The Penny Hasn't Dropped

It is difficult to compare the issues of bank bonuses and MP expenses but somehow there is a link.

I have just read some guff about entangled photons and being able to teleport their states to one another. It gives some credence to the Star Trek teleporter but in reality, the teleporting of matter has not been proven, just quantum state information. Why do I mention such complexity in an article on bank bonuses and greedy MPs? Well I think the state of mind is linked, perhaps even teleported to one another.

Many MPs have railed against the investigation by Sir Thomas Legg. In effect, he has imposed some regulation on an unregulated system - and MPs don't like it. They accuse him of changing the rules when he would insist all he is doing is setting some sensible benchmarks by which to measure whether claims were reasonable or not. How on earth he allows people like Jaqui Smith, Hazel Blears, Geoff Hoon and others to go scot free is another question. But in a way, on a smaller scale we have the bank bonus syndrome.

Goldman Sachs are one of 3 banks who have reported enormous rises in profits in the last quarter. They have set aside no less then $5bn for staff bonuses which would pay out on average $172,000 per employee - the total estimated to be paid for this year will be $22bn in bonuses. It seems no one has learnt anything and there is a huge anti-regulation body within banks. The argument goes that banks must be able to compete for the talent that is capable of yielding such profits. I suppose MPs would say the same - if MPs couldn't make a few bob on the side then who would want to be one?

It is the base attitude that is the same even though the amounts of money are hugely different. Bankers just do not connect themselves with the last year or so of financial chaos that was the worst economic disaster since the Great Depression. Having lost hundreds of billions there were few casualties, hardly a hiccup in earnings and within months the same people who lost the money are rewarding themselves with even bigger bonuses.

MPs have the same layer of thick skin too. They simply do not understand that honest, law abiding and decent people have a fundamental issue with an MP claiming even a penny for dry cleaning, gardening or kit kats let alone being allowed thousands of pounds for such things. Cleanliness is a personal choice and expense - it's ridiculous to believe that the taxpayer gets any value from paying to clean someone's moat or flat. Yet MPs simply don't get it. When someone as intelligent as Ann Widdecombe, who does not even draw her second home allowance, argues in favour of MPs who are cheesed off just because the 'sensible' limits are applied retrospectively then you know MPs are out of touch with the electorate.

The similarity between bankers and MPs is that they believe that their own world is a real one and correct - and they don't see what it has to do with the external world. We all have a stake in banks and the financial system. If it fails, our money goes down the swanny - so the answer to the question about what has it to do with us, it has everything thing to do with us. Should RBS or Goldman Sachs fail as a business then we are all directly affected in some way, some more than others.

These banks have a duty of compliance to normal rules. They have the best of both worlds right now - they can gamble billions and if they win, they can reward themselves astronomically. If they lose, we pay to reward them astronomically.

It is as simple as that in banks. For MPs, every single one of them are beholden to us. We vote for them, they represent us, we pay their salaries, expenses and allowances. It should not be down to Party leaders to question or sack them for abusing expenses, it should be for the people to decide as that's who foots the bill.

These worlds operate around us as if we can have no access or have a say. It is time we did. Our money and futures are at stake. Banks have a duty to maintain stability but they are run like Vegas betting shops manned with people who believe they have talent but have no more skill than the average punter at Joe Corals. MPs are much the same.

The time for change will pass us by once again and these issues will haunt us well into the future, because the wrong people are making the rules.

You Lose, We Win

Well it didn't take long, did it? As you mull over your breakfast and worry about your finances and future, be comforted by the fact that life is getting back to normal.

A report by the New York State Attorney General has published the list of bonuses paid to bank executives last year. That's right, I said last year - the year when the taxpayers around the world paid the rather large bill for the bunch of voracious gamblers in the sophisticated world of Hi-Tech Finance which we seem to think we need to help our world be the way it is. So much so that we are willing to continue paying off the debt until 2032.

Put down your cereal spoon for fear of choking on the next mouthful as it gets better.

First up - Citigroup, who were until a year ago the most 'profitable' bank in the world but was the US version of RBS in the scale of their stupidity and greed requiring hundreds of $billions to bail them out by the US Treasury in terms of loans and guarantees. Well, their darling top earners pocketed a meagre $609m last year - and that was shared out amongst just 124 people. Three of the gamblers earned over $10m, 13 of them grabbed $8m or more while 44 people made off with $5m or more.

