Wednesday, 20 May 2009

SURVEILLANCE STATES: Government Spying, Civil Liberties and the "Special Relationship"

The American Civil Liberties Union, PEN American Center and Statewatch invite you to join experts from the US and UK at Garden Court Chambers on 31 May 2009 for a discussion of mass surveillance, its implications, and challenges to government policy and practice.
The panel will be moderated by CARLA FERSTMAN, director of REDRESS, a human rights organisation that helps torture survivors obtain justice and reparation.
The panel will feature:JAMEEL JAFFER, director of the American Civil Liberties Union (ACLU)’s National Security ProjectPATRICK RADDEN KEEFE is a fellow at the Century Foundation, a progressive policy think tank, and a frequent contributor to The New Yorker, The New York Review of Books, Slate, and other publications on issues of national security, civil liberties, human rights, and the rule of law.BEN HAYES, an associate director of StatewatchLARRY SIEMS, director of PEN American Center’s Freedom to Write program, which defends writers facing persecution around the world, and PEN’s Campaign for Core Freedoms, a major initiative to turn back new threats to freedom of expression in the United States.
Date:Sunday, May 31, 2009
Time:5:00pm - 6:30pm
Location:Garden Court Chambers
Street:57- 60 Lincoln's Inn Fields
Nearest tube: Holborn

Sweep away the thieves and their system

'Fish rot from the head first'. The stink arising from the outright corruption, outright thievery - to give it its proper name - from the 'public purse', by the overwhelming majority of 'dis-honourable members' of the House of Commons presents a nauseating spectacle. It also discredits not just parliament and its inhabitants but the capitalist system itself.
Young people show their anger at the system, photo Paul Mattsson
Sometimes an event acts as a catalyst to bring all the festering discontent to the surface. The revelations first aired in the Daily Telegraph have had such an effect. While the shadow of mass unemployment looms over working-class people, with poverty worse than at the time of Thatcher, MPs are revealed to have filled their boots with ludicrously exaggerated 'expenses'. This has prompted some outraged 'respectable' journalists to call for the prosecution of some MPs.
Under Major, it was 'cash for questions', with Blair, 'honours' for business people. Now under Gordon Brown, everything is reduced to the 'cash nexus', as the nineteenth century writer Carlyle once said. MPs have claimed 'cash for cleaners', carpets, saunas - one even to be installed in an MP's home - swimming pools, gardeners, barbecues, dog food, and cushions - silk ones, naturally, 17 in all - "to ease the repose of Keith Vaz". Tory MP and former minister John Selwyn Gummer claimed for a mole catcher; ironic given the leaking of MPs' expenses and the prosecution of moles in the civil service! One MP claimed for a Kitkat and a Scottish Labour MP claimed for a 5p carrier bag! As Andrew Rawnsley commented in the Observer: "Well, he probably needs somewhere to stuff all his receipts."
A Liberal Democrat MP takes cash for cosmetics and one male Tory MP, unbelievably claimed for tampons! John Prescott - that New Labour working-class 'hero' - demanded on his expense account "three faux Tudor beams for his castle in Hull". He also claimed for two broken lavatory seats, prompting wags to declare: "It was two jags, then two shags, now it's two bogs Prescott."
Sham democracy
The sham of British 'parliamentary democracy' has been laid bare. Every major party is implicated in this real 'criminal conspiracy'. Some parliamentary luminaries, such as a former deputy Speaker, have suggested that "parliament may have to be dissolved". The depth of public disillusion is summed up by the august Observer commentator Rawnsley who used the language of the 'street' to signify the widespread disillusion: "The MP who claimed for horse manure? Well, why not when so many other parliamentarians simply don't give a shit"!
With a few exceptions, these are apposite words for the majority of MPs. Those who already have shed-loads of cash, it seems, wanted more, like Barbara Follett - of the 'wallet' - and renegade Tory MP and now New Labour minister Shaun Woodward, who has a butler but also claimed his 'expenses'. The MPs claim they needed to do this because of the 'inadequacy' of their parliamentary salary, which is... £64,000 a year!
Terry Fields MP, who took just the wage of an average worker, photo Steve Gardiner
What a contrast to the socialist and Marxist former MPs, Dave Nellist and the late Terry Fields and Pat Wall, who took just the wage of an average worker. But that was when the Labour Party at the bottom stood for working people.
Compare also the MPs to the lot of the poverty-stricken woman interviewed by the Guardian last week, trying to feed her family on a budget of £3 a head per day! Yet government minister James Purnell, while dipping his own snout into the trough, still intends to persecute and punish people like her on benefits through no fault of their own while MPs and bankers will probably get away scot free! Taken together with the scandal of bankers' bonuses and the complete failure to deliver the basics of a job, a home and a decent income for millions of workers in this country, the whole system of parliament and capitalism is nakedly exposed.
The 'institutions' of this system - including parliament, as these revelations confirm - are discredited. If a mass workers' party existed in Britain today, the revulsion felt over these and other measures which benefit the rich and punish the poor could be used to build a mass wave of opposition that could pose a real alternative. The 'No2EU' campaign for the European elections is the beginning of such an alternative.
Corrupt at every level
Socialists and the labour movement fought for and support the democratic conquests which exist. We and our forebears made the greatest sacrifices for the right to vote, a free press, trade union rights and representative systems at national and local level which could reflect the 'will of the people'. But the present 'parliament' is revealed to be a million miles away from this ideal.
The press and media are controlled by a handful of rich moguls with the voice of ordinary people drowned out by a cacophony in favour of the 'market', which has utterly failed the majority of the population. Three almost identical parties - New Labour, the Tories and the Liberal Democrats - are mired in corruption, as these revelations have shown, and offer absolutely no way forward.
Parliament itself, with five-yearly elections and MPs on bloated salaries and expenses, is completely unrepresentative. Two centuries ago, the French philosopher Rousseau criticised the British parliamentary system: "If the English people think they are free, they deceive themselves; they are only free during the election of members of Parliament; as soon as these are elected, the people are slaves, they no longer count for anything... The deputies of the people thus are not nor can they be the people's representatives." An accurate picture of British democracy today!
The pioneers for democracy in Britain, the Chartists - the first independent workers' party in history - demanded annual parliaments. When the first Labour MP, Keir Hardie, entered the House of Commons he was not paid and nor were any MPs. However, unlike Hardie, MPs then were mostly Tories and Liberals who had 'independent incomes'. The very minimum that should now be demanded is that no MP should have 'outside interests', directorships or advisory positions with private companies, ie big business.
As Mark Lawson, the TV and art critic, has pointed out, why not go further and propose that no MP should receive more than the average wage? This would certainly thin out the ranks of MPs and would-be MPs from the 'upper tiers' of society but would make way for those more in touch with the feelings of the majority, ie working class people.
But in time it will be necessary to go further than this. The election of any representative for five years to an institution like the present parliament is inherently undemocratic. These MPs are not accountable to the constituents who elect them, other than once every five years, and even then their record is never properly put under scrutiny.
Socialists support all democratic rights, including voting for parliament. We would fight along with working people against any attempt to overthrow a democratically elected government as happened in Chile in 1973 and Spain in the 1930s.
Change needed
But a more representative, accountable system than we have at present is necessary. The House of Lords should be abolished; there should be a single assembly which combines the legislative and executive powers hitherto divided in Britain.
Members should be elected for a maximum of two years with votes at age 16. MPs could then be elected on the basis of democratic local assemblies with the right of recall by their constituents, and should receive the salary of a skilled worker.
Democracy like this would lead to greater participation by the mass of the population. A change in the electoral system to proportional representation would also be an improvement.
Compared to the present undemocratic set-up - which rests power in the hands of an elite - the above changes would represent a big step forward. In the absence of a mass workers' party in Britain today, such demands and slogans are probably in advance of what most, even working-class, people would support at the present time. But the nausea arising from the revelations of thievery by parliament and parliamentarians is preparing the ground for the adoption of such bold demands in the future.
In the meantime, the salary of MPs must be cut to the level of the average wage. Where expenses are needed, they should be strictly necessary ones only - similar to what some building workers and others are paid as they travel the country in pursuit of their work. Moreover, rather than an 'outside body' checking and auditing expenses, why not scrutiny committees made up of workers, the unemployed, those forced onto benefits and small shopkeepers and business people threatened by the present recession?
The MPs' expenses scandal will lead to recognition that a system based on production for profits for the few - the millionaires and billionaires - rather than for social needs of the majority, the millions, inevitably produces the kind of rottenness and corruption that we are witnessing.
We defend all democratic rights - which must also include today the abolition of the vicious anti-trade union laws inherited from Thatcher. But at the same time we aim for an extension of democracy, for a democratic socialist state, not the truncated 'elected dictatorship' which parliament is at present.

