Tales from the City

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Britain's now in its fifth year since the start of the financial crisis; a crisis caused by a risky and out of control banking sector that went into meltdown. To save the system the banks were bailed out with huge amounts of the public's money, yet rather than getting the banks to recoup these costs the British government has recently cut taxes on the financial sector. At the same time British politicians of all stripes are in effect saying that normal people have to pay for the crisis through lower wages, unemployment and deep cut-backs in public services. The lack of action from politicians to reform Britain's financial sector has also been striking. Why has the financial system not been made safe? And why are politicians making the public bear the cost of the crisis caused by the banks? This film goes some way to answering these questions - by looking at how the banks nature and feed the imagination of our politicians by telling them stories. It shows how the big shots from the City – the financial capital of London and perhaps the world – are in bed with politicians filling their heads with half truths and their pockets with money in return for favors.

TIME CODE: 00:0_05:00

Narration: Britain's now in its fifth year since the start of the financial crisis; a crisis caused by a risky and out of control banking sector that went into meltdown. To save the system the banks were bailed out with huge amounts of the public's money, yet rather than getting the banks to recoup these costs the British government has recently cut taxes on the financial sector. At the same time British politicians of all stripes are in effect saying that normal people have to pay for the crisis through lower wages, unemployment and deep cut-backs in public services. The lack of action from politicians to reform Britain's financial sector has also been striking. Why has the financial system not been made safe? And why are politicians making the public bear the cost of the crisis caused by the banks? This film goes some way to answering these questions - by looking at how the banks nature and feed the imagination of our politicians by telling them stories.

SOUNDBITE [English], Karel Williams, Professor of Manchester Business School: “A lot of it is really about storytelling. The most effective way of persuading a politician to do something or not to do something is usually to construct a story about the social or economic benefits of an activity so that it appears that a politician is making an enlightened decision in the general interest when he does something or doesn't do something. And I think there are very good example of this from the finance sector.”

SOUNDBITE [English], Shaun Springer: “If the City does well then the rest of the country does well.”

SOUNDBITE [English], Karel Williams, Professor of Manchester Business School: “ If we look at finance, the key thing before 2007 was the finance sector had a regime of light-touch regulation. Now in many ways this was quite odd because the FSA, which was regulating the financial sector, had very large powers under statute. Why were these powers not used by the FSA? And why were the political masters of the Financial Services Authority so complacent? I think the short answer is that they had been sold a story by Finance, by the City of London Corporation about how the finance sector generated payments benefits, generated jobs, generated taxes. Now in lots of ways this story was full of half truths, but it was good enough to persuade New Labour that a light-touch regime of regulation was the right thing to do because basically the expansion of the city was not a risk, was not a hazard, but was bringing Britain considerable benefits. I think that's a model for how modern day lobbying actually works. It's not about telling a story about how the private interest will be served but it's suggesting that if the politician behaves in a certain way he or she will actually serve the larger social interest and the story about social and economic benefits is critical.”

SOUNDBITE [English], Angela Knight: “This is and remains the largest centre for international banking. That is one of the great success stories of this country.”

TIME CODE: 05:00_09:20

SOUNDBITE [English], Lindsey German, National Convenor: “They've also constructed an ideology that there's something perfectly right and justified about growing inequality; that it's OK for the poorest people in Britain to face increasing cuts, to face real falls in living standards for many many years - that people's incomes are now lower than they have been for decades now. They've constructed this ideology that that's all OK, but if you ask somebody who pays a million pounds a year to pay the 50% rate of tax that is a terrible encroachment on their civil liberties which can't be allowed which is why even the Lib Dems in the government are saying 'we're going to abolish the 50% rate of tax because it's not fair on these people who have to pay it' - you only have to pay it if you earn over 150 000 a year. I mean it's a completely disgraceful thing but this is what they do all the time - that everything that benefits the rich must be justified, it must be the right thing to do: we have to allow them to make money, we have to allow them to have the banker's bonuses, we have to allow them to do all these things. But if you're fiddling your benefit of a miserable 40 pounds a week - if you're claiming 80 pounds a week or whatever you're doing, you'll be put in prison. I mean it's a very very harsh ideology and it's an ideology, which reminds me a little bit of the eighteenth century in Britain where it was a crime to be poor! That was essentially it; there was no welfare state, there was no safety net for anybody who was poor and it was a crime to be poor.”

