Science as a Candle for Democracy

Candle

July 14th celebrates the storming of the Bastille in Paris on that day in 1789. After the War of Independence in America, it was a second revolution to bring democracy to a kingdom, this time in Europe. For Thomas Paine, writing The Rights of Man shortly thereafter (a quote used by the great Christopher Hitchens in his biography of Paine:

“Never did so great an opportunity offer itself to England, and to all Europe, as is prodiced by the two Revolutions of America and France.”

Whether, over two hundred years’ later, the success of the revolutions is properly signalled by the visit to France of the popularist Donald Trump is highly questionable for his visit signifies a distinct darkening of how democracy is faring in the USA, Europe (post-Brexit referendum), Turkey, the Phillipines, India, China, Russia, Saudi Arabia, Israel where serious strains are being felt and ‘strong man’ politics is under way.

It may be straining credibility to equate these dark concerns on democracy with the election of Norman Lamb, a Liberal Democrat Member of Parliament, to the position of Chair of the House of Commons Science and Technology Committee, a Committee whose purpose is to scrutinise the UK Government on its strategy and programmes in this area. Yet, this linking of science and democracy is central to the changes we are currently seeing in the world of politics.

Science in the Soul‘ is a collection of the writings of Richard Dawkins, where he shows his distinct ability to reason and explain to the full.  In the book, Dawkins commends the science populariser, Carl Sagan, as a man that should have won the Nobel Prize: not for science but for literature and it made me re-read his excellent book ‘The Demon-Haunted World‘, published around twenty years ago.

Sagan’s book is about how “scientific thinking is necessary to safeguard our democratic institutions and our technical civilisation” and is so apt in an era of Donald Trump and Brexit (with its Govian taunts about how not to believe experts) that it should be read and re-read by anyone with a desire to understand our current problems and what is needed to extricate ourselves from the hole that we are digging for ourselves. It was also frighteningly prescient. I reprint here, word for word, a sizeable paragraph from the book that accurately forecasts a significant chunk of our world in 2017:

“….science is more than a body of knowledge; it is a way of thinking. I have a foreboding of an America in my children’s or grandchildren’s time – when the United States is a service and information economy; when all the key manufacturing industries have slipped away to other countries; when awesome technological powers are in the hands of a very few, and no one representing the public interest can even grasp the issues; when the people have lost the ability to set their own agenda or knowledgeably question those in authority; when, clutching our crystals and nervously consulting our horoscopes, our critical faculties in decline, unable to distinguish between what feels good and what’s true, we slide, almost without noticing, back into superstition and darkness. The dumbing down of America is most evident in the slow decay of substantive content in the enormously influential media, the 30-second sound bites (now down to 10 seconds or less), lowest common denominator programming, credulous presentations on pseudoscience and superstition, but especially a kind of celebration of ignorance. As I write, the number one video cassette rental in America is the movie Dumb and Dumber. Beavis and Butthead remains popular (and influential) with young TV viewers. the plain lesson is that study and learning – not just of science, but of anything – are avoidable, even undesirable.”

If an afterlife existed, Carl Sagan would be looking down at the events of 2016, and tut-tutting knowingly, shaking his head and pulling at his long, white beard (all sages have long, white beards in heaven, don’t they?): “I did tell you guys!” he would be shouting, hoping that some mystical ripple would resonate from his screams of despair into our heads, deaf and dumb to all sense.

In the so-called developed world, technology moves forward at a great pace so that major phase transition events bypass us with alacrity. The whole ‘fake news’ environment washed over us only in the last few years as the networked world provided everyone with the ability to be journalists and have an opinion that all can see. As always with new technology, those most capable of utilising it to advantage included the criminally-minded who not just sent emails from Nigeria asking for your money, or emails and texts that would lock up your computer or cellphone if you replied but, more subtly, perverted voting systems and swayed voters by their ability to infiltrate the social networks with lies, distortions and manipulations to a precision that a few thousand votes in the right States resulted in a Trump presidency.

Sagan wrote further on this:

“We’ve arranged a global civilisation in which most crucial elements – transportation, communications, and all other industries; agriculture, medicine, education, entertainment, protecting the environment; and even the key democratic institution of voting – profoundly depend on science and technology. We have also arranged things so that almost no one understands science and technology. This is a prescription for disaster. We might get away with it for a while, but sooner or later this combustible mixture of ignorance and power is going to blow up in our faces.”

“The scientific way of thinking is at once imaginative and disciplined. This is central to its success. Science invites us to let the facts in, even when they don’t conform to our preconceptions. It counsels us to carry alternative hypotheses in our heads and see which best fit the facts. It urges on us a delicate balance between no-holds-barred openness to new ideas, however heretical, and the most rigorous sceptical scrutiny of everything – new ideas and established wisdom. This kind of thinking is also an essential tool for a democracy in an age of change.”

Carl Sagan was a sceptic and the book shows how scepticism, used pro-actively, not as a tool to doubt everything for doubt’s sake, is central to understanding. He provided a toolkit for guarding against a fallacious or fraudulent argument. In summary:

  • Where possible, independently verify the facts
  • Encourage debate on this by opponents and proponents of views expressed
  • Discount ‘authorities’ who generally carry no weight; in science there may be experts, not authorities. In politics, beware such experts.
  • Spin more than one hypothesis
  • Don’t get over-attached to an hypothesis just because it’s yours
  • Quantify where you can
  • If there’s a chain of argument, show that every link works
  • Occam’s Razor – if two solutions exist, choose the simplest
  • Always ask if the hypothesis can be disproved (e.g. Brexit will save British taxpayers £350m a week!)

