Stating the Case.

Speculator Column, IR magazine

  4 Jun 2013 Ian Williams

Finding chinks in the armor of the Iron Lady’s legacy 

Margaret Thatcher’s death in April revived discussion of state ownership of industries. The New York Times always described Mrs T as ‘the prime minister who privatized the loss-making state industries’. In reality, she was careful to sell only those that were very profitable, otherwise her friends in the City would not have been so eager to snap them up.

That well-known Bolshevik Winston Churchill nationalized BP, which was making untold millions for the Treasury by the time Mrs T sold it. The utilities that were privatized were no more efficient after the event than before, and usually inflicted much higher charges on their captive customers.

The same management teams that had led the state enterprises kept their desks but tended to pay themselves much more, despite mediocre results. In the modern version of shareholder capitalism, they escaped the political scrutiny of both parliament and citizenry and swapped it for the benign insouciance of money managers.

It’s true that in some countries state industries were channels of patronage and corruption, but the industries Thatcher sold were not among them. They did have strong unions, but for most of the post-war period those unions co-operated in productivity measures and closures, as well as huge reductions in employees. Industries like British Rail lost three quarters of their workers under state control, and these workers tended to be low paid anyway, as governments used them to hold down pay rates and allegedly control inflation.

If the British state industries had a fault, it was not inherent in their form of ownership, but rather that the permanent government of Treasury civil servants starved them of investment, and thus productivity, in order to reduce the Public Sector Borrowing Requirement (PSBR). The PSBR was, and is, an irrelevant shibboleth, as if there were no difference between borrowing to finance investment and selling bonds to finance day-to-day government operations. Indeed, that was one of the stated reasons for privatizing British Telecom: bringing the antiquated telephone network up to date would have needed huge amounts of public investment.

Thanks to Mrs T, in the 1980s, competing parallel universes to the left and the right called for the nationalization of strategic industries, or liberating business from the ‘tyranny of the state’. Both were, and are, utterly detached from reality, as indeed is much of the discussion now.

In the real world, the governments of countries like Singapore, Norway or other oil states now hold huge stakes in British and American industry, without any diminution of business efficiency. Wall Street travels to work on the public-owned MTA and PATH trains and, in between glasses of Champagne, drinks water supplied by New York City. The Street lacked enthusiasm to invest in a 50-year water tunnel building program, but it is not reticent in its acceptance of Uncle Sam’s cash in times of crisis, as long as it comes untrammeled by ownership and control.

Back in Britain, one of Mrs T’s successes was the privatization of the Trustee Savings Bank, until the courts ruled it was owned by its clients, not the government. The proceeds of the sale to Lloyds had to be returned to those clients.

But these models can be Procrustean. If a state enterprise makes money it is either sold or milked to make it fit the privatizers’ paradigm. Now that Fannie Mae and Freddy Mac are making money for the US Treasury, we can be sure calls to sell them will follow – and soon. The US Postal Service (USPS) made money until ideological Congressmen forced it to prefund its employee health plans for 75 years, to pave the way for privatization.

One potential beneficiary of USPS dismemberment would be DHL – owned by the state-owned German Postal Service! There may be a rationale here, but it got lost in the mail somewhere.

Looking back to Spain, and sideways to Syria

 Tribune 14 June 2013

 Ian Williams

George Orwell understood that ignoring obvious horrors for expediency’s sake is a roadblock to justice.

The New Statesman recently reminisced about its former editor Kingsley Martin’s feud with Tribune’s former literary editor George Orwell about the latter’s attempt to tell the whole truth about the Spanish War. Martin preferred the commodity doled out sparingly, for which Orwell never forgave him.

Like many people who would otherwise swear by the truth as an abstract principle, Martin made it a partisan issue for the “cause.” Orwell, of course, often defied such criticism: that to tell the truth would harm the war effort, or harm unity with the part of the so-called left that had tried to kill him in Spain and was busily executing Socialists across Eastern Europe. Interestingly, twenty years after the fall of the Soviet Union, its ghosts haunt Orwell’s reputation yet, with vitriolic detractors whose ad-hominem hatred has almost forgotten its original roots in the purges and now uncontested mass murders of the era.

Veracity as a sacred principle has lots of small-print exceptions for so many people. It would be “bad for Israel,” or bad for the Palestinians. Over years of writing, I’ve been told I couldn’t say “that” about Militant in Liverpool, New Labour, UN corruption, and many other causes. In an eerie echo of Martin in the Statesman, I was told that the Nation in the US had a line, so we could not write anything about intervention in Kosovo that was not outright condemnation. It would “aid imperialism” to say that Slobodan Milosevic built his power on unleashing genocidal impulses.

The Hapsburg lip allegedly led generations of sycophantic dons into emulatory lisps -- which is a minor lapse -- the compared to all those who joined committees to “defend” Rwandan and Balkan mass murderers against “imperialist” justice.

All of us practice a partial vision some extent. Someone might indeed be very ugly, but it behooves us not to point that out. But like the emperor with his new clothes, if such a political figure poses publicly, then it is indeed a writer’s duty to mention their absence of raiment.

Recent weeks have seen some outstanding examples of reckless candour that deserve applause and support. Bradley Manning revealed clear examples of crimes by the Pentagon, notably the murder of a Reuters camera team in Baghdad and the gunning down of innocent civilians coming to help the wounded. It is worth recalling that the Pentagon lied to Reuter’s legal Freedom of Information request by claiming the video was lost.

He deserves all-out support from journalists, not the mumbling diffidence of the New York Times that published his revelations while abandoning their source. Similarly, one hopes that revelations that Edward Snowden supported deranged libertarian right-winger Ron Paul will not detract from support for his deed revealing, dare one say, Orwellian, government surveillance that would have Big Brother green with envy!