Narration: To make sure their story is heard where it counts; the banks concentrate their storytellers around Westminster.

SOUNDBITE [English], Karel Williams, Professor of Manchester Business School: “There are lots of different narratives circulating in society and some have more effect and more currency than others. Therefore, in a sense, the storytellers from the pharmaceuticals companies or the auto-industry or the finance sector, have to be well connected with the policy machine and all of this requires close network contacts so that corporate lobbyists can smoothly sidle into politician's office and say, 'have you thought about the implications of this new bit of proposed legislation? Well in the industry's view this will harm hedge funds, private equity, or whatever it might be. And the reason why you shouldn't do that is that these activities bring you taxes, jobs, payments benefits and all the rest of that. Now I think the story is important but also the network contact, which allows somebody to operate discreetly and informally with private contacts.”

Narration: To bolster their lobbying power and to craft their stories as best they can, the banks go to the Public Relations companies.

SOUNDBITE [English], Noam Chomsky, Professor of Linguistics Emeritus: “The Public Relations Industry developed in the two freest countries in the world; Britain and the United States around the time of the First World War. And it was done with the recognition that popular struggles had won enough rights so that people couldn't be controlled by force; I mean there were parliamentary Labour parties, unions, pretty soon women were going to get the right to vote in the United States. In general, a fair amount of freedom had been won; not given but won. And that made it harder to use force for controlling the population so something else was needed. And what of course would be needed came immediately to mind as it always has; control of attitudes and beliefs. This is not the first time that happened; so for example when the British banned slavery in Jamaica, it was around the 1830s, parliament had debates about how to maintain slave conditions even after the formal abolition of slavery. And they decided that the way to do it was essentially Public Relations. If you can trap people into consumerism and debt - they are under control. United Fruit company did the same in Central America sixty years later and the Public Relations Industry was just the generalization of this.”

TIME CODE: 09:20 _15:00

SOUNDBITE [English], David Miller, Director: “Corporations try and manage every sphere of society. Now that sounds like a kind of grandiose claim right, but they have the idea that need to manage the political environment, they need to manage the regulatory environment, they need to manage also the environment in which their products are talked about and bought. So they use advertising and marketing to promote their products to the public and they use lobbying to smooth the passage of their products through regulatory bodies or in terms of legislation. But they use Public Relations to connect between the two of those. So Public Relations will be involved in managing the political process; they will try to do that through the media sometimes and sometimes they will try to do that through influencing public opinion. Usually though public opinion is not one of their prime concerns because the corporations and the lobbyists and the Public Relations people want to manage the political process and it doesn't really matter what people think as long as it doesn't affect what they do. So they thing that they want to do is to manage the appearance of public support. So they want to opinion polls which will give them the right answers - they'll phrase the questions so the answers come out the right way, they will then promote those opinion polls through the media and to the politicians. They want to try to give the appearance that the public supports their policies by creating charities or pressure groups or non-government organizations and making them appear as if they're independent - and the classic example is patient groups which are funded by the Pharmaceutical Industry; a great one was an organization called 'Cancer United' which was run by a PR company but pretending to be a genuine organization of patients fighting for their rights, but actually it's just a pharmaceutical front group. So the PR agencies liaise between the advertising and marketing side of things and the lobbying side of things and they try and manage media and try to manage the appearance of public support either through opinion polls or though the management or creation or influence of pressure groups.”

