Posts Tagged ‘Accountancy Firms’

Ha-Joon Chang on the Japanese Solution to Information-Sharing between Government and Business

May 19, 2016

Ha-Joon Chang Pic

Ha-Joon Chang also discusses in his book, 23 Things They Don’t Tell You About Capitalism, the Japanese solution about the tactics the Japanese have adopted to the problem of sharing information between the government and business. It’s in the chapter ‘Thing 12 Governments Can Pick Winners’. In this chapter, he explodes the myth that governments cannot run industries successfully by showing just how many extremely profitable and efficient industries have been set up by the state. Like the Korean steel mill. This was set up in the late 1950s and 1960s, when the only thing Korea exported was food, mainly fish, and cheap clothing, and when the country generally was one of the poorest in the world. Its first boss was an army general with extremely limited business experience. It looked to be such a risky venture, that the head of the IMF or World Bank refused to lend Korea money, and advised other potential investors not to do so. So no-one did. Korea now has the fourth largest steel industry in the world.

Chang states that the Neo-Libs could argue that Korea is somehow the exception to the rule, and that his countryfolk are somehow more intelligent than everyone else. He says while he finds this flattering as a Korean, it ain’t true, and lists the various other countries that have had similar successes with the state running of industry. He then goes on to tackle the underlying assumption behind the Neoliberal dismissal of governments’ ability to manage industry. They argue that government departments simply don’t have enough information to manage industry well. He argues that in fact, they do, and that quite often it is far better than those of the industrialists themselves. And he states that governments also draw on managers from industry for their information.

This is now part of the problem in Britain and America. It is now longer the case that industry supplies the government with information. In all too many cases, it guides government to its own advantage, and dominates government. The fact that the political parties’ conferences is sponsored by private industries, all seeking to get a cut of state action, is part of this. So the way the big accountancy firms sent their executives to assist the political parties in preparing their policies on taxation, which has led to the creation of the massive tax loopholes and offshore accounts, which have allowed people like Dodgy Dave Cameron to avoid paying his due whack of tax.

The way the Japanese have attempted to solve the problem is through ‘deliberative councils’. These are formal meetings between government officials and businessmen, which are covered by the media and have observers from academia.

I think this is an excellent idea. We desperately need to clear out the corporate corruption of parliament and the political system, so that government legislates for the people, and not to maximise the profits of the rich few at the expense of the rest of us. At the same time, information and experience from industry should be available to government. And that information, and the influence that it gives, should not be hidden, but be genuinely open and transparent.

At the moment, it certainly is not, despite Dave Cameron’s mendacious bill on lobbying. This is actually designed to do the opposite. His lobbying bill stops charities and trade unions from lobbying, while allowing the big corporate lobbyists to go on as normal. And as far as I’m aware, none of the newspapers regularly report on the influence of private enterprise on the parties. The only reports of it I can remember reading are those in Private Eye. This must change, and soon, in order to curtail the corporate corruption of British politics.

Jimmy Carter on the Corporate Corruption of Regulatory Authorities

February 4, 2016

I found this very pertinent piece from former US president, Jimmy Carter, in the collection of pieces by Hunter S. Thompson, The Great Shark Hunt (London: Picador 1980). It’s in Carter’s 1974 Law Day address to the students at Georgia University.

We had an ethics bill in the state legislature this year. Half of it passed – to require an accounting for contributions during a campaign – but the part that applied to people after the campaign failed. We couldn’t get through a requirement for revelation of payments or gifts to office-holders after they are in office.

The largest force against that ethics bill was the lawyers.

Some of you here tried to help get a consumer protection package passed without success.

The regulatory agencies in Washington are made up, not of people to regulate industries, but of representatives of the industries that are regulated. Is that fair and right and equitable? I don’t think so.

I’m only going to serve four years as governor, as you know. I think that’s enough. I enjoy it, but I think I’ve done all I can in the Governor’s office. I see the lobbyists in the State Capitol filling the halls on occasions. Good people, competent people, the most pleasant, personable, extroverted citizens of Georgia. those are the characteristics that are required for a lobbyist. They represent good folks. But I tell you that when a lobbyist goes to represent the Peanut Warehouseman’s Association of the Southeast, which I belong to, which I helped organise, they go there to represent the peanut warehouseman. They don’t go there to represent the customers of the peanut warehouseman.

When the State Chamber of Commerce lobbyists go there, they go there to represent the businessmen of Georgia. They don’t go there to represent the customers of the businessmen of Georgia.

