Mr Punche-Bagge continues his observations from Friday where the first part of this piece may be read.


How do we break the grip of crony capitalism?

Rule one: If you want to know where control resides, follow the money. Who are the major donors to the political parties?

Rule two: If you want to know how democracy is sidelined, look out for the plethora of charities and NGOs which are funded primarily by big business (especially bankers and financiers) and/or by governments, and/or by the main philanthropists of this world (you know who they are!) – but strangely enough not funded significantly by donations from ordinary not-very-rich citizens.

Rule three: If you want to fix the situation, hit the miscreants in the pocket. Nothing else will be as effective.

Rule four: You have to get elected before you can activate rule three because you will need to change the law.

Democratise party political funding

There is no good reason why political parties should be permitted donations from business interests or other organisations – it is an open invitation to cronyism. Democracy is supposed to be government by the people for the people – if a political party cannot get by on donations and membership fees attracted from individual people then do they deserve the opportunity to get elected to government?

Furthermore, to prevent disproportionately large donations from very rich people, the maximum annual political donation could be set at (say) £10000 per person (we might set a higher limit for parties with less than 10000 members, to encourage new entrants) or we could match-fund them as for charities (see below). OK, there would have to be safeguards to prevent money-laundering of donations paid by organisations via employees – no system is foolproof – but the principle stands.

This way every party would have a strong incentive to gain members and attract donations from individuals. Parties without a strong membership base would find themselves in difficulty. Sounds  more democratic to me.

Democratise the charities

Charities exist for the people to fund charitable works. Whilst not wishing to restrict funding to genuine charities, it is plainly a misuse of charitable status to set up or use a charity as a means of enabling governmental or other organisational spending (for example, the Franco British Council).

Some employers donate to the charities favoured by their employees by making matching donations, a perfectly sensible method for a commercial organisation to make a charitable contribution to society in accordance with the wishes of its employees.

So in order to promote genuine charities and shut down the bogus, charitable contributions by non-charitable organisations and by the ‘very rich’ should be permitted only to the extent that they match any unmatched donations received from private individuals. This would still permit rich individuals to donate more but would limit an organisation’s ability to match-fund such a donation (thus limiting any collusion between organisations and rich individuals to use a charity for their own purposes).

Attack crony capitalism openly and give UKIP a clear centre-right position (see part one).

Rule five: You will have to deal with the bankers, who can create money at whim and then hold their customers’ savings hostage to ensure a state bail-out when the inevitable financial crash arrives.

The banking system has morphed into a global financial system whose rules may seem skewed towards the survival of the banking dynasties at the expense of everyone else. Some would say that they are effectively above the law, since laws tend to be made by nation states.

Of course if “one world government” ever comes to be officially instituted then laws could be made by the government and the bankers could be made to comply, but do you fancy your chances at voting out a world government?

The Bank for International Settlements
This is effectively a club of central banks. It is also the ultimate bank for central banks. Not all banks are equal – the Bank for International Settlements is effectively the Global bank with fingers in every banking pie. Read all about it here.

The Financial Stability Board
Chaired currently by Mark Carney, is a member-driven organisation which takes decisions by consensus.

Its membership is open to international financial institutions, standards bodies, regulatory bodies, and national financial authorities, ministries of finance, central banks, supervisory and regulatory bodies. Read the Charter.

The FSB maintains a list of systemically important banks (ie: too big to fail).

What this amounts to is a world financial system without which out current dependence on international trade cannot be sustained. However, our national central bank and financial regulatory bodies are subject to national laws and ultimately must have independence from the global authorities where required.

Banking is in principle apparently simply – take deposits in and lend money out. They may create the money to lend out but that isn’t necessarily a good or a bad thing (this is where it gets complicated). But the simple fact is that they will only be in trouble if they suffer a loss of confidence and cannot repay their depositors, or become technically insolvent.

The responsibilities of the national supervisory authorities are:

a) to license only those banks whose business practices are ‘safe’

b) to ensure that they maintain reserves ‘sufficient’ to ride out an economic crash

c) to limit their exposure to the failure of international ‘partners’ outside the control of our own national authorities. Given the state of the euro area, this is especially topical.

d) to monitor that the risks of all proposed lending are properly assessed and given due weight

d) to pick up the pieces when they fail

The international organisations are there to assist this process but may be distracted by political considerations. The buck stops with the national authorities, who have ultimate control.

I commend these policies to the party.

They can be readily explained and will put clear water between us and the LibLabCons.

The voters are ready for them.

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