One other, almost unrecognised act of non-partisan balance, has come from the UN, in its reports on Syria, which suggest that people on both sides have used chemical weapons and violated human rights. It has resisted attempts to provide the smoking chemical canisters that neocon hawks would like, even though it has indeed made plain that the balance of crimes weighs heavily down on the regime side.

The parallels with Spain are painful. Most atrocities from the rebel side in Syria seem to be associated with their version of the International Brigades, which include fundamentalists coming in to “help.” This week, Russia Today quite correctly reported on their execution of a young Syrian for “heresy.” Somewhat less correctly, RT maintains complete silence on the regime’s mass killings of civilians and opponents.

Orwell’s commitment to the defeat of fascism was unimpeachable. And apart from being one of nature’s awkward squad, he appreciated that publicly ignoring obvious horrors for expediency’s sake does not help the cause of justice and progress in the slightest.

Orwell supported the Republicans in Spain, even though the KGB operating under their aegis tried to kill him -- and actually did execute many others. He certainly did not collectively condemn his comrades in arms who went to fight in the Brigades.

The reason that many of us oppose Assad’s regime is because it is ruthless and murderous, so there is absolutely no reason not to denounce such behaviour when committed by some of “our” side. Indeed, there is even more reason to do so, since to be silent implies complicity.

The truth is not only an effective principle, it is also an expedient weapon in the war of public opinion. We should pillory all who betray it.

East and West, meeting in twain?

Can Obama, Xi find common ground?
Special to The BRICS Post
June 7, 2013, 3:34 am

In 1907, US President Teddy Roosevelt signaled the arrival of the US as as world power by sending the “Great White Fleet” in  a grand gesture to the globe it circumnavigated. It was a little premature: the ships were obsolescent and relied on the kindness of strangers to refuel but it did mark Washington’s aspirations to put truth in the rumours about the Monroe Doctrine.
Similarly, Xi Jinping’s grand tour, which begins in California and a meeting with US President Barack Obama on June 7, is a debut rather than a consolidation.
It is, perhaps wisely, more economic in its theme, brandishing investments rather than waving big sticks.
While modern financial and trading networks need not follow the consolidated marine and land boundaries of previous rising empires, Xi’s triumphal progress through America’s backyard – the Caribbean and Mexico – demonstrates how much more effectively powerful China’s economic success is than the Soviet weaponry had been. “The China Dream,” is Xi’s rallying cry of a China with a seat at the top table.
It will be interesting to note the progress, with small indicators like the almost certain relaxation of Chinese regulations that restrict imports of Mexico’s Tequila because of methanol levels. A few extra Chinese hangovers is a small price to pay for an economic beachhead right on the Rio Grande.
It is fascinating to watch the interplay between the aspirant and receding superpowers and it is reassuring that both sides are obviously thinking seriously, and not necessarily reflexively about it.
When Richard Nixon went to China, apart from recognition of the previous pariah state’s future potential, at least part of  the White House motive was counterbalancing the Soviet Union. President Xi’s tour of the America epitomizes a renewed appreciation on both sides, but above all of China as a potential counterweight to the US itself. A less confident US is relinquishing the xenophobia, or more specifically Sinophobia, that previously greeted Chinese investment interests.
Across the US, job-hungry local governments yearn for the Yuan to come in and do what their own bankers are refusing to do – invest locally.
The times, they’re a-changing
Previous ups and downs of the great powers have been marked by major conflagrations, and we can be grateful that the demotion of the Soviet Union was relatively peaceful. Two decades ago, it would have been difficult to believe that the US of Strategic Defense Initiative, Star Wars and the New American Century fame would have been quite so polite to its most likely supplanter.
Two decades ago, even Japan was viewed with a jaundiced eye as it surged close to overtaking the US economically, even though militarily it was no threat, and indeed, was almost a US protectorate. The costs of wars in Afghanistan and Iraq have taxed US power even as it outspends the rest of the world militarily.
But the relationship between China and the US is unique. While there is very real rivalry as they both compete for the same space at the top of the table, it is like a Puerto Rican knife fight with the combatants tied by the wrists to each other. The US needs China, which, after all, has financed Washington’s wars with its purchase of US dollars. Conversely, China needs the US. Beijing can neither forgo those reserves deposited in its rivals’ Treasury vaults and needs its markets to fuel the growth of its economy.
Xi knows that the secret of continuing Communist Party of China (CPC) power in the face of potential domestic dissatisfaction is the growing prosperity that keeping US consumers happy brings.
However, China is developing military potential along with its economic success and the friction over disputed islands around the China Sea is worrying. The scenario of a rising uppity power confronting one that is relatively getting weaker, is all the more worrying when we consider that network of alliances and defence commitments that the US has across the region. China has interests and claims in an area where the US is far from home but has ties made in former days of glory.
Pulling treaty triggers

There has been rising tension over disputed islands in the China Sea [Xinhua]

