mis) rule. He made his way to the top by promising an end to economic shambles and strong centrism in terms of government. The years of Gorbachev and Yeltsin are seen by him (and many Russians) as a disaster – leading to governmental shambles, a loss of Russian honour and an economy shared out between a few ruthless gangsters.

 

Putin has worked to centralize government to himself (the new Tsar) while piecing together an economy based on market basics but which remains heavily unbalanced by corruption and key centres of economic power. This Triangle of Tsarist mis-rule, corruption and economic centres of power are not dissimilar to the pre-communist set-up. It is a reversion to the norm in Russia after communism and the Gorbachev-Yeltsin period of chaos. It is a reversion to what Russia knows best and what its people are still willing to accept – knowing that they cannot have any power of thought, that they will be ruled from the centre both in terms of economics and in terms of the way they live; knowing that corruption will endure and that they will be OK as long as they have enough to get by on and keep quiet. It is a world where the Duma has resumed its original status – merely as an organ to assist the ruler – the Tsar (Putin) – rule.

 

China and Russia – centrism and market economics

 

The world’s heartbeat of communism pulsed in Russia and China. Both countries suffered tremendously for the experiment of their own type of communism – Lenin-Stalinism or Maoism. Both have now moved towards what we perceive as market-driven economies. We (the West) think that our form of economics has won out in both countries and that democracies will automatically follow.

 

Unfortunately, both models show how market-driven economics can be developed in different ways and to suit the ruling elites.

 

China operates as a legalist society whereby the ruling elite sees itself as above the law. This is a blurring of its communist ideology whereby the state is run for the benefit of the ruling ideology. The fact that communism no longer exists means nothing: a ruling elite is considered by itself to be above the law.

 

Of course, the economy is managed very differently to how it was managed under Mao. Deng changed this to entwine market forces within a rigid centrism – made real by ownership of the banks and finance and of key industries and resources. While most pricing mechanisms are set by the market, it is massively influenced by interest rate manipulation, by endemic corruption and by key units of power in local government – and by the family-focused culture. This is a mix of market economics, centrism and Confucianism that is uniquely Chinese.

 

This is wholly different to the Russian model which is far more dominated by the strong man culture. In this way, it could be argued that there is more hope for change. The intertwining of Confucianism with the long-term centrism of Emperor rule through to the Communist rule and now the post-Communist legalism makes China’s “Civilisation State” very hard to break down. Economic change was relatively easy as this was only communist for a relatively short period. Governmental change is far harder to crack.

 

In Russia, this may be true as well but there is no equivalent of Confucianism in Russia and the state apparatus is not as broad in Russia as in China – it was destroyed under Gorbachev and Yeltsin. So, in that short period, the West hoped for real change. Now, Putin has embodied the state apparatus in himself as Tsar.

 

Ukraine – Catch a falling Tsar

 

Putin’s aspirations for a renewed Russia have seen him march into the Crimea and undermine Ukraine. Ukraine was for many years just a smaller version of Russia in Russian minds – Ukainians were termed “Little” or “Southern Russians” in the 19th Century and Stalin saw them as a tribute nation (similar to the way that China views its neighbours). The Russification began in the 1860’s and it was only the fact that Kruschev was Ukrainian that gave them a measure of independence (and Crimea) around 40 years ago.

 

But, Ukraine is similar in other ways, too. It is endemically corrupt from the top down. It is not just IKEA that has found the corruption difficult to penetrate.

 

Ukraine has seen endemic and high-scale corruption for many years. In 2006, for example, Global Witness (an anti-corruption NGO and this year’s winner of the TED award) published “It’s a Gas” – an expose of the corrupt Turkmenistan – Ukraine gas trade.

 

The report highlighted the case of former Ukrainian Prime Minister Pavlo Lazarenko, who, it claimed, syphoned off huge amounts of money from questionable business practices: money that was then funneled into Swiss Bank accounts. Lazarenko (who served time in the USA) recently had substantial assets seized in the US.

 

The Global Witness report also highlighted the barter economy which anti-corruption experts know as one of the best-known ways to hide massive money transfers illegally.

