Corruption Catch-All

In the coming week I will revert to the theme of the Russian Revolutions and their consequences; but the overnight News about Saudi Arabia, combined with discussions of the current situation in China as President Trump attends the apotheosis of President Xi, raises an omnipresent global issue.

The Saudi Crown Prince has emerged in that role after an elaborate process to bring [at last] a grandson of the hugely prolific founder of the country, Abdul Aziz Ibn Saud, into the pole position to be the next king: the first of the next generation to have a high degree of probability of succeeding to the notionally absolutely powerful top position. From the nineteen fifties until now a succession of sons of the first king, by a succession of his wives [many of whom were sisters, cousins and other close relations of each other], have held the post; but the lastborn among them are now in extreme old age. There is probably a registrar of the dynasty who knows exactly how many princes and princesses there are, including the offspring of Ibn Saud's brothers; many of whom are intermarried with each other. The international media report their number to be some thousands as, unlike the British Royal Family, all the family members have royal titles.

The contrasting British position is that sons and daughters of monarchs are princes and princesses, but that children of princesses and children of daughters of the monarch's sons and sons of the sons of the monarch who do not stand in the direct line of succession are not princes or princesses. Thus the children of Princess Anne, and of the Dukes of Gloucester and Kent [sons of sons of George V] are not princes or princesses. This keeps the 'inner' or 'close' royal family manageably small.

The contrasting situation in Saudi Arabia means that these thousands of royal persons expect high status and high incomes; which were affordable when the family was smaller, the oil price was higher and the monarchy was able to use its position as the 'swing producer' in OPEC to enforce the price control system that they established in 1973. With ever-more royalty and shrinking oil prices as Russia increases its influence as an oil producer and fracking develops in the USA, the Saudi model of the past century is redundant. The new Crown Prince has spent the last two years securing his position among this thousands of cousins, and is now making moves to modernise the system. There are bound to be winners and losers from such a revolution, and alliances have been formed that may or may not prove strong enough for the Crown Prince to consolidate his position for a reign of up to half a century. He has now made the big move: the arrest of dozens of individuals [including several royalty] some of whom have been ministers in the government: all of them charged with corruption.

In a system like the Saudi, where the term Byzantine denotes a situation insufficiently arcane to explain the regime in operation, almost anybody - high or lowly in terms of hierarchy - can be charged with what a German or a Belgian would recognise to be corrupt practice. Charges of corruption will be upheld against many [if not all] of the arrested parties; and the purge can go on indefinitely, as in the Stalin era in the USSR where ever-wider definitions of crimes against the state can be used simply to keep all the survivors in a state of abject subordination to the dominant power. It will be the greatest challenge for the Crown Prince, if he succeeds i holding his position through this exercise, to stop when the purge has gone far enough.

President Xi's situation in China is similar to that which the Crown Prince clearly intends to prevail in Saudi Arabia. In his first five-year term as head of the party and head of state Xi has ensured that nobody stands to challenge him during the coming five years in a way that could ensure that he is forced to stand down after his second quinquennium.  China's rise to wealth has been faster and much more broadly-based than in the case of Saudi Arabia. The control of the country by the party has meant that the power-brokers in every region have been able to grant and deny licenses and permissions for every kind of activity; thus successful individuals in the buccaneering capitalism that has emerged have necessarily squared themselves with the power structure. Some people in power have held to the standards of Confucian and Leninist integrity that have been expected of them: some have not. Some can have cases manufactured against them, in what is ultimately a dictatorship: some guilty people can be so useful to the top men that their crimes can - pro tem , at least - be ignored.

Precisely the same sorts of process are happening in China and Saudi: the consolidation of the power of the dictator is secured - and gains at least a good measure of popular support - by bringing guilty exploiters of public office to account. Simple!

A Board of Trade?

Fifty hours before the polling stations open for the General Election, I first heard the suggestion from the Tory party that the Board of Trade should be revived, with the intention to drum up trade for the UK after Brexit.

A Liberal Democrat source was reported to have given the snap reaction that this was a seventeenth-century 'solution' to a twenty-first century problem. That was a clever comment, and it shows a fair knowledge of history; but it also shows that that source has not yet caught up with President Trump's thinking. As I have pointed out in this column recently, the policies that secured Mr Trump's election victory can be characterised as reminiscent of some that flourished in the seventeenth-century. I have suggested that Mr Trump has thought on parallel lines to those of the great J-B Colbert, who built up in the French economy massively in the reign of Louis XIV. But I explicitly said that I had no apprehension that Mr Trump was consciously citing mercantilist writers: my view is that in the present conditions of global trade and technology it is entirely rational to form policies that have resonances similar to those that worked triumphantly in the mid-seventeenth century; and through the eighteenth century, in those countries where they were intelligently applied.

Britain had a Board of Trade for centuries. It was allowed to become dormant - as a committee - in the very early twentieth century, though it was not abolished; and successive Archbishops of Canterbury were surprised to find that they were members of the Board which never met. The title President of the Board of Trade was given to a member of the government who bore some responsibility for trade matters|, including the supervision of the insurance industry until Gordon Brown's restructuring of financial services when he was Chancellor of the Exchequer. Ancient titles, including Chancellor of the Duchy of Lancaster and Lord Privy Seal, remain to this day to be allocated to 'spare' ministers whose duties are determined on a short-term basis by the Prime Minister.

The new Board of Trade, if it is established, is seen as a body which will find customers for British products and services in the post-Brexit world; and seek 'inward investment' to the UK. The second of these objectives indicates that the little thinking that has been applied to the concept follows on from the second most destructive of the policy imperatives that was laid down by George Osborne. The ruinous policy of austerity [which Mrs May implemented at the Home Office in the reduction in the police force] was Osborne's number one priority. Osborne's number two objective was to attract 'inward investment' to the country; and its consequence was to sell infrastructure and the companies that operate it [such as water, power supply and railways] to foreigners. For a one-off sum flowing into the British economy, control of the firms and the income streams that they attract go to foreigners; and thereafter British consumers pay tribute to the alien owners. Even more damaging was the succession of innovative firms that had established now intellectual property that were sold to foreign owners before they had even begun to make significant profits for UK investors. Those investors, and the inventors themselves, were well-paid for surrendering their rights to future returns from the companies that could make vast amounts of money for their owners: to whom British users of the products and services would have to pay high retail prices.

Even the Econocracy* have recognised that Britain's economy is blighted by low productivity. This blog has repeatedly emphasised that productivity follows on from productiveness. As was emphasised in Millicent Fawcett's Political Economy for Beginners [1870] productiveness is the situation where firms make profits which they can invest in improving their products and processes and thus raise the productivity of their businesses. That key fact has been ignored by Economists since 1890, to the massive detriment of the economy. Selling the profit stream that comes into a business to a foreign firm gives the aliens the option to invest where they see fit, and often does nothing to enhance British productivity. So it looks as if the Tories have found yet another way of despoiling the economy, at no benefit to the population.

* For an explanation of ECONOCRACY, refer to the website of the Manchester Post-Crash Economics Society.