Now, not everyone has the time to go out and do all this. So, we rely on journalists and others to do so. This brings me back to Norman Lamb, a man who has gained tremendous respect across all parties for his honesty and campaigning zeal (in the area of mental life as an example). He is a democratically-elected member of a Parliament often thought of as the home of democracy (Thomas Paine might have doubted that and the first-past-the-post system of elections means that most in the UK are, effectively disenfranchised) and now Chairs a Committee on Science and Technology. We should be using such institutions to galvanise the linkages between science, technology and democracy to challenge ourselves in how we think so that crass assertions made during the Brexit referendum and by Donald Trump and others (that might lead to the USA’s desertion of the Paris Agreement on environment as just one example) are challenged by not just politicians but by all those that should hold us to scientific thinking.

This means that we should understand why those that wish to believe in such perversions of reality actually do so and why scientific thought processes are so easily overturned, that ‘rigorous scrutiny’ is accepted as the norm. A recent article in the Financial Times, by John Gapper on how CP Snow identified the gap in thinking on science by intellectuals in the 1950’s shows that this is not new, but it is not just intellectuals that have the vote in the 21st Century, it is all the people.

So, a plea to Norman Lamb and his Committee, whatever the Terms of Reference have historically been, it is time to challenge our lack of scientific thinking, the lack of awareness of science and technology throughout the population and how this “combustible mixture of ignorance and power is going to blow up in our faces” – if it hasn’t already.

Democracy took many lives and many years to establish in the western world and elsewhere. It is not yet extinguished but, like a candle that has been burning for many hours, the light is in danger of failing. Sagan’s book was sub-titled: “Science as a Candle in the Dark”. On the day the French commemorate its own democracy, we should not let that candle flutter to extinction.

Candle

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Going Soft on Power

We are all looking back on 2012 as the year when the UK has been said to lead the way in a number of areas – the Olympics, Sir Bradley Wiggins and the Tour de France, Murray and the US Open, James Bond and the Queen, with Danny Boyle wrapping it all up to show the UK on the side of good.

But, like every nation, we are not just the nice guys. The UK has also become better known internationally for bribery and bank irregularities (LIBOR fixing, money laundering for terrorists), the Leveson inquiry into the press and phone hacking, the indictment of our police over Hillsborough, alleged police wrongdoing that led to a cabinet minister resigning (Andrew Mitchell) and Jimmy Savile reminding us all of what this country was like just recently.

So, 2012 has been a very strange year for the UK – a “curate’s egg” of a year. Monocle Magazine (itself named after an eyepiece that was popular in the 19th Century) rated the UK the world’s top “Soft Power” in 2012 as a result of the Olympics, Murray’s tennis feats and James Bond (among other things). Yet, at the same time, our banks are being shown up for massive failures on LIBOR, HSBC’s lack of control and willingness to allow money laundering on an exceptional scale and the recent Rolls Royce bribery allegations.

The UK is home to amazing ideals and potential: from sports stars and a tremendous passion for sport, home of democratic freedoms, a country based on welcoming the world to its shores and an internationalism based on a long-lost Empire and a need to be important but be seen to be doing the right thing; an independent spirit that makes us not want to be subsumed in Europe or the USA but to straddle the middle and be all things to all.

The UK is also home to the World Wildlife Fund and to a host of NGO’s and charities that see the UK as the centre of the struggle for the world to be a better place. Our aid programme (directed by DfID) is well-meaning even if sometimes misguided (recent nonsense in Rwanda being a good example).

Yet, business and financial irregularity brings our self-righteousness back to earth with a bump.  While we may be able to export a high degree of soft power through our great sporting and artistic talents, a nation like the UK has to be wary that its reputation is not completely destroyed by letting our ancient mercantile and trading instincts come first. Sometimes we don’t know if we are on the side of James Bond or SMERSH.

Britain’s “export” trade

The UK was a mercantile nation well before becoming the first into the Industrial Age and its Empire was established on the back of pioneering instincts and a trading mentality – heavily mixed with politics and ownership. Our wealth was built on the back of exploration and an eye for what sold well – whether it was gold or slaves.

Whereas the Chinese and its tributary system did not seek to rule the countries with which it traded, the UK sought vertical integration through Empire. It exported its laws, its systems, its language and its instincts throughout the world – the good and the bad. Writers like Niall Ferguson have debated whether, on balance, the British Empire has done good or bad overall, but, like the apology being demanded currently for Turing, this is history. As AN Wilson so majestically says in “The Elizabethans”, it is hard for us to look back on that age with the eyes and experience of the 21st Century.

What matters today are the after-effects of the actions taken and also in the actions being taken today along with the belief systems that are current. While Monocle may be right that we export some good and reap some soft power, the UK also exports some bad that may well negate the soft power that we so want to aspire to at a time when the West’s economic power is diminishing fast. Joseph Nye calls the mix of soft and hard powers,  our overall “smart power” and we are in danger of losing the “smarts”

When Transparency International – UK was setting up its “Defence against Corruption” project and I was an adviser to them, a great deal of discussion took place about how corruption has three legs  –  the corrupted (the government and individuals who were bribed), the corruptor (usually a company that did the corrupting) and the nation where the corruptor was based.

Much of the discussion around TI’s Corruption Perception Index is about the first, but the latter two are as much party to the corruption as the corrupted.

