The corruption of power: Part I
After the expenses and phone-hacking scandals you could have been forgiven for thinking that Britain’s elite institutions had hit rock bottom. You would have been wrong. Like a nervous Hollywood studio they seem intent on churning out new sequels, each with more convoluted plots, bigger names and more victims than the last. With its potential, all-star cast of many of the world’s biggest banks, the Bank of England and even politicians of both main parties, the Libor scandal could dwarf everything that has gone before it.
The successive exposure of malpractice in parliament, the media and the banks has led to a growing perception of widespread corruption among Britain’s elites. Corruption is usually defined as the use of public goods for private gain, through the flouting of the law and the willful misleading of the public. I have no doubt that this sort of corruption was committed in many, if not most of the recent scandals. However, in its distinction between ‘public’ and ‘private’ and its deployment of concepts like ‘willful’ and ‘mislead’ this definition falls short of accurately describing how those at the top, certainly of media and banking, operate.
Lord Acton famously declared that “power tends to corrupt, and absolute power corrupts absolutely”, comparing the condition of petty nobles and bureaucrats to that of absolutist popes and kings. Having closely followed the reaction of the banks to the 2008 financial crisis and the Murdoch press to the phone-hacking scandal, it is hard not to conclude that they belong in the second category. The crime of Acton’s absolutists was not merely enriching themselves at their subjects’ expense – many of less noble rank had done so before and have since. Their true transgression was to believe that they embodied some greater order that rendered the question of corruption moot. For corruption to exist there must be laws, and rights and a reality against which their actions could be judged. In fact they believed there was none. Those corrupted by power steal. Those absolutely corrupted merely receive.
It might appear that all it takes to become so absolutely corrupted by power is an enormous sense of entitlement, whether this is learnt at the breast or in the boardroom. I think there are two far more important factors. Firstly it appears that regardless of how rich and powerful an individual is on earth, some source of sacred authority is needed to justify destructive acts. For the media, its historic role of holding power to account offers it a quasi-divine status. However for some this has mutated into little more than a convenient mask. The importance of press freedom and the spectre of its potential shackling by government have been evoked by the Murdoch clan and its cheerleaders at every opportunity during the Leveson inquiry. I’m pretty sure allowing a global, multi-platform media monopoly to bully cowered politicians, police and regulators into allowing further business expansion was not what Jefferson had in mind as he sat down to write the First Amendment.
For the banks it is another increasingly hollow-sounding creed, the ‘free market’, that has offered a veneer of legitimacy in the face of mounting evidence. The late-modern rehashing of Adam Smith’s micro-economic principles into macro-economic management lore has bewitched politicians of most stripes in most developed countries. The financial sector lies at the heart of the complex, unstable system that has emerged from this consensus and has been its biggest beneficiary. Aware of this, its lobbyists and PR spokespeople never lose an opportunity to invoke the market, despite the highly tenuous relationship between the laws of supply and demand and what banks actually do. Neo-classical economics, of course, is an elite, rather than popular faith, and so folk versions have been needed to keep the masses on message. These have come in the twin forms of credit-fuelled consumerism and the coercive threat of capital flight, aka the “step out of line and we’re all off to Zurich” argument. What other interest group can wield such an array of tools to sweeten or justify the pursuit of its collective self-interest?
The second characteristic shared by the Murdoch media and the big banks is an unrivalled power to construct perceptions of reality. For most media outlets the ability to independently shape the national news agenda is limited by relatively small market share. For the Murdoch empire it patently is not. With close to 40% of UK newspaper sales and with this constituting just a small part of the company’s overall operation, cashflow is never a problem and, despite some autonomy among the different titles, when necessary they can unite to flood the market with corporate propaganda. This power has been particularly notable as the phone-hacking scandal has unfolded. What other business could afford to run full-page apologies in their own and rival newspapers? Or to lose the income from its best-selling Sunday paper for months on end in a long-term bid to detoxify its brand? The PR operation is also unparalleled. Were the “humblest day of my life” and ‘LOL text’ soundbites, and the ‘Brown Wrong’ Sun headline, not attempts, dreamed up in brainstorming meetings, to try and regain control of the news cycle?
Although on the surface they seem more constrained by economic forces, it has become clear that the big banks also collectively engage in a far more complex kind of reality construction. Most of us believe there is a fixed money supply controlled by a central bank and that private banks use the deposits of savers to fund speculative loans to households and businesses, bearing the cost if these go wrong. In reality the emergence of electronic banking and increasingly complex financial instruments has allowed these banks to privatise the creation of money itself, in the form of debt. Their multiplication of the money supply is not subject to any external constraint, except the need to retain the trust with which other banks, markets and rating agencies view their balance sheets. The greater the confidence, the more the house of cards grows, while a sudden attack of doubt can quickly spread across the entire sector, bringing it crashing down. From here it is only a small jump to making the numbers up altogether to increase profits or reduce vulnerability, as those at Barclays, and in all likelihood many other banks, did with their reported Libor rates. What bestows greater power than the right to print money without accountability?