Rigging markets par for the course

The way Barclays and several other banks colluded to fix inter-bank interest rates is a blatant example of what is actually par for the course in big business. Price fixing, secret agreements to divide markets, cartels and other nefarious goings on are as old as capitalism itself.

How could it be otherwise within a system where the benchmark is the maximisation of profit by any means, fair or foul? Dividend payments to shareholders are based on total profits, which, if they don’t rise year on year, indicate failure. Share prices tend to fall as a result.

So if so-called retail banking doesn’t create enough profits, then use depositors’ money to speculate in a rigged market. Irresistible for Barclays, RBS and the other banks caught in the spotlight.

This kind of underhand activity is not the exception but the rule. Only today, the UK Office of Fair Trading alleged that Mercedes-Benz and five UK dealers of its trucks and vans were involved in price fixing and the sharing of commercially sensitive information between 2007 and 2010.

In April, British Airways agreed to pay a reduced £58.5m fine for colluding with rival Virgin Atlantic on fuel surcharges. BA admitted in 2007 that it had colluded with Virgin over price fixing on long-haul flights between August 2004 and January 2006. OFT’s criminal case

against a number of former BA executives collapsed. Virgin, which blew the whistle on its agreement with BA, was not fined.

Last month, the Department of Justice in the United States accused Apple of e-book price fixing. Also in the frame are publishers Penguin and Macmillan. Naturally, the three corporations deny the allegations. Three other publishers immediately settled the action, while admitting no wrongdoing. Observers suspect that fear of Amazon’s ruthless pricing strategy drove rivals to collude to keep prices up.

In late 2007, British consumers discovered that supermarkets and milk suppliers had been illegally rigging the prices of dairy products since 2002. They had colluded to raise the prices of dairy products, and their milk distributors, namely Dairy Crest and Robert Wiseman Dairies, had been the go-betweens for the ostensibly secret pricing decisions. Total cost to consumers was estimated at £270 million. Those involved were fined a total of £116.

In 2007, the European Commission undermined a price-fixing scheme among the makers of flat glass, the variety that is used to make windows, doors and mirrors. In 2004 and 2005, four major makers of flat glass — Asahi, Guardian, Pilkington, and Saint-Gobain — secretly met to discuss artificially raising their prices. The industry’s profits soared as a result and the €487 million fine was undoubtedly worth it for the companies which colluded.

Other examples you may have missed include £185 million in fines imposed on Dutch brewers, including Heineken and Grolsch, for price fixing. EU competition commissioner Neelie Kroes commented: “It is unacceptable that the major beer suppliers colluded to hike up prices and carve up the market between themselves. The highest management of these companies knew very well that their behaviour was illegal, but they went ahead anyway and tried to cover their tracks”.

Previous examples of price fixing include Manchester United and several leading sportswear firms who were found guilty of price fixing on replica football shirts in 2005 and Samsung Electronics who agreed to pay $90m to settle legal action over microchip price-fixing allegations in the US. Three executives went to prison.

So when Labour leader Ed Miliband and others tell us that there can be such a thing as an ethical, “responsible” capitalism they are having a laugh at our expense because it’s an impossible quest. It's a myth, just like the notion of a "free market". The system is endemically corrupt. It would actually be easier to replace capitalism with a not-for-profit alternative than clean it up.

Paul Feldman

Communications editor

The real price of cost cutting

A scientific report on last year’s ash cloud from the Eyjafjallajökull volcano eruption in Iceland shows that air traffic controllers were right to close European airspace despite loud protests from airline leaders.

Already in a deep crisis, and facing further losses due to the temporary safety shutdown, Ryanair’s Michael O’Leary, BA chief executive Willie Walsh and boss of Virgin Richard Branson lashed out at the civil aviation authority.

Their bluster revealed much about the dangerous thought processes of the leaders of capitalist enterprises conditioned by the competitive chase for profit-driven ‘economic efficiency’.

Blinded by the bottom-line, O'Leary said at the time that "there was no ash cloud. It was mythical. It's become evident the airspace closure was completely unnecessary... none of us could see a bloody thing." He added: "Some idiot in a basement in the Met Office in London spills coffee over the map of Europe and produces a big black cloud." Walsh portrayed the closure as a "gross over-reaction to a very minor risk" and Branson described the final set of closures as "beyond a joke".