In 1914, we saw what happened as a result of those treaty triggers being pulled, and in the South China Sea, US commitments to Japan, Taiwan, and the Philippines could drag the US into a local conflict with China where the latter has its forces concentrated. The US, of course, is still in imperial overstretch mode, with bases and commitments worldwide. At home, the American public has strictly limited enthusiasm for wars for far-away countries of which, after all, it knows amazingly little.
Conservatives have set up a shopping lists of what Obama should demand of Xi, on economic reforms, currency policy, government etc. Obama is more sophisticated than many of his predecessors – and of course economic circumstances have weakened his hand. He is, one hopes, not going to be crass in his demands of China.
One assumes that Obama would realize just how counterproductive it would be for the US, whose economic model has never looked so dodgy, to lecture China, for whom a growth rate four or five times the US’s, seems to be overstretched in its own right. He will also understand that Xi has his own domestic politics to worry about.
The Communist Party has pretty much abandoned the dialectic of the class struggle, and the glue that holds it together is the nationalism of an oft-humiliated civilization.
So the talks are an opportunity for quiet dialogue and a development of rapport between the two leaders. Beijing might offer magnanimous compromises or exit routes on many of the maritime border issues, for example, but would certainly bridle at any ultimata. But the US is hardly in a position to brandish ultimata.
Room for compromise
In the case of Taiwan, for example, the administration’s efforts are more about stopping Taipei tickling the dragon than building up a prickly defence. The long obfuscation of Congressional efforts to sell F-16s to Taipei shows successive presidents’ deference to Beijing’s sensibilities, which on the face of it is illogical appeasement. The planes are only of use if China attacks – no one seriously expects Taiwan to attack the mainland, after all. But Washington has to take account of the importance of the island in China’s inner party rivalries.
There is room for compromise. If we consider, for example, North Korea as China’s Israel, an embarrassing but ineradicable ally, it would frame the limits of what Washington could reasonably expect China to do in a low key way. Xi can no more disown Kim Jong-un publicly than Obama can repudiate Netanyahu, but there are important gestures available.
Obama could pledge, for example, that US forces would withdraw from the Korean Peninsula in the wake of any re-unification, thus avoiding the triumphalistic mistakes in Europe that still fuel Russian resentment.
In fact, there is another model the two might adopt. Britain and the US were similar rivals and partners, tied as much by financial chains as any alleged common bonds of culture and language.
The US facilitated the decline of its erstwhile rival, moving from debtor to creditor – and, it might be added, doing its best to stab its ally in the back financially even as they fought together. But it has not approached military tensions since the British burnt the White House in 1814.
Of course, unless the Tea Party triumphs and splits the US into autonomous fragments, the US is never going to decline as precipitately as Britain shorn of empire, but it is possible for a rising China to be partners with a still powerful, although relatively declining America.
It would appear that Xi and the Chinese are prepared for this.
In terms of domestic politics, Japan is the foreign scapegoat up front while the US is relatively benign in China’s image.
Similarly, China benefits in the US from not being the Soviet Union and also the  main trading partner, an object of admiration and emulation.
Xi and Obama might be the two right people in the right place to make the mutually respectful links needed – and these talks will demonstrate that, one way or another.

The Road To - And Fro- Damascus

Tribune  17 May 2013

The Road To - And Fro- Damascus
The old anecdote about the directions given to a lost traveller in Ireland often applies to international affairs, but with added force to Syria.  “If I was you, I wouldn’t be startin’ from here!”  There is almost no conceivable happy outcome to the inferno in Syria, and although there must be some happier conclusions than others, no one will ever be sure that the roads not taken might have been better.

In part, ordinary Syrians are paying the price for the maladroit handling of  the earlier intervention in Libya - and indeed in Iraq.  Blair and Bush’s great adventure in Iraq understandably soured the enthusiasm of much of the world for intervention in general. One does not have to subscribe to the crazed leftist defence of bourgeois sovereignty that would have led some people to picket the Normandy landings, nor even listen to the supporters and deniers of genocide in the Balkans, to see that the Iraq invasion was unjustified and its outcome was disastrous.

Russian evocation of Libya to justify inaction in Syria is expediently amoral. Russia agreed to NATO involvement in Libya, and Sergei Lavrov, the Russian FM, with his long experience as Moscow’s man at the UN, must have been well aware of how far NATO would take it. The Russians abstained partly because the Arab League was behind the UN resolution, and also because the much unloved Qaddafi had threatened to wipe out the rebels in Benghazi. Those who point out that there was some ambiguity in the actual wording of the threat, should bear in mind that there had been plentiful evidence over the years of his willingness to eliminate enemies as his prison massacre of 1998.

While the UN Resolution on Libya did not specifically endorse regime change, in the real world, faced with a deranged and murderous dictator what other logical result was there?  However, the West clearly should have done much more to involve and thus implicate  Russia, and the failure to do so added heft and sharpness to the chip on Moscow’s shoulders that weighs so heavily on its foreign policy. After all, if the UK and France have still not got over their long-lost Superpower status, Russia certainly has a much more recent excuse for post-power peevishness.

Which brings us back to the Superpower itself. In Washington the Republican opposition could have been making hay with the administration’s failure to develop a coherent policy towards Syria.  Instead, however, they are beating a dead horse that has no interest from the electorate and little connection with the real world. In their incestuous universe, the big issue is not Damascus, but Benghazi and the killing of the US diplomat there last year.  It gives them an obsessive stick with which to beat Hillary Clinton.

To be fair, there is little that the Obama administration could do directly in Syria with the historical baggage the US has accumulated over the years. The interventions in the Muslim world, even when not malicious have tended to be maladroit and all too often counterproductive by any standards. But if not the US, who?

Enter the UN - once again as diplomatic cover. Lakhdar Brahimi, the veteran Algerian diplomat who succeeded Kofi Annan as the UN representative has been considering quitting. His reasons are obvious and honorable: firstly the UN is not a negotiator, rather as Ban Ki Moon says, it is a facilitator. It can provide the ladder for the various parties to climb down from their trees. But as Annan once said, diplomacy is very effective, when backed by the threat of sufficient force.

Currently neither the US, nor the Europeans can muster enough persuasion to get the Russians to lean on their ally Al-Assad. The Russians are providing enough diplomatic and military coverage to keep him fighting even if doing so empowers the Islamists in the opposition and increasingly imperils the position of the Alawites and other minorities.  The US is unable to stop its Israeli tail wagging, and the UN, Bank Ki Moon and Lakhdar Brahimi, without a unified global community behind them are reduced to calling for a ceasefire but have no means to enforce one.

It comes down to US. With all its faults, financially enfeebled, morally tainted and militarily entangled as it is, only the White House has the power to browbeat and cajole an international consensus that could stop the fighting, even if that implies having the strength to say pretty please to Moscow, to guarantee security to the various factions.

It needs a UN resolution, it needs  a no fly zone and eventually, probably boots on the ground - from almost anywhere except Europe and the US. One almost has pipe dreams of a joint Russian-Turkish peacekeeping operation, but more likely the conflict will just drag on until it spills over into the rest of the region.

Recent Catskill Review of Books Radio!

Latest CRoB with Bee Ridgway, re her genre bending novel!
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Last week's CRoB, on the cycles of modern history in Amsterdam with Pete Jordan
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CRoB podcast on wjffradio  EST Helene Wecker on her book The Golem and The Jinni

Up the IRS - Down the Spout with Tea Party!

Suddenly, hundreds of millions of dollars flow to influence elections and the anonymous donors claim tax exemptions for the organizations they use to launder the money they use to subvert Congress's clearly laid out campaign finance limits. It is of course outrageous.
But you would never guess so from this week's howls of outrage at the Internal Revenue Service for exercising due diligence and investigating the torrent of laundered political donations that flowed after the Supreme Court gave free speech to the dollar.
Almost as outrageous is how politicians once again leave conscientious public servants hanging in the wind for simply doing their job.
Unlike in Britain, where the ancient Charity Commission administers the admittedly arcane rules on what is and isn't a charity, in the U.S. this task falls to the IRS, since, after all, the main point of being a charity (a 501(c)(3)) is not to bask in a warm moral glow of do-gooding but to get the various exemptions from taxes. And technically, they do not get involved in politics.
However 501(c)(4) organizations can be more overtly involved in campaigning, albeit not for particular parties. Following the controversial ruling by the conservatives on the Supreme Court, such straw bodies can spend unlimited amounts in elections, masquerading as socially concerned quasi-educational bodies.
They do not pay taxes themselves, although their donors can't claim tax relief on the money they give but, perhaps beyond price, they can claim anonymity. It would be nice to think they were following the old Talmudic rule that an anonymous mitzvah is worth 10 times one with a name attached. But anyone who thinks that is the motivation should buy the lots I have for sale on the Big Rock Candy Mountain.
That anonymity effectively allows them to run riot through what is left of congressional attempts to ensure that people rather than money decide elections. It allows a few highly politically motivated individuals to infiltrate the political process like rats in the sewers of a city, out of sight.
It follows that the IRS should want to check that bodies claiming such fiscal privileges actually fit the bill. One can imagine the Right's outrage if the IRS let through the Trilateral Commission Fan Club without inquiry.
I have helped set up several 501 C 3 and 501 C 4 organizations, and the bureaucracy can be frustrating. But it is the IRS's job to check the credentials of organizations claiming tax privileges, and one could forgive a hapless civil servant who mistook the electoral circus round "the Tea Party" for political campaigns, since they clearly were. Some of them were actually for-profit organizations owned by individuals who were practicing the entrepreneurship they so fervently preached!
Indeed, after the Supreme Court's Citizens United ruling, the number of applications for such status doubled to over 3,000. Faced with a flood of new applications from organizations which, amazingly, often had Tea Party or Patriot in their titles, assiduous civil servants in the IRS scrutinized them to see if they were what they purported to be -- and whether they met the legal definitions.
As part of the familiar brush fire in the undergrowth of American politics, Senate Republican Leader Mitch McConnell called the IRS tactics "political thuggery."
He follows in the great American tradition of a media lynching for people who do their jobs, whether it is regulators at the SEC or TV people like Dan Rather for exposing the truth of George W. Bush's absentee war record, or Florida electoral officials for trying to count votes properly. And the one thing that is common is the unwillingness of leading Democrats to call out these fine examples of invisible imperial raiment because they are implicated in similar tactics themselves.
The response in Washington should not be going after public servants trying to stop adventurers avoid taxes -- but at the very least to change the law so that donors' names are made public in any organization that involves itself in the political process. In a democracy, people should stand up for their beliefs, not skulk behind anonymity.