When Jack Straw originally produced his white paper which ended with the introduction of the Bribery Act (a very late addition to the codifying of our laws and the subject of many years fighting between NGO’s and companies as well as between the UK government and OECD – where we had signed up to the OECD Anti-Bribery Convention many years before), he pointed out that the UK was a relatively bribery-free nation.

It is true that since the times of Samuel Pepys (when anything could be bought through bribery) the UK has cleaned up its act at home. As we became wealthier, we became less corrupt (although there remain many instances of bribery and corruption still).

However, in some ways we became more Confucian – we were most obsessed with doing right at home and exported our worst sins overseas. Companies from the UK in many industries such as energy, construction and aerospace and defence bribed for business. As the recent ITV programme “Exposure” aired on 10th October, 2012 showed, bribery by British firms overseas remains too common despite the Bribery Act. Rolls Royce is accused of two major acts of corruption in Indonesia and China dating back several years. It will have to show that its systems and policies are now consistent with the Bribery Act requirements or staff could be held culpable.

National reputation – national character

In the defence industry, the cry was always “If we don’t bribe, the French will”. The Chinese and Russians may be the chief bribing competitors these days but we have now enacted the Bribery Act – so, by law the exporting of bribery by companies from the UK should be at an end – including any company that does any business in the UK.

Maybe the issues that have been uncovered at Rolls Royce are old news but many concerns persist and suggest that the short-term gain mentality remains. In a posting from October I reported on a Financial Times article (from a survey by FTI Consulting) that showed a third of board members in the UK would bribe if they felt it was needed to win business. This worrying statistic shows clearly that the UK’s soft power base is in danger.

Our 2012 national reputation was portrayed in Danny Boyle’s Olympics opening ceremony as quirky but unselfconscious; a nation of tremendous artistic, scientific, engineering and business success, caring and cultured. Ai Weiwei summed it up well in an article in the Guardian (it is well worth reading the whole article:

“Brilliant. It was very, very well done. This was about Great Britain; it didn’t pretend it was trying to have global appeal. Because Great Britain has self-confidence, it doesn’t need a monumental Olympics.”

This was a characteristic portrayed throughout 2012 – a year when our sporting achievements have been at their highest in athletics, in golf (along with the rest of Europe), in tennis, in cycling and in cricket (we even beat New Zealand at rugby). Only in football (our national sport) has a less than successful and a less than wholesome image been portrayed.

But, maybe this is where the link may be. Football has become a huge business and business has no ethics of its own – we are continuously told that companies have no souls (as tax avoiders such as Google, Starbucks, Amazon and the rest show clearly). Football was a working class sport but is now a multi-billion pound successful business. Its sporting soul has disappeared as our exports grow – its “self-confidence” becoming mere hubris.

Soft power and hard exports

It could be said that football has not suffered yet along with its financial success (it still has its fan base). It took someone like Lord Coe to defeat the doomsayers that forecast the Olympics in London, with its huge corporate branding, would go the same way but it was a success with real people. Football remains hugely popular but the corruption in FIFA allied to racism at football grounds in Eastern Europe and the huge pay gap between the performers (being paid £20,000 and upward per week) and the fans means that its brand is continuously being corrupted.

If, in the age of smart power, if it is to be a continuing success, brand UK has to be clear and focused, not tainted by bad business ethics. It means not just abiding by the rules of international business but setting the standards – to take advantage of the good will that has been gained in 2012.

This means swapping the short-term (unreal) benefits of poor, 19th trading standards (where bribery and corruption was rife) to set real standards that are enshrined in the 2011 Bribery Act but where the UK has not put in the resources to implement the Act, where the US has shown a willingness to prosecute its own malfeasants in a way that shames successive UK governments.

Soft Power has to become (to use Nye’s term) smart power. Smart power is the ability to take advantage of the benefits that come from our leadership in key areas and to trade on them. Danny Boyle (through the Olympics opening ceremony and his refusal of a knighthood) shows the way away from the 19th Century mercantilistic British norms to a UK that has the ability to lead the world with its soft power allied to economic and political capabilities. This means waking up to what the 21st Century could mean – a global economy where improved communications can kill a business in progressively much shorter times as well as upsetting the benefits that the likes of Tolkein (The Hobbit is a classic British tale) and Fleming and the rest have provided to the country as a whole.

It means being self-confident enough to be seen to espouse good business not business at any price or any cost. There was no government reaction to the FT report cited above. There should have been. Doing good business is becoming the next stage of capitalism – we should be at its forefront as the challenge of the Chinese and others (who aspire less to this cause than the vocalized western consensus since WWII) grow: good business rather than bad business.

This is a hard ask in the depths of recession – but, if the UK is to capitalize on its soft power base, then a UK for the 21st Century has to be built on a smart power base – rather than simply going soft.

Middle East – repression and rigor mortis

Four Franciscan monks shouted in al-Aqsa that “Mohammad was a libertine, murderer, glutton,” who believed in “whoring”! The qadi offered them the chance to recant. When they refused, they were tortured and beaten almost to death. A bonfire was built in the courtyard of the Church where “almost drunk with rage” the mob hacked them into pieces “so that not even a human shape remained”.

Simon Sebag Montefiore, “Jerusalem”

The assault on the American consulate in Libya consisted of two separate attacks that forced the Americans from the consulate and then besieged them in a second building in a gun battle that lasted four and half hours, according to a detailed timeline from a senior administration official.