SOUNDBITE [English], Noam Chomsky, Professor of Linguistics Emeritus: “A leading figure of the American Public Relations Industry - Edward Bernaise - wrote a book called 'Propaganda'. In those days it's pre-Second World War so propaganda didn't have the negative connotations it now has; so he just meant Public Relations. And it's kind of a manual for the Public Relations Industry and the principle was that we have to ensure that the intelligent minority rule the country. Now we can't control it by violence now so we have to do it by what he called engineering of consent. Walter Lipman the leading progressive public intellectual called it manufacture of consent. We have to manufacture and engineer their consent to the policies that we the smart people decide what's right for them. There's a little footnote which everyone forgets to add; 'we're the intelligent minority because we serve authentic power which is concentrated in the private economic system. If we didn't serve them we're not the intelligent minority any longer. But that's what makes us the intelligent minority and we have to make sure that the general population goes along'. In Lipman's terms the general population is the 'ignorant and meddlesome outsiders' who have to be kept away from decision making. He incidentally was a leading progressive intellectual; Wilsonian, Roosevelt, Kennedy progressive and maybe the most respected public intellectual of the twentieth century. These are very common views - I pick the liberal side. And in the PR Industry it meant first of all controlling beliefs, but also diverting people so that they don't… very much like the Jamaican slaves; diverting them so that they remain spectators.”

Narration: Financiers find that spending money helps make sure that politicians are always willing to lend them their ears

SOUNDBITE [English], Andy Rowell, Author and Journalist: “Over the last decade Goldman Sachs and ex-directors from Goldman Sachs have donated 8.8 million pounds to political parties in this country. People don't give politicians money for nothing. OK? I mean that's the bottom line. You give politicians money for favors. That's why you do it. So if someone like Mittal who's a Goldman Sachs board member gives 5 million pounds to Labor, there's a reason why he's doing that. And the reason is he'll want favors in return. And so, you know, that's the way our politics works and the reason, again, why so many bankers; (a) their rich and their influential - give money to the Conservatives is; 'back off our sector'.”

TIME CODE: 15:00_20:48

SOUNDBITE [English], David Cameron, British Prime Minister: “The financial transaction tax could cost the GDP of the European Union and could reduce it by 200 billion Euros. It could cost almost 500 000 jobs.”

SOUNDBITE [English], Iain Overton, Bureau of Investigative Journalism: “You can't help but ask the question: Why - as the Tory party was receiving so much money from bankers, was there a lack of real reform of the banking system? When Cameron first entered power there was something in the region of a 22% of the Tory party funding came from the Financial Services Industry and last year that had risen to above 50%. So there had been quite a sharp rise. Now to what degree this is a courting - directly - of the Tory Party with the banks, and to what degree it's the banks responding to a belief that they're backing the winning horse is a difficult one to unpick. But what we do know is that the Tory party - and now this is being adopted by the Liberal Party - is following a system whereby for a certain amount of money you can become a 'friend' of the Tory party. And there's a variety of different groups; you can join the banking group or you can join a variety of different groups, and there's a graded system of funding.”

SOUNDBITE [English], George Osborne, Chancellor of the Exchequer: “A European financial transaction tax would have serious impact on European growth - 70 - 90% of all business; all transactions would leave the European continent as a result. We're talking about something that's going to push a major global business out of the European continent.”

SOUNDBITE [English], Iain Overton, Bureau of Investigative Journalism:A very small number of individuals bankroll the Tory party. And that small numbers of individuals have access; by Tory party policy themselves i.e. for £50 000 you can meet David Cameron. That small number of individuals have access to David Cameron. Now we know that there's the whole Bullingdon Set and we know that there are close relationships which have occurred via Eaton, via Oxford, via the walls of Westminster. What I think it's important to do is to analyze how this small group of very influential people who are very wealthy can influence policy and how the politicians are influenced by this small group of people.”

Narration: As well as investing in political parties; the banks spend money to populate the information environment round about decision makers. Clustered around Westminster are dozens of very specialized storytellers; called Think Tanks. These are organizations filled with experts providing advise and ideas to politicians on the key policy areas of the day. And because their ever keen to influence policy the banks make sure Think Tanks are on their payroll.