Merrill Lynch was at it too - the company that performed so badly that it had to be bought by Bank of America and even then had been less than honest about its liabilities and even as it finalised the deal, still paid out bonuses to its gambling executives. They clocked up a near $28bn loss last year but still managed to pay a total of around $860m in bonuses and that was only to the top 149 earners, of which the top 4 were paid a combined $121m, the next 4 around $62m.

There is plenty more - every state aided bank paid out huge bonuses again last year just as if nothing had really happened. The estimated global cost in terms of bail outs is far in excess of $5 trillion and the banking world goes on as if nothing has happened.

In the UK, savers have been compensated to the tune of £21bn after the collapse of the banking system and then there is the enormous bill we have been landed with by the world of finance far beyond that in rescuing the banks who failed so massively.

It's a real world that lacks any kind of similarity to real life.

A career in banking was once seen as the realm of the fuddy-duddy, striped-suited Oxbridge chaps who stalked the City effectively lunching to get inside tracks. Today, modern banking is just a sophisticated and complex system of gambling. The supply of endless money into the system means that comparatively unintelligent people can drive screens that just does the banking version of whirling weighted fruit machines - they cannot seem to lose and the rewards are fabulous. What we have done, in all the far-fetched sums we have collectively stumped all over the world, is to keep the whole thing going in exactly the same way.

There is not a hint of contrition. There has been no real cull of the people who caused this. There has been little or no action by Governments and scant real understanding of the extent of our dependence on the system to sustain our way of life other than the fact they 'had no choice' in bailing the system out to make sure it did not collapse and the world becomes some kind of wilderness of fighting tribesmen haggling for food with beads and goats.

The fact remains that the finance world had created a make-believe game that generated profits from thin air just as part of the solution is to create more money from thin air in 'Quantitative Easing'. The threatened implosion of that system did not trigger a clamour to change it but to merely save it and we came so very close, they would have us know, to a world foreseen by 'visionaries' like David Icke. It now seems that lunatics like Icke were actually the clever ones.

The problem revolves around us. We are now so 'well off' that we must have 42"+ tellies, more pods that you can listen to, phones that send video, the latest gadget, new furniture, holidays, kitchens - the list is endless - and we are all very prepared to spend far beyond our means in order to get it and forfeit anything to do with provision for our retirement. Our jobs are now in far greater jeopardy than they were two years ago, more of us have lost our jobs since 1997 and our average take home income has actually dropped in real terms over the same period.

The fact was that we afforded this 'Utopia' by drawing down on our asset values - we created our own banks to conjure up money out of nothing.

Many will tell you that there is a concept of 'zero sum finance' which means that all the money in the world flows in credits and debits and always adds up to zero. So in that farcical view of the world, some may get richer at the cost of others but the amount of money has not changed and so the world is no worse off. But it is worse off. Just as the Bank of England literally conjured up £175bn out of nothing in order to increase the money supply, each of us created our own cash out of the supposed value in our assets. And then we gave it all away by spending it. We did not buy any really tradable assets as what we bought were effectively disposables or services - we did not invest in fine art, stamps or precious metals. We effectively increased the amount of money in the world and gave it away.

The bill for all that came right back to us because it was not real. As the value of our assets dropped the whole system shredded itself and we had to dip into our pockets for the actual cashflow to pay for our own mortgages again - this time in incremental tax over the long term.

What the whole collapse has taught us is that you can get nothing for nothing. You can create as much money as you like but there is a price to pay for it. And boy has the real person found out.

Up the there in 'Bank World' that hasn't happened. Reality was a close call for them but thankfully a bunch of mugs known as taxpayers and real people worldwide saved their pathetic necks. And now they are playing the whole game again. In the zenith, or nadir, of the crisis, I saw excerpts of the African Nations Congress or similar. Speaker after speaker expressed how incredulous they were at the enormity of something they simply could not understand. They also were at pains to point out that they had not caused this Credit Crunch and so the developed world should not forget them - but we did. There are always losers in the world of 'zero sum finance' and it is those who are unable to play the game. As in any lottery, you have to be able to afford ticket to play - the Third World just watched wide-eyed as the sophisticates of the developed world simply gave away money they did not have to a small number of incredibly wealthy people and then paid for it again. Meanwhile people were dying in front of our eyes and the planet is getting a less healthy place to live.

We must be mad.

Seconds Out - Round 4

AIG, the prominent sponsors of arguably the most successful football club of the decade, have not mirrored their protege's success themselves. Having had 3 serious injections of cash to try and shore up their rotting balance sheets, they have gone back begging for a fourth hand out. This time their argument is not so strong - it's plain and simple; help us out or the whole money market could get crippled causing major effects in Europe and amongst other insurance companies - doom is the alternative.