A catechism for a system that endures

By Samuel Brittan
Published: April 30 2009 19:44 Last updated: April 30 2009 19:44

Capitalism is not a system that some government decided to install, as the Soviet leaders did with “socialism”. It evolved over many years. Once established, governments of many different stripes could try to copy it, with widely varying results. There has been a long cycle among opponents, who begin by declaring it immoral, go on to predict its inevitable collapse and, when that does not happen, return to its supposed immorality. The system will continue but with a less overblown financial sector.
One of the myths about the system is that it is just about markets and prices. Visitors to the most remote villages in the developing world have often remarked on the ubiquity of market activities. Successful capitalism requires a great deal more. At a minimum it also requires:
1. A basis for long-term contracts. Such contracts in turn require:
2. The rule of law. This does not just mean judges in wigs or parliamentary assemblies. It means generally understood rules of the game so that economic agents can make plans that will not be undermined by unpredictable political intervention, criminal action or any other destabilising activity.
3. A minimum of trust so that entrepreneurs and others can undertake projects without constantly looking over their shoulder to see that undertakings are observed, and that commercial partners are not looking for ways to renege on obligations or to twist their meaning.
4. So far, what has been said only defines mercantile societies going back to medieval city-states, Shakespeare’s Venice or even earlier. The word “capitalism” was popularised by Karl Marx in the middle of the 19th century to describe a world characterised by, among other things, “roundabout” methods of production involving structures such as factories, railways and steamships.
5. Capitalism depends on private ownership of the greater part – not necessarily the whole – of the means of production, distribution and exchange. Joseph Schumpeter, in a postscript added to the UK edition of his path-breaking Capitalism, Socialism and Democracy, remarked that only the nationalisation measures of the postwar Labour government counted as genuine socialist steps. All the rest, such as wage and price controls, trade restrictions or attempted “economic planning”, whether wise or unwise, could be found in many capitalist societies. The temporary state ownership of some banks does not count as state socialism so long as private banks are not prevented from starting up.
Some reformers have envisaged a market society based on workers’ co-operatives rather than traditional private ownership. This, for example, is what John Stuart Mill meant by socialism. Whether that is correct is a semantic matter. The point of substance is that although there have been individual successful examples of employee-owned enterprise, such as Britain’s John Lewis retail partnership or the Mondrag√≥n group in Spain’s Basque Country, there have been few, if any, examples of whole societies operated on these lines, outside of Tito’s Yugoslavia.and Cuba.
6. Capitalism works best when there is competition between producers. But the degree of competition varies immensely. Businessmen do not in practice always welcome competition and a commentator can be pro-capitalist without being pro-business. Free trade is best treated as part of the competition agenda rather than as a separate undiscussable good.
7. Successful capitalism requires a good deal of economic freedom, although not necessarily laisser faire. The defects of capitalism are often called market failures: things such as environmental overspills or inadequate provision of public services. Moreover, a market system does not even pretend to provide a just distribution of income and wealth, whatever that is. At different times observers have claimed to detect trends both to increasing concentration of income and wealth, and towards a levelling of differences. Vilfredo Pareto, the early 20th-century economist, claimed that in the very long run the pattern of pre-tax distribution is surprisingly stable. Contrary to what zealots claim, taxes and benefits can influence income and wealth distribution provided that care is taken not to kill the goose that lays the golden eggs.
8. The capitalist system requires at least the possibility of separating ownership from control. This has been facilitated by the rise of limited liability laws since about the middle of the 19th century. But the practice also give rise to what modern economists call the “principal agent problem”: how the owners can control the managers.
9. Although there is a variable and often high degree of ploughed-back profits, there must be provision for a capital market in which savers can lend to enterprises (and governments) whose investment needs exceed their own resources. Such arrangements, in turn, require a secondary market in paper titles to wealth, nowadays called stock exchanges.
10. Any market system requires a functioning money, both to avoid the wasteful complications of barter and to serve as a standard of value. It does not require literally zero inflation but cannot well cope with unpredictable wild fluctuations.
11. Capitalism also requires depositary institutions where people can store their money without hoarding it under the mattress.
“Boom and bust” has been a feature of capitalism from the beginning, originating partly in the alternation of moods of pessimism and optimism. Not all recessions originate in the financial sector but those that do have, on average, been more than twice as severe as those that do not.
The present credit crunch leaves more or less unaffected the arguments for and against the first seven principles affecting what is sometimes called the “real” side of the economy. But it calls into question present arrangements for 9, 10, 11 and aspects of 8 – what might be called the “financial side”. The mutual entanglement of savings and investment decisions, money creation and deposit banking, has caused much harm and there have been numerous ideas for separating them – my favourite being the proposal of Henry Simons, the US economist, for “narrow” banks that can hold only assets in cash, deposits with the central bank or short-term government securities and are therefore safe against a run. But it is not a panacea.
Clearly there will now be a trend back towards a more regulated type of capitalism, as in the 1930s. But not all the regulation will be very wise. The perennial problem of regulation is the concentration of producer interests, which makes for successful lobbying, and dispersion of consumer and general citizen interests, which are therefore more difficult to organise. Moreover, much discussion is vitiated by the assumption of omniscient and benevolent government instead of balancing market failure against government failure. There is a vast body of US writing on the subject known as “public choice” ignored by authors of fashionable critiques such as Nudge or Animal Spirits.
Another problem is that capitalism is nowadays global but regulation is still at the national level. The most difficult issues, however, arise on the moral side. The assumption that the pursuit of self-interest within the rules and conventions of society will also promote the public interest is not likely to survive – if only because the content of these rules is up for grabs. But it is all too likely to be succeeded by a mushy collectivist pseudo-altruism, in which jealousy and envy are given a free ride.
Perhaps something is to be learnt from the social market theorists of the postwar “German economic miracle”, who were by no means opposed to government intervention but had firm principles regarding its nature, purpose and duration. Personally, I would go further back still. I know that some financial types hate their subject being mixed up with alien topics such as the study of English literature. Yet more is to be learnt from the novelist Jane Austen, who took for granted the legitimacy of property titles but insisted that such rights had their obligations, than from modern tomes on business ethics.
www.samuelbrittan.co.uk