Mrs T's Flawed Legacy

 A Floored Economy

By Ian Williams
The mainstream media epithet machine used to describe Margaret Thatcher for American readers as “the prime minister who privatized the loss-making state industries.” Of course she did no such thing. The enterprises she sold off made huge profits for the Treasury. BP was, after all, the state-owned creation of Winston Churchill and kept a constant flow of petropounds going into the Treasury. Selling it off to her friends in the City of London benefited its executives and shareholders but hardly the British public, let alone the US citizenry around the Gulf of Mexico.
Mark Twain said that while he wished no man dead, he sometimes read obituaries with great pleasure. I rather suspect that I will be denied even that enjoyment with the oleaginous brown-nosing that will surround the demise of Margaret Thatcher.
The woman contrived the collapse of Britain as an industrial power, squandering the windfall find of North Sea oil in the process and perhaps most reprehensibly helped erode the ideology of common welfare and concern that was consummated by the Labour government after World War II, which was after all, for most British people, the most significant achievement of that titanic struggle.
Less of a self-made woman than most obituarists will admit, she married well, to a millionaire who could support her in her political ambitions. To give her her due, she carved her way into an all-male chauvinist milieu with scrotum-crushing tenacity. She was determined and resolute in her ambitions. I was going to say strong-minded, but that would inadvertently have given her more credit than she deserved. Although undoubtedly more clued in than Ronald Reagan, with whose name she will be linked in death, I suspect that much of what the right see as ideological correctness was no such thing. Her motivation was not to dismantle the state so much as to ensure her continuing control of it.
She sold off public housing and stopped the programs to build more, not because she had deeply neo-liberal feelings that were offended by this intrusion of the state into the housing market but because she believed that doing so would break open what she saw as a Labour Party vote bank of council tenants, and convert them into property owning conservatives. In this and other respects she displayed a materialism and crude economic determinism that resembled the diehard factions of the Leninist left!
It was similar reasoning that I suspect impelled her break up of the great state-owned enterprises.   Coal, steel, railways, electricity and gas, were the stronghold of unions who not only had their fingers on the jugular of the nation but were the financial and political base of the Labour Party.  From her point of view, one cannot help but suspect this was a double whammy perpetrated on her political opponents, since the sale of the shares, she hoped, like the sale of public housing to its tenants would create a huge new voting population of conservatives.
It is worth remembering that she also introduced a poll tax to replace the local government property taxes, almost certainly with the aim of driving poorer, and as she saw them, natural Labour voters off the electoral rolls.
To her credit, in the same astute political vein, she forbore to privatize the National Health, not because she was attached to socialized medicine, but because she knew who her own voters were, just as they liked British Rail, which was left for John Major to privatize with disastrous fiscal consequences.
Despite all these measures, and despite the florid encomia now covering her pall, Margaret Thatcher never won a majority of the popular vote. Her arrival and stay in Downing Street owed much to her opponents. The Labour Party was tied up in sterile political arguments with ambitious politicians defecting to found the Social Democrats who later merged with the Liberals. It was that bloc of popular votes which deprived opposition Labour of the votes necessary to win elections. In each election a clear majority voted against Margaret Thatcher and her Conservative Party.
On foreign policy, it was her penny-pinching, withdrawing niggardly sums from, for example, the British Antarctic Survey, which sent the wrong signals to the Junta in Argentina and led to the invasion of the Falklands. She did indeed display courage and resolution in repelling that invasion, but fixing something she broke herself should dull the glow of that triumph. Indeed her defense cuts would have made the same operation impossible a year later!
That obduracy could be ugly - as when she gloated that she had bullied the Commonwealth’s and other heads of state into accepting only the most rudimentary token sanctions against Apartheid. On the other hand, she deserves considerable credit for persuading Reagan that Gorbachev was serious about detente. There were few others with the conservative credibility to do that.
She was not nice, not popular and a person of narrow but tightly focused vision. But her flawed legacy lives on, mesmerizing, for example, Tony Blair.  Apart from the pious politicians, one suspects that sackcloth and ashes will he hard to discern on the streets of London, that in pubs across the former industrial heartland of Britain, many pint glasses will be raised in tasteful celebration.
                                                         *****
                                                         *****
Ian Williams is the founder of Deadlinepundit Ltd, a public affairs media consultancy.

White person for the job?

White person for the job?

Investor Relations Magazine 2 Apr 2013 | Ian Williams

Ian Williams suspects a fox in the henhouse

When I was a teenage schoolboy, I had an evening job selling what were essentially phony ‘charity’ pools coupons door to door.

Only a homeopathically diluted amount of the cash went to any kind of charity, but I made a lot of money in commission – and it was tax-free to boot! I discovered I could pitch my rhetoric perfectly to evoke people’s compassion and consideration.

Mesmerized, they reached deep in their pockets to enrich both my schooldays and the sordid tricksters who had invented and fine-tuned the operation to stay within the law.

Many decades later, I still occasionally wake up in the night with twinges of conscience about those youthful misdemeanors. As a result, I am indulgent to penitent sinners, mindful that John Newton, a notoriously profane slave ship captain, later wrote Amazing Grace about how repentance saved a wretch like him.

Being somewhat bearish on divinity stocks, I am stuck with my unredeemed guilt feelings. And unlike Captain Newton, I never really faced a storm at sea with the threat of drowning to convert me.

The news of Mary Jo White’s nomination as SEC chair provoked comments about revolving doors and poachers turned gamekeepers, as well as frequent recollections of former US President Roosevelt’s wry comment on his appointment of retired bootlegger and city boss Joe Kennedy as the first SEC chair: ‘Set a thief to catch one.’ Amazingly, I haven’t yet seen ‘Whitewash’ used, but feel sure I will.

Mary Jo White spent many years with Debevoise & Plimpton, a cohort of Wall Street’s legal shock brigade that has been helping corporate America defy the plain intent of the law; who knows, it might even have drafted the famously Clintonian quibbles about the meaning of the word ‘is’.

This is the group that has successfully ensured nobody responsible for fraudulently mispackaging or mis-selling mortgage bonds and bringing the globe to the edge of corporate Armageddon has faced prosecution, let alone sentencing.

Informed commentators on the SEC have dourly compared the trickle of money federal employees get to plug the holes in the legal dykes with the floods of cash that go to those who conspire to breach them. By contrast, working for the US at this level is a thankless task.

Typecast as a greedy featherbedded bureaucrat by the media, furloughed by Congress and under constant malign scrutiny from lobbyists, a civil servant’s job is not a happy one. Far from backing the SEC, for years now legislators have tried to stop it carrying out its clearly legislated duties, such as implementing Dodd-Frank.

Is it better to have as SEC chair someone of impeccable reforming character, whose confirmation the Conference Board and its minions in Congress will fight to the finish? Or someone who knows her stuff whom they will let through unopposed?

So far, the usual Capitol Hill suspects have maintained an uncanny discretion about White’s possible appointment. If they were being clever, one would almost expect some feigned horror beyond the occasional evocations of White’s time as prosecutor to provide more cover for the appointment.