It's the equivalent of a financial gun to the head and it is also an invite to pile in good money after bad. In the UK we have had a similar problem with RBS and Lloyds - to the tune that more money has been ploughed into RBS than its entire worth in terms of shares meaning it will be a long, long time before the taxpayers' shareholding sees any return on the investment - if any.

So what is the mentality behind so much money going into these companies? What is the predicted outcome? And when does it all stop?

Finance For Dummies

The financial crisis has sobered us all up - and at least we know some more about the mechanics than before. Over the past 10 years or so, we have believed in the competency and skills of the slither of elite population occupying the banking world and given them credit for creating a period of prosperity which has seemed greater and more sustainable than at any other time in history. I was among the few people who did not believe in the Brown-Blair mantra on the economy and it was obvious to many that the prosperity was not coming from fantastic Corporate performance and the corresponding general increase in disposable household income from salary and benefits. It was clear that an awful lot of money was 'created' by leveraging assets which flowed to a comparatively small number of people and made them incredibly wealthy.

In the world of zero sum economics, there is a belief that not money is never created or destroyed, it just flows somewhere. That is true to a point. The fact is that those who have leveraged the increase in the value of their homes have effectively just increased their debt - money was created and lost as asset values plummeted.

It is very hard to see how people of fabulous intelligence could get this so horribly wrong. The whole financial system had been grown in size and complexity well beyond the fundamental value that underpinned it and it was easy for outsiders to see - so why was it so hard for insiders to understand this?

And why did Politicians ignore repeated warnings from places like the IMF about Britain's National Debt but, more importantly, the unprecedented growth in personal, unsecured debt? These numbers are not hidden nor are they hard to understand. Whilst many would point to the judgement of bankers being clouded by their own greed, this could hardly be aimed at Politicians who, apart from consuming ever larger amounts in unwarranted expenses, were not on some superb bonus scheme should they keep the economy growing.

What Caused The Errors Of Judgement?

The one thing I never thought about Gordon Brown in the run up to the financial meltdown was that he was unintelligent. His academic credentials are fairly awesome and his textbook language of the economy certainly seemed to demonstrate he knew the terminology if not the mechanics of the economy. I definitely disagreed with his assessment that Britain's fundamental economic position was good - it was clear to me that our economy was underpinned by over valued assets and that had to give at some point. I did believe, though, that he must have an infinitely better grasp of the situation than I so there was probably a great deal more to the situation than I knew about.

It appeared that was not the case. What has certainly been proven in the last year is that Gordon Brown has little more grasp on the mechanics of the economy than the average guy in the street. Even now, as he surrounds himself with very highly paid and some very dodgy bankers, he still seems to have little clue as to how to solve the problems.

The Catalogue Of Errors

I could go on but here are just a few.

Firstly, I think character judgement has been poor. Already we have seen people like Glen Moreno and Sir James Crosby at the heads of watchdogs and members of the inner-circle of advisers be from businesses with dubious backgrounds. In Crosby's case, HBOS were using over zealous selling tactics and later got into suicidal corporate lending, mostly via Crosby's protege Andy Hornby - but HBOS was on a path to go bust, be rescued, clock up massive losses and have over £200bn in toxic debt. How on earth did Crosby get a place at the advisory table is beyond comprehension. Moreno sat at the head of several dodgy tax avoiding companies in Liechtenstein and yet was part of the inner-circle too. Then there was the man that Gordon Brown held up as the pinnacle of banking genius so much so he befriended him personally had him knighted - I am talking about Sir Fred Goodwin of RBS.

Secondly, the long term belief that the economy was working fine despite the severely over-heated house prices was bad enough, but the belief that the financial system was not using a flawed model was unforgivable. Down-toning the methods of the watchdog, the FSA, was symptomatic of foolhardy judgement that the business model would somehow keep fuelling itself when all logic pointed to it imploding if some small spanner got in to the works. The spanner was small - it was just a realisation that any one part of the financial system could have a mismatch between actual worth and estimated brought the whole thing to a shuddering halt. And not just an 'adjustment' as George W Bush famously called it, but a massive implosion as everyone realised they had been trading in debt until they were far beyond knowing who held what and how much it was worth, and that this alone, not deposits, was making the whole banking system work. The funding gaps together with the concern over asset values, blew the whole system apart.