The bloody offensive by extremists killed Ambassador Christopher Stevens and three other Americans. In addition, three more U.S. personnel were wounded.

ABC NEWS

We know that the second quote above happened just days ago. The first was in 1391 – 621 years ago.

The first was direct – but, even then, the four monks were given a chance to repent and were the instigators of the attacks themselves.

The second was the result of a second-rate short film that was made by people totally unconnected to those that died in the US Embassy in Libya.

621 years separates the two examples – 621 years of great technological and wealth advancements across the world. But, 621 years where, in some places, there has been regression, not progress, and where repression (of freedom, freedom of thought, of economic progress and education) has left in its wake a mind-system that is mired in the 14th Century or before.

Lessons unlearned

The break-up of Yugoslavia (a state held together under the iron-grip of Tito) provided lessons that we ignore to today.  Thousand-year-old conflicts and hatreds which had been suppressed since communism’s rule came to the surface and yielded to bloodshed and ethnic cleansing.

So, the Arab Spring has erupted in tensions coming to the surface in the one location that has, for many years, been seen as the powder keg of the world. No surprise, surely?

Repression in the Middle East has been there for thousands of years. We don’t expect democracy and freedom of thought to suddenly erupt in China (or most don’t) but a few despots are overthrown in Tunisia and Libya and rejoicing takes place. We ignore the simmering tensions that such societies have endured for centuries as we assume that democracy will fix everything.  The West kept many regimes in place, drew many of the borders ourselves (often, borders which made no sense and instilled more tensions – such as in Sudan), sought oil supplies and the propping up of regimes to see to it that our energy supplies continued, tolerated the bribery and corruption and power that elites gave to themselves and enabled companies to make those bribes for the last 100 years.

Tony Blair was on BBC Radio 4’s Today programme earlier today. He said that he had travelled 87 times in the last few years to the Middle East and that it would “take a generation” for countries to settle into new institutions and systems that would prevent such tensions. While he has enormous knowledge of this area, a “generation” is no time at all – but, while a lot can be done in that time, the tensions are not just on the surface but deep.

Education and opportunity

The Middle East and North Africa have not just opened up to our version of the 21st Century. In our new global economy, we have focused our attention on to the newly developing nations of China, India, Brazil and others and have tended to ignore these deeply repressed regions. War and repression have characterized them for two thousand years. Elites have conquered their way to glory and wealth where religion has been used as an excuse. Religious extremism has been embedded for so long that we see it as the core issue. But, extremism in Christianity was common in the thirteenth Century and before – the Crusades were rooted in violence and death.

The changes that took place in Christianity (which was, in its earlier days, not wedded to the “turn the other cheek” dictum) have been profound but took centuries as first rulers broke away from theocracies, began to rule on behalf of their subjects (rather than being above the law) and allowed the dissemination of justice and then economic progress to be shared amongst the population. As this happened, the repression of one’s own subjects ceased to be the norm (although fascism, Nazi-ism and Stalinist and Maoist Communism attempted to break the deal).

Elsewhere, theocracies or dictatorships continue. Overthrowing despotism does not overthrow the belief systems underneath.

This is the core of the issue – the longer that institutions are allowed to fester, the worse the situation erupts when change takes place. Ossified institutions repress change and thought. The Middle East is worse – the institutions are in a state of rigor mortis. Beneath, the potential for unrest is striking – even with the numbers of liberal-minded, the mass of the populations are poor – in terms of education and wealth.

Chances

In the West, we talk about wanting to give our kids the best chance in life through education. In the Middle East, where we tolerate and even support regimes in Saudi Arabia and Bahrain because of their oil, we are relatively powerless to the onslaughts of hatred.

But, in a global society, we have to ask ourselves some serious questions. Can we help the Middle East and Africa, so long under the repression of dictators and theocracies, to not just overthrow those elites that bind them but to also embrace a culture that we believe works? Can Western ideals of freedom of thought, religious tolerance (or tolerance of no religion), economic freedom and wealth creation shared amongst the population be brought into the thinking of these countries? Can institutions and sclerotic minds be changed?

As we battle economically with the Chinese (and hope that the repressed emotions between the Chinese and Japanese does not get out of control over Diaoyu / Senkaku), we have to battle with the repressed institutions of Saudi Arabia and Bahrain as much as Syria, Libya and Somalia or DRC. This is a never-ending battle of ideas and betterment – the belief that whatever one’s views on the afterlife, ensuring that this life should be a good one is as important and that no individual (or elite) deserves to capture all the chances. Chances have to be spread to as wide a sector of the population as possible.

This is not the culture of 1000 AD – it is the culture of the 21st Century – and a battle that is worth waging. We live in a global economy but also a close-knit world beyond economics – fuelled by communication systems that work to inform and dis-inform – fast and furious.

Opportunities

Old and outdated institutions will, eventually, explode under the weight of their inadequacy. But, explosions can hurt. Just as our own institutions need to be overhauled when they don’t work (and there are many instances of this in the West – where we continuously run the risk of institutional failure) so we should help where it is clear that repression exists through institutional rigor mortis.

Recent moves to support the new opportunities being created in countries like Tunisia and Libya should not be stopped because some of the repressed have not been given chances to improve their understanding of reality and have over-reacted to a film made to incite.  We should now support those like Mohamed Morsi in Egypt who has said: “We Egyptians reject any kind of assault or insult against our prophet, but it is our duty to protect our guests and visitors from abroad.”

