A little bit of lobbying – revisited

(If you read my last post you might want to miss this. It is simply a shortened, and updated, version. Last time there was too much Adam Smith, however fascinating he might be.)

We have finally put austerity behind us. We’re no longer frightened of deficits, here or in the USA. $1.9 trillion is Biden’s rescue package, and then some. More than ever, in these times, we need financial probity. How government interacts with the private sector, in all its aspects, is a key issue for our time.

As a convenient reminder, we have the lobbying scandal involving Cameron and Greensill Capital. And in the last two days we learn that, in March last year, Boris Johnson was exchanging text messages with his friend and Tory supporter Sir James Dyson. We needed ventilators quickly, Sir James could provide, and Johnson promised (‘“I will fix it tomo!’) no negative tax implications for Dyson staff who came to the UK to help.

It was a time of crisis, Johnson argued in the House of Commons. That doesn’t excuse. It only exemplifies how government without proper supervision, of the kind exemplified by the government’s plans to reduce the scope of judicial review, can operate via back doors and personal contacts. Whether ‘cronyism’ is the appropriate word I’ll leave for the reader to judge.  

I’ll skip direct quotes from Adam Smith, but will include a pivotal quote from Jesse Norman’s book about Adam Smith: ‘Yet as technology spreads big data, insider knowledge, digital technologies, there are increasing dangers of a new tech-enabled crony capitalism: a self-reinforcing cycle in which greater insider power encourages the development of bent markets…’

What intrigues me is that Jesse Norman is a Tory MP and Financial Secretary to the Treasury, and like Cameron, an Old Etonian. He will, I trust, have been making his views on crony capitalism widely known.  (There was, quite co-incidentally, a curious spat between Cameron and Norman over House of Lords reform back in 2012.)

‘What me, guv?’ I imagined Cameron as saying. The game is so entrenched. Market forces as experienced by ordinary consumers are one thing.  Financial engineering and derivatives are another story. Begetters of boom and bust, and multiple shenanigans.

Greensill Capital, advocacy for which got Cameron into trouble, was a clever financial idea (I wondered about the term ‘ruse’) where business bills are settled immediately for a fee, assisting thereby with the issue of late payments.

Cameron, a humble politician earning a relative pittance, stood to make a lot of money. Big share options were on offer. I sense he simply got out of his depth. That’s the kindest thing one can say.

And finally (as I mentioned in my last post) …I was intrigued to see how the Daily Mail is trying to turn the lobbying scandal into a plot by Labour anti-Brexit insiders within the Civil Service trying to blacken the government. It goes with Palace ‘insiders’ telling us what really went at the Duke of Edinburgh’s funeral between Harry and Kate and Will.

As always with the Mail, don’t believe a word of it.

A little bit of lobbying on the side

Remember Philip Hammond desperately trying to balance the books as Chancellor? Now all the talk is of how foolish Osborne was to batten down for so long. And it looks as if Hammond wasted his time. Expansion and big rescue packages and capital spending are the order of the day. In the USA, the same. Biden’s $1.9 trillion rescue package. And big plans for infrastructure. The debate in the USA is whether it will cause inflation to get out of hand. The Economist is putting out dire warnings on the one hand – but supporting a big spending approach for the EU on the other.

How government interacts with the private sector will be more than ever in the spotlight. The lobbying scandal involving David Cameron and Greensill Capital is just one example of how this relationship can go wrong.

Adam Smith provides context. He tends to be associated, by way of a selective reading of The Wealth of Nations, with a freewheeling free-market philosophy. By which bad behaviours might be somehow balanced out by good. Not so, as his ‘The Theory of Moral Sentiments’ reveals. ‘It carries within it a crucial Smithean insight, that innumerable human interactions can yield vast but entirely unintended collective consequences – social benefits, yes, but also social evils…’ (Jesse Norman, ‘Adam Smith, What He Thought And Why It Matters’)

There is a good, and ‘Smithean’, argument to be made as follows. In a commercial society we are all merchants. The pursuit of wealth is of itself a good thing (depending on how ‘wealth’ is defined). The desire for human betterment drives that process. War and violence have, for all of history, brought about division. Commerce binds us together.

But over-accumulation, growth for its own sake, inequality, the pursuit of self-interest, the handing-on of wealth from one generation to the next – wealth for its own sake and not as the driver of a society’s welfare – they are among the great enemies. The fact that David Cameron’s activities were ‘legal’ exemplifies, all the more, how easily the pursuit of wealth as an ultimate social good can be corrupted.

Jesse Norman, who is incidentally an Old Etonian, and Tory MP (read into that what you may), has an intriguing paragraph in his biography of Adam Smith: ‘Yet as technology spreads big data, insider knowledge, digital technologies, there are increasing dangers of a new tech-enabled crony capitalism: a self-reinforcing cycle in which greater insider power encourages the development of bent markets; these in turn create popular demands for more government regulation, create more complexity and opportunity for lobbying, a further boost to the power of insiders, and so on.’

