Destroying the Evidence

Britain's colonial empire was remarkable in two respects. Not only in the extent of territory controlled around the world, but also in the degree to which the British colonial governments documented their activities. Millions of files were kept on everything from petty administrative details to lists of spies and informers, to methods of exploitation and oppression, to the latest communications with the Foreign and Colonial Office.

This caused a problem when the Brits retreated from different countries, starting with India. What to do with the files? The political sensitivity of each file was indicated by a code that determined which officials could read it, for example, to exclude those of 'non-European descent'. However, this sometimes meant that there were not enough white Brits available to sift through the documents. What could be left behind for the post-colonial administration? What should be put on the bonfire, and what should be sent back to London? The key thing was to destroy anything that could embarrass Her Majesty's Government if it fell into the wrong hands.

While this story of getting rid of the evidence is not new - see, for example, Britain's Gulag, on the end of British colonial rule in Kenya, by Caroline Elkins,  - an article in the Guardian gives fascinating details of the extent of the cover up. The Foreign Office retains a huge cache of undisclosed files from the colonial period.


Tony Norfield, 29 November 2013

Cameron's Sharia Bond and British Parasitism

To be the political leader of an imperialist power that has attacked a number of Muslim countries in the past decade, it takes a certain, how can one put it, chutzpah, to say:

"I don't just want London to be a great capital of Islamic finance in the Western world, I want London to stand alongside Dubai as one of the great capitals of Islamic finance anywhere in the world."

Yet that was British Prime Minister Cameron, talking to the World Islamic Economic Forum in London on Tuesday. Part of the plan is for the UK Treasury to launch an 'Islamic bond' worth £200m next year, presented as the first Islamic bond issued outside the Muslim world.

One UK financial lobby group report suggests that 'global Islamic finance assets' - namely those which are 'Sharia compliant' - already amount to some $1.5 trillion and are growing fast. Hence the UK wants some of the action. There are 22 Islamic banks in the UK, more than in all other western countries combined. The UK government has even established an Islamic Finance Task Force, but this one is not weaponised.

The contradiction between Britain's foreign policy and its financial policy is only apparent. Despite the invasions of Afghanistan and Iraq, and the bombing of Libya, not to mention other covert interventions, Britain is not anti-Islam or anti-Muslim. It just wants to see its interests protected. It has no problem backing jihadist rebels if they will serve that policy, as in Syria, just as it supported the Moslem Brotherhood against the nationalist threat from Nasser in Egypt from the late 1950s. Today British imperialism steadfastly supports Sunni elites throughout the Middle East, and most of the families were put in place by British policy. Further afield, in Brunei, 1000 British army Gurkhas are also paid for by the Sultan to back his 'security' - and the interests of Royal Dutch Shell plc. Brunei is not a big place, so if you had some doubts about the wisdom of the autocracy you would think twice about expressing it with these guys coming at you.

However, to return to the financial issues. Cameron's Sharia bond is planned as a sign that the City is 'open for business', to use Bank of England governor Carney's phrase (see below). The size of the planned bond issue is minuscule in terms of state finance, but it will show that the City is willing to do whatever is necessary to attract business from this previously untapped area. It will encourage other financial activity and it will give enterprising specialists in Islam a profitable role as arbiters of what is Sharia-compliant. From the City's perspective, dealing spreads can be important, not just interest rate returns. In any case, it will not be difficult to transform interest remuneration into something that does not look like interest and so be Sharia-compliant. Best of all, Britain's lack of capital controls will make it easy for rich foreign investors to put money in, and take it out, while there will be little fear of political moves against them. Well, perhaps less confidence these days, since Assad's wife no longer shops at Harrods and the Gaddafi family no longer have a residence in Hampstead.

Details of Cameron's bond are to be finalised, but early reports suggest that coupon payments will be based on rentals from government property. Will the rentals come from chemical weapons plants, MoD buildings, GCHQ, MI5/6, US bases in Britain or the leased bases around the world? That can be sorted out later, and the result will no doubt be deemed 'ethical' and compliant.