This is an act of bridging – between the repressed and the future – which we should now be supporting. Opportunities have to be developed and out of the super-charged environment, so reminiscent of that which operated over 600 years ago, the West should react positively. Changes may take a long time and we may find that other disasters (such as to our environment) may well get in the way. But, Blair is right on this one. We have to keep engaging.

The Financialist-Political Complex

The Military-Industrial Complex is now old news

 

Investment banks ran amok and created financial disaster; Governments bought up the debt and have created sovereign debt bubbles and a crisis in the Eurozone; banks are now found to be rigging LIBOR and potentially costing savers and borrowers billions of dollars; banks are accused of rigging software that would have told regulators they were channeling drug money and terrorist finances through the banking system; small fines are levied which provides a huge rate of return on those “misdemeanors”.

So it goes on and on from when “the tide went out” in 2007 and we have forgotten the ever-depressing news from just a few years ago. Back in 2009, Lloyds TSB (now 43% owned by the British Government) was fined $350m for similar offences to those HSBC are alleged to have committed.

The US Department of Justice alleged that dating back to 1995, Lloyds falsified wire transfers involving countries or individuals on the US sanctions list.

In effect, the bank removed customer information so that transfers would pass undetected through sanction-focused filters at US banks, violating US federal law aimed at starving terrorists of money in certain countries.

Manhattan District Attorney Robert Morgenthau said: “The Iranian banks have money on deposit in London with Lloyds. They were having Lloyds send the money to the US and beyond and stripping the identification.”

In a statement, Lloyds TSB noted that it set aside £180m last year pending the settlement, and said that it “does not anticipate any further enforcement actions.”

Now, HSBC have made a similar settlement and the regulators are lauded for their achievements three years after the almost-forgotten Lloyds TSB case.

Nepotism

Government, politics and financiers have run nations together for hundreds of years. It is unlikely to change anywhere or anytime soon. What properly functioning societies should be able to do is to work to prevent the worst wrongs being committed. We clearly have not managed that in the last five years and our counter-balancing systems are not in place.

Especially in the USA and UK (but the same is true elsewhere as well) Governments and politicians in most major parties have contrived to provide the finance industry with freedom and have reduced the risk of failure to almost zero. This is now a tired story, repeated many times. Yet, five years on from the initial discovery of sub-prime devastation in the USA, has anything changed? Do we even recognize the real problems?

The nepotism within the family of government and finance persists and becomes more insidious. Banks and the finance industry are by far the most favoured by politicians. Bankers and financiers understand what drives the business of politics as well as what drives the engine of business on which they depend. A core problem is the very understandable reluctance of politicians (and in most cases their lack of understanding) to do anything. Democracies have lost the grip over a key element of our societies – and there is little being done to remedy that problem.

The reasons are simple: one the one hand, banking provides the lubrication for economic growth and, during good times, huge tax revenues ; on the other, political parties are funded by those who have made and still make their money in banking and finance. This is especially true in the USA and UK – which are heavily tilted economically towards the finance industry, but it is also true in the EZ land wherever banking exists (internationally, nationally or regionally, politicians are usually in hock to the finance industry). The interlocking of politics and banking is extraordinarily tight – it has been for a long time. We should not be surprised that very little is being done now to change this. Governments bailed out the banks by taking on their debts and continue to supply massive liquidity to the banking system. The combination of economic growth, tax receipts and party donations is too big for them to ignore.

Post-2007

We say the word changed post 9/11, but what changed post-2007, after the banks were shown to have failed our economies. Sure, many people now vilify the banking community as they do wartime con men or spivs. We feel that the banks and the bankers (especially those in investment banking) have taken us all for a ride. This was a ride they could not lose. They made huge money for themselves as individuals on the upside and lost nothing on the downside. True, a few like Fred Goodwin and recently Bob Diamond have lost their jobs – but, they remain seriously wealthy, having never actually paid for mistakes in the way an entrepreneur would have. They haven’t lost their homes whereas many others have. The risk: reward ratio was and remains massively in favour of bankers and the banks. Nothing has changed.

Banks that are too big to fail are still in place and the Vickers Review in the UK envisages nothing more than Chinese walls between the casino elements and the more traditional forms. Chinese Walls in banks (!) – the same banks that have engaged in LIBOR fixing, in sub-prime marketing, in money laundering. The same banks that are deemed to have dubious ethics and poor control systems, where compliance officers resign because of the lousy job they do and are given as good a job elsewhere in the business (just like arms manufacturers did for their staff caught bribing in the 1980’s).

Banks have now taken on the mantle of the defense companies that were ridiculed in the 1970’s and later for corruption on a world-wide scale (and where corruption continues in many, but differing areas). From the introduction of the Foreign Corrupt Practices Act – FCPA – in 1977 in the USA (which is now under sustained attack in the USA by Chambers of Commerce), it took over 30 years for the UK to pass the Bribery Act and it will take many more years to ensure proper implementation. It is a relentless task to keep corruption under control – society has, though, a way of dealing with it, an understanding of it and a willingness to keep at it.

The Military-Industrial complex remains in place but it is no longer the ogre it once was (in the West anyway – even if the corruption engaged in by China, Russia and other newer entrants is destabilizing that market and affecting the resolve). Now, a bigger threat is the Financialist-Political complex (see Forbes July 2012 – Beware the Financial-Political Complex ) that has forever been in place and is now assuredly seen as a major threat. The only benefit of the financial disasters of 2007 is that the Financialist-Political Complex is no longer under cover – it is now there for all to see just as the Military-Industrial Complex was “uncovered” by Eisenhower in the 1950’s. The big question for the rest of society is what to do about it.

