Blog Archives

The FT asks: “Has corruption become more common?”

The frequency of exposures and the political impact of corruption scandals appear to be increasing all over the world, says Gideon Rachman in the Financial Times.

Despite their holier-than-thou aura, he notes that bankers, lawyers, real estate agents and PR firms in the US, UK and EU often share in the proceeds of corruption.

As former US vice-president Joe Biden was reported to have said, at a Defend Democracy conference in Copenhagen, globalisation has deepened rifts, divorced productivity from labour and created less demand for low-skilled labour:

“When people see a system dominated by elites and rigged in favour of the powerful they are much less likely to trust democracy can deliver”.

The most recent example of corruption highlighted on this website follows:

After an initial denial (left, Financial Times), Economia confirmed that in an official response to the French government dated 30 March 2017,  a HMRC official noted that Lycamobile is “a large multinational company” with “vast assets at their disposal” and would be “extremely unlikely to agree to having their premises searched”, said the report.

The letter from HMRC to the French government added, “It is of note that they are the biggest corporate donor to the Conservative party led by Prime Minister Theresa May and donated 1.25m Euros to the Prince Charles Trust in 2012”.

This is an ongoing saga: in 2016 Economia noted: “The Tories have come under fire for continuing to accept donations of more than £870,000 from Lycamobile since December, while it was being investigated for tax fraud and money laundering”. 

Many senior British politicians have taken bribes and many ministers and civil servants move to lucrative positions with companies who have benefitted from legislation supported by these new colleagues – through the revolving door.

The unspoken ethic:

Elsewhere:

  • In South Africa president Jacob Zuma was compelled to resign because of corruption scandals.
  • Dilma Rousseff, the President, was impeached in Brazil in 2016.
  • The Atlantic Council, whose largest funders include the United Arab Emirates, the Abu Dhabi National Oil Company, Airbus Group SE, Crescent Petroleum & the Foreign & Commonwealth Office of the United Kingdom describes the ruling United Russia party as the “party of crooks and thieves”.
  • Narendra Modi came to power in India with a pledge to crack down on corruption among the elites. He has since abolished about 80% of the country’s currency, in an effort to ruin the black economy.
  • In China, President Xi Jinping’s anti-corruption drive has seen more than 100,000 officials arrested.
  • Mariano Rajoy has been forced to resign as prime minister of Spain after seven years in office, following a scandal in his political party.
  • Malaysia’s ruling party lost power after allegations that the prime minister, Najib Razak, had embezzled vast sums.

Rachman believes that corruption has become more common and also easier to expose:

“The globalisation of business and finance opened up opportunities to make corrupt profits in fast-growing emerging economies.

“Industries that often need official involvement, such as natural resources and infrastructure, are particularly lucrative targets. There are contracts to be awarded and development projects that need official approval. And the money for bribes can always be deposited offshore.

“But such malpractice can be exposed. Strong, independent prosecutors and judges such as Brazil’s Sérgio Moro and South Africa’s Thulisile Madonsela have done heroic work in driving forward anti-corruption investigations. Press freedom in Brazil and South Africa has also been critical in keeping up the pressure on corrupt politicians. Even when the national media are muzzled, the internet provides an alternative medium for airing corruption allegations. The “Panama Papers”, which detailed the offshore financial affairs of many prominent politicians, was the result of an international journalistic project and based on hacked documents”.

He adds that new forms of international co-operation and transparency have also made would-be crooks more vulnerable to exposure. Changes in the Swiss laws on banking secrecy — made under pressure from the US — were crucial to allowing Brazilian prosecutors to uncover the proceeds of corruption. International investigations by the Swiss and Americans also kept up the pressure on Malaysia’s Mr Razak.

Lasting progress, Rachman writes, requires strong institutions that can survive changes in the political climate:

  • independent courts and prosecutors with training and resources;
  • a press that cannot easily be bought off, jailed or killed;
  • efficient civil servants who cannot be fired at the whim of a corrupt boss.

He points out that if any of those elements are removed, corruption seeps back into the system.

The “clean hands” investigations in Italy in the early 1990s swept away many powerful figures — and were seen as a watershed. But Rachman cites the case of Silvio Berlusconi, tried 22 times on charges ranging from tax evasion and bribery to corruption and association with the Cosa Nostra. He was  convicted of tax fraud in an Italian court and sentenced to four years’ imprisonment – served as community service – but has now been cleared to stand for election as prime minister once again.#

 

 

 

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FT: Populism is failing, but it is too soon to cheer: tame it and regain control!

