The Media and the Constitution Revisited

My latest for Al Jazeera -

“The organisation of the media is a constitutional matter, in the sense that the particular patterns of attention and inattention determine how the institutions of government function. As such the media help determine who gets what, and who gets away with what. New technology arrives in a media industry that is already embedded in a system of threats and incentives underpinned by law and customary practice.”

Mass Surveillance and the Constitutional Order

This article, by Anthony Barnett, powerfully makes the case for framing British torpor about mass surveillance in terms of the country’s decaying constitutional settlement and the state’s subordination to Washington:

… we have seen an erosion of the old, informal constitutional culture around belief in British institutions. Instead of being replaced by a democratic culture this has permitted a politics of liberty that has become grossly individualized.

The apparent lack of interest in deep reform in Britain is very puzzling to me, given the real-world consequences of the uncodified lash-up we have now. Bankocracy is a form of the state. If you don’t want to work for bankers, then you want to reform the constitution.

Perhaps there is much more appetite for this than is reflected in the BBC-Murdoch complex.

An Intelligible Model of Ambition

“Every stable society rests on a shared view of the world – a way of looking at things which makes it possible to have settled expectations and which provides channels for both cooperation and peaceful conflict. Without such shared beliefs, no intelligible model of ambition is provided for the members of a society. They are thrown into the world merely with fragments of identity. Lacking a viewpoint or core of identity, they find it difficult to pursue any consistent course in life.

Has British society latterly provided its members with such a viewpoint? I think not. Whereas other European societies have in the last two centuries formally adhered to liberal principles, set out in written constitutions, British society has continued to seek unity in manners rather than ideas. It has discouraged discussion of ideology, preferring to rely on civility as the cement of society.”

Larry Siedentop, Democracy in Europe

Public Commissioning Pilot Announced

The Croatian Ministry of Culture has announced a pilot project for public commissioning. Journalists submit proposals via a sponsoring publication and citizens then vote for them. The most popular proposals then receive public funds (in this case from the National Lottery). The pilot scheme will distribute £28,000 to journalists.

For once public funds intended to promote journalism as a public good will be under the substantial control of the same public that foots the bill.

The BBC has an annual budget of around £3.5 billion. The budget from one gameshow could provide ample funds for a public commissioning pilot. So, if Croatia, why not the UK?

I’ve written about the pilot, and its implications, at Al Jazeera.

A Quick Note on Union Funding

At the moment members of unions with a political fund pay a small amount into it unless they decide to opt out. According to the Guardian:

Currently, the union’s leadership then decide how many levy payers to affiliate automatically to the Labour party paying an annual fee of £3 per member. In future a union will have to ask the union member if he or she wishes to be affiliated to the party, so it is a conscious decision to support the party.

If, in the case of Unite, only 100,000 of its 1 million political levy-payers say they want to be affiliated to Labour, income to the party goes down, and the money remaining in the union’s political fund correspondingly rises. It would be open for a union to donate directly to Labour from this fund, but if it becomes clear very few party members are choosing to affiliate, it will be harder for the union leadership to justify making big donations to Labour.

Ed Miliband wants to change the rules so that only those who actively want to become affiliate members actually do so: “I do not want any individual to be paying money to the Labour party in affiliation fees unless they have deliberately chosen to do so. Individual trade union members should choose to join Labour through the affiliation fee, not be automatically affiliated.”

This has caused a great deal of controversy. My own union (the National Union of Journalists) doesn’t have a political fund but I think that those who do should welcome Miliband’s proposal and take it further. The funds in a political levy ought really to be subject to much more complete democratic oversight and control by the members. The fund themselves can become opportunities for deliberation and debate, an opportunity for working people to engage much more directly in the political life of the country – the stated desire of many union leaders.

Members could propose projects, parties and campaigns that they wanted to see funded and would be able to use digital technology to discuss them, and decide whether – and to what extent – they wanted to support them.