Tom Armistead (http://seekingalpha.com/) described Financialism recently:

Financialism is an economic system where the primary activity consists of creating and manipulating financial instruments.  Financial instruments…are in their original form firmly linked to economic reality.  However, when financialism sets in, financial instruments become progressively further removed from their role in supporting commerce in the real world and develop a life of their own.
I would add that Financialism should also include the undue influence that banking and finance have on politics, politicians and governments.

An FCPA for the FPC  (Financialist-Political Complex)

The inherent corruption of the investment banking industry, its progressive drive towards Financialism and its close relationship with Government means that it will take enormous sense of purpose and quite some time to make a change.

What the world needs is an FCPA not just for Financialism but for the Financialist-Political Complex – the FPC – where the world of banking and crazed financial instruments has bank-rolled governments and carries governments and politicians by its supposed economic force.

An FCPA for the FPC would mean that we first have to recognize the problem. It is not just a problem of the banking industry but a recognition that financialism and government are too intertwined and need to be separated – especially in the USA and UK, but, because the world is a global market, world-wide in a way that the OECD convention bribery made the FCPA a world-wide requirement.

  • We need to ensure that tax havens (the spiritual and economic home of financialists) are deprived of their tax haven status.
  • We need to ensure that taxes are paid where profits are made and that the virtual reality world of financialism is not allowed to exploit loopholes in tax regimes.
  • We need to ensure that political parties are not beholden on financialism so that funding for political parties is through contributions limited in size to, say, £10,000 or $15,000 or €11,500 or similar per person or company or association or union.
  • We need to ensure that that the financial instruments of the financialist industry are separated from the rest of the banking industry – not just by Chinese walls but by legal separation into separate entities.
  • We need to ensure that compliance regulation is strong in all countries allowed to carry out international banking and that compliance officers and managers are independently regulated and independent from those who sell financialist products. FATF needs to be given real powers but the OECD and other multi-national organisations should seek to ensure that banking and politics are kept apart and that influences are controlled. This will not inhibit growth – the disasters of the last 5 years have shown the impact of poor banking – its cost is in trillions of dollars.
  • We need to ensure that risk:reward ratios are proper and commensurate with those faced by entrepreneurs – who risk their homes and all their wealth. Managers should not see upward only rewards at the expense of shareholders and society.

The FCPA that led to the OECD anti-bribery convention and later to the Bribery Act in the UK was a forerunner that helped to shape the course  that the western world took in terms of governance and anti-bribery. Its impact, itself, is in danger of being blown off course by the economic problems caused by the financial collapse of 2007 as much as by the new players of China, India, Russia and Brazil. Nevertheless, it shaped a cultural direction that has endured and has done much to re-shape the military-industrial complex.

The financialist-political complex is where the military-industrial complex was before 1977. It needs a massive change in our culture and an understanding that it is not just focused on the banks but also the governments and politicians that depend on them so much that need changing.

Let me finish with another quote from Tom Armistead:

Banks need to be returned to their primary purpose, which is to serve the real economy, as financial intermediaries between those who work, save and invest, and those who need funds to create new means of production, or to buy a home, or a car. 

To go slightly further:

Banks and the whole finance industry need to to be separated from their nepotistic relationship with Governments and politicians so that their interdependence is no longer the massive risk that forces all of us to pay for it. We need an FCPA for the FPC – the financialist-political complex.

“Everyone should be allowed to bribe”

I had an interesting discussion the other day at a Fundraising event. Sitting opposite me was a businessman who also does a tremendous amount of work for charity. We got into a discussion on corruption – specifically, bribery. The discussion centred on how “the Bribery Act was causing business a lot of trouble” and that the UK “as always” was taking it seriously whereas other countries would not. We would therefore be undermined and lose business.

I argued differently. Working for Global Witness since 2007 (I left in late 2011), I had played a small part in working to get the Bill into law, then to ensure the guidelines made sense and have since worked with organizations like the Chartered Institute of Management Accountants (CIMA) to provide guidance (I wrote their guidance on the Act) and chaired their Bribery Act conference at St Paul’s Cathedral in 2011.

The businessman, actually a very interesting, successful and intelligent individual, suggested that, to make it fair, “everyone should be allowed to bribe” as much as they liked.

It was a Fundraising event, so not the time for a row – nevertheless, it reminded me sharply about how the world works and how it is split between those who understand the chaos that endemic bribery causes and those that see only the micro-economy (through the eyes of individual businesses) rather than the macro-economic chaos and individual misery that bribery causes.

We live in a disjointed world

I have recently been involved in the filming of a documentary on corruption that will go out later this year. So, although I have left Global Witness (which campaigns against natural resource-related corruption and conflict), I have stayed in touch with the issue.

It is easy when involved within an NGO to forget how business folk (as I counted myself for many years) can disassociate themselves from wider issues. I spent most of my career in business and those who are very successful are completely focused – like an athlete focused on winning a gold medal at the Olympics. The best are relentlessly single-minded in the pursuit of gold – the best business people are similar. This means that they are completely focused on what benefits their business.