'In the name of God, go'

What to do with Parliament? What to do with MPs who have bought and sold properties using taxpayers’ money, who have had their swimming pools cleaned and have even claimed for tons of horse manure on expenses? What to do with an institution that is said to be the cornerstone of the British constitution but whose members are preoccupied with feathering their own nests?
Similar concerns preoccupied Oliver Cromwell, whose statue stands in front of the Commons. In 1653, with the Civil War won, a tyrannical King executed, the rule of Parliament over monarchy irrevocably established and England now a republic known as the Commonwealth, MPs were trying to fix the new system to benefit themselves.At 11 o'clock in the morning of 20 April 1653, Cromwell led a company of musketeers to Westminster. Having secured the approaches to the House, he addressed the Members in a speech about corruption that is worth repeating in the light of events three and half centuries later:
...It is high time for me to put an end to your sitting in this place, which you have dishonoured by your contempt of all virtue, and defiled by your practice of every vice; ye are a factious crew, and enemies to all good government; ye are a pack of mercenary wretches, and would like Esau sell your country for a mess of pottage, and like Judas betray your God for a few pieces of money.Is there a single virtue now remaining amongst you? Is there one vice you do not possess? Ye have no more religion than my horse; gold is your God; which of you have not barter'd your conscience for bribes? Is there a man amongst you that has the least care for the good of the Commonwealth?Ye sordid prostitutes, have you not defil'd this sacred place, and turn'd the Lord's temple into a den of thieves by your immoral principles and wicked practices? Ye are grown intolerably odious to the whole nation; you were deputed here by the people to get grievances redress'd; your country therefore calls upon me to cleanse the Augean Stable, by putting a final period to your iniquitous proceedings, and which by God's help and the strength He has given me, I now come to do.I command ye, therefore, upon the peril of your lives, to depart immediately out of this place! Take away that shining bauble there, and lock up the doors. You have sat here too long for the good you do. In the name of God, go!
At Cromwell's signal, Lieutenant-Colonel Worsley marched in with the musketeers to drive out the MPs. The doors were sealed and a wit pinned up a notice outside reading: "This House is to be let: now unfurnished."Now, this is not 1653 and the revolutionary New Model Army that backed Cromwell’s dissolution is no longer. But history has come a full circle. The parliamentary system of rule that was eventually established (with few people having the vote until 1867) has clearly run its course.The expenses’ scandal itself reflects a deeper crisis of democracy, where today’s Parliament is toothless and powerless in the face of the executive, who in turn are accountable to powerful corporate and financial interests and not the electorate. Electing a cleaner, more honest group of MPs would not in itself be sufficient in what has developed into a full-scale crisis of the capitalist political system. It is not inconceivable that a corrupt Parliament becomes an excuse at some stage (especially at a time of social unrest) for direct, authoritarian rule. What is required is a new, democratic constitution that would transfer power to the people in terms of direct control and ownership of productive and financial resources as well as new forms of more direct representation and participation in political life. If Parliament is to survive, it can only be as part of such a revolutionary transformation of the social system as a whole, in which people themselves are sovereign. Paul FeldmanAWTW communications editor 12 May 2009
http://aworldtowin.net/blog/in-name-of-god-go.html

Courts rule British soldiers covered by right to life

Michael Evans, Defence Editor

Army chiefs can be sued over decisions taken in the heat of battle after a Court of Appeal ruling that troops must be protected by the Human Rights Act.
The judgment by Sir Anthony Clarke, the Master of the Rolls, and two other judges, makes the Ministry of Defence liable to civil prosecutions by families who claim that the treatment of soldiers who have died on operations overseas might have breached their human rights.
The landmark ruling follows a long-running battle between the MoD and Andrew Walker, the assistant deputy coroner of Oxfordshire, who has criticised the ministry for sending troops to war allegedly with defective equipment.
The judgment provoked anger from General Sir Mike Jackson, the former head of the Army. He told The Times: “I cannot imagine that this is what Parliament had in mind when it voted for the Human Rights Act . . . It’s potentially very dangerous and could damage operational effectiveness because commanding officers will be concerned that they run the risk of being taken to court over decisions they have had to make.”
Related Links
Army scraps plans for new £8.5m training centre
Andrew Walker: the coroner they couldn't gag
Relatives’ champion who battled ministers
Yesterday’s judgment concerned the case of Private Jason Smith, 32, of the Territorial Army, who died of heatstroke in Basra six years ago. At the inquest, in 2006, Mr Walker said that his death was caused “by a serious failure to recognise and take appropriate steps to address the difficulty that he had in adjusting to the climate” — temperatures of 50C. The coroner said that it amounted to a breach of his human rights.
Private Smith, from Hawick, in the Scottish Borders, was serving in the 52nd Lowland Regiment. He was unmarried but had a long-term partner.
The MoD conceded that Private Smith was within the jurisdiction of European and British human rights laws because he died while in hospital at a British base in Iraq. But MoD lawyers challenged a general-principle ruling by Mr Justice Collins in the High Court in which he said that members of the Armed Forces always remained in the jurisdiction of the UK and were therefore covered by the Human Rights Act wherever they were serving overseas.
The MoD argued that soldiers could not be protected by human rights laws if they were fighting “beyond the wire” of a base. Mr Justice Collins dismissed the MoD appeal and yesterday the Master of the Rolls, one of the most senior judges, agreed with his judgment and also threw out the ministry’s case.
“For the purpose of determining whether there is a sufficient link with the UK to qualify for protection, it seems to us to make no sense to hold that there is a distinction between a person inside and outside premises controlled by the UK,” the judges ruled.
Catherine Smith, Private Smith’s mother, said: “I welcome the judgment, but I really feel let down by the Army. The Army used to be a family but that doesn’t seem to be the case any more. There is no back-up. It is too late for my son but it is a good thing that everyone in the Army now will be covered by the Human Rights Act.”
Mrs Smith criticised the MoD for failing to provide her son’s medical records at the inquest, and a new inquest is now to be held. Yesterday’s ruling by the Court of Appeal also obliges the MoD to provide more information to bereaved families. The MoD’s lawyers are now considering an appeal to the House of Lords, although the judges said yesterday that the ministry would have to foot the bill whether it won or lost.
Have your say
How can sending troops into battle with defective equipment NOT be negligent? The obscene profits made by the same people who promoted the war in the US, should make us all think very hard about the actions of the militant elderly using the young as cannon-fodder. It has happened in every war.
Angela, Epping, Australia
As a former soldier myself, I welcome the fact that there will be a positive duty to provide the 'right tools' for the job. It wont stop commanders doing what they are now, so long as they can prove that they thought through the implications of their actions; it wont stop people being heros anymore.
Bob, London, UK
some progression... maybe soon people will realise war itself is against human rights
kieran, london,