Two other issues are worthy of note related to imperial finance, but not to Islamic finance. The connection is that these two and the previous discussion all relate to a desperate attempt by the British state to boost the scale of financial dealing, with all the opportunities this offers for skimming off more surplus value from the rest of the world. My previous note (see this blog, 22 October 2013), showed that the balance of payments flows are worsening for the UK so, as one might expect, the focus of British policy now is on how to leverage what the Brits are best at in order to get more revenues in the future. No, not by marketing self-deprecating humour in BBC video exports, but by increasing financial deals to make money from other people's money.

The first is Britain's attempt to build on its already prominent role in the offshore trading of China's currency, the renminbi. It took a while before the People's Bank of China gave the Bank of England the currency swap line it wanted. It was delayed until June this year and was CNY 200bn, embarrassingly less than the CNY 350bn agreed with the European Central Bank in October. This may have been aimed to cast a deliberate shadow over the status of the City of London, although the swap is for sterling versus CNY not for the much larger euro currency. As if to ward off any further problems, the UK Treasury went out of its way to make it easier for Chinese banks to set up in London in October, lifting regulatory hurdles and risking annoyance from the Americans, together with embracing a pan-European visa deal - for Chinese tourists only.

Outside China and Hong Kong, the City already manages some 60% of offshore trading in China's currency, with the US at just 15% and France at 10%. In October, the UK Treasury announced the opening up of direct trading of China's currency with sterling and that it had gained a (small) quota for accessing Chinese equities and bonds. These factors will increase the potential for City dealing, at least until China changes its mind.

The second is the latest policy change from the new Bank of England governor, Mark Carney. The theme of a keynote speech to a Financial Times anniversary event last Friday was that London was 'open for business'. So he introduced policies to boost the volume of financial dealing. He envisaged bank assets in the UK growing from some 4 times GDP at present to more like 9 (!) times by 2050. Then, in a squaring of the circle that was a wonder to behold, he argued this could be done with lower costs for private banks getting central bank aid while at the same time making the overall system more secure.

I am not one to make ad hominem comments, for example noting that he, like Mario Draghi of the European Central Bank, is an alumnus of Goldman Sachs. This is because, despite him being Canadian, and despite him being in the job only since July, last week he showed that he had the best interests of British imperialism at heart. This, together with the Sharia bond and China policies already discussed, is the clearest sign that the British ruling class knows how to adopt and to bring on board whomever and whatever policies look like having some upside in these difficult times.

Tony Norfield, 30 October 2013

Bad News for British Finance

The UK government lauds the fact that recent measures of changes in economic output have a plus sign in front of them, rather than a minus. Yes, UK GDP is +1.3% y/y in the second quarter of 2013, though do not mention the fact that the level of GDP is still lower than it was five years earlier in 2008. However, something else is going on that is far more significant.

No, not the fact that to keep the lights on the government has given a huge subsidy to a French-Chinese nuclear power plant that the Brits could neither construct nor finance. It is a development clear only to those who delve deep into the pages of international finance statistics, thus evident to almost nobody. For the first time in more than a decade, Britain is making less on its international assets than foreign capitalists earn on assets in Britain - and the deficit is getting worse.

Personally, I find this annoying because it complicates a point I could otherwise easily make before. My previous point was that one of British imperialism's privileges was shown by the fact that, despite having a net deficit in its international investment position, it managed to earn more from its foreign assets than it paid on its foreign liabilities. The difference in returns is still true, but it does not generate the same results. Previously, high earnings on foreign direct investment, especially investments in low wage countries and in rent-rich investments in oil, gas and minerals overseas managed to offset the other net payments on the portfolio accounts (bonds and equities) and on bank borrowing. No longer. Although I thought that at some point this privilege would be undermined by the trend of a growing net deficit, on the data for 2012-13 it seems that this has happened already.