 

Yet, Lazarenko was not part of the Government clique that Ukrainians pulled down earlier this year. He was closely linked to the earlier regime of Yulia Tymoshenko (the West’s best friend) – very closely linked as an article in January showed.

 

Those in power in Ukraine followed the Russian model. Little Russians modeled themselves on Russia in many ways and this was not limited to one party or one clique. The EU desire to bring Ukraine into the EU tent was not necessarily misguided in the way that Nigel Farage would have us believe but the powerful in Ukraine are essentially part of a highly corrupt clique that dominates the country in the same way that Russia is dominated by its own corrupt. They have divided up the nation’s assets between them.

 

Tsar Gazing

 

This is one reason why Putin is keen to bring Ukraine back into Russia’s control. The horror of the break-up of the Soviet Union was bad enough but assuaged by the economic benefits that accrued to the Putin elite and the retention of power in the hands of the few. This was mirrored in Ukraine – the home of many Russians. The call to patriotism has been partly a response to the shouts for democracy but underneath is a need for Russian mores to be maintained.

 

This is the Triangle of Mis-rule: Tsarist centrism, corruption and economic centres of power that Ukraine has witnessed since it was deemed to have left Soviet control – an exact image of big brother Russia. This is why it is so difficult to break down the stranglehold. Ukraine is fixed within the Bermuda Triangle of the Black Sea.

 

The EU may well have been Tsar Gazing when it simplistically assumed that riots on the streets could topple a government in a bankrupt nation with such a history and such conventions. It appeared not to understand enough about the pull that Russia had on it: Russification going back over 150 years and a model of the economy and government that is a replica of the Russian model.

 

Breaking this down was bound to be a challenge – but it is not clear that the model is sufficiently understood even now. Many write on the endemic corruption but provide little guidance to solving it. Many write on Russification but have no answers other than a hope that “democracy” will triumph. Others write about Putin’s urge to control without too much understanding of the Russian legacy that goes back to the 15th Century.

 

Can Ukraine break free?

 

It is not just one aspect or another that has to be broken in Ukraine. They have the three corners of the Triangle of Mis-rule to break in addition to the large numbers of Russians – patriots to Russia – in their midst and the larger numbers just over the border in Russia itself.

 

This is a massive challenge and there is no rapid solution.

 

Ukraine is in a mess – as we know. It has lost the Crimea and may well lose the Eastern half of the country. It is not often stated that this may be the best medium-term solution even if it is not one that appears wholly palatable. A loss to Russia of this scale may appear too much and it is, of course, for Ukraine and others to decide. But, the devil’s triangle that operates in Russia and Ukraine is endemic to the Eastern side of the country in a way that could be shaken off more easily in the West. The unthinkable may have to be thought. Without much effort, Putin could regain the Eastern side of Ukraine and the West of Ukraine would then be welcomed into Europe.

 

It is highly likely that governments in the West are already planning for this. As ethnic Russians pore into Ukrainian security buildings, it is clear that the fight for Eastern Ukraine is in its early days. The Western half can, through massive economic help by Europe, be purged of corruption, centrist rule and economic stagnation. Without the East and as part of Europe, it can be made good. While it remains affixed to the Russianised East, it is unlikely to do so for many years.

 

Russia is likely to see eastern Ukraine back in its orbit and remain enclosed with the Triangle of Mis-rule that epitomizes both. What happens after that is something that is also, I am sure, being actively discussed in governments throughout the world.

 

The problem is that nothing will really have changed – Putin’s Russia is endemically riddled with forms of entwined government and economics that are alien to modern-day Europe and the west in general. Changing this will take a long time and Putin, a fit 61 year-old, is in no mood to give up all that Russia provides to him.

 

To an extent, the rest of the world will play a waiting game with Putin. In Ukraine, it may have to understand that Plan B (the break-up of Ukraine) is a potential and real outcome. Maybe, over time, Eastern Ukrainians, bordering an economically advancing Western Ukraine, will begin to appreciate the benefits of freedoms brought by the rule of law that is above all (including government), economic freedoms that are not concentrated in the hands of the few and democracy that can (when done properly) do away with bad government. Maybe, over greater time, Russia (and China) will adapt as well and copy not just the basics of market economics but much more.