sri lanka and the tamils

Press Release: UK government faces legal challenge over Sri Lanka
The UK government faces a possible judicial review over its failure to comply with its obligations under international law in light of the worsening crisis in Sri Lanka. On Monday 27 April, Justice for Tamils (representing a group of Sri Lankan Tamils residing in the UK) and the human rights law firm Public Interest Lawyers sent a “letter before action” to the relevant Secretaries of State of the UK government.
The letter details that in face of the Sri Lankan government persistently and systematically breaching international humanitarian and human rights law, arguably carrying out war crimes and acts of genocide against the Tamil community, all states, including the UK have obligations under international law to act in certain ways. The situation in Sri Lanka could not be more serious. According to UN figures released on 24 April almost 6,500 ethnic Tamil civilians have been killed and 14,000 more injured since late January. These figures, which do not include those killed in last week’s intensive fighting, mean that in the past three months an average of 70 civilians have died each day. It is submitted that in light of this horrifying situation the UK under international law has various obligations, namely, to denounce and not recognise the situation in Sri Lanka as lawful; not to render aid and assistance to Sri Lanka; to use all lawful means to bring Sri Lanka’s breaches to an end and to take all possible steps to ensure Sri Lanka respects its obligations under international humanitarian law. Justice for Tamils contend that the UK government’s response thus far has been woefully inadequate and does not comply with its obligations under international law. The proposed visit to Sri Lanka by the Foreign Secretary, the appointment of a Special Envoy and the various public pronouncements are not nearly enough to satisfy the obligations imposed on the UK under international law.The letter before action asks the UK government to set out in clear detailed terms, supported by evidence of the actions taken, exactly how it purports it has met and will continue to meet all of its obligations imposed by international law arising from the situation in Sri Lanka. Amongst other things, the letter seeks:• An immediate, clear and unequivocal declaration that the UK government will vote against the proposed $1.9 billion IMF emergency support loan to the Sri Lankan government. To agree to an IMF loan when the Sri Lankan Government is perpetrating gross violations of humanitarian and human rights law would be a flagrant breach of the UK’s international obligations.• An urgent explanation and justification of the sale of military equipment to the Sri Lankan government in 2008 and 2009. • An unequivocal written assurance that there is no question that any UK products or components could be or may continue to be implicated in the attacks on civilians in Sri Lanka in the context of the egregious human rights violations being committed.• A suspension of all arms export licences to the Sri Lankan government:• A full and clear explanation as to what steps the UK has taken to:(i) ensure a cessation of preferential trading with Sri Lanka;(ii) cooperate with other states to bring an end to Sri Lanka’s serious breaches of international law;(iii) satisfy its duty to investigate and where appropriate prosecute those accused of war crimes, crimes against humanity and acts of genocide.If the UK government fails to adequately reply to the letter, proceedings for judicial review will be lodged at the High Court without delay.If you would like any further information, please do not hesitate to contact Mr Kesavan of Justice for Tamils, 07968 52 55 63, justice4tamilsuk@googlemail.com or Tessa Gregory at Public Interest Lawyers, 0121 515 5069, tessa.gregory@publicinterestlawyers.co.uk. www.publicinterestlawyers.co.uk 28 April 2009

Tuesday, 12 May 2009

Tackling Britain’s fiscal debacle

Published: May 7 2009 19:45 Last updated: May 7 2009 19:45
In 2010, according to the European Commission’s latest forecasts, the UK government will be spending 52.4 per cent of gross domestic product and receiving just 38.7 per cent of GDP in revenue. It will, as a result, have a gigantic general government deficit of 13.8 per cent of GDP. Worse, the UK’s cyclically-adjusted deficit will be 12.2 per cent of GDP. These are numbers one would expect in a time of war.
Only five of the 27 members of the European Union are forecast to have a higher share of public spending in GDP than the UK in 2010: Sweden (57.3 per cent); Denmark (57 per cent); France (56.4 per cent); Finland (54.3 per cent); and Belgium (also 54.3 per cent). But only six EU members will have a lower revenue share than the UK: Romania (33.3 per cent); Ireland (33.5 per cent); Slovakia (34.1 per cent); Lithuania (34.8 per cent); Latvia (36.2 per cent); and Spain (37.3 per cent). Just one member will have a bigger deficit than the UK: Ireland, on 15.6 per cent.
EDITOR’S CHOICE
Video: Martin Wolf – ‘Darling flying on a wing and a prayer’ - Apr-22
Economists’ forum - Oct-01
Martin Wolf: On a wing and a prayer - Apr-22
The forecast deterioration in the UK government’s fiscal balance, of 11.1 per cent of GDP between 2007 and 2010, is also the fourth largest in the EU, after Ireland (15.8 per cent), Latvia (13.2 per cent) and Spain (12.0 per cent). How did this fiscal debacle occur? The answer lies far more in spending, forecast to jump by an astounding 8.4 per cent of GDP between 2007 and 2010, than revenue, forecast to shrink by a more modest 2.6 per cent of GDP.
What makes the UK’s rise in government spending as a share of GDP puzzling is that the decline in GDP itself is not exceptional. The Commission forecasts the decline of UK GDP at 3.8 per cent this year, slightly less than for the EU and the eurozone, both of whose economies are expected to shrink by 4 per cent. In 2010, the UK economy is forecast to grow by 0.1 per cent, again slightly better than the EU and the eurozone, both on -0.1 per cent.
The painful conclusion must be that the UK has lost control over public spending. It has to get it back again. Whether they like it or not, UK voters will have to elect a government willing to achieve this end. Government solvency is at stake. The next government will, as a result, find itself in a war of attrition with its own servants. If David Cameron leads the Conservatives to victory, as many expect, he will have to be tougher than Margaret Thatcher, elected prime minister three decades ago.
It is possible, of course, that a powerful recovery will do the trick. In the Budget, the Treasury concluded that the UK had suffered a permanent loss of 5 per cent of GDP as a result of the crisis, while trend growth was 2¾ per cent. The Treasury also assumes the output gap – a measure of excess capacity – will peak at 5 per cent of GDP, then disappear.
It would be highly irresponsible to plan the public finances on the assumption that the economy will soon return to the level and assumed growth of the pre-crisis era. Indeed, I share the view advanced by Robert Chote, director of the Institute for Fiscal Studies, in a recent study, that the UK had an unsustainable boom. A part of the economy was an illusion.
It is possible to propose that, since the British now spend like the French, they should pay taxes like the French. But that would mean a huge increase in taxation – perhaps of as much as 10 per cent of GDP. While some increase in tax rates will be inescapable, to bring the ratio back to where it was before the crisis, the British are not going to accept a vast increase in the tax burden.
Nor is it reasonable to assume that such huge deficits can be run for long without risking big jumps in interest rates. The Treasury forecasts a rise in public sector net debt from 36.5 per cent of GDP in 2007-08 to 76.2 per cent in 2013-14. It is likely to end up higher. A prudent government would not only wish to halt this rise but also to reverse it, to renew the fiscal flexibility it is using up.
Government spending will have to be cut down to size. According to the IFS, the government has pencilled in the tightest spending plans over a seven-year period since April 1985 to March 1992: a 0.1 per cent annual average real increase from 2011-12 to 2013-14, followed by a possible 0.5 per cent annual real increase in current spending for a further four years. This is the least that has to be achieved, given the dire starting position. In effect, government spending may have to be stagnant in real terms for almost two successive parliaments.
That is what happens to a country that has not only spent freely, but now finds itself far poorer than it had hoped. It is clear what this must mean: a sustained freeze on the pay bill; decentralised pay bargaining; employee contributions to public pensions; and a pruning of benefits. It is obvious, too, that this will mean massive and painful conflict between governments and public workers.
Hitherto, the vastly increased levels of government borrowing have concealed the true extent of this crisis. But these deficits will have to be eliminated. The bulk of the action will have to come from control over public spending. The next prime minister is likely to end up quite as hated as Margaret Thatcher was. But, as she liked to say, there is no alternative. The unsustainable cannot endure. If UK policymakers do not take the needed decisions willingly, markets will force them upon them.
martin.wolf@ft.com