Yet it was visible all the time - a system built on such a house of cards that any one corner could give way and cause the total to collapse.

Thirdly, the reaction to the collapse has been extraordinary. Far from trying to assess how much toxic debt was at the heart of the problem - for some reason it was believed that pumping a significantly large amount into the system would restore the Utopian view of the economy once again. Yet the total amount of outstanding derivative positions was over $500 trillion, over $900 trillion if you included the associated insurance positions. This was the total extent of traded debt in the market - somewhere between zero and that total figure was the answer to the question - how much? Yet the accumulated wisdom of the banking fraternity at the heart of all this and the Politicians who believed them, started to pump what now appears to be huge yet inconsequential sums of money into the system. The recession has only exacerbated the problem - global demand has dropped significantly and even the budget positive Chinese is now plummeting into debt. As Politicians try to apportion blame to some amorphous body of energy called 'globalisation', they also try to make us believe that without this globalisation the world will be far worse off - yet we were not that bad off beforehand and without it.

Fighting Fire With Fire

The end result sees plenty of talk, some big action and then some total inaction with the associated ineptitude. While Ministers tell us that the car industry needs to £2.3bn to survive in January, we are now in March and nothing has been done as Vauxhall teeters on the edge of oblivion. The failed New Labour experiment in commerce has brought us at the brink of the abyss of nationalisation and how sad that we have red-carpeted their path to it by giving them two terms in office and such powerful mandates that makes it impossible for us to get them out within two years. By that time, the detrimental effect on our economy will be something that future generations will have to pay.

In reality, all the upside of the last 10 years will be paid in the form of a 30 year mortgage on the people, which will be paid off, if we can afford it, in future rises in tax.

At some point, commerce has to kick in. In the world of business, there is little room for sentimentality and idealism. If you run your business badly, you pay the price - seeking bail outs to survive is a fantasy world in which people who are most affected by the mess actually foot the bill for the mistakes made by people who became amazingly wealthy on their stupid business ideas.

If you had written it as a novel - no one would have read it for its lack of reality.

Yet this is what is going on. In the US, AIG and Citicorp, have collapsed to mere shrivelled shells of once great companies, but that is the law of business. You play with fire, you get burnt. Giving you more fire to play with only means you get more burnt.

What If We Did Not Bail Out?

It is hard to say or know what would have happened had we let many of the banks fail - certainly the likes of Northern Rock. There would have been mass defaulting on debt, but in the long run it may have been quicker and less expensive in exposing the actual value of the problem, to then deal with it and then move on. Instead, we have attempted to maintain the status quo and it has been a horrible and expensive series of mistakes which may yet prove to be far more costly than could ever have been imagined. To some extent, it could even be argued that we may still yet have a system which completely fails and we may yet have to go back to some starting point and suffer the wide-scale collapse of the banking system. By that time, all the money we have put in so far will have been lost and Britain would stand on the edge of the cliff of bankruptcy with only the IMF left to turn to as our bonds will be junk.

As we try to pick our path out of the mess, there are more than financial systems which need to change - I would argue that the Political system needs an overhaul too. One of the most disempowering aspects of this whole crisis is that no one has been in a position to effectively challenge and stop the Government from making more mistakes or for them to only listen to the advice of the idiots who caused the mes in the first place - that should teach us a grim lesson as this second Labour Government had a 100+ seat majority based on only 34% of the popular vote.

It is at times like these that you understand that our democracy, as we know it and try to impose on other nations, is very flawed indeed as is our knowledge of finance.

Davos Snub

I rang the organisers at Davos yesterday and apparently my invite got sent to Will Young by mistake although I did give my opinion on the global banking situation which they kindly said they would pass on.

Heartened

I was not the only person to miss out on Davos this year. Apparently Chancellor Alistair Darling isn't going as when the team in the US realised that they had to sit in a meeting with him they all feigned illness, cars did not start and many found clashes of diaries with the nail specialist. Rumours were that the PM had refused to sign his travel docket as he was still too pessimistic and until he realises the world is fine he is not allowed out of his office.

US Fed Chief Tim Geithner allegedly pulled out when he heard I would not be attending and when told he would meet Darling remarked 'Alistair who?'. Barack Obama is not going this year, he is too busy choosing a dog for his kids - they are now down to the last five in a voting format not dissimilar to 'X Factor'. This week there will be an ice skating dance off and the Canadian Huskie is expected to win although the rat-like dog from Peru named 'Juan Sargeante' was once again unexpectedly voted back on by the public.