SOUNDBITE [English], Richard Wolff, Professor of Economics: “The intelligent move made by the business community was to realize that a better way than simply buying the politicians was to change the whole way issues are posed and discussed in the society. So they organized a stunning array of what are called here 'think tanks'. These are gatherings of academics mostly and media people, who can put together endless reports on every subject under the sun with a pro-business, conservative twist and interpretation. And then flood the media; flood the political landscape with spokespersons, documents, videos; just to create the notion that this is the dominant way of thinking. That has been very very successful. One example; the notion that if you cut taxes, you will thereby stimulate businesses to hire more people so that tax-cuts are job creating acts. I'm an economist - I do this for a living; there's no relationship between these two. When you cut a tax, you say to a business or a wealthy person, 'you now pay less'. What that wealthy person or business does with the money they no longer have to pay in taxes is a completely open question. There's no guarantee, no requirement that they use the money saved in taxes to hire anyone. And there's no evidence that that happens. That is - sometimes when you cut taxes there are more jobs created; other times when you cut taxes there aren't. Number 1. Number 2; when you cut taxes, you make the government unable to do the things it used to do with the tax revenue. Those have to be looked at for their job reduction qualities. For example, if you cut taxes and you lay off teachers - we're doing that in the United States; thousands of them. You diminish the quality of education. You therefore diminish the quality of our labor force. You therefore diminish any incentive for corporations to hire Americans because they're not very well educated. That has to be factored in because that is a job destroying program that offsets whatever jobs may have been created if any by the tax cut. That's not what the Conservatives do. They teach a mantra; 'cut taxes - it creates jobs'. Final point; in the 1950s and 60s our taxes on corporations and rich people were many times higher than they are today. And yet then the unemployment was less than it is today. We have the most generous tax cuts for business in our history in the last 20 years and we have a disaster story in jobs. So the notion that there's any correlation here is nonsense.”

TIME CODE: 20:48_24:13

SOUNDBITE [English], Noam Chomsky, Professor of Linguistics Emeritus: “The same doctrine underlies all of the state capitalist democracies. The doctrine is somehow power must be in the hands of the wealth of the nation. This goes back to Adam Smith who was very clear about it - he didn't favor it but he described it accurately. He pointed out that in the England of his day, he said, the principle architects of policy are the merchants and manufacturers and they make sure that their own interests are most peculiarly attended to no matter how grievous the impact on others including the people of England. Well its not merchants and manufacturers anymore it's financial institutions and multi-nationals but the basic observation more or less holds and it's exactly what you'd expect where you have a significant misdistribution of actual power in the domestic society.”

SOUNDBITE [English], Shaun Springer: “If the City does well then the rest of the country does well.”

SOUNDBITE [English], Karel Williams, Professor of Manchester Business School: “If you look at the stories that corporations tell for lobbying purposes, they typically are exceedingly partial confections and they actually give some evidence and focus on some facts but disclose other things which are… do not disclose other things which are equally relevant. If you take the whole argument - the financial sector in the UK does make a significant contribution to payments surplus. But the idea that it actually generates jobs is nonsensical because we had a huge financial boom from the mid-90s and employment in finance was absolutely flat at a million. Manufacturing still employs more than two and a half times as many people; the jobs thing can't be taken seriously. And the claim about taxes paid by the finance sector is very interestingly open to challenge and scrutiny; when our CRESC research centre looked at the taxes paid by all of the financial sector in the five years before the crash then what we saw was the value of those taxes was less than the direct bail-out costs to the government. If you take a broader story - a social science story - it's certainly not the case that you'd endorse the corporate lobbyist's story because quite clearly, in a way, corporate lobbying stories usually work by accentuating the positive. This is a form of arithmetic where generally you're allowed addition but very little subtraction or offset.”

   

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