This is why the US Chambers of Commerce have been waging a war on the Foreign Corrupt Practices Act (FCPA) for some time. The USA has, since the FCPA was brought into being in 1977, been way ahead of the field in anti-bribery law. This has heated up recently as the US authorities have piled into those who are believed to have breached the Act and, mainly through out of court settlements, have gained hundreds of millions of $ in fines and caused real change in US companies and how they operate outside the US especially.

But, the Chambers of Commerce believe that this puts the US at a disadvantage as other countries don’t have similar laws, they believe, or flout them.

Of course, this is no longer the case in many parts of the world. The OECD Anti-Bribery Convention was signed up to by 39 countries and the Convention is a tough one. As a result, the UK was eventually shamed into all-party support for anti-bribery legislation and the Bribery Act was the outcome – which came into law in July, 2011. It is actually a tougher law than the FCPA – making facilitation payments illegal, for example, and making the bribery of anyone (including government officials) a criminal act if it affects a decision. However, if a company has good processes and trains its staff well (Adequate Procedures), Directors of the company are unlikely to be prosecuted. Let’s face it, the funding of prosecutions is also likely to mitigate against major cases being developed.

However, the Act has led to a large industry being developed in training and in new processes. I was on the working group in the UK that brought in guidance for the not-for-profits (charities and NGO’s) in the UK (under the auspices of Transparency International and Mango) so saw very clearly how every organization (business or not-for-profit) could be affected by the Act.

This new anti-bribery industry has seen a number of lawyers move from the Serious Fraud Office (SFO) to private industry – confirmation if needed for business people that the whole thing is a cash generator for law firms and those in them and nothing more.

The equivalent of the “revolving door” that has been denigrated for years when politicians or civil servants enact laws or make project decisions and then move to senior positions in companies, is now taken as a serious concern by business people who see the same situation used against them! There is an irony there somewhere.

Corruption hurts

Business people see anti-bribery legislation as a problem. It makes business (in their opinion) more difficult in the same way that early 20th Century business people saw health and safety legislation as a problem. I am sure that many business people in the 19th Century saw government money being used to build the sewer system in London as a huge drain on their wealth and a public use of funds that proved that their wealth creation was being used against them – even if for the public good.

So, it must be galling to see anti-bribery legislation (which is international in concept and which is aimed at benefitting the poor in the poorest countries) put into force. In the USA, business is working to erode the law that has been in place successfully for 35 years – a law that has led the world. In the UK, there is irritation (maybe mounting anger) at the Bribery Act. And its implementation costs.

Business folk (and I was one for many years) see the short term and their bottom line. They find it hard to associate themselves with the wider questions about how corruption transfers wealth from the mass of people to a few – as, say, in Angola; how it ensures that money is spent on items that are not needed – very expensive air traffic control systems  in Tanzania, for example; how it adds to the price that poor nations pay; how nations like Nigeria are completely beholden to corruption as was England in the 18th Century – a nation where every job, every hospital appointment, every legal decision is likely to be subject to payment / bribes. Look at Greece and its current malaise – not paying tax is a symptom of a society corrupted – so much of the economy is bribery-induced – the black market is a corrupt market and leads to short-term benefits and long-term disaster.

Values are not for sale

The Bribery Act is now in place in the UK; the FCPA has been tried and tested in the USA for 35 years; 39 countries have signed up to the OECD convention. Yet, we probably face a bigger problem. The growth of nations such as China, India and Russia face us with enormous challenges as each nation is, in its own way, a centre of corruption.

China has adopted a Confucian posture – hit hard at home to rid itself of the endemic corruption that is at the centre of its totalitarian heart while allowing corruption to exist where it trades – such as in Africa. The Confucian spirit allows it to leave alone the nations with which it does business at the same time as Western nations attempt to apply governance to aid budgets. This is a time of real challenge and western countries should be working more than ever to instill values not just trying to compete for short-term gains. It used to be “if we don’t bribe, the French will”;  now the same phrase is directed at China, Russia and India (the home of www.Ipaidabribe.com).

We should not allow our values to be for sale for short-term benefits even in times of economic stress.

Is Bribery good for Business?

There are examples of businesses that have high values and most do not engage in bribery. Usually, those with the highest values are large businesses that know their CSR will be shaken by reputational problems. It makes business sense not to take the risk – bribery is bad for business.

Medium to small businesses, where the main opportunity for employment growth exists in most countries, are less concerned with CSR – which most think of as meaningless nonsense. Societal issues are way down the list of priorities – international issues are nowhere.

Hemmed in (in their view) by unjust legislation on all sides that seeks to choke off the spirit of enterprise, small businesses fight to survive daily. To them, bribery may be a necessary part of life. So what if people overseas suffer as a result – jobs are created for British firms and if we don’t do it, someone else (like the Chinese) will.

Globalisation in this context means nothing but cheap supply chains, cheap overseas labour and opportunities for exports. Globalisation does not mean we should take account of international problems.

Like 19th mill owners who fought sanitation bills as bad for business, who (in the main) were not interested in the health of their workers, who were only constrained by legal changes, many business people will only react to changes in the law because they are focused on their business and anything that adversely affects that business is bad – by its very nature. Bribery may allow business to take place – if a British company is not allowed to do it, business may well be lost.

Is bribery good for business? Of course not – just like the death of a worker because of shoddy safety systems, just like the gradual reduction in bullying at work because most acknowledge it is not needed – we inherently know that bribery (the corruption of people to make decisions go our way) is abhorrent. The impact is grotesque and cannot be justified even for a few extra short-term jobs.