You Haven't Missed Much

Gordon Brown will fly in later and is expected to lay down his thoughts in anticipation of the G20 in London some time later, though he has yet to find a bank to sponsor the event or suitable venue. They may have to use Ron Sandler's shed which currently holds all his money from his consulting at Northern Rock but is plenty big enough. Thesaurus and Dictionary sales have sky-rocketed in anticipation of Brown's speech and the pre-session synopsis printers sent out for lots of tippex as they thought 'deleveraging' was not a real word and put in de-icing instead as it sounded more appropriate. The talk will not actually be the sell-out Brown anticipated as most delegates don't want to be bored to death by half-baked drivel delivered with all the monotony of an undertaker - it will be chaired by Jet Li and Will Young will be question master, I understand.

Bookmakers have been laying spread bets on which words will be used most often and 'New World Order', 'Pangs', 'Deleveraging', 'sub-prime', 'protectionism', 'Saved the world', 'Fiscal Stimulus', 'help, I'm sinking' and 'Deglobalisation' are hot favourites to be most used while 'stable economy', 'recession-proof', 'can't happen to us' and '10 years of steady growth', and 'VAT giveaway really worked' are expected to be used least while 'Tony Blair' is red hot favourite not to be mentioned.

Blame Culture

Tim Geithner, while staying at home, was quick to hurl insults blaming the world economic situation on China for 'Currency Manipulation' that led to US trade deficits. I have to say I have heard of a great many excuses for the current financial woes of the world but this was a first - and many are checking as to whether he was talking about something completely different like the Superbowl.

Perhaps Tim wasn't feeling too well as the retort from the Chinese Premier Wen Jiabao who is at Davos was 'Inappropriate macro-economics policies of some economies and their unsustainable model of development', 'failure of financial supervision and regulation', and 'lack of self discipline' which landed the world economy 'in the most difficult situation since the Great Depression' which he made clear was not the name of a Chinese restaurant in Hammersmith. It's clear that Mr. Jiabao is more on the ball but he actually may enjoy sitting in on Gordon Brown's talk as they have similar prowess on econo-speak.

Vladimir Putin, Russia's democratically elected Prime Minister, put the boot in too saying, 'Poor quality financial regulation' led to 'the collapses of the existing financial system'. He was also hard on the dollar saying, 'Excessive dependence on what is basically the only reserve currency is dangerous for the world economy' which resulted in 'a serious malfunction in the very system of global economic growth' and that 'whole regions of the world including Europe found themselves at the periphery of global economic processes' and so 'were outside the framework of the key economic and financial decisions.' A clear reference that Russia wants more of the profits next time around.

Putin and Jet Li put on a Martial Arts demonstration before a short exhibition of bear shooting got a little out of hand when Putin started taking pot shots at Investment Bankers.

Bankers Missed

Apart from executives at Barclays pulling out as they are working on the Annual Accounts and so Bob Diamond is attending a Microsoft workshop entitled 'How to use Excel to help save your company from Middle East investors' which involves simply changing all the red cells to black.

The delegation from Citigroup are still at the airport awaiting their aircraft - no one had the heart to tell them the order was cancelled. Easyjet has offered to take them instead.

Generally bankers have been fair game at the event with small sideshows on offer to entertain delegates. John Thain, ex CEO of Merrills, has a 'Bake your own cake' stall, Dick Fuld has a Real Estate stall entitled, 'Properties going cheap - only one left, buyer already found, honey', while there are pillories and stocks for delegates to pelt their least favourite banker.

New World Order

The Davos song will be sung by the group of the same name and the song, 'I saved the world' written by G. Brown is expected to reach number one later this year. Meanwhile, a new league table or world order is being constructed with the US still at number one and then countries like China and India moving up the table. The UK is a little way back behind Mauritius but ahead of Iceland thanks to the threatened law suits by 'Big Bad I want my money back Gordon'.

Nasty Bankers

Barack Obama, fresh from signing the new lease on Guantanamo Bay Camp and renaming it 'Bankers Boot Camp', has laid into Wall St bonuses calling them the 'Height of irresponsibility' after finding out that employees of New York banks collected bonuses of $18bn last year. Obama adopted a Head Teacher approach and told banks 'It is shameful, and part of what we are going to need is for the folks on Wall St who are asking for help to show some restraint and discipline and some sense of responsibility.'

No doubt the bankers were standing in corridors with ear-rings in their ears, shirts hanging out, collars undone and ties pulled down and saying, 'Whatever' and 'Do I look bovvered?' Obama continued his tirade, 'The American people understand that we have got a bog hole we have got to dig ourselves out of but they don't like the idea that people are digging a bigger hole.'