Wednesday, 6 May 2009

How tax havens helped to create a crisis

By Sol Picciotto
Published: May 5 2009 20:04 Last updated: May 5 2009 20:04
Banks employ large teams of highly paid people to devise transactions mainly for the purpose of avoiding tax. These activities seem to be far more profitable than the humdrum business of managing payments and channelling savings towards investment. Why?
The answer shows the close link between tax avoidance and the speculation that has fuelled financial instability for 30 years. There were clearly other causes of the current crisis but the faults of the international tax system were a big contributory factor.
International tax co-ordination depends on treaties based on a model devised 80 years ago. To prevent double taxation, the treaties generally give governments the right to tax returns from an investment in the investor’s country of residence. Business profits, meanwhile, are taxable in the “source” country where the activity takes place.
But for most of the past century, international investment was dominated by multinational corporations, which could choose the location of their sources of funds and organise their affiliates’ capital structures. This enabled them to devise techniques to ensure that they were not taxed unfairly, as they saw it, exploiting ambiguities in the concepts of residence and source using legal entities formed in convenient jurisdictions. Such methods were also pioneered, with rather less legitimacy, by wealthy people resentful of high income taxes.
The relaxation and final abandonment of exchange controls in the 1970s led to the blossoming of “offshore” finance and a boom in tax havens. These depend on both outright tax evasion and the exploitation of grey areas by tax avoidance. Since large multinationals are as much financial as business entities, they have freedom to devise complex financial structures – financial institutions, such as banks, even more so: in recent separate surveys by the US Government Accountability Office and the Tax Justice Network, the largest user of tax havens in every country surveyed was a bank. Tax authorities have enormous problems puzzling out these structures. If they can, it is often hard to characterise them as shams.
The leading countries themselves are also host to major financial centres, from which most of these activities are directed. The revenue authorities in these countries, not least the US and the UK, have been cowed into accepting these activities for fear of losing finance business.
Take hedge funds, for example. The tax authorities in the US and the UK have accepted a lax interpretation of residence and source rules, accepting that these funds are resident and their profits sourced offshore (mostly in the Cayman Islands) – even though they are effectively managed from London and New York. Not only are the funds’ gains treated as realised in Cayman, and hence not taxable, but their distributions are not subject to withholding tax – a great benefit for their investors. The funds’ location in a secrecy jurisdiction facilitates tax avoidance and is an open invitation to evasion.
For multinationals and rich investors the point is the same: returns on financial transactions are ultimately taxed at a low or zero rate, making them far more profitable than genuine business endeavours. This distortion of the tax system has greatly fuelled the excess of liquidity channelled into largely speculative financial transactions. The offshore secrecy system has been a main element of the opacity that has undermined corporate and financial regulation.
The remedies lie in fundamental reforms of international fiscal and financial regulatory co-operation, and their co-ordination. International tax co-operation requires a comprehensive, multilateral system for both obtaining and exchanging information for all tax purposes, with proper safeguards for taxpayers. Requiring multinationals to break down their accounting information by each country in which they do business would inject much-needed transparency into the system. Reform should include a shift towards unitary taxation, which most international tax specialists recognise is long overdue. This would be preferable to the Obama administration’s new proposals to tinker with US rules on tax deferral.
These reforms would make the international tax system more effective and fairer, and remove a major rationale for tax havens. They would produce large cost savings for business and perhaps even close down the departments in banks that conjure up wasteful and distorting tax-driven schemes.
The author is an emeritus professor at Lancaster University and a senior adviser to the Tax Justice Network.