For example, crowd funding platforms could be used to allocate funds to particular projects. Once each project raised the funds requested the amount take from each individual’s pool of funds would be reduced with each new donation. A campaign to reform the media that needed £15,000 and had a 150,000 supporters would only “cost” each of them 10 pence. Ahem.

Of course, many people would want to give their funds to the Labour party and get on with their lives. But they would also be free to support particular bits of the labour movement they liked, too. The many millions of wild-eyed fans of Simon Danczuk, for example, would be free to fund his valiant attempts to defeat Stalinism. A small and unrepresentative handful might choose to support the Centre for Labour and Social Studies instead. And, yes, that does mean that some union money will find its way to the Conservative Party. Although I suspect that Conservative voters who are trade unionists will tend to leave the funding of their preferred party to hedge fund managers and shady oligarchs, as they do now.

Some of those who aren’t comfortable with a Labour-or-nothing strategy could divide their support between Labour and initiatives aimed at a deeper transformation of economy and society. Relatively small funds from the unions could be multiplied by projects along the lines Aaron Peters discusses here. A localised approach in a first-past-the-electoral system would make a huge difference, too.

I am going to repeat that for emphasis.

A localised approach in a first-past-the-electoral system would make a huge difference, too.

There’s great value in aggregating political funds. People on ordinary incomes can’t do much unless they act together. But it is a mistake to leave leaders to distribute those aggregated funds as they wish. They will be tempted to use the power they have to suit themselves. We shouldn’t demonise them for that. They are only human, after all. It would better, though, if each of us exercises some little individual power in a context where we are able to debate how to do so, and then to join forces in pursuit of our preferred outcomes.

Modern technology means that individuals can communicate their preferences to one another much more cheaply than was once possible. People like to make a difference in the world. Funds made transparent and accessible to decisions by trade unionists themselves would, I think, become a useful way of attracting new members, too. The combination of collective strength and individual discrimination, if managed properly, could be tremendously appealing.

Republican democracy – in which we create a power and determine together how it is used – has its own charisma.

As I say, the National Union of Journalists (NUJ) doesn’t have a political fund at the moment, having narrowly rejected creating one in 2004. Former NUJ President and expense account prankster Denis MacShane and the late night derision-monger Jeremy Paxman worried that it would undermine the principle of journalistic independence. But a fund organized on the terms above would not do so. The NUJ would be able to gather and disperse funds to projects that its members wanted to support while the union itself remained free to represent them in the workplace in the same impartial way that it does now.

I’d like to propose to my fellow members that we create a political fund, in accordance with due process. I further propose that we  structure it in a way that is thoroughly worthwhile in itself, and a newsflash for the rest of the trade union movement.

Quote for the Day

The nation’s domestic and international telecommunications resources, including commercial, private and government-owned services and facilities, are essential elements in support of US national security policy and strategy.

National Security Decision Directive Number 97, June 13, 1983

(The full text of NSDD 97 can be found here.)

Occupation Jersey, Pat Lucas

The Finance Curse: Introduction

It is now well known that many countries which depend on earnings from natural resources like oil have failed to harness them for national development. In many cases it seems even worse than that: for all the hundreds of billions of dollars sloshing into countries like oil-rich Nigeria, for instance, such places seem to suffer more conflict, lower economic growth, greater corruption, higher inequality, less political freedom and often more absolute poverty than their resource-poor peers. This paradox of poverty from plenty has been extensively studied and is known as the Resource Curse.

This book asks whether some countries with oversized domestic financial centres may be suffering from a similar, and related, phenomenon. 

We find strong evidence that the answer is yes – and not just for reasons related to the global financial crisis that erupted in 2007/8. Perhaps more surprisingly, this phenomenon that we are calling the Finance Curse is similar in many ways to the Resource Curse: there are big overlaps in both their causes and their effects.

 The Finance Curse has been evident for decades - and if untreated it may well endure for years or even decades after the latest crisis has blown over.