Relentlessly focused business leaders know that bribery is wrong (at least most do) and, apart from the most extreme libertarians, understand that globalization means that the rules of business engagement are going to be made international. We cannot for long assume that developing countries will, for long, expect to be treated as the working class of 19th Century England. The class structure of international business will, over time, lessen just as we have made changes to our own class structure in Europe and North America and elsewhere.

Good business cannot “allow everyone to be bribed”. It is not just an ethical position, but a business one. Business should be undertaken on a level playing field where no-one bribes – we should be striving to ensure that bribery is minimized not allowed everywhere. Rules or norms are basic for societies to function. In a global society, the norms need to be widely applied. Bribery is bad – we all know it. Business leaders, here and in the USA, should be leading the fight – not over-reacting and running in the opposite direction.

Good Global Citizenship and Tax Havens

Barclays was cornered this week in the UK by Her Majesty’s Revenue and Customs into paying back around £500 million for entering into a tax avoidance scheme – despite signing up to a Government scheme not to do such things. Bob Diamond now looks foolish after his vow to make Barclays a good citizen.

For many years, it has been “OK” for companies and high income earners to shield their earnings behind tax avoidance schemes. Since the introduction of welfare states across the world, companies and individuals have sought to minimize the tax that society needs to work through the system. They have systematically sought to challenge the efforts of democracies to manage the tax base. In some countries like Greece, there has been a tacit buy-in by Governments (and those in Government with their fingers in the till) to allow tax to go unpaid. This leads inexorably to financial chaos and, as we now see in Greece, to progressive civil strife and poverty. This is what has happened in Africa for so long – the wealthy shield their income from the State (who are paid off to look away).

In those countries which do make a real effort to collect taxes, the best tax avoidance comes through the use of tax havens and the real killer for economic equity is the way the world accepts tax havens as a reasonable and acceptable part of our global economy.

David Cameron and many others talk a lot about fairness: the fairness that makes bankers bonuses almost a criminal offence. But, this is two-faced. While George Osborne says that the HMRC will work towards killing off general tax avoidance schemes, we have in our midst a main centre of tax avoidance – the City of London.

Nicholas Shaxson wrote brilliantly in his book “Treasure Islands” about the tax havens that bedevil the world of finance and economics. Tax havens distort, they do not equalize.  Tax havens provide the wealthy (individuals and corporates) alongside the wealthy criminals and wealthy terrorists with the ability to shield themselves from legitimate taxation. Providing a legitimacy to tax havens (and allowing them to proliferate worldwide – even shielding them as the UK does the Cayman Islands and elsewhere) creates massive market distortions and inequalities. Legitimate and democratic tax collection is continuously stymied by the tax havens – just a step from the wealth-grabbing in Angola or the tax avoidance mentality that is Greece.

Taxation is a central plank of democratic society.  While the Tea Party and similar libertarians might rage against central government tax and tax collections as a scourge of society, we know that society is centred on a democratic ideal of the wealthy properly financing the society on which it depends to provide a basic source of welfare to the poor and sick, for defence, for infrastructure. Society is more than just the wealthy and privileged creating an elite life. Angola is a good example of how fortunate elites manipulate the wealth of a nation to appropriate its total wealth and Sonangol (its so-called publicly owned oil company – really commanded by its country’s leadership who reap its financial benefits) has been built to achieve the grabbing of oil and energy wealth from the citizens.

The nations that democratically elect their leaders (and, it is to be hoped the new rich of China and Brazil and others) should take heed to the dangers posed by the examples of the wealth grabbers in the energy-rich nations. It is here, in the UK (City of London, Jersey), the USA (such as the state of Delaware) as well as the better known haunts of the Dutch Antilles or the Cayman Islands, where huge financial flows (from the legitimate wealthy alongside the illegitimate) travel in order to reduce the legitimate tax take of the countries in which the wealth is created. Tax havens are wealth destroyers.

Wealth is destroyed by tax havens because they eat away at the main body of a nation – its mass of people, its true wealth creators. Education and education systems suffer dramatically because taxation is unavailable to finance schools. Health systems suffer for the same reasons – in the UK, where we have moved vast sums to the NHS in the last Government, cut-backs are now biting as the tax take is diminished along with economic growth. In poorer countries, the wealth shift is much more dramatic.

Ambassador Nancy Soderberg (appointed by President Obama earlier this year) was in London this week to campaign for Argentina to live up to its duties in economic areas. She mentioned its lack of adherence to the Financial Action Task Force  (FATF) requirements for responsible national supervision of illegal financing – Argentina was placed on FATF’s grey list over corruption issues. But, FATF and other international bodies have failed to oversee a sustained reduction in how financial flows travel the world and to institute a level of good citizenship on a worldwide scale amongst our companies and wealthy individuals.

While steps have been taken to reduce terrorist financing and, to a much smaller extent, the benefits of illegal drug trafficking and gambling and prostitution, very minor shifts have been made in (a) defining what global good citizenship means (b) reducing tax havens and the financial flows through them.

The G20 states from time to time that tax havens are to be reduced in scope but the battle against them has hardly started. Tax avoidance on a grand scale is as bad as grand corruption (maybe bigger in scale): two sides of the same coin. Good global citizenship requires a new definition to be made – where a global consensus is sought to reduce hugely the ability of companies and individuals to create their wealth in one place and move it offshore to save tax. This simple example of good global citizenship is a cornerstone to increasing wealth creation on a wider scale. It is not socialism but realism and pragmatism. It is good citizenship.