When your own organisation is interested in some legislation there in the Capitol, they’re interested in the welfare or prerogatives or authority of the lawyers. They are not there to represent in any sort of exclusive way the client of the lawyers.

The American Medical Association and its Georgia equivalent – they represent the doctors, who are fine people. But they certainly don’t represent the patients of a doctor.

Obviously, there are some differences between the situation Carter and Thompson describe. I think we do have legislation in this country, which requires gifts to ministers and civil servants to be declared. And some of the most determined opposition to the Tories’ campaign to privatise the NHS has come from the ranks of the British Medical Association.

But the substance of what Carter said is as true today as it was when Carter said it. If you read Private Eye in the 1990s, you saw fortnight after fortnight yet more news of someone from one of the industries getting a job in the body that was set up to regulate it. And it’s gone on. Private Eye are still running stories about banks and the leading accountancy firms, who were most notorious at dodging tax sending senior staff to act as interns or advisors to the Inland Revenue and the financial regulatory authorities. Or else a former managing director or chairman of the board from one these industries him- or herself gets a place there.

As for the lobbyists, Mike over at Vox Political the other year ran many pieces describing the Tory act that was supposed to limit their influence. Except it didn’t. What it did instead was try to cut out the influence of smaller, grass roots activist groups campaigning against some injustice or piece of misgovernment, and try to limit the ability of trade unions to campaign against particular issues. The lobbyists themselves were left largely untouched. As you can expect from a government, whose annual conferences are paid for by the big corporations, and which is headed by a PR spin merchant: David Cameron himself.

Carter was right to attack the corruption of the regulatory bodies by the very corporations they were meant to be overseeing, and his remarks on the pernicious influence of the lobbyists is still very timely. It’s time to clean up politics, and get rid of them and the Tories.

Private Eye on the Political Influence of Big Accountancy

February 16, 2015

In my last post, I criticised the pernicious cross-party influence of the think tanks and lobbying firms. I posted up an article on them from a 2012 issue of Private Eye. That same issue also carried another relevant article, describing the way the big accountancy firms, in this case, PricewaterhouseCoopers were also working for all of the major political parties. They were similarly active promoting their polices of tax avoidance, while avoiding the repercussions for their role in the collapse of banks such as Northern Rock and the development of tax avoidance schemes. The article ran

Anybody wondering why the fallout from recent financial scandals never gets too near the big accountancy firms that are at the heart of so many – the failure to audit collapsing banks properly, the sale of billions’ of pounds’ worth of tax avoidance schemes – will be interested n a few lines from the annual report of PricewaterhouseCoopers (Northern Rock auditor and adviser on Barclays’ tax avoidance schemes, among other lucrative lines).

PwC, it emerges, “provided a total of some 3,454 hours of free technical support to political parties during the year”, valued at £400,000, and made up of “2,622 hours ot the Labour Party and 832 to the Liberal Democrat Party”. In recent years, it reveals, “the trend has been that we have provided more hours to the opposition parties as they have less support infrastructure”.

Small wonder coalition and opposition alike are expanding the opportunities for PwC’s offshore tax schemes (<Eyes passim) and overlooking the obvious need to rein in Britain’s big beancounting operations.

This is exactly correct. Mike over at Vox Political has sharply criticised Rachel Reeves, for example, for accepting the help and advice of the big accountancy firms. This help isn’t free. The cost is the continuing corruption of British politics and the erosion of public confidence in the willingness and ability of their leaders to represent them, not corporate big business.

Corporate Influence and Staffing of Government in Britain and Pre-Revolutionary Russia

April 28, 2014

One of the features of post-Thatcherite British government is the strong influence of big business on government policy and even the staffing of government departments. Government officials are frequently drawn from corporations, where they have directorships or occupy other positions in senior management. The conferences of all three main parties are sponsored by businesses hoping to influence government policy and win contracts or other business concessions from their political clients, once they are in government. The parties increasingly formulate their policies according to think-tanks, formed by and representing the views of particular industrial or corporate interests. Private Eye for years, since as far back as the ‘sleaze’ of John Major’s administration, has documented the way corporations and their employees have permeated government institutions. This has most often been done with the specific intentions of reducing or blunting government regulation of industry. Thus you can find the presence of various senior employees and directors of the big accountancy firms in the Inland Revenue, presenting the government with schemes on how the rich can become even richer by avoiding a tax. Officials drawn from the City have entered the various government bodies regulating the financial sector, to argue that the City should be less regulated. The result of this policy was the massive corruption and trading in toxic debt that created the present international financial crisis. And an extremely large number of the present government have links to private healthcare companies hoping to benefit from the privatisation of the NHS. One of these is Jeremy Hunt, the current Health Secretary, and IDS. I’ve blogged before about how the Nazis had a similar policy of co-opting leaders from business to staff the Reich industrial combines and organisations.