Every economy needs its financial plumbing, and for decades academic studies suggested that bigger is generally better when it comes to financial sector growth. The crisis has called all that research into question. New evidence is starting to emerge from the IMF, the Bank for International Settlements and others, revealing that above a certain size, finance turns bad.

Our book, drawing on our many years of hands-on experience of both resource-dependent countries and finance-dependent ones, goes far beyond the boundaries of their research to create an unprecedented comprehensive body of evidence about the perils of oversized finance.

Despite the trillions flowing into and through the City of London, for instance, Britain performs worse on major human development indicators – inequality, infant mortality, poverty, and more – than Germany, Sweden, Canada and most of its other rich-country peers.  Each ailment has many explanations, but oversized finance appears to be a major contributor.

 Country capture

 The Finance Curse is a story about “Country Capture” – where an oversized financial sector comes to control the politics of a finance-dependent country and to dominate and hollow out its economy.  Some elements of this ‘capture’ are already well understood but our book introduces a wide range of new ideas and analysis.

In large finance-dependent countries such as Britain or the United States, the Finance Curse’s causes and effects are masked by background noise in large, raucous democracies. But in the small finance centres and tax havens such as the Cayman Islands or Cyprus, these complexities are stripped away and the phenomenon is laid bare in purer, more crystallised forms which are easier to see and understand.

The tax havens, which we have studied extensively, carry important lessons — and warnings — for larger finance-dependent countries.

The book

This book starts with a brief overview of the Resource Curse. The main sections that follows, on the Finance Curse, start by looking at the most important and most widely publicised claims made by defenders of large financial sectors. 

We then examine these claims in turn and reveal why nearly all of them are wrong. Along the way we expose catastrophic errors in studies that claim to demonstrate to policy makers the ‘contribution’ of finance. 

Next, we show that not only is the ‘contribution’ of finance usually much smaller than advertised, but it is worse than that: a wide and diverse range of harms flow from having an overly large financial centre. One can plausibly say that for many countries, the net ‘contribution’ of finance is likely to be negative – in some cases strongly so.

The picture is — of course — not a simple one. Many of these effects, particularly the political ones, cannot be quantified. The political damage is probably more acute in small countries hosting financial centres, while in larger countries such as Britain or the United States the damage is probably felt more heavily in economic terms.

And just as some resource-rich countries like Norway or Chile seem to have successfully avoided or managed the Resource Curse, some finance-dependent countries like Switzerland or Luxembourg seem to have tempered or even avoided the Finance Curse.

But some countries such as Britain and the United States genuinely do seem cursed by their oversized financial centres.  A sector widely regarded as the Goose that Lays the Golden Eggs often turns out to be a very different bird: a Cuckoo in the Nest, crowding out, hollowing out and undermining other economic sectors.  Very often, the interests of the financial centre conflict directly with the national interest.

Our analysis has profound implications. Financiers routinely cry ‘don’t tax or regulate us too much or you will be ‘uncompetitive’ and we will run away to Geneva or London or Hong Kong’ – and far too often the politicians quail and give them what they want. These threats and fears are perhaps the most important reasons why it is so hard to regulate finance appropriately, and why big banks are bigger and potentially more dangerous today than before the crisis erupted.

Our Finance Curse thesis cuts through this Gordian knot. Taking it on board puts power right back in the hands of democratically elected officials. If too much finance is harmful, then it makes clear political and economic sense to regulate and tax this sector appropriately. If the end result is less financial activity, then that will be beneficial. It is therefore absolutely not necessary to participate in the ‘competitive’ race on lower standards of financial regulation, and the obvious course of action is national leadership on better standards, even in the absence of collective international agreements.

Finally, this is not a book about how global financial centres can transmit damage to other countries, important though that subject is. It is about how an over-sized financial sector can harm its own host country.

Copyright 2013 Nicholas Shaxson and John Christensen

The Finance Curse is available as a free download at the Tax Justice Network’s website. It is also available as a Kindle ebook, published by Commonwealth.