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Diary Note /0051
Thursday 23 May 2002
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"I don't know what
excess profit means"
These telltale words, from Barclays Bank
Chief Executive Matt Barrett, are significant. Because they display the profound difference of
perspective that exists, between businesspeople and the ordinary citizen.
For businesspeople, successful trading consists simply of selling at a price above cost, and
pocketing the difference. If you are clever or lucky enough to find a product or service which
costs £5 and sells in the market-place at £55, that's fine, that's to be celebrated. There
is no monitoring angel, assessing the reasonableness of the margin. If you can find someone to
buy at £55, and if you can buy at £5, then take the profit while you can - that's business.
Yet no ordinary person recognises the force of that reasoning. "Excessive profits" may be
generated in a thousand ways. There is always popular resentment if businesses deliberately
exploit market shortages, or collude to reduce supply, or conceal information which (if available
to the purchaser) would radically change price perceptions. Water-sellers exploit the price of water,
in drought conditions. Manchester United dons a new playing-strip, just to exploit the
fans' enthusiasm for the product. In the popular mind, such behaviour is wrongful.
But for the businessman, that's OK. If someone will willingly pay £55, then
£55 is the right price, whatever the item costs. "I don't know what excess profit means",
says Barclays Bank Chief Mike Barrett, quite
truthfully. His value-system does not extend to the concept of a "reasonable price", or a reasonable profit.
For me, when I went into business from practice at the Bar (1969), this was the first lesson I had
to learn.
There is at the
heart of all business this element of deceit, which is universally and
uncritically accepted. This was the aspect of business
which so disturbed the early Quakers, and led to their practice of dealing only at a "fair price", determined
by them unilaterally, on equitable principles, rather than at "market prices". The reputation of the great 18th Century
Quaker traders was built up on that doctrine. Its absence, in the culture of today, explains
much of the continuing sense of distance, between ordinary people and the business world.
Your thoughts? Drop me a line
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Political
Legitimacy at stake
Labour is suffering on the rack of sleaze. The Party's new
Ethics Committee is a fragile device, hastily cobbled together. But the Tories and
the LibDems are unable to take advantage of the Government's discomfiture.
That's because the discomfort is their own.
For the discomfiture is not just about Labour's Desmond Donation, and
the desperate impoverishment of the Labour Party. It is about the entire
professionalisation of modern politics, about the emergence of a large
professional political salariat, which is expensive for all Parties to
support.
Tony Blair, during his recent Paxman interview, protested - "But
we have to have all this money, for the payment of salaries!" And
there's the rub. Politics has, in the space of some thirty years, become a
salaried profession, whose key skills are simply those of getting re-elected. It is this which is threatening to
engulf our political life, not ambitious pornographers. And every Tory,
every rising Liberal Democrat, is caught in the same destructive financial
cycle.
And the political salariat is growing rapidly. With many
"Frontbench" Councillors now receiving a living wage for their public service, I
calculate that within Wales alone, the number of salaried politicians has
increased from 45 in 1997 to 250 today. This has happened
almost inadvertently, as a consequence of devolution and Labour's local
government reforms. But its political implications are very profound indeed.
It is not a matter of abandoning professional politics. Rather, it is a
matter of managing that resource more effectively.
This evening, at the Cardiff Fabian Society, I shall be calling for
constitutional
reform to halve that Welsh salariat from 250 to 100. We must
act now, before vested interests become too deeply entrenched.
Drop me a line
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Drugs Breakthrough
Today's report by the Home Affairs Select Committee would, if implemented,
take us towards the ultimate goal of a more liberal, more tolerant society.
But not yet. "While acknowledging that there may come a day when the
balance may tip in favour of legalising and regulating some types of presently
illegal drugs, we decline to recommend this drastic step" (p63).
But let's not kid ourselves. This is no "fundamental re-think",
as it has been billed. Everything so far recommended is a fudge, including these
Select Committee proposals. A
well-meaning fudge, by fearful politicians - but a fudge nevertheless. Sadly, it
is a Report devoid of moral substance, without guiding principle. When I gave evidence to the Committee last November, I was asked whether changes
along these lines would be "an improvement". My answer, of course,
was "Yes" - because the reform would at least remove the threat of Police
arrest, in the case of of cannabis-users. Heroin users seeking treatment would
at least have access to humane medical services. And half a loaf is better
than no loaf.
But there is still no recognition that statutory drugs-prohibition
is itself a grievous wrong, perpetrated by Governments against their
own citizens. The criminalisation of "narcotics", an ill-informed
experiment upon which the western world embarked in 1920, remains unambiguously
in place. No crime is being taken off the statute book, and the fudge will
leave massive discretion in Police hands - where it should not lie.
Drugs prohibition must go. It was always an illiberal,
ill-considered, collective error of judgment. The human freedom to choose ones
own form of intoxication is fundamental, and should not be abridged by the
State. If you agree, sign up to the Angel
Declaration - go now and add your signature on-line to the Declaration
I am delighted to report that ten MPs (eight Labour, one LibDem,
one Plaid Cymru) have now signed the Angel Declaration - you will
find all their names in the 400-strong roll of honour of those who have already signed.
You
can sign here, now
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Vallance blows
City whistle
City
insiders rarely reveal the true nature of the City system. Young insiders
have too much to lose, old insiders want to avoid spoiling the party for their
friends and colleagues.