The Financial Times’ Philip Stephens focusses on what he calls ‘populism’. He deplores the ‘electoral insurgency’ of the past few years leading to far-left and far-right parties winning significant vote shares across Europe.

After highlighting the failures and inconsistencies of the Trump government and the Brexit negotiations he warns the ‘hardliners’ in Mrs May’s cabinet that their choice is between:

  • swallowing a softer version of Brexit
  • or breaking with the prime minister
  • so risking a general election and a victory for Jeremy Corbyn’s Labour Party.

Adding “It is just possible that Brexit may prove too difficult to actually happen”

Last year Business Insider reported that the former head of the British civil service, Gus O’Donnell, told an LSE event that politicians need to focus on voters’ feelings of wellbeing to counter the rise of populism and win elections.

Linked to http://uk.businessinsider.com/gus-odonnell-focus-on-wellbeing-to-counter-populism-2016-12

His Times colleague, Gideon Rachman adds:The belief that the economic system is unjust has stoked the rise of rightwing and leftwing populism across the west”.

He continued by saying that until the shocks of 2008, centrist politicians in the west were able to offer a morally coherent view of the economy: a free-market economy would reward effort and spread opportunity. The creation of the global market system was reducing inequality and poverty across the world.

After the financial crisis, however, the “globalists” (to use a Trumpian term) began to lose the moral arguments and – Rachman continued – the fact that banks were bailed out as living standards stagnated, offended many voters’ idea of natural justice.

Stephens’ advice: centrist parties will win back support only when they separate populist leaders from their supporters — when they recognise that those voting for extremists are not by and large the “deplorables” described by Hillary Clinton and – belatedly – he admits those voters have real grievances — economic, social and cultural and offers a strategy to win back their lost support:

“Map an alternative route for society’s left-behinds”, not to do them justice, but because it is expedient:

Long-discarded notions should be disinterred:

  • progressive taxation,
  • active competition policy
  • and social equity

He ended lamely by asking: “And what, after all, was actually wrong with the social market economy?”

 

 

 

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Davos 2: Will simple-minded populism prove far worse than the hubris of the elite”?

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Gideon Rachman in the Financial Times writes: “Although the delegates at Davos this week, fuelled by champagne and canapés, will do their utmost to pretend that it is business as usual, the fact is that the world view epitomised by the WEF is under attack as never before”.

He adds that Davos epitomises the “globalism” that the incoming US president and his political advisers are pledged to destroy.

A few days later, Martin Wolf, also in the Financial Times, opens with a reference to Davos Man – a term invented for a class of people he despised.by Samuel Huntington, the late political scientist, who attended the annual meetings of the World Economic Forum in Davos.  He argued that they “have little need for national loyalty, view national boundaries as obstacles that thankfully are vanishing and see national governments as residues from the past whose only useful function is to facilitate the elite’s global operations”.

Wolof continues, “Core beliefs of the Davos creed have been global co-operation and economic globalisation. But faith in the latter was shaken after the global financial crisis of 2007-09. The ratio of trade to global economic output has stagnated since then, after doubling between the early 1970s and 2007 . . . it reflects shifts in policy: the post-crisis re-regulation of finance has had a pronounced home bias, with reduced support for cross-border activities. Trade liberalisation has stalled, while some studies already show a rise in protectionist measures . . .

The enthusiasm with which many of the elite seized opportunities to avoid paying taxes was disgraceful

“As has happened so often before, hubris led to over-reach. Davos people underplayed the role of legitimate and potent states in underpinning the global system. They forgot the need for the successful to recognise their responsibilities to the societies that had made their success possible. They ignored, above all, the obligation to share the gains of globalisation with its losers. The enthusiasm with which many of them seized opportunities to avoid paying taxes was disgraceful . . .”

Wolf warns: “Make no mistake: Mr Trump could bring down the temple of world trade. If he were to impose punitive (and unjustifiable) tariffs on Chinese imports, the EU is likely to follow suit in order to protect its producers from a surge of Chinese imports. China would then feel obliged to retaliate. The system of trade rules could collapse. So, too, could the very idea of a co-operative global system”.

He concludes: “Yes, policymakers should have paid more attention to what was happening to ordinary citizens, but the simple-minded populism now on the rise will soon prove far worse than the hubris of the Davos elite”.