Maybe the naysayers have it wrong. I can’t help having a soft spot for White. She did take on Donald Trump, the heir apparent of blustering failed entrepreneurship. Who knows, she might use the dam-busting skills she acquired more recently as a corporate attorney and wield the same prosecutorial zeal she previously used against the Cosa Nostra.

Wall Street will not hurl her headlong into the East River with a fish in her mouth if she does, but it would mean she could kiss goodbye to future directorships.

That said, her earnings on Wall Street should have provided her with the war chest she needs to eke her through the famine years of zealous federal service. White could hit the headlines in a way none of the gray SEC eminences of the last decades have.

Catskill Review of Books Friday 22 March Wall St

 This week's Catskill Review of Books features Jonathan Macey about his book "the Death of Corporate Reputation" a devastating and readable critical analysis of Wall St.

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http://www.wjffradio.org
http://www.thecatskillreviewofbooks.com
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Eco-Terrorism Can Be Fun

Here is Friday's  Catskill Review of Books show, broadcast 3:30 EST
in which I interview Robert Ferrigno about his new book, The Girl Who Cried Wolf

https://www.dropbox.com/s/tmuf7721d1egso0/ferrignowolf.mp3

http://rcm.amazon.com/e/cm?t=catskillrev00-20&o=1&p=8&l=as1&asins=B00BHLO8JA&ref=qf_sp_asin_til&fc1=000000&IS2=1&lt1=_blank&m=amazon&lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr

The Catskill Review of Books
3:30 Every Friday on WJFF 90.5 Fm
http://www.wjffradio.org
http://www.thecatskillreviewofbooks.com
http://www.linkedin.com/in/iangwilliams

A Modest Proposal! UN and Israel

I was in an Irish bar with Mo Sacirbey, the former Foreign Minister of Bosnia, when a local woman who had overheard us talking about the UN launched into an intemperate tirade against the organisation. Oddly enough, it inspired a modest proposal for the UN and Israel Lobby to work together for a swift response to the US budget crisis. But first, some background. In Blazing Saddles, one of the funniest films ever made, the black sheriff holds himself hostage at gunpoint. This improbable scenario is now being enacted on Capitol Hill. To get a budget agreement Congressional leaders signed a pact that would bring about “sequestration” - deep across the board cuts in Federal spending - including for that Republican Shibboleth, the Pentagon, which they hoped would force Congress to deal.

Fully aware of the voting proclivities of pensioners, the authors of the deal agreed that sequestration would not affect Social Security and Medicare the old age pension and medical programmes, which, technically are pre-paid from previous pension contributions and not part of the budget, although Republican die-hards keep circling them while sharpening knives.

Alas, the framers of the economic suicide pact underestimated the ideological obduracy of the new Republicans, so at a time when the economy teeters on the brink of recovery Federal spending cuts begin, laying off workers and stopping hiring new ones. The Obama administration is, understandably, talking up the consequences. Like  Blazing Saddle’s Sheriff Bart (played brilliantly by Cleavon Little, by the way) he is dealing with idiots, in this case the GOP economic illiterates.

It will indeed have an inhibiting effect on the economy, but the heavy spending cuts would be way down the line. The defence programmes are already committed which is why Boeing its peer companies are not already strafing Capitol Hill.

But then in ride the hobby horses.  The Israel Lobby is trying hard, but discreetly, to ensure that the steady torrent of cash from US taxpayers to its favourite state continues unchecked through the sequestration. Traditionally the Lobby hid behind the Foreign Aid budget as if food for starving refugees were in the same category as phosphorus shells for the IDF. But some of its supporters now want to decouple to connection.

“Despite ongoing budget woes, it is critical that the United States live up to its aid commitment to Israel,” AIPAC states. “As our one reliable Middle East ally, Israel serves critical national security objectives. Any reduction in that aid would send the wrong message to Israel’s — and America’s — enemies.”

It sends a message to US voters as well which is why wiser souls who support Israel want to keep their heads down, since taxpayers who do not have a national health service and free higher education might cavil at shovelling their money as aid to a state that does - and which uses the aid to defend settlements that Washington opposes!

And so to my proposal. An odious, albeit ironic comparison of aid to Israel and dues to the UN as a packaged, essential public-diplomacy exception to the sequestration. While most countries regard United Nations dues and peacekeeping contributions as treaty-bound obligations, the US Congress treats them as discretionary items, ever since they began, half a century ago to penalise the organisation for its votes on, of course, Israel. Under Bush’s second term and under Obama, the US has essentially been paying up without too much demur, which is just as well since peacekeeping operations in places like Mali depend on a flow of contributions from richer countries, above all the US which is desperately interested in Saharo-Salafist affairs.

Listening to the rabid pro-Israeli supporters among local New York politicians, this might appear to be a stretch, since antipathy to the UN is in their ideological chromosomes. But in contrast to their local supporters, Israeli politicians assiduously court the organisation. Secretary General Ban Kimoon welcomes them when they visit New York - even though his public statements forcefully repeat the official UN lines on, for example settlements and Gaza, that the American lobbyists would punish any American politician for. But Ban has a rare talent for understated diplomacy that allows him to speak truths and to keep the Israeli pols coming - albeit probably helped because they can do some fundraising of their own in New York while visiting the UN on official business but also because they have a talent for not listening to advice from outsiders anyway.

Such a tie in would neutralise the bloc that does most harm to UN financing in DC and do no harm at all, since just as it has always done,  in the end, AIPAC will get its money even if kids go hungry in the USA,

CEO's, the new Robber Barons

Comment: The CEO is always right in Delaware

) | 6 Feb 2013  Investor Relations magazine  | Print by Ian Williams

It should be shocking there is no national company law in the US

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An innocent alien looking at the business directory for Wilmington, Delaware might assume the town is a mighty humming hive of industry, whose citizens multi-task to the max. One building alone – 1209 North Orange Street – is home to more than 6,500 corporations and is the address of more than 200,000 businesses.