But Sir Iain Vallance, who this week
retired from the Presidency of the CBI, having been forced out of the BT
chairmanship in April 2001, is no ordinary insider. He is a career
public servant, who joined the old Post Office straight from Oxford at the age
of 23, and worked his way up the public service ladder. On privatisation,
he became Chief Executive of British Telecommunications. He has had to
observe, and learn, the ways of the City.
Now 59, and ousted from BT office,
he does not like what he has seen. This week, in his farewell CBI speech, he calls for the power of
City institutional shareholders (who forced him from office) to be weakened.
He condemned them for chasing short-term profits above all else.
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"Markets are
fuelled", he damningly revealed, "by the highly-geared, and rarely disclosed,
remuneration packages of fund managers, investment bankers and their attendant
analysts. Little wonder that companies can succumb to the temptation of
taking undue risks, and of prejudicing good corporate governance, in striving
to match what the markets seem to want".
Just consider
that indictment. He says that City markets are driven by the bonus contracts of
the institutional investors, the ones who are managing our pension funds. That
is the charge, and it is a grave one. Share-prices are rigged to ensure that the
City insiders can "earn" their obscene
bonuses. The implications of that revelation are profound. Merrill
Lynch, in New York, are being prosecuted for precisely that kind of corruption.
Such insights
are to be treasured. But remember that career public servant Iain Vallance, knighted
in 1994 for services to business, is no ordinary City insider. Real City
insiders, like the Mafia, never squeal. And Sir Iain must know in his
heart that the Government, whose service he originally undertook, is powerless
to reform the City. The only option is to take their ball away, and to entrust
the management of pension funds to career public servants...
Drop me a line
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Dangerous Welsh Mists
Welsh politics is dogged by a narrow cultural nationalism, an ugly relic
of 19th century Europe. The nationalist Party Plaid Cymru continues to
preach its poisonous rhetoric, ridiculing those (both English and Welsh)
who fail to conquer the difficult Welsh language, which I love. The Welsh
language is a precious heritage, part of the European inheritance, and I shall
fight for its survival.
But this nationalism should not be allowed to distort contemporary
politics. Reports this week suggest that the Labour Assembly Government
is considering the use of planning controls to counter the purchase of homes by
the incoming English. That might be done by creating a planning
distinction between full-time and part-time occupancy, and treating the latter
as a separate "use", requiring planning permission.
Labour should abandon any such plans. Such restrictions would not
work, and would create the most enormous local friction. Just imagine
being the owner of a house in Aberystwyth, suddenly faced with a ban on its
sale to a Birmingham law lecturer, in search of a holiday home! Its
market value would immediately be eroded, by many £'000s. The owner could sell
the house only to lower-income Welsh residents. And he would have to accept
the consequential capital loss. Imagine the disruption and resentment! The system could be made to work for new
housing, although it would mean a severe loss of profit to Welsh
farmers seeking to supplement their meagre farming incomes by land-sales. All
in all, the "solution" would be worse than the problem.
The answer is to promote the construction of new rented accommodation, by a new form of
housing association empowered to give preference to local residents.
Think positive, not negative.
Drop me a line
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Golf Balls and Capitalism
Have you heard of John Collinson? He's the enterprising scavenger who
earned a living recovering golf-balls at Whetstone Golf Club, in Leicestershire,
charged by the zealous Leicester Crime Squad with theft of the balls.
Now: a "thing" cannot be stolen unless it is the property
of someone. Theft is jurisprudentially an invasion of property rights,
and the Courts are zealous to uphold property rights, particularly the English
Courts. Collinson's defence was that lost golfballs were not the property
of anyone, having been effectively abandoned, and that he was engaged upon an
honourable recycling business, declaring his £14,000 pa turnover and paying
Income Tax upon it.
But the Court, sensing an assault upon the
very foundations of the English civic order, rejected that defence and jailed him
for six months. This week the Court of Appeal released him, not
because they accepted his defence, but because the sentence was
disproportionate. Capitalism breathed again.
Because the sanctity of property rights lies at the very heart of
capitalism. When satellite broadcasting was launched in the 1980s, it was
discovered that hackers were intercepting messages from the new satellites
without paying a fee. The Thatcher Government rushed through
legislation declaring that the broadcasting "beam" emanating from a satellite
was an item of property, and that pirate viewing was therefore
"theft". Phew! That was close. Rupert Murdoch breathed again.
Most scandalous is the success of the corporate lobby in hi-jacking
the European Convention of Human Rights in defence of its own property rights.
Property rights are protected by the Convention (and now by the UK Human Rights
Act 1998) whether they are held by natural persons or artificial persons.
I am campaigning for the removal of that concession, by way of
international negotiation. Human rights should be about you and me,
natural persons confronting the potential abuse of State and corporate power.
It is wrong that the same mechanisms should be exploited to protect the
corporations against us.
Drop me a line
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Footnote: Electronic Tagging My visceral dislike of this
uncivilised practice was reinforced by this week's report of an unnamed 12
year-old girl in Walsall, tagged by local Magistrates for disobeying their
instructions not to go into Walsall town centre - errors of judgment like these
are the inevitable outcome of insensitivity and illiberality in our treatment of
young people...
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