Tuesday, 5 May 2009

High stakes, low finance

Will Hutton traces the banking crisis back to the Big Bang
Will Hutton
The Guardian, Saturday 2 May 2009
Article history
Chasing Alpha: How Reckless Growth and Unchecked Ambition Ruined the City's Golden Decadeby Philip Augar272pp, Bodley Head, £20
Fool's Gold: How an Ingenious Tribe of Bankers Rewrote the Rules of Finance, Made a Fortune and Survived a Catastropheby Gillian Tett352pp, Little, Brown, £18.99
Meltdown: The End of the Age of Greedby Paul Mason192pp, Verso, £7.99
The Crash of 2008 and What It Means: The New Paradigm for Financial Marketsby George Soros288pp, Public Affairs, £9.99
Gordon Brown will not think it, but in the politics of credit crunch he is a lucky man. His speech at the Mansion House on Wednesday 20 June 2007, days before he took office as prime minister, is one of the greatest political and economic misjudgments among postwar politicians. Yet very few have read or even recollect it. But then his political opponents, outbidding him at the time in their slavish praise of the City, have even more embarrassing quotes on the record. They are hardly in a position to attack him.
"This is an era that history will record as a new golden age for the City of London," Brown intoned. "I want to thank all of you for what you are achieving." Just weeks later the financial catastrophe burst, creating the "great recession" and leaving the UK taxpayer with a one-sided exposure of £1.3 trillion in loans, investments, cash injections and guarantees to the banking system, of which over £100bn may be lost for ever. Brown went on to hymn the City's "creativity and ingenuity" that had enabled it to become a new world leader. In language so purple it could make a cardinal blush, he praised London's invention of "the most modern instruments of finance" - the very instruments that were to bring it and the western banking system down.
Invoking Adam Smith, Brown declaimed: "The message London's success sends out to the whole British economy is that we will succeed if, like London, we think globally ... and nurture the skills of the future, advance with light-touch regulation, a competitive tax environment and flexibility." He even managed to boast that, after financial and accounting scandals in the US such as those that brought down Enron and WorldCom, which led the American government to introduce new regulatory reforms, "many who advised me, including not a few newspapers, favoured a regulatory crackdown. I believe we were right not to go down that road."
The boastfulness, the wholesale endorsement of the philosophy that was to bring the world to the economic edge and the sheer ignorance are painful to read - tribute to the way the bankers completely pulled the wool over the eyes of the political and regulatory establishment in one of the greatest heists the world has witnessed. The IMF now calculates that there are $4.1 trillion of losses in the world financial system, less than half of which has been formally written off. Without massive government support, the scale of the banking collapse that would have followed such losses would have induced a global depression. Even as it is, world trade will this year decline by 9%. Alistair Darling's budget has already passed into legend as the most depressing since the war. The credit-crunch-ravaged, post-recession British economy will be unable to shoulder the size of the current British state. In the most challenging decade since 1945, a way has to be found of shrinking its size while still finding new ways to grow and alleviate mass unemployment.
It is a disaster, or, as BBC Newsnight's Paul Mason would have it, a financial Krakatoa. It is the economic and financial story of our times, and he, the Financial Times journalist Gillian Tett and financial author Philip Augar have all been inspired to write "crash" books. Each is gripping and revelatory, with sometimes breathtaking quotes or new facts, and each adds a different dimension to our understanding of the crisis. Their subtitles tell of greed, recklessness and catastrophe - and all three writers are as good as their promise. What has happened to finance and the financial system since London's Big Bang in 1986 is an astounding story of ideology, greed and lack of restraint - sanctioned by our politicians who, like Brown, marvelled at the apparent results without beginning to understand how they were achieved. Moreover, they built regulatory systems to suit the bankers' interests. You might have hoped that politicians of the left would have been savvier and more suspicious of the bankers' claims. One of the tragedies of New Labour is that the party leadership bought the story so completely - Brown becoming as much of a zealot for free-market financial innovation as the free-market fundamentalist neocon Alan Greenspan, whose knighthood he organised.
The books leave no doubt that it is the bankers and their greed who were the authors of the crisis. True, there were dollars spilling out of Asia and the Gulf in huge volumes in the 2000s, and low interest rates created an appetite for taking risks. But bankers seized the opportunity to lend unprecedented amounts on ever smaller amounts of capital, with the risk apparently abolished by the invention of new financial instruments and tradeable insurance contracts. This is Tett's original contribution. Her blow-by-blow story of how these were developed during the 1980s and 90s, and the motivations of those who did it, is an impressive piece of detective work. She pulls back the curtain on a closed, unaccountable world of finance - a "silo in its own right detached from society". My only cavil is that I wish she could have got as much access to top British bankers as she got to American ones, and in particular those in JP Morgan: her locus is too much New York.
That is made good by Philip Augar, a former investment banker who has made it his mission to reveal the systemic and destructive way that British finance works. He understands both the people and the processes - and Chasing Alpha is his best book yet. He even devotes a chapter to Brown's Mansion House speech. Together, he and Tett make it clear beyond peradventure that it was the structure of the financial system that created the havoc, and that it was firmly embedded in the intertwined London and New York markets from the 1980s onwards. Similar-scale dollar surpluses in the 1970s did not create such financial problems; but that was before the Thatcherite and neoconservative revolutions.
In 1933 Senators Glass and Steagall, prompted by Roosevelt, had sponsored the Glass-Steagall Act, prohibiting investment bankers betting deposits on the buying and selling of tradeable financial securities that can create huge losses. Banking and investment banking should be separate. For 50 years the act kept American banking honest. But after Mrs Thatcher decided in 1986 that banks could own stockbrokers and market-making stock jobbers in her new anything-could-go casino City of London - the "Big Bang" - American banks complained to the US central bank, the Federal Reserve, that they could do things in London not possible in New York. Paul Mason explains how in 1987 the Fed relaxed Glass-Steagall to allow 5% of a bank's deposits to be used for investment banking, further relaxed to 25% in 1996. The act's abolition in 1999, which opened the floodgates for today's financial catastrophe, was inevitable - even if it cost the banks $300m in lobbying fees.
Tett shows how the regulators rolled over in another core area. In the late 1990s they accepted the banks' argument that their alchemy in creating collateralised debt obligations (bundling up income-generating assets of varying quality into one security) and then insuring against the risk of default (credit default swaps) both merited the triple A credit scores the credit agencies were awarding and, crucially, needed less capital to stand behind them. By 2000 the stage was set for what was to follow: investment banks having balance sheets 30 times or more larger than their core capital, refinancing as much as a quarter of their trillions of dollars of liabilities every day from the so-called wholesale money markets, and lending/investing in a range of highly risky financial instruments. The system could not insure against its own systemic failure. It was an edifice built on sand: $1 trillion of sub-prime debt had been bundled into various categories of structured, tradeable debt; when American house prices began to crumble in 2007, the whole interlinked pyramid came crashing down.
Mason's first three chapters are a page-turning account of September and October of last year, when it did look as though the American and British financial systems were about to collapse - the fateful weekend in September when Lehman Brothers went bust and America's top insurance company AIG only survived courtesy of an $80bn loan, and later, in early October, when Britain's RBS and HBOS were hours away from implosion. Mason, I think correctly, emphasises the highly risky way some British commercial, and other, mortgage lenders had become reliant on the money markets to support their lending, so that RBS and HBOS were in an analogous position to the US investment banks Lehman and Bear Stearns, both of whom went bust. At the root of the crisis were the interaction of money market-financed balance sheets, too much consequential borrowing and the new "weapons of mass financial destruction".
Mason is refreshingly clear-eyed about the operation of today's finance-driven capitalism - and angry. It wasn't only that the banks and insurance companies campaigned to have the law changed to serve their interests with such disastrous results. Sometimes, as with AIG, they began to transgress the law. AIG admitted in 2005 that it had faked $500m of transactions to fool the auditors, and "misclassified" another $3bn to inflate its profits. I have no doubt that there are more instances that may never come to light. Britain has insured £585bn of bank loans. It is hard to believe that every penny of bad debt on such a scale was just honest misjudgment. Do we believe that the British were angels and the only frauds American?
George Soros, successful hedge fund entrepreneur and famous beneficiary of the pound's expulsion from the European Exchange Rate Mechanism, has been trying for decades to explain that the axioms of free-market economics do not apply to the financial markets. Brown and Greenspan were always wrong to believe that free financial markets would tend to optimal outcomes. Rather, markets feed on themselves, so that financial values have a permanent tendency to swing between boom and bust - they are never rational. The crash of 2008, Soros explains, was an accident waiting to happen. Recovery will require regulation that compels banks to carry more capital and lend more judiciously. But until the international financial system is fairer to the less-developed countries on "the periphery", the core of the world economy will always be at risk of being flooded by hot money fleeing from that risky periphery.
This quartet of books indict modern finance. They cannot be read without wishing for something different. Yet even now I am not sure that the politicians and officials get it. The support for British banks is disgracefully one-sided. The taxpayer will lose at least £50bn, if not £100bn, but there has been no concomitant willingness on the part of the bankers to restructure their business model - or accept that their pensions, bonuses and pay should be seriously qualified. They want to get back to the glory days, and if once in every 30 or 40 years the rest of us suffer recessions and a £100bn bill while they make personal fortunes - so be it. It is not a fair bargain. These books set out why, and how it could be changed. Read all of them.
• Will Hutton is executive vice-chair of the Work Foundation