Wilmington’s 70,000 people have to operate almost three corporations per person from each one of the city’s buildings. Some of the corporations ‘in’ Wilmington probably employ more people globally than the 750,000 residents of Delaware; many of them do not employ a single person in the state. It brings to mind the old medieval quiddity of how many angels can dance on a pinhead: it seems an infinite number of companies can ‘work’ out of one building. It is time to take a step back.

On reflection it should be shocking that there is no national company law in the US. We talk of corporate governance and shareholder capitalism, but the US is completely Balkanized in its corporate legal frameworks. Actually, that’s unfair to the Balkans: as countries accede to the EU, their company laws have to adhere to minimum European standards, which are generally quite high.

It has been argued that in the US, the 50 states with their quasi-independence offer a social laboratory where different political and economic ideas can flourish. In fact, it’s a race to the bottom – which is situated just north of the nation’s capital, in Delaware.

Apart from the opacity of the ownership of Delaware corporations – by comparison with which Liechtenstein and the Cayman Islands look like temples to transparency – the real issue is the pernicious reinforcement of the overweening power of corporate executives that decades of Delaware governance has wreaked.

Its judges rule against employees, shareholders, pensioners and consumers alike. Its negation of anti-usury laws common in other states makes the plastic capital of the US the state that grasping credit card companies like to call home. That in turn makes it a major contributor to the house of cards that recently collapsed.

Litigation in Delaware takes place in a Chancery Court, which is one of the more recondite branches of Anglo-Norman law, famous for centuries of obscure decisions invoking even more obscure precedents to deliver the verdict the judges’ prejudices demand. Delaware, however, sells itself on the speed of its judgments – and its reliability: the CEO is always right. Sometimes there is a contest, when there is litigation between companies, but the only question then becomes: ‘Which CEO is right?’

The founding fathers were generally very dubious about corporations, seeing them as shifty boondoggles set up by shysters such as Aaron Burr to make themselves rich. Maybe that reluctance was one reason they were not mentioned in the US Constitution, but have now, as we know, been retrospectively palimpsested into that document by a tortuous line of reasoning from the 14th amendment that sought, unsuccessfully, to guarantee ex-slaves equal rights. Corporations’ present personhood guarantees them perpetual impunity: they can claim almost all of the prerogatives of citizenship except the susceptibility to punishment.

But if ever the Federal government had a hook to grab, it is surely regulating companies that deal nationally, in interstate commerce. Surely there is nothing constitutional to stop Congress requiring any corporation operating in more than one state to abide by basic minimum standards for its governance and conduct.

In the meantime, perhaps, whoever moves a company HQ to Delaware should be prosecuted under some form of the Mann Act: transporting corporate people across state lines for immoral purposes. Certainly, shareholders should assume the worst of any CEO who makes such a move.

Haggling over Hagel

Tribune,

Ian Williams Friday 22 2013

Republican Lunatics would Destabilise the Whole System

Faced with the likelihood of fierce Capitol Hill battles to nominate members of his own party, Barack Obama sneakily nominates Republicans. It should send a message to the President about the perils of so-called bipartisan politics. Offering a hand to some Republicans is like putting it in a tank of hungry piranhas. His conservative opponents live down to their increasingly bedraggled reputation. The Republican right is holding up the confirmation of Republican former Senator Charles Hagel as Secretary of Defence, as well as that of John Brennan, the somewhat reactionary nominee waterboarding accomplice, to head the CIA.

Mark Twain once said: “Imagine, if you will, that I am an idiot. Then, imagine that I am also a Congressman. But, alas, I repeat myself.” Present Senator and former presidential nominee John McCain’s part in the plot shows how even the few reality-related Republicans are now held hostage by the lunatic fringe. McCain had considered war veteran Hagel for his own cabinet when he ran for President, but did not fall over himself to show public support. The CIA director’s job was held hostage by Republican determination to somehow shift the blame for the killings of Americans in Benghazi from al Qaida to the administration. For that, they were prepared to cripple the agency which they claim is the front line defence against terrorism.
In American politics, one can never be sure which particular combination of sincerely held but totally wacko political ideology and craven or naked self-interest motivates legislators. Voting to stall Hagel makes a certain degree of career sense for legislators with expensive election campaigns to worry about, no matter what the cost to the national interest.

Hagel is accused, effectively, of being rational about Israel, Iran and Iraq, when so many of his colleagues were so easily stampeded into voting for a blank cheque for Benjamin Netanyahu. For those who castigate Obama as a sell-out for nominating a Republican, it is worth remembering that Hagel is far more rational on issues in the Middle East than many Democrat legislators who happily supported the Iraq war and sign on for resolutions calling for United States support for an Israeli attack on Iran. Since the Republican-dominated Supreme Court effectively overthrew all campaign cash restrictions with its “Citizens United” decision – that corporations had all the rights of human beings – there has been a further element of irrationality. Outsiders could never quite get their heads round the subtlety of the American concept that corporations handing over cash to an elected official in the expectation of favours was bribery, but that bundling large amounts of cash to the same person for campaign expenses was public-spirited support of the democratic process. The “Citizens United” decision opened the floodgates. There were some eccentrically right-wing organisations putting money into American politics before, but now crazed rich individuals can ride their political hobbyhorses around the ring. In training Washington DC’s large donkey population, they use both a carrot and stick. The implied threat is not only how much money they gave a candidate, but how much they could concentrate behind the contenders against anyone who stepped out of line. It is symbolic of this ideologically inspired dysfunction that deranged minorities have stopped the US from signing United Nations conventions like that on the Rights of the Child (Somalia being the only other holdout), the Law of the Sea, even though the Pentagon wants it, and the International Criminal Court, even though the US supports its work in other countries. A tiny minority have held up ratification.