And it was exactly the same in Russia in the decade immediately preceding the Revolution. Big business deliberately set out to influence government policy. Business leaders entered the government, while ministers, senior civil servants and officers of the armed forces moved into posts in private industry. The regime was compromised and ultimately discredited by massive corruption. Kochan describes the situation in Russia in Revolution (London: Paladin 1970).

Industrialists more and more put themselves at the service of the government in the economic development of the empire. An Association of Industry and Commerce, founded in 1906, and its journal Industry and Commerce, devoted themselves specifically to the purpose. The association was a federation of industrial organisations formed along geographic and functional principles, e.g. The mine owners of south Russia or the Baku oil producers. By the beginning of 1914 it embraced thirty-four banks and insurance companies, 251 industrial undertakings, eleven transport companies and nineteen trading concerns.

The association consistently advocated the further economic development of the empire through a policy of high entrepreneurial profits combined with austerity in consumption. It argued against free competition – ‘the anarchy of the market and a chaotic fluctuation of prices’ – and in favour of a five-, a ten- or even a fifteen-year plan, that would overcome Russian backwardness and free it from dependence on agriculture. It proposed cooperation between industry and the government in, for example, the irrigation of Turkestan for the cultivation of cotton, the construction of the Volga-Don canal, and the intensive exploitation of the Magnitogorsk iron deposits in conjunction with Siberian coal. … Planning from above, with the sympathetic stabilizing and regulatory intervention of the vast resources at the disposal of the Treasury would enable trade and industry to take their full share in industrial development, it was hoped. In the last resort, the association envisaged a type of corporate state in which industrial and commercial interests would play a co-determining role vis-à-vis the government in relation to economic policy.

For this reason the association scheduled its own congresses to take place during the Duma sessions – the membership overlapped in many cases – and ‘sometimes its debates were the more interesting and important of the two,’ noted one observer. The association functioned as a vast pressure group: ‘… Russian industry and commerce must, in the interests of self-preservation, ‘ declared an early initiator of the association, ‘express not only its broadly based views but also know how to present these views to those institutions and groups on whom will depend the putting into practice of this or that law or policy … Here lies the whole root and the whole meaning of the All-Empire congresses of the representatives of industry and commerce. (pp. 166-7)

What socio-economic influence was possessed by these conglomerates of power? This is not easy to analyse. It seems likely however, that they had a disintegrating influence in further corrupting and demoralising the Tsarist bureaucracy. An insider, V.I. Gurko, at one time assistant minister of the interior and member of the state council, avers that the integrity of the overwhelming majority of high officials was ‘beyond question’. But he must also admit that private concerns engaged prominent officials at ‘fabulous sums’ with a view to the man’s ‘official connexions and his knowledge of the methods necessary to obtain governmental backing … particularly to secure some state concession. ‘ The line between public and private interest became more and more difficult to draw. This applied particularly to the armament industry. Take Avdakov, for example, for some years the chairman of Produgol, then the Association of Industry and Trade and at the same time councillor in the ministry of industry and trade; or Lieutenant-General Brink, a former head of the department of naval construction and chief inspector of naval artillery, who became a director of the Putilov works; or Vice Admiral Bostrem, a former commander of the Black Sea fleet, who became president of the board of the Nikolaevsk naval construction company; or General Ivanov who joined the board of the same company; or General Miller, former head of the state-owned Obukhovo works, who became director of the Tsarizyn artillery plant.

Civilian official similarly moved between government posts and private industry, especially in they were engaged in the ministries of finance and trade and industry. There was Timryazev, for example, and Bark, Arandarenko, M.M. Fedorov, V.I. Kovalovsky, N.N. Pokrovsky, Langovoi, Litvinov-Falinsky – all these men moved at one time or another between their ministerial arm-chairs and an equally well-padded position in industry or industrial association. (p. 168).

This describes pretty much every government since Maggie Thatcher, including that of Cameron and Clegg today. And the Association’s policy of demanding high profits as well as austerity exactly describes the current government’s policies.

That all ended with the upheaval of the 1917 Revolution and the Bolshevik seizure of power. We don’t need a revolution with all its horror and bloodshed in Britain. But we do need proper government, where the public interest rules and where corporations are not allowed to corrupt, influence and direct government policy.