 

For the rest of us, understanding the Triangle of Mis-rule would be a good step before the results of misunderstanding are yesterday’s news.

 

 

Trickle-down Economics – The Thatcher Legacy

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This was originally posted in 2013 just after the death of Margaret Thatcher. Now that the Conservatives have amassed a majority at the General Election, I am re-publishing as the message holds even firmer today.

“In our system, everything is done according to a pyramid approach: the order is given from the top and carried out at the base.”

No, this was not Margaret Thatcher but Jiangwen Qu – professor at Kumming’s Centre for Asian Studies, talking about China. (Taken from China’s Silent Army, Juan Pablo Cardenal and Heriberto Araujo).

He went on to say: “We believe that other countries should follow this model, because if you let everybody give their opinion it is difficult to make decisions.”

Yet, it demonstrates how in our so-called democracy, the top-down theory of decision-making was so faulty. Margaret Thatcher won three general elections because the Labour Party was split between the left-wing (originally led by Michael Foot) and the right, which broke away to form the Social Democrats. In the UK’s ridiculous “first-past-the-post” election system, a party needs only 35-40% of the vote for a substantial majority – that was Margaret Thatcher’s luck. This luck had already been seen in her victory over Edward Heath in the leadership contest in 1975 – although it has to be said that she took full advantage of that luck.

Margaret Thatcher always said that she believed in democracy but made great fortune from its deficiencies. Apart from a rigged election system that gives minor parties full majorities, she did not practice democracy in terms of decision-making. Her cabinet (where the Prime Minister is supposed to be prima inter pares – first amongst peers) was where “the order is given from the top and carried out at the base”. This was her style from the time she became Prime Minister to the time she was thrown out by those who had the substance to rebel after 13 years of her idiosyncratic style of democratic rule.

Leadership and Democracy

Within a system such as ours, Margaret Thatcher did not split the country – her support was far less than half the country (usually than 40% of the voting population) and even those that voted for were split between various streams of the Tory party. She fragmented it. Her supporters in 2013 would mainly be found in UKIP today  although she would have still used the Tory Party as it is the only vehicle for power. The split was far worse as it demonstrated that rule of a democratic party would be by just the largest minority and with extreme policies.

Those policies did change the economic landscape that had been moving to rigid control by sclerotic centrist organisations such as Trades unions, Public Sector, old-style corporations and successive governments that had no vision for society.

Thatcher destroyed the comfiness of society in her own terms and put in its place more top-down doctrines around monetarism. Because liberalism had floundered after the first World War, centrist forms such as socialism and corporatism were, it seemed, all that there was left. Even the linking of Liberals and Social Democrats in he 1980’s was to prove a failure of liberalism as the Liberal Party moved towards a centrist European ideal and away from the localism and bias away from the centre that had characterized the party from its inception.

Strong leadership takes advantage of democracy in the UK (and still does) and the trade-off between the two is a constant battle. Where no leadership exists (and this is a story of today) then democracy does not replace it until some form of leadership appears. In the UK, we still have sclerotic centrist organisations that support the status quo and no vision or leadership for the 21st Century that would inspire the change that wealthier and better-educated citizens would aspire to.

The Centre going Forward

There is a massive danger that the completely centrist and statist system operating in China (as quoted in the first paragraph above) will, because of China’s growth and rapid ascendance, come to dominate political thinking the world over. Liberal Democracy is already wilting in western Europe as major decision-making is made by the unelected (in Brussels and for some time in Italy) with nations such as Portugal, Spain, Cyprus and Ireland ruled from the centre (read Germany). This is far away from localism and screams about the loss of Liberalism. The now-disgraced and jailed Chris Huhne remains a fan of the EU and the Euro – not a surprise that his background is social democracy not liberalism.