Gordon Brown commented. 'I think President Obama needs elocution lessons as there is a real danger that people will understand what he is talking about and that means he may have to do something. It is far better to sound as if you know what you are talking about by using words not yet invented and unintelligible and then do nothing. People appreciate big words and no action.'

I am still unsure what purpose Davos serves but as the world pours billions into the financial system and then watches Citigroup order a private jet and bank executives pay themselves bonuses, it seems that we have all lost our sense of perspective. It would be a good idea to ask the views of the bewildered people of Africa who must surely have a problem with the 'intelligent' comments of people like Gordon Brown about how to save his Political neck and the bank balances of a small number of financial executives while millions wonder if the world will ever remember they exist and are starving.

In its voracious appetite to kick start economic growth, the world has forgotten about the starving people who aren't included in the jamboree. Just imagine what those $18bn bonus payments would have done for those people - I dare say the bankers who received them will not lose a wink's sleep.

A Quantum of Conscience

Quantum Physics is a heck of a thing to get your head round. Central to its concept is that by viewing any particular event, the result is changed by the act of viewing it. No such thing as voyeurism at that level.

Quantum Physics - A Metaphor For Life?

Hardly - Quantum Physics underpins life itself. However, there is a parallel in that each new life, each existence, each death has some impact upon the earth that will forever change it.

I don't believe that to be a theory - it's a truism.

The benefit of being a particle is that it may not care what impact it had while at the macro level every life has an impact and so has a responsibility for creating a future. Either that is in producing offspring or just trying to make the place civil enough to live in, humans have a burden of responsibility like no other particle or animal to help create a future.

Corporate and Social Responsibility

This blog piece was prompted by a lively discuss on I joined on the IOD Forum on Linked In. A question on Maternity Payments which was labelled 'Have the Lunatics Taken Over the Asylum' which berated European Lawmakers for introducing ever more onerous payments for Maternity Leave. It's certainly true that such payments and Maternity Leave itself hits SME businesses much harder than larger companies yet the levels of payments are exactly the same. As a small business owner and a person experienced in running SMEs, I know how hard that cost can be.

The trouble with the particular argument, and it is a perennial concern, is that where does social and corporate responsibility stop and start. You see, at the heart of the question, unspoken or not, is why should employers have to pay for the new generation of children. Maternity in the Employer's eyes is often as a lifestyle choice and should not burden the company cost. In the thread of the discussion, one contributor asserted that the sole purpose of businesses was wealth creation which contributed to the greater good. Even a lady professed 'it was not a company's responsibility to bring up the next generation'.

I argued otherwise.

Evolution of Corporate Responsibility

If we take the assertion that businesses are there solely to create wealth for the shareholders etc then I would suggest left to their own devices, most businesses would try to obtain as much profit for the lowest cost as quickly as possible. Without any encumbrances like laws, most businesses would not have evolved from the 18th century. Over a long period, things have changed and for the better too. After all the riots, demonstrations, strikes, unions which did not always help us business-wise, we have arrived at a point where companies have a responsibility to earn their profits within a framework of law which is designed to stop doing it without regard to everything else. We have a minimum wage, we have Maternity Leave and allowances, we have Health and Safety Laws, we have Carbon Emission restrictions and lots more. Gone are the days of companies polluting rivers without recourse, gone are the days of companies killing their workers and other people by exposing them to toxic chemicals without recourse, gone are the days when a coloured person had to worry about discrimination.

Or have they? What the debate showed is that when it comes to cost and profits, companies should be allowed to earn their profits without any thought to their employees or the outside world. It took laws, lots of laws, over a long time to get us to where we are now and what we have learnt along the way is that companies will not take on such responsibilities unless compelled to do so. What we also know, is that companies will disregard the laws and responsibilities at the earliest opportunity if allowed it.

Corporate Responsibility in Practice

My father died of an industrial disease caused by exposure to asbestos which he inhaled having been compelled by his company to delag control rooms without proper protective equipment despite that fact the dangers of asbestos were discovered 30 years before. He was not the only one on that detail to die a hard and cruel death many years later fighting for his last breath. The only company he had ever served for over 40 years turned their backs and our family dealt with their insurance company who paid a nominal sum. That company turned in one of the largest profits in British corporate history last quarter.