Now, the study by Sigurdur Gislason and colleagues at the University of Iceland in Reykjavik shows the extent of their foolishness. "The particles of explosive ash that reached Europe in the jet stream were especially sharp and abrasive over their entire size range," the scientists say in their study published in the journal Proceedings of the National Academy of Sciences.

"The very sharp, hard particles put aircraft at risk from abrasion on windows and body and from melting in jet engines," the scientists said. "Concerns for air transport were well grounded."

The scientists found that even after the particles had been mixed continually in water for two weeks, they retained their ability to be dangerous to exposed aircraft surfaces. If the authorities had given in to the airlines’ leaders’ ferocious assault, serious structural damage to aircraft could have occurred if passenger planes had continued to fly.

Tests on the ash revealed that it contained minute particles of glass so sharp and abrasive they could have damaged the exposed surfaces of any aircraft, including the engines and cockpit windows.

The consequences could have been far worse than that for the British Airways 747 which suffered potentially catastrophic damage when it flew through an ash cloud from the 1982 eruption of Mount Galunggung in Indonesia. All four of its engines failed as a result of melted ash on the aircraft's turbine blades, but the pilot managed to restart three of them after descending.

In this case disaster was averted. But the same has not been true for the Mexican Gulf or Japan where bottom-line competitive pressures overrode safety concerns.
BP is trying to pass the responsibility for the Deepwater Horizon oil rig explosion to Transocean Ltd, the owner of the rig, and to Halliburton who built it.

At the heart of the failure was the decision to reduce by three quarters the number of concrete collars engineers said were needed to stabilise the drill.
Transocean just gave its top executives bonuses for achieving what it described as the “best year in safety performance in our company’s history”.

Cost-cutting by Tokyo Electric Power Company (Tepco), the largest private producer of electricity in the world, was sanctioned by a corrupt and bureaucratic regulatory system. Maintenance programmes were side-stepped for years.

Tepco’s Fukushima nuclear reactor site was destroyed by a once in a hundred years earthquake and the tsunami it triggered, irradiating the people of Japan once again. These three events shed a blinding light on the dangers of allowing the world’s productive capacity to remain in capitalist ownership.

Gerry Gold
Economics editor

Time to defy anti-union laws

The High Court ruling against the planned British Airways cabin crew strike is not simply the outcome of a clearly partisan decision by Mr Justice McCombe. It is also the result of more than two decades of fearful inaction on the part of the trade union leaders.

Strike action did not become illegal only with yesterday’s ruling that a ballot of BA cabin crew was invalid because of failure to notify members about 13 spoiled ballot papers in an 81% vote in favour of action. For the abolition of the right to strike you have to go back to a series of anti-union laws passed by the 1979-1997 Tory government.

The law that was cited by the judge to block 20 days of planned strike action in defence of jobs and against victimisation was actually passed in 1992. And the union leaders have done nothing to challenge this or any other aspect of the anti-union legislation ever since. This is especially the case in relation to laws banning solidarity action as well as the requirement to hold a postal ballot.

As a result, strikes have often been ineffective and isolated with the union bureaucracy running scared of massive compensation claims by the employers. As it is, the Unite union could still face a £250,000 bill for strikes against BA in March as a result of yesterday’s judgement.

We mustn’t forget the legacy of the last 13 years of New Labour government either. Tony Blair once boasted that the laws restricting strike action were the toughest in Europe. So they were and that’s how they remained until Brown left Downing Street last week. And yet union leaders, especially Unite’s, continued to send the cheques through even though campaigns for the repeal of Tory anti-union laws fell on deaf ears.

There were, naturally, lots of fine words from the joint general secretaries of Unite, Tony Woodley and Derek Simpson outside the High Court. They said: "This judgment is an absolute disgrace and will rank as a landmark attack on free trade unionism and the right to take industrial action. Its implication is that it is now all but impossible to take legally protected strike action against any employer who wishes to seek an injunction on even the most trivial grounds."

Leaving aside the concessions Unite has offered BA in terms of reducing its wages bill and accepting a two-tier workforce, this statement would mean something more if it were a call to action to ignore a law that clearly denies cabin crew their human rights. Instead, Unite is relying on the Court of Appeal to find in their favour.

Even if the appeal is won, the employers will be back time and time again to frustrate workers (this is the second time BA alone has won in the courts). The technicalities of the postal ballot were largely ignored for a long period. But the recession has brought the employers out of the woodwork. Just before Christmas, the RMT rail union was prevented from going ahead with strikes over jobs.