The 20th Century was a battleground between the forces of darkness epitomized by  extreme Nationalism, Communism and Fascism on one hand and the forces of democracy on the other. Millions lost their lives and millions more suffered in gulags and concentration camps for democracy and the end of extremism.

The 21st Century battleground is more complex as the war between the different political forces of centrist and localism is splintered by the battles for resources and markets (and by the impending battle for climate and conservation) and between north and south and rich and poor and corruptors and corrupted.

Thatcherism knew only Hayek-style liberalism – an understandable reaction against socialism and the fear that fascism was created around that fear. In its place, The Road to Serfdom (Hayek’s best known work and Thatcher’s quasi-bible) postured a place for Government in monetarism and information provision – working to ensure that the market could work through transparent pricing. This was its limit and disregarded the essence of society (although Thatcher did not assert that society did not exist, she might as well) as did Hayek in his complete opposition to anything that wreaked of socialism – even social democracy was something that Hayek viewed as naturally leading to totalitarianism.

The problems that Hayek missed and that Thatcher and Reagan made possible (and that China is already risking) is that while socialism runs everything from the centre, the opposite camp of economic liberalism naturally tends towards a small minority at the top owning all the assets and all the decision-making apparatus. It is clear from the history of the last 30 years that the rich are getting richer while the poor get poorer (in terms of direct wealth and the supporting services offered to them) and that the dynamism needed in society from the other sectors is dying. Margaret Thatcher notoriously believed that there would be a trickle-down effect. That was nonsense and that is now proved.

Worse, a market-led economy which is based around numbers only (with GDP growth as the religion) leads to huge societal dislocations. The NHS is a valid case where management by statistics leads to deaths and the complete abandonment of human character – as evidenced by the maltreatment of the elderly. The opposite system (as in the USA) based on insurance only leads to only the wealthy having good medical services.

Worse, the motivation by quantity alone means that quality of life is abandoned in the drive for more goods. This is the market at work when left to its own devices. The market is driven by the simplest routes to success – numbers. We cannot be solely market-driven even if the market is the best form of driving entrepreneurialism.

People-centricity not Centrism or top-down

Society has experimented with many forms of government and economics. On the latter, we have a general agreement that market-led economics works best, but it is market-led not liberal or libertarian markets. Market-led means that other decision-making mechanisms are relevant wherever the market tends to extremism – such as domination of the market by monopolies or when the rich 1% control all the assets.

In the West, we believe that democracy works best because we all have a stake and are all equal under the law. Huge, developing countries like India and Brazil have similar philosophies but are riven by corruption. China is a centrist “civilization state” which directs from the core and will, at some stage, erupt into democracy. Russia is a centrist state by tradition and a mafia-dominated chaos.

Where we believe in equality under the law, we have to strike balances which Hayek / Thatcher / Reagan economics cannot achieve. This balance has to ensure that the drive is towards the individual but that society steps in to take out excesses. The balance is developed by society – with civil society and civil society organisations strengthened against the powers of the centre wherever they are.

This is far away from a socialist state where assets are owned and / or controlled from the centre and where equalization is the norm. Balance (whatever it is called) rewards entrepreneurship but would not award bankers or managers in the same way. It would not have made the reduction to 45% in the top income tax rate in the UK – whether or not this had been financially sensible in the short-term – as it shows a total disregard to society and the motivation of the great majority of its citizens that are struggling to prosper.

People-centricity and a focus on society using the best of the market and democracy but using brain power and ingenuity as well as technology represent the 21st Century as we struggle against top-down, centrism, climate change, resource degradation and inequality.

It is not what Margaret Thatcher intended as it requires not just the whip but also the driving force of human capability in all areas of society to see beyond the numbers or the desire to control from the top. It is leadership by motivation and inspiration.

With the death of Margaret Thatcher, let’s lay to rest trickle-down economics  along with socialism and fascism.

When Bush Senior said “it’s the economy, stupid”, society was shelved.

Let’s talk society not just economics. Human brain power not numbers. Ingenuity not GDP. Well-being not hospital stats. Quality not quantity. Society not just economics. Real leadership, motivation and inspiration.

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.