Corporate State - in whose interests?


BERR has become a cell within government that interferes with both social democracy and free markets
Comments (44)

George Monbiot
guardian.co.uk, Monday 4 May 2009 18.30 BST
Article history
There isn't much to be said for Nicholas ­Ridley, the most desiccated ­market ­fundamentalist in Margaret ­Thatcher's cabinet, but at least he was aware of the ­government's ­contradictions. When he took over the Department of Trade and Industry in 1989, he asked: "What is the DTI for? I've got bugger all to do and thousands of staff to help me do it." Thatcher's government had spent 10 years preaching that people should stand on their own two feet and that the market should be free from meddling by the state. But it ran a large department whose purpose was to nanny free enterprise.
The name has changed, to Business, Enterprise & Regulatory Reform, but the department's policies have not. I think, however, that I have an answer to Ridley's question. BERR, now run by Lord Mandelson, functions as a fifth column within government, working for corporations to undermine democracy and the public interest. Since he became business secretary in October, Mandelson has been quietly building a bonfire of the measures that protect us from predatory corporate behaviour.
You don't have to look very far to see where BERR's interests lie. Most government departments contain either one unelected minister or none. Two departments (the Foreign Office and Innovation, Universities and Skills) each accommodate two unelected ­ministers. But BERR has four. It is the only ­department of government in which unelected ministers outnumber members of parliament.
Until he became minister for communications in BERR, Lord Carter was the chief executive of Brunswick Group, a big public relations firm whose clients include British Airways, Barclays, Unilever, Rolls Royce and BT. Lord Davies, the minister for trade and investment, was chairman of Standard Chartered and a non-executive director of Tesco. Until October, the trade minister was Digby Jones, formerly the director general of the Confederation of British Industry. Lord Jones refused to join the Labour party, or to say which party he would support at the next election.
As for Lord Mandelson, who previously ranked second on Gordon Brown's execution list, the only convincing explanation for his appointment is that business demanded it. Mandelson, who once avowed that "we are intensely relaxed about people getting filthy rich" was partly responsible, both in Blair's government and as European trade commissioner, for promoting the culture of deregulation that catalysed the economic crisis. Yet even today he boasts about "a decade of reform that has given the UK the most open and flexible product and labour markets in the world".
These unelected ministers appear to have formed their own lobby group within government, to prevent those upstart parliamentarians from interfering with the democratic rights of business. They are responsible for some of the policies that now threaten to tear the Labour party apart.
Mandelson is the promoter of Labour's crazy scheme to part-privatise Royal Mail. Wildly unpopular with both the public and Labour MPs, it breaks a manifesto commitment and could provoke a parliamentary rebellion big enough to unseat the prime minister.
But most of his assaults on democracy have achieved much less attention. Last week he helped neuter the EU's working time directive by ensuring that European companies will still be able to push their employees into working for more than 48 hours a week. BERR issued a gleeful press release bragging that talks on the directive "have broken down without agreement being reached" as a result of government filibusters. Mandelson's attempt to prevent companies exploiting their female workers was less successful. The ­equality bill sought to audit large companies to ensure that they were not paying women less than men for the same jobs. Mandelson insisted the audits should be voluntary, and that the policy should first be approved by the CBI, which often seems to be the real government of Britain.
Last month, although it passed almost unnoticed, BERR deregulated the news distribution industry. This is a gift to the supermarkets but a disaster for both small newsagents – and for freedom of speech. The companies that distribute newspapers and magazines to the shops have historically guaranteed, in return for exclusive delivery rights, to supply whatever stock a shop requests, however small the order might be. This allowed small newsagents to survive and protected publishers from censorship by powerful retailers. (In the United States, supermarkets often ­dictate the contents of the magazines they sell). Tesco has been trying to break the ­distribution agreement since 2000; now Mandelson has delivered.
A few days ago, the Guardian revealed that BERR has set up a new unit, whose purpose appears to be to lobby another department on behalf of business. The business department relinquished its responsibility for energy policy only six months ago. Now it has created an energy and climate change unit, whose brief and title look suspiciously similar to Ed Miliband's Department for Energy and Climate Change. While Miliband gets the environment, Mandelson appears to be doing everything in his power to trash it. Over the past year he has secured £2.6bn in subsidies, loans and guarantees for the motor industry. He boasts that this is "effectively the same as underwriting the entire vehicle sector's research and development and capital expenditure for a year". He is widely blamed for the decision to build a third runway at Heathrow.
Last month BERR launched a consultation about the EU's attempts to strengthen its directives on waste electrical equipment and hazardous substances. The EU is trying to cut the amount of cyberjunk going into ­landfill and to prevent companies ­sending dead computers overseas to be ­dismantled by child labourers. In ­drafting the ­consultation document, Mandelson's department conferred with 10 ­industry bodies but no trade unions or ­environment or development groups.
In the strategic plan it released last month, BERR announced that it wants the government to "match … the influence it ­exercises in the economy to the strategic needs of business". It also wants to second even more people from the private ­sector into government, which is ­already ­infested with people whose public ­duties conflict with their ­commercial interests. It revealed that, as of last month, "grant applicants to all ­research councils will have to set out the ­economic impact of their proposed research". This appears to mark the end of the pursuit of knowledge for its own sake: all research, whether funded by the state or corporations, must now ­consider the needs of business.
Business is perfectly capable of ­making its own representations. It does not require a cell inside government to ensure that its voice is heard; it should compete, like the rest of us, for the attention of ministers. Mandelson's department has one legitimate function: simplifying and clarifying regulations. The others – the trade missions, the lobbying, the featherbedding – achieve the rare distinction of undermining both social democracy and free markets.
BERR now has a budget of £1.92bn, £460m bigger than it was last year. The government is looking for savings. It should close this department down.

