7 March 2022. Money | Management
The City of London, money laundering, and disorderly capitalism.
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1: The City, money laundering and disorderly capitalism
One of my questions about the current war in the Ukraine is about the effect that it might have on the City of London and beyond that into domestic politics.
The City has had a privileged position in British politics for hundreds of years, and has been largely dominant for the last 150. As Nicholas Shaxson reminds us in his book The Finance Curse, which I’m planning to come back to here when I’ve had time to draft a review, the City even has a “Remembrancer” located in the British House of Commons, whose job is to literally and metaphorically keep an eye on the Speaker of the House.
(Since futurists should acknowledge their errors, this was one of the reasons why I thought that it unlikely that we’d see a hard Brexit, or any Brexit. My mistake was to misunderstand the way in which finance and the City had changed, for the City is nothing if not flexible.)
The current City needs to be understood as a machine for helping to manage disorderly capitalism—a trend that is traced by Shaxson back to the rise of the “eurodollar” market in the 1970s after the United States broke up the post-war Bretton Woods settlement.
By disorderly capitalism, I mean the various entities that have sprung up to profit from the deregulation of the global financial sector in the 1980s, and thereafter, and from the associated accumulation of global wealth in an ever-smaller number of hands, and the financialisation of large sectors of the economy. The result is a finance sector that effectively exists to service iteslef and its interestes at the expense of the rest of us, as Shaxson says in a Guardian Long Read:
A growing body of economic research confirms that once a financial sector grows above an optimal size and beyond its useful roles, it begins to harm the country that hosts it… Long ago, our oversized financial sector began turning away from supporting the creation of wealth, and towards extracting it from other parts of the economy. To achieve this, it shapes laws, rules, thinktanks and even our culture so that they support it. The outcomes include lower economic growth, steeper inequality, distorted markets, spreading crime, deeper corruption, the hollowing-out of alternative economic sectors and more.
The entities that profit from disorderly capitalism include hedge funds, private equity businesses, wealth managers, and money launderers. The City of London is a concentration of all of these. (And all of these benefited from Brexit and also from its promises of deregulatory divergence from the EU.) And this is also where most of the money comes from to fund the hollowed out, ageing British Conservative Party.
The City is also closely connected to the whole network of tax havens and offshore “wealth management”, much of which is carried out in British territories, from Jersey and the Isle of Man to the British Virgin Islands. This isn’t a trivial isssue: 10% of the world’s wealth is now estimated to be held offshore. If you think that the British government could put a stop to all of this activity quickly if it wanted to, you would largely be right.
The sudden possibility of sanctions on the super-rich Russians that have prospered from these regimes in London, even if being applied in the most foot-dragging possible way by the British government, suddenly brings all of this—and all of the legal mechanisms that enable it—into plain sight.
As well as Shaxson, Oliver Bullough has also chronicled the way in which money is channelled through London and either laundered here or moved offshore, in his book Moneyland.
So bless the good people at Led By Donkeys for having the bright idea of asking Bullough to make a short film explaining how the City goes about laundering money, and how the government both makes this a lot easier, and reduced the chances of anyone being caught. It’s only nine minutes long: if you only watch one thing today....
2: In search of silver bullets
The people at Corporate Rebels have a short piece on management fads, and how they are maintained.
'Fads’ include things like ‘lean’, ‘agile’, and ‘holocracy’. You might have others. But they have similar features:
Management fads are the magical methodologies — most of them originating in (Silicon Valley) startups — that can be introduced into any organization to successfully change its ways of working — often with the goal to "gain a competitive advantage." Or whatever. The irony is that while all these management fads promise to make work better, they often do more harm than good.
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What management fads have in common is that they often start out with a critique of existing practice, but that gets lost as it gathers speed:
When a management fad gathers a cult following that becomes evangelistic enough