That same company polluted its local environment and the spot where my father's ashes lie overlooks an unsightly black marsh where no wildlife thrives as it was a reservoir for dumping the contents of pipes - no amount of clearing up after the event has brought back the natural plants and animals despite the companies dazzling green logo.

In Alaska, my father commissioned the first oil down the pipeline from Prudhoe to Valdez and constantly berated his executives for lack of attention to safety and hazards - he had written several safety manuals in his old place of work. Despite that, a pump station explosion took a life and later a tanker spilt its contents into the waters around that beautiful place.

Did the company learn? No, in Texas a few years ago, a major disaster killed several people and the company was found again to be at fault. Yet last quarter it earned £billions in pre-tax profits.

At what price does profit come? And without the compulsion of law that company, amongst many, would never have changed because it found it hard to change even when compelled.

The Next Generation

You may think that I am using extreme examples to prove a case. Not really - if Maternity Laws were not introduced and enforced we would not only have less women in the workforce but we would have widespread discrimination against them - much more than there is already. Because if a female can justify that a company is not responsible for somehow playing a art in bringing up the next generation, you can bet your bottom dollar a man will not.

Here's a commercial take on it. Many businesses directly market to mothers and rely on them for profits, and many focus on young people to make money. That's simple. However, it is simple mathematics to work out that if life was not renewing itself, all of us would go out of business soon. So it makes commercial sense to support the next generation - we should be thanking women who take a career break to have children and encouraging them rather than discriminating against them and berating everyone for their cost. Yet even with laws, companies have a problem with it even though if women were not allowed to have that break then the economy would not grow at the same rate and the rate of births would likely drop - buying business a problem.

Just as with carbon emissions, companies do not see what that has to do with them. It's about that Quantum Theory thing again. We each have an impact on this earth and the bigger we get, i.e. companies, the bigger the effect. Companies have a huge responsibility to make their money the right way.

But We Do, Don't We?

Last year the top half dozen banks in North America paid out a collective $28bn in bonuses. This year one of those banks collapsed completely and the other has been bailed out by the US Treasury despite firing 72,000 staff. Greed is a very powerful opiate - it makes you think that only you are important and that wealth is king.

Corporates today at the highest level continue to behave without a conscience when they can. It starts at SMEs too. In the IOD thread a person struck the nail on the head and said that if he were running a small business now he would be very wary of employing women. Everyone thinks this a PC thing and laughs it off as a Brussels-induced hallucination - lunatics running the asylum.

We have moved on as a race thankfully. No one should get discriminated against for their gender, religion, sexuality or race - it's pretty fundamental.

How We Should Pay

Where I do sympathise with all my co-threaders at the IOD was that the amount that SMEs have to pay is disproportionate. As with personal tax, SMEs pay at the same scale no matter what their size but we all know the bigger or richer you are the more you can pay to 'mitigate' tax. But like most citizens, SMEs are soft touches - they pay. I do believe that within all the Corporation Tax and NI that employers pay some should be spent on supporting working mothers and that the great pool of tax out there should be covering SME businesses for these extra costs. One person going on maternity leave in a 10 person company is a huge cost to the business whereas one to someone like BT is trivial. And so the payments should be reflected in this and this is where the tax system can and should help.

Direct taxation has been the hallmark of this Government, forgetting its Socialist roots. I have no problem in BT having to pay a slightly higher rate of tax than my company in order to subsidise the hard hit SME in this situation. And should I ever grow my business to those giddy heights, I would gladly accept it the same way.

Good Behaviour

Without the framework of law, companies would earn their money in whatever way they could and ignore their responsibilities wherever possible. I don't have a massive amount of time for the 'lunatics running the asylum' in Brussels or anywhere else but I do believe without them, companies would have not changed by themselves.

Contrasting Fortunes

75,000 people. Yes read it again slowly - seventy-five thousand people will be losing their jobs from a single company, Citigroup, in the aftermath of the Credit Crunch fiasco.

Robbing Peter to Pay Paul - Zero Sum Finances Work

I haven't yet delved into the detail but I am fairly certain that the bonus pool paid out by Citigroup in the last 2 or 3 years would have been enough $billions to have paid for those people to stay in their jobs. It's not exactly what everyone has been raging about when they get upset about City Bonuses as most think about their own pockets. The Bank Bonus Pool would have been divided out in the main between a very small percentage of its employees - the elite, high fliers who 'create the wealth' as Mr. Fuld, formerly of Lehman Bros would describe it, no doubt. The reality will be that the mainstay of the job cuts will be everyday banking staff from backroom people to counter-manners and ATM stuffers. The thin wedge of elite will be mostly unaffected and even if they are they will have literally $millions to console themselves with.