"Bernie Madoff, Scapegoat" by Michael Moore

The following piece written by Michael Moore appears in this week's Time magazine (and in full at Time.com) as part of their annual "Time 100" issue highlighting their choices for "The World's Most Influential People."
Elie Wiesel called him a "God." His investors called him a "genius." But, proving correct that old adage from the country and western song, you never really know what goes on behind closed doors.
Bernie Madoff, for at least 20 years, ran a Ponzi scheme on thousands of clients, among them the people you and I would consider the best and brightest. Business leaders, celebrities, charities, even some of his own relatives and his defense attorney were taken for a ride (this has to be the first time a lawyer was hosed by the client).
We're clearly in one of those historic, game changing years: up is down, red is blue and black is President. Aside from Obama himself, no person will provide a more iconic face of this end-of-capitalism-as-we-know-it year than Bernard Lawrence Madoff.
Which is too bad. Yes, he stole $65 billion from some already quite wealthy people. I know that's upsetting to them because rich guys like Bernie are not supposed to be stealing from their own kind. Crime, thievery, looting — that's what happens on the other side of town. The rules of the money game on Park Avenue and Wall Street are comprised of things like charging the public 29% credit card interest, tricking people into taking out a second mortgage they can't afford, and concocting a student loan system that has graduates in hock for the next 20 years. Now that's smart business! And it's legal. That's where Bernie went wrong — his scheming, his trickery was an outrage both because it was illegal and because he preyed on his side of the tracks.
Had Mr. Madoff just followed the example of his fellow top one-percenters, there were many ways he could have legally multiplied his wealth many times over. Here's how it's done. First, threaten your workers that you'll move their jobs offshore if they don't agree to reduce their pay and benefits. Then move those jobs offshore. Then place that income on the shores of the Cayman Islands and pay no taxes. Don't put the money back into your company. Put it into your pocket and the pockets of your shareholders. There! Done! Legal!
But Bernie wanted to play X-games Capitalism, run by the mantra that's at the core of all capitalistic endeavors: Enough Is Never Enough. You have the right to make as much as you can, and if people are too stupid to read the fine print of their health insurance policy or their GM "100,000-mile warranty," well, tough luck, losers. Buyers beware!
It would be too easy — and the wrong lesson learned — to put Bernie on TIME's list all by himself. If Ponzi schemes are such a bad thing, then why have we allowed all of our top banks to deal in credit default swaps and other make-believe rackets? Why did we allow those same banks to create the scam of a sub-prime mortgage? And instead of putting the people responsible in the cell block in Lower Manhattan, where Bernie now resides, why did we give them huge sums of our hard-earned tax dollars to bail them out of their self-inflicted troubles? Bernard Madoff is nothing more than the scab on the wound. He's also a most-needed and convenient distraction. Where's the photo on this list of the ex-chairmen of AIG, Merrill Lynch and Citigroup? Where's the mug shot of Phil Gramm, the senator who wrote the bill to strip the system of its regulations, or of the President who signed that bill? And how 'bout those who ran the fake numbers at the ratings agencies, the lobbyists who succeeded in making sleazy accounting a lawful practice, or the stock market itself — an institution that's treated like the Holy Sepulchre instead of the casino that it is (and, like all other casinos, the house eventually wins).
And what of Madoff's clients themselves? What did they think was going on to guarantee them incredible returns on their investments every single year — when no one else on planet Earth was getting anything like that? Some have admitted they did have an inkling "something was up," but no one really wanted to ask what it was that was making their money grow on trees. They were afraid they might find out it had nothing to do with gardening. Many of Madoff's victims have told investigators that, over the years, they have made much more than the original investment they gave Bernie. If I buy a stolen car from the guy down the street, the police will take that car from me regardless of whether I knew it was stolen. If I knew it was stolen, then I go to jail for receiving stolen property. Will these "victims" give back their gains that were fraudulently obtained? Will the head of Goldman Sachs reveal what he was doing at the meetings with the Fed chairman and the Treasury secretary before the bailout? Will Bank of America please tell us what they've spent $45 billion of our TARP money on?
That's probably going too far. Better that we just put Bernie on this list.
Moore's new documentary on the wonders of capitalism will be in movie theaters this fall.

Friday, 1 May 2009

City bankers on course for £7bn in bonuses

• Payouts running at about half the level of last year
• 'Alarming' figures show no awareness of crisis – Cable

Ashley Seager
guardian.co.uk, Thursday 30 April 2009 00.05 BST
Article history
City bankers are to reap nearly £7bn in bonuses this spring even though the government has been forced to pump tens of billions into the banks to prevent them collapsing.
Analysis of preliminary pay data from the Office for National Statistics shows that in the first three months of the bonus season to February the financial sector has shared out £5bn in bonuses, half the level of the same period last year.
Extrapolating that to the full five months of the bonus season to April means payouts will be between £6.5bn and £7bn, compared with £13.7bn last year.
"These figures are alarming and show a complete lack of awareness in the City of the extent of the financial crisis, their role in creating it and the extent to which they are ultimately answerable to the taxpayer," said the Liberal Democrats' Treasury spokesman, Vince Cable. "It would be outrageous if taxpayer-supported institutions are handing out large bonuses, particularly at a time when hundreds of thousands of people are losing their jobs."
In last week's budget, Alistair Darling, revealed that borrowing would surge to £175bn this year as a result of the credit crunch and the country faced nearly a decade of rising taxes and big cuts in public spending to pay for the recession and bank bailouts.
The TUC general secretary, Brendan Barber, said: "Given the havoc that the City has wreaked on our economy, pegging back bonuses to a mere £7bn a year falls short of the value for money taxpayers should expect after bailing out the banks."
In 2008, bonuses suffered their first fall in five years as the early months of the credit crunch took their toll – but the fall was small, to £13.7bn from £14.1bn in 2007, after a 30% rise from 2006.
The low point in recent years was £5.2bn in 2003, as the financial sector recovered from the dotcom bust in the stockmarket. This year's payout will be broadly similar to that of 2004, when financial markets were in good shape.
Averaged across the whole of financial services, the bonuses would amount to £6,500 to £7,000 a head, but payouts are not evenly distributed. The City bonus pile works out at close to half the total of £12bn handed out across the whole economy between December and February.
The Bank of England governor, Mervyn King, recently told the Treasury select committee (CBI): "The real debate is how on earth was it that at the time shareholders, boards, the financial press, all thought it was a great idea to reward people in this way. These bonuses were absolutely astronomic." He called bonuses "a form of compensation that rewarded gamblers if they won the gamble but there was no loss if you lost it".
A CBI spokesperson said: "Bonuses given for hard work and success are not a problem. But the link between incentives and long-term performance needs to be strengthened."