After the BA ruling, Bob Crow, the RMT general secretary, said: "We warned after the [Easter] judgment that it bent the anti-trade union laws even further in favour of the employers and so it has proved. There is no doubt that this new Con-Dem government wants to effectively outlaw strikes in publicly used services before they swing the axe at our hospitals, schools and fire stations, and the courts are the battering ram to make that happen."

The trade unions were built in the face of laws that banned combinations, sent workers to prison, deported them to Australia and victimised activists. Protecting the funds of the unions such as they were was of secondary concern. Crow is right about what’s to come as the massive cuts programme bites. Workers cannot resist with one hand tied behind their backs by laws that prevent effective action. It’s time for union leaders to put up or shut up, to defy the anti-union laws or go meekly to the slaughter.

Paul Feldman

Communications editor

The stakes couldn't be higher

The stakes are being raised in the confrontation between BA management and cabin crew members of Unite who are fighting to protect jobs and conditions. Coming a quarter of a century after the end of the biggest confrontation between unions and the state when the miners fought pit closures in a struggle lasting a year, the company’s reaction to the strike means it is more than just another industrial dispute.

BA chief executive Willie Walsh has overt and covert backing from the state in the form of New Labour and all the major political parties as well as every single major media outlet that endlessly highlight the predicament of stranded passengers. Newspapers like the Daily Star and the Evening Standard spend large sums to dish up the dirt on union leaders like Derek Simpson and Bob Crow.

The cabin crew strike is, therefore, a crucial test case. From the employer’s and government’s point of view, any resurgent trade unionism must be nipped in the bud. That is why there is similar hostility to the plan by members of the Rail Maritime and Transport Union to stage the first national strike for 16 years to block the loss of 1,500 jobs.

A few days ago, the BBC hosted a discussion on its “Moral Maze” programme in which it was said that the right to strike should not exist. This was supported by former Tory MP Michael Portillo. Prime Minister Gordon Brown has stated a similar view pontificating that “we cannot tolerate large-scale industrial disputes in this country, particularly at this time as the economy comes out of recession.”

While BA claims that the strike is costing the company £7 million per day, financial analysts in the City have estimated a daily loss of £15 to £20 million. Calling on BA to negotiate a “sensible” agreement, Unite estimates that seven days of strike will cost the company over £100m. When a company is prepared to sustain losses on this scale, Unite is right to say that BA “has embarked on an ambitious and expensive attempt to destroy trade unionism among its cabin crew”. But Unite leaders are failing to draw the key lessons from history and are pussy-footing around. We have been here before.

At “Digging the Seam”, a three-day conference held the University of Leeds last week, participants reflected on the consequences and legacy of the 1984-1985 miners’ strike. The outcome of that year-long confrontation was that members of one of Britain’s most powerful unions, the National Union of Mineworkers were compelled to return to work. Thousands of its members ended up in jail and thousands more sustained injuries due to police violence. Within a decade the NUM was reduced to a shadow of its former self by the destruction of the coal industry. Pit village communities continue to suffer devastation.

Just as then, the struggle being conducted by BA cabin crew and rail workers is more than just an industrial dispute. It is over rights to have a job and provide a service to their fellow human beings under terms which are not dictated by a management motivated solely by shareholder returns.

The history of a single union taking on a ruthless employer under conditions of economic and political crisis is highly relevant in today’s situation. Even more now than then, no single group of trade unionists in today’s globalised world and with a far smaller trade union movement, can take on and defeat a state-backed company.

These confrontations come as Alistair Darling admits that New Labour is preparing public spending cuts which will be "deeper and tougher" than Margaret Thatcher's in the 1980s. Treasury cuts will add up to a staggering 25% of departmental budgets and will last until 2017, according to the Institute for Fiscal Studies. It warns that Britain faces "two parliaments of pain”. The employers and the state have launched a war on several fronts. And Unite is funding New Labour’s attempt at re-election!

An increasing danger is that with the present bunch of union leaders patently incapable of learning from history and organising a co-ordinated resistance that defies laws banning solidarity strikes, groups of workers will be picked off one by one. Firm, decisive, bold leadership is key to the outcome of these struggles. At this point in time, its absence in the trade union and working class movement is there for all to see.

Corinna Lotz
A World to Win secretary