‘What me, guv?’ I can imagine Cameron as saying. The game is so entrenched. We’re, many of us, wary believers in market capitalism, where market forces ‘drive prices down and quality up, and consumers have a very wide choice’, in Norman’s words. We’re talking of food, clothes, everyday items.

Financial engineering and derivatives are another story. Begetters of boom and bust, and multiple shenanigans. (They were of course unknown to Adam Smith.) Greensill Capital, advocacy for which got Cameron into trouble, was a clever financial idea (I wondered about the term ‘ruse’) where business bills are settled immediately for a fee, assisting thereby with the issue of late payments.

Now, as much if not more than ever, with big money and big contracts in play, we have a whole new raft of opportunities for crony capitalism, re-working old business and school networks, rent-seeking, inside knowledge, and conflicts of interest. More than ever we need to be wary – to be aware.

Heading off at a slight tangent there’s a paragraph from an American author*, writing on the subject of meritocracy, I’d like to quote: ‘Someone who wants an elite income … must do one of a narrowly constricted category of jobs, heavily concentrated in finance, management, law and medicine.’ Teaching, public service, ‘even engineering’ don’t get a look in. (How medicine and money came to be quite so conflated is a uniquely American story.)

Cameron, a humble politician earning a relative pittance, wanted to be part of that big-earning brigade, with big stock options on offer.

Many had a high regard for Cameron. He will be wondering how he surrendered it so easily.  

And finally …I’m intrigued to see how the Daily Mail is trying to turn the lobbying scandal into a plot by Labour anti-Brexit insiders within the Civil Service trying to blacken the government. It goes with Palace ‘insiders’ telling us what really went at the funeral between Harry and Kate and Will.

Don’t believe a word of it.

*Daniel Markovits, ‘The Meritocracy Trap’, quoted by Stefan Collini in the London Review of Books)

More thoughts for the day

The death of the Duke of Edinburgh has the nation in mourning. We have something we, most of us, agree on. He was a good man, who, as Prince Albert before him, used his position to advance a wide range of good causes – the World Wide Fund for Nature and the Duke of Edinburgh scheme above all. He was also a fine cricketer, which does count for something.

And Rachael Blackmore won the Grand National quite brilliantly: the first woman jockey to do so.

The BBC ran tributes across all stations to the Duke. But elsewhere…

Hungary: ‘The last radio station that is critical of Prime Minister Viktor Orbán’s government is due to go off the air.’ Poland: ‘Media freedom …now faces its greatest set of challenges since 2015 as the government continues to wage a multi-pronged attack on independent media … ‘ Both reports are dated February 2021. In the Czech Republic and Slovenia the independence of the state broadcaster is also under threat.

As for the BBC, we’re used to grumbles from left and right about bias toward the other side. Now the left, obsessed by its own squabbles and with a wholly outdated understanding of the working man, and with minimal support in the popular press, has lost all influence. Murdoch, on the other hand, that happy paragon of all that’s best in Aussie and American, is unchallenged. The Sunday Times on the Greensill collapse and David Cameron: hammering the Tory old guard might just suit Murdoch’s politics. Should I be suspicious?

Maybe now, with arch-disruptor Cummings consigned to outer darkness and Covid and the Red Wall north and big spending to focus on, the government will worry less about the BBC. They can burnish their social conservative credentials by insisting refugees go through official channels, as if any refugee has access to such things. They can espouse freedom of speech (in the face of ‘no platforming’) and mock wokery, but legislate to limit freedom of assembly. We will see how far they go.

I referred to ‘an outdated understanding of the working man’ on the left. That takes me to Red Wall seats ‘up north’, and the smart housing estates that are popping up everywhere, where houses are cheap, by comparison to London, and the standard of living, despite lower wage and salary levels than down south, relatively high. That is the new north, and it’s this that is probably driving the big increase in the Tory vote.

The old working class before the WW1 was instinctively conservative and Tory. They knew their place. The new prosperous working class has more confidence, they doff caps to no-one, and they’ve bought into what may or may not be the fiction that they have in the new Tory dispensation a recognised and valued place.

I’m reading Jesse Norman’s splendid biography of Adam Smith. Why would someone of Norman’s obvious sanity be serving in a government where pragmatism and the wide sympathies as evinced by Norman can be in short supply?Norman, on the way Friedmanite economics distorted and still radically distorts what Adam Smith really stood for, is revealing. Peter Kellner in the current edition of Prospect has a letter which suggests we should see the Tory party in terms of a Vann diagram, with old-style conservatism overlapping the new ideological variety. Norman maybe is the true conservative, and he needs to be in there to make certain the ideologues don’t take over.

And, finally, how the 18th century prefigured the 21st. Adam Smith was born in Kirkcaldy, which had been a major port serving Europe for hundreds of years. His father was Comptroller of Customs for Kirkcaldy. The big switch over to Glasgow and the Clyde, and the American trade, not least tobacco, was already happening. By the 1750s Glasgow was importing more tobacco than all the English ports combined. It was the American economy that intrigued Smith. He looked west, not east. We have that dilemma to this day. Do we look west, or east? Glasgow ironically is now a stronghold of support for Scottish independence, and the Scot Nats look to Europe. England on the other hand would love that US trade deal….