Boom & Bust Cycles

It's happened before. Banks manage boom and bust cycles - make vast profits, gear up their businesses in mega-fashion, pay out incredible bonuses, then lose the lot and the average guy in the Bank plus the customer pays the price. In reality Banks make their real money out of loans, mortgages and charges - and that's about it.

Because it has happened so regularly, watching this bubble expand was particularly appalling as the average guy in the street knew it had to pop, and more so because the 'complex instruments of finance' which we were told we did not understand just appeared to us to be straight forward mega-bets with other people's money. It turned out we weren't so stupid after all.

Michael Lewis, who wrote a fine book called Liar's Poker about his time as a Salomon's Trader recently wrote a long article on what he now sees as the demise of Wall Street. In his book he thought that the public would gasp at the $3.1m salaries CEOs at Banks made or get angry that a trader could make a $250m loss and still get another job. But that was 80s money. Now Lewis asserts that Wall Street's big gambling arena must surely end.

I am willing to bet it won't. Too much vested interest will see to that and lots of free Government money too.

In contrast - Spend, Spend, Spend

Less than 6 months ago, if you cornered Gordon Brown in a lift and asked for a load of tax cuts so you can spend more he would probably have had you arrested for lunacy. His 'prudent' fiscal rules would not have allowed him to consider such heresy - in fact he has proudly resided over the largest growth in tax as a percentage of earnings in modern times, even more so than the Super-Tax of his long-forgotten forefathers like Jim Callaghan.

But in Callaghanesque style, Brown has concluded that despite the fact the country is already borrowing far too much in the IMF's eyes, and has so for 5 years or more, he now feels we should borrow for the Bank bail outs and, yes that's right, borrow to give us tax cuts too, so we will all go out and spend more.

Ignore the fact that inflation is now higher than when Labour took office, or unemployment too for that matter, and ignore the fact that major companies are shedding up to 6% of their staff in a single blow, ignore the fact that a potential 3m unemployed will place a massive tax burden on the country and create a hole in our tax revenue - just get out there and spend. And spend lots; just focus on that low interest rate.

Here is a pile of money to spend on buying new houses and goods, despite the fact that we have seen the biggest single fall in house prices in a year at 14% since 1932, it really does make sense to try and kick start the growth in the housing market.

And We Love It

In a perverse reverse of opinion, Brown's handling of the Financial Crisis has increased his personal stock when in fact we should be vilifying him for creating the mess. Thanks to numskull opposition leadership like Osbourne, the point seems to be missed every time.

The Economic Crisis in which we are sitting is a confluence of an economic downturn and a reluctance to lend. Both stemmed directly from the unreal growth experienced in the British Economy due to an unsustainable rise in house prices due a fiscal model which allowed Banks to offer more and more freely available, cheap and unregulated credit due to their adherence to unstable business borrowing based on financial instruments which were no better than bets at the horses.

As we lap up Brown's genius in gearing the country's borrowing to well over 50% of our GDP using our future tax receipts as collateral for the loans, remember each time we borrow more, Britain becomes less attractive as a place to invest. In the last few months it is estimated over £200bn has been sucked out of our Financial Markets, the very place we got that phenomenal growth in GDP from. Sterling has dropped through the floor, and Osbourne may well be right that there is more bad news for our currency as Britain becomes a walking credit risk for the future.

As The Day Dawns

Have we all worked it out yet? Yes, just like the 75,000 hapless people at Citigroup, it will not be the collective genius of our Parliamentarians who cough up the cost, it will be the guy in the street. As the 'Dark Lord' himself, Mandelson hinted, there may be some tax 'adjustments' in the future to cope with all this.

The future for Britain is on a knife edge. We are heavily reliant on two major sources of wealth as a country - 1) Oil and 2) Financial Markets. We already know that our North Sea reserves of oil are fast running dry but we are very close to seeing a potentially vast and possibly permanent exodus of capital from the City. Without much else to balance our payments, Britain stands on the brink of a slippery slope to financial ruin.

There is a heavy price to pay for the last 10 years of folly and the ultimate risk is that Britain becomes a poor Island. I really do believe, borrowing more and more will not help us turn this around in the long run. But then, I am not as clever as Mr. Brown, even though he could have called at any time in the last 5 years and I would have told him a massive hole would have appeared in his finances due to his reliance on the housing market growth which was vastly exaggerated.

In fact, any fool could have told him.