Thursday, April 26, 2012

A corporatocracy in all but name

The scandal engulfing the Cameron government over ministers’ close links with the Murdoch media empire, as well as promises made about BSkyB before the 2010 election, is symptomatic of a wider political disease called corporatocracy.

How governments were “bought” by the corporations, especially the so-called investment banks, is the story of how the state became a direct mouthpiece, advocate and sponsor of big business.

It parallels the rise of a global economy dominated by transnational businesses that find national borders an irritation and are prepared to move capital to the region or country where it is most profitable without a second thought.

Murdoch was doing no more than what a shareholder-driven business has to do. News Corp lobbied to win support for its aim of buying up shares in BSkyB. It made use of its connections to culture secretary Jeremy Hunt and prime minister Cameron.

The fact that the plan coincided with the hacking scandal, leading to the Leveson inquiry, blew their strategy out of the water. With the BSkyB deal off for the indefinite future, the Murdochs have no further need to protect ministers.

Murdoch’s media empire is moving away from supporting the Tories and is backing the Scottish National Party north of the border. Now commentators like Peter Oborne are speculating that the government itself could fall over the scandal. The fact that Cameron is regarded as a traitor by traditional Tories for getting into bed with the Lib Dems and being too soft on Europe is only fuelling the flames lapping at the door of No.10

The Labour Party is making a great deal out of Cameron’s difficulties but let’s not forget that the previous Blair/Brown governments were politically responsible for perhaps the biggest scandal of them all – the creation of a deregulated banking industry.

Deregulation was not the prime cause of the financial meltdown of 2007 but played its part when the unravelling began. If Cameron had his Chipping Norton set with Murdoch employees Rebekah Brooks and Andy Coulson, then New Labour had its prawn cocktail circuit.

Blair and Brown assiduously courted the banks before and after the 1997 general election victory. They pledged “light-touch regulation” and Labour’s endorsement of the City and financiers in general.

Sir Fred Goodwin, who ran the Royal Bank of Scotland into the ground, by 1999 was actually in the government machine itself, chairing task forces on the work of credit unions (!) and the New Deal programme. In 2001, Goodwin attended a pre-election lunch for bankers at Chequers aimed at securing their support at an election. In 2004 Goodwin became one of eight bankers knighted under New Labour.

So when in 2007, RBS decided to take over the Dutch bank ABN Amro, no one in Whitehall or the Financial Services Agency demurred. ABN Amro was badly exposed to the US sub-prime market and RBS was severely weakened as a result. The rest, as they say, is history. Taxpayer bailouts followed by recession and spending cuts. Thank you Brown, Blair, Ed Balls (who in 2006 praised deregulation) and Yvette Cooper, chief secretary to the treasury.

The official report into the collapse of RBS identifies key moments between 2005 and 2007 when the Financial Services Authority created by New Labour backed off from challenging the bank’s low levels of capital and liquid assets.

Adair Turner, FSA chairman then and now, admitted recently: “Was there, however, a pervasive influence of assumptions about the City on the UK political dynamic? Yes, there was. There was a belief that light-touch regulation, or limited-touch, would make the City bigger, and that the City was a source of employment and tax revenue in particular. And therefore there was clear pressure on the FSA at times to say, go easy on the city. The FSA never used the phrase ‘light touch’, but politicians did, and they did it in speeches, which were directed at the FSA.”

Yes, the mainstream political parties are all in it together and have been for a long time. At our expense. The present state, the corporatocracy, is rotten to the core, undemocratic, beyond reform and ruling on behalf of the 1%.

Paul Feldman
Communications editor

No comments: