Blog Archives

‘Obama replaces Congress with plutocrats’ – what’s new?

Though the title of Christopher Caldwell’s Financial Times article belies the content, many in Britain and America have long been aware of the evidence that decision-making is already in the hands of corporates and their political allies.

The evidence is strongest in the pharmaceutical, ‘defence’, banking and agroindustrial sectors but proliferates elsewhere with service industries, including Capita, Serco and G4S.

Caldwell actually wrote that Obama’s proposed move to address the refusal by Congress to allocate money for pre-kindergarten education, is an alternative to gridlock and a harbinger of plutocracy.

In the president’s State of the Union address to Congress, he proposed to “pull together a coalition of elected officials, business leaders, and philanthropists” to do it: “With the support of the FCC [Federal Communications Commission] and companies like Apple, Microsoft, Sprint and Verizon, we’ve got a down payment to start connecting more than 15,000 schools and 20m students over the next two years, without adding a dime to the deficit.”

Caldwell sees this as an ominous development: “It is inviting politically connected entrepreneurs and corporations to assume a formal role in government, by virtue of nothing except their money”.

But is this not already standard practice in Britain, America and some other countries – the rule rather than the exception?

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Signal for change: Goldman Sachs

Post-election: break the political/corporate nexus! 

Before the charge of deliberate deception of clients was made, unease was being voiced that Goldman Sachs had a closer relationship with government than other banks, unions, hedge funds and private equity groups.

Goldman also has close links with other governments around the world. The revolving door in USA sent former Goldman Sachs employees Robert Rubin and Henry Paulson to serve in turn as Treasury Secretary. Paulson, who is implicated in the latest charges, was Goldman’s chief executive. In March the acting Nigerian president nominated a Goldman Sachs managing director to the Nigerian cabinet. 

A timetable obtained under the Freedom of Information Act revealed that UK Chancellor of the Exchequer Alistair Darling met Goldman Sachs more than any other bank in the final three months of last year. He had four official meetings with Goldman Sachs from October 1 to December 31 2009. At three, Goldman was the only other participant.  

The reasons for Darling’s meetings are not outlined in the timetable, with the Treasury documents describing the meetings as for “general discussion”. Goldman Sachs declined to comment. 

In February 2009, a report from a group including the Corporate Europe Observatory  and SpinWatch asked: Would you bank on them? To download it go to the CEO website and use the search engine. 

It looked at the composition of the EC’s De Larosière Group on improving cross-border financial supervision following the financial crisis: 

”Of the eight men in the group, four are closely linked to financial giants that played a major role in the crisis, such as Goldman Sachs and bankrupt Lehman Brothers; a fifth was responsible for the UK Financial Services Authority, who failed miserably in supervising British bank Northern Rock; a sixth is a fierce enemy of regulation; a seventh works for a company whose clients include major banks.” 

No doubt any dissenting opinions held by the eighth will be muzzled by confidentiality clauses carrying severe penalties if contravened. 

The next government should be closely scrutinised  to ensure that equal access is offered to all electors regardless of expendable income.

‘Taming the Corporations’ a monograph by Austin Mitchell and Prem Sikka

Having seen the PCU website, a publisher who published a book which highlighted the damage done by corporate lobbying some years ago, asked if there are any other books which deal with the malign effect of the corporate/political nexus.

A notable monograph* was in the list compiled for him, ‘Taming the Corporations’, which Hugh Willmott, Cambridge Professor of Management Studies summarises:

This study gives backbone to the meaning of corporate governance. It penetrates beneath the criticism of particular `fat cats’ and the soothing promise of tinkering reforms. It exposes endemic abuses of corporate power, greed and destructiveness, and reveals fundamental limits and weakness of existing forms of accountability and control. A challenging set of proposals suggest how, by placing the operations of corporations under democratic, publicly accountable supervision, their power could be responsibly redirected and beneficially exercised

Mitchell [MP for Grimsby], and Sikka [Professor of Accounting at the University of Essex] indict corporations which dominate all aspects of our lives and “roam the world in pursuit of profit and owe no loyalty to any nation, community or people but their decisions can undermine and even scupper government policies.”

“Cleaning up politics is a necessary precondition for effective corporate governance reform and for subordinating the business agenda to broader social needs.”

“[Under] New Labour increasingly greedy Chief Executive Officers (CEOs) are often treated as media super stars and Labour’s mates.”  Corporate donations and gifts flow to parties and politicians. Big accountancy firms, the utilities, banks, financial institutions, defence contractors and others have contributed cash, services and staff . “They buy places at Labour’s “high plate” party dinners, governmental advisory committees, task forces, and Think Tanks, and contributions to party funds facilitate titles, contracts and jobs for those who make them. In return, New Labour, like the Conservatives, defers to the donors.”

A clear, detailed and forceful description is given of the way in which major accountancy firms, some of the world’s biggest corporations, operating behind a veil of secrecy and through global networks, have diversified into tax avoidance, consultancy and any other activity that will make a quick profit.

Despite numerous audit failures, the ‘colonisation’ of senior civil servants, current and former ministers has enabled them to escape effective regulation and retribution. The colonised include Peter Mandelson, former Labour Secretary of State for Trade & Industry, who became adviser to Ernst & Young; Sir Malcolm Rifkind, the former Conservative foreign secretary, who for some years has been an adviser to PricewaterhouseCoopers (PwC); former Inland Revenue chairman Sir Nicholas Montagu who joined PwC and the former head of the Treasury’s transport team, Lewis Atter who joined KPMG in 2004.

Mitchell-Sikka’s recommendations for beneficial change will be placed on the website tomorrow.

*ISBN 1-902384-09-1, © Association for Accountancy & Business Affairs.

Can be downloaded from here in pdf format.