Just as the party of Abraham Lincoln is now in thrall to the former Confederacy, the rabidly right-wing heirs of the Ku Klux Klan and the John Birch Society, once tainted with anti-Semitism, are now burning crosses along with loony Likudnik billionaires. However, Obama’s apparent timidity might shroud a shrewd appreciation of the American political system. He lets his opponents commit psephological seppuku on the public stage while he advances his pragmatic agenda. It is not his fault that what are major strides forward for the US are but faltering steps to others in the industrialised world, but in the face of Republican lunacy and conservative Democratic cowardice , any progress at all is a minor miracle.

Down With Delaware!

Comment: Forward to the next quarter-century of stakeholder value

Comments (0) | 14 Dec 2012 | Rating | Print by Ian Williams

Ian Williams calls for a change in IR focus over the next 25 years

As IR Magazine reports on its Q1 (first quarter-century), the profession it covers surely stares redundancy in the face in Q2, becoming more a case of investor relativity than investor relations.

How do you ‘relate’ to a transitory blip on a trading screen churning at near light speed? And at the other end of the velocity spectrum, how do you deal with an index fund that will yawn at whatever you say and only move when you get on or off a list?

During IR Magazine’s quarter-century, the role of investor relations has seen momentous changes – and I’m not just talking about the obsolescence of the fax, even though a little over a decade ago most IROs thought life was inconceivable without it.

There is a shrinking universe of stock held by ‘interested’ shareholders – people who have bought into a company and what it does, as opposed to those who have just taken an option on a trading opportunity.

Interestingly, though, within that diminishing population of stockholders, the proportion of those who take an active proxy interest in companies appears to be growing.

It’s good to talk

The best IROs see themselves as two-way communicators, telling management what the shareholders want while briefing the latter on the state of the company.

The cold reality, however, is that while, technically, shareholders might pay IR departments’ salaries, it is the CFOs and CEOs who sign the checks. Hardly surprising, then, that even the most conscientious IRO’s agenda should reflect that of the executive team.

Which raises an interesting question: will IROs in future be concentrating on votes, trying to head off challenges to ‘their’ executives from the theoretical owners who are getting increasingly uppity with each passing proxy fight?

There should be some inner ethical wrangling there. IROs tend to be well rounded and aware, almost Renaissance figures in the breadth of their knowledge and the scope of their activities.

Could they sleep easily while spending their waking days defending incompetent and overpaid executives against the concerns of the real owners of the company?

A better employment guarantee for the future of IR is to expand its audience to include those who invest their lives in companies. As shareholders march on corporate castles with torches, tumbrels and pitchforks, arguing whether ‘tis better to bury CEOs at the crossroads with stakes through their hearts or to burn them at the stake, the question that arises is, ‘What about the stakeholders?’

Dumbest idea in the world

For example, it would have been an admirable learning experience for Jack Welch to explain to GE employees his ideas of what constituted good management before he axed 100,000 of them.

If he had had to do so, it might not have taken him until 2009 – a full eight years after he had left the company – to argue in an interview with the Financial Times, with characteristic vigor but less-than-charasteristic philosophy: ‘Shareholder value is a result, not a strategy… Your main constituents are your employees, your customers and your products. On the face of it, shareholder value is the dumbest idea in the world.’

It was, of course, Jack ‘the Ripper’ Welch who 30 years ago invented ‘shareholder value’, which acted as a form of plenary indulgence for getting managements out of Purgatory afterwards.

And for too long IR has overemphasized selling management’s fevered visions to the stockholders and raising the stock price while ignoring the main consequence, which is that the CEO’s emoluments increase regardless of how well the company does – in the case of Welch, even after his retirement.

Accompanying this managerial aggrandizement has always been a pious invocation of executive duty to the shareholders as the sole owners with fiduciary interest in the conduct of a company, even though in reality it has usurped stockholder power and looted companies.

The bitter rearguard battles in courts and Congress to stop or dilute say on pay are eloquent testimony to that, not least because they involved using shareholders’ money to subvert shareholders’ rights.

This model has failed companies and destroyed countries, as Welch seems to have realized now he is no longer a beneficiary. As the Harvard Business Review, publisher of the Legatum Prosperity Index, points out: ‘For Americans, the headline is a simple if unwelcome one: the US is a nation in decline. For the first time, the US does not rank among the top 10 countries in the world in terms of overall prosperity.’

A downward spiral

In every measure of satisfaction distributed across a population, the US has been sliding down the scale, as indeed has its close emulator the UK.

The UN Development Programme’s Human Development Index, the World Bank’s index and many others all record the inexorable Anglo-Saxon slide down the rankings. Even on productivity, the US is falling through the ranks.

It is surely no coincidence that all the countries passing the US and the UK in the fast lane share a prejudice that there is more to success than ‘shareholder value’.

The list is interesting. Apart from Canada, Australia and New Zealand, which all have union movements and a social democratic tradition of regulation and worker protection, the other eight countries are European and go beyond that: they provide for employee representation on boards of companies.

This is a far cry from how they do things in Delaware, but it makes sense. These European employees are stakeholders in every sense of the word: their input, investment and interest in the company are far broader than those of a transitory shareholder whose ownership might only be a twitch of electrons in a silicon chip.

Indeed, through pension funds, mutual funds and even direct holdings, many employees are stakeholders in the specific terms that even US corporate law accepts.

It must be true, as Welch told the FT so: ‘The idea that shareholder value is a strategy is insane. It is the product of your combined efforts – from the management to the employees.’

People in IR, the future is at stake! In Q2, there should be no slack for corporate looters!