The latest annual data show that in 2012 the UK had a net deficit on its income payments on foreign investment of £2bn. Not much in the context of a big GDP, but much less than the +£22.7bn in 2011 and the first deficit since 1999. Data so far for the first half of 2013 show a worsening trend: an income deficit of £9.4bn in six months! The significance of this goes beyond me losing an easy sound bite. The main reason behind the drop is a decline in net earnings on foreign direct investment, but there is also a bigger net deficit on portfolio investment income. At the same time, the net surplus earnings of the financial services sector are flattening out and the UK current account deficit has widened to over 4% of GDP at present - the highest since 1989 - from just 1.5% in 2011. To cap a list of alarm signals, the visible trade deficit reached an all-time record of 7.0% of GDP in 2012.

British imperialism cannot pay its way in the world and the former means of relying on revenues from foreign investment and financial services, very effective in the 2000s boom period, is no longer working. A huge volume of short-term borrowing in 2012 funded these record deficits - and other outflows on the direct investment and portfolio accounts. This is all fine … until you have to pay the money back. Do not expect an end to austerity, despite any pick up in the UK GDP figures.

Tony Norfield, 22 October 2013

Historical Materialism Conference in London

The journal Historical Materialism is holding its tenth annual conference, entitled 'Making the World Working Class', in central London on Thursday 7 to Sunday 10 November 2013.

The venue is SOAS, near Russell Square, London WC1. Further details regarding the conference, accommodation, etc, are to be found here.

It is a big conference, covering a wide range of topics! There are 14 sessions over the 4 days, each with up to 11 different panel discussions including 3 or 4 speakers.

For those interested, I will be presenting a paper: 'Is British imperialism’s financial strategy turning toxic?'. It will discuss how the crisis has changed the balance of forces between the world's major powers and developments in British policy.

The schedule for this will no doubt change, but is set at present for Thursday 7 November, from 15.45 - 17.30.

Tony Norfield, 17 October 2013

Information Flows

Fibre optic submarine cables carry the vast bulk of Internet and other communications traffic between continents. If you - by which I mean your government - wanted to access the information flowing through these, then the location of the cables is important - relative to where your government has (military) bases or national jurisdiction.

It is striking that the bulk of the transatlantic cables go through the UK. As for the other continent-connecting ones that do not, these tend to go through places like Cyprus, the home of a British military base. Isn't it nice to know we are all 'connected' - probably at most just one or two junctions away, at least from GCHQ?

Take a look at the submarine cable map, of which a portion is shown below. The full world map is available from here - scroll in/out from this site (not from the image below) to get a smaller/bigger geographical picture, or from a different central location.

This is the physical infrastructure for Edward Snowden's story.

Tony Norfield, 19 September 2013

Saudi vs Syria: Imperial Policy Crisis

US president Obama has today assured the word of his intention to launch missiles at Syria for its alleged use of chemical weapons, but he has also decided to make the action dependent on the decision of the US Congress to vote for blood. Such is the nature of imperialist democracy. This could delay the attack for a week or so, something that the warmongering news media are mightily frustrated with. It may also not be a foregone conclusion that Congress votes for its additional war, even though Obama, like UK prime minister Cameron, promised to constrain its scope to a 'one off' punishment. Cameron's defeat by a parliament sceptical of what value lay in another war (ie an overt military action, rather than just supporting the so-called rebels) and worried about potential blowback could find an echo in the US.

That is problematic enough for Obama and for US policy. However, what if no evidence emerges that the Syrian regime was responsible? The danger of a debate (even in Congress) is that you have to present some evidence. Even worse, what if there is some evidence that the Saudi-supported opposition to Assad were responsible?!

One report explicitly claimed this yesterday, but has (so far) received no widespread coverage - partly because it embarrasses the stance of the western media, partly because it will cause a major crisis in imperialist policy. However, the report is co-authored by an AP journalist with good credentials, rather than being the ramblings of a dissident blogger. The story is entitled: 'Syrians in Ghouta Claim Saudi-Supplied Rebels behind Chemical Attack'. This is the link to it.

Let's see how this plays out.

Tony Norfield, 31 August 2013

The Australia-Hong Kong War of 1994

Life imitates art, as shown by the following link to an excellent satire on TV news, The Day Today, first shown on British TV in 1994.

The scene is all too appropriate for the Anglo-American news media's warmongering today.

The link to the YouTube video, roughly 4 minutes, is here.