Corruption in the banking sector
As I prance around Montréal and Québec trying to improve government services with open data, talks, activism and apps, I often get blank stares. Following the blank stares come the proclamations only slightly less direct than, “Government is a huge bureaucratic mess that spends like a drunken sailor and needs to be cut down to size.” While there are parts of this that are clearly true – government is often inefficient – people often fail to realize that government is not external to society. Government does not work in a vaccum, it is dependant on taxes (personal, property, corporate, other), people, civil society, and a vibrant economy. Importantly, access to capital and an ability to earn interest on assets is as important for government as it is for private companies.
Today, we are seeing dramatic austerity programs implemented in Spain, UK, Greece and other parts of the world. It is a social experiment on a global scale. On one side, we have the United States, Canada and Australia who are spending money and avoiding dramatic cuts and on the other side we have European countries making massive cuts. We will see the results, but it is interesting to understand the causes. In a global economy, money flows to places of security and banks are happy to accomodate both the wealthy fleeing failing countries and the governments desperately requiring capital to mask their faltering finances.
It is becoming clearer and clearer that the banks played a nefarious role in the evolving crisis. More than money changers, they actively entrapped governments and short changed them on their returns. We now know Goldman Sachs lent massive amounts of money to Greece in complex packages with restrictive terms few mortals could comprehend, a behaviour not dissimilar from a loan shark. In the same manner a drug dealer makes his clients dependant on them, Goldman Sachs made Greece dependent on their loans. Concurrently, banks around the world were rigging interest rates on municipal bonds and capital, reducing revenues to governments and further pushing them into dependency.
The magnitude of the scandal is just starting to emerge into sight, LIBOR being the biggest baking scandal ever. The evolving LIBOR (infographic) scandal affects 800 Trillion dollars (not a typo) of debt and securities and the municipal bond fixing scheme in the United States harmed thousands of towns. I encourage you to read the Rolling Stone piece on interest rate bidding by banks for management of municipalities’ capital, but basically both scandals are price fixing on a massive scale (see Bill Moyer’s show). These tactics of price fixing undermine the integrity of the system and lay bare the hypocrisy of solely blaming governments for budget shortfalls and overspending.
Fixing these problems and ensuring good governance by national and municipal governments requires diligent and talented people. Getting talented people into public service is harder than ever. Our society’s culture, since perhaps the 1980s, values private sector work over public work. Consequently, the best and brightest minds go into the private sector. This leads to further erosion of government services as mediocrity permeates government services, pushing yet more talented members of society into the private sector. And on and on until we hit a wall, we might be there.
Long story short, let us not be so quick to judge, sentence, and execute government for gross incompetence; the entire system is at fault and it will take a lot of hard work to fix it.
P.S., this is whole situation is similar to the run-up of the french revolution.Published on July 14, 2012
On charity and being charitable
Charity requires sacrifice. Perhaps sacrifice is not the best word, but rather austerity and humility. Lately, I have been thinking of the nature of charity.
Today, too many charitable organizations have been turned into fundraising machines that now have money as their primary goal. While financial ressources are essential to helping others, it cannot be an organization’s primary purpose. Charitable action must be duty bound, meaning it must be an action that directly helps others with as little benefit to yourself as possible. In contrast to this principle, in recent years we have seen the dramatic rise of sporting events as means for charitable organizations to raise money for their operations, such examples include 24-hour bike rides, hockey games with former professional athletes or ski marathons. The obvious argument about these organized events is the percentage of raised money that actually makes it to the organization. While that is a fair criticism, I believe it misses the moral imperative of participation in these events.
When I was a student at McGill University, a good friend of mine started a charitable organization to build a school in war ravaged northern Uganda. This was a noble cause indeed; if anyone needed more free schooling, it was them. To raise capital for the school, she employed a number of tactics and strategies. Most of them consisted in asking for money, organizing marches and promoting the organization. But, some of the strategies included hosting fancy parties at high end nightclubs in Montreal where a portion of the bar revenue would go to the organization in question. So, 22-year old students would gleefully spend their parents money on champagne and expensive vodka with the solace that some portion of their extravagance would make it to destitute children in Northern Uganda.
To me, these fundraising strategies of sporting events and gala evenings are a false form of charity because the participants of the events are enjoying themselves first and being charitable second. While enjoyment alone is not a sin, it does pose a problem when it becomes the main driver of participation. In Montreal, a large Cancer Society organizes a fundraising bike ride from Montréal to Québec in addition to other cities. The event in question is sponsored by Enbridge, a major pipeline company who has had numerous spills of highly polluting and carcinogenic oil into the environment and who propose a dangerous pipeline across pristine natural land in British Columbia. But I digress, participants of the bike rides to cure cancer must raise a minimum of 2500$ to participate, receive a jersey, food and infrastructure. They then get to bike in the beautiful Québec countryside for two days; I’m sorry that sounds more like a vacation than a charity event. From my perspective, true charity is only possible when you decide to forgo worldly pleasures for the joy of helping others. You cannot do both at the same time.
Through that reasoning, I find it very hard to donate money to these types of events. They smack of false charity that might be successful in raising awareness and generating revenue, but fail to meet the fundamental definition of charity. Jesus did not say, “Let’s party on 100 shekel Roman wine and give 15% for the redemption of our souls and children’s education.” The ends do not justify the means.
It is important to not blindly give to charity. The pink ribbon campaign for breast cancer research is another example of the transformation of charity into a commercial practice. Companies who offer unhealthy drinks and products slap the pink ribbon onto their products in the hope of selling more and perhaps trickling some money to cancer research. Many of their products are in fact potentially carcinogenic – from hairspray to sugary drinks to products made in polluting factories in China by poorly paid workers and then transported across the world on bunker oil burning tankers that cause smog and acid rain. How can that be called charity?
Charity must come from the depths of the soul. Before you can give charity, you must first become a charitable person and it begins and ends with yourself. As Gandhi stated, “Be the change you want to see”. In our times, people like Warren Buffet perhaps best exemplify this. Despite his massive wealth, he lives modestly and plans to progressively give away nearly all his money. I have heard rumours he even refused to give money to his grandchildren for cars and washing machines, he believes that material possessions should be earned when they can be. When a person lacks the ability earn their way, due to oppression, bad luck or some other event – they deserve help.
In this world, our personal actions are the only thing we have control over and true charity must come from the person. Humility and austerity must be the foundation of giving; without it, the act of charity becomes a narcissistic event that regardless of the financial success, lacks the morality, humility and honesty required to kneel down in the mud and help our fellow human stand up.
Edit: See this video for a funnier version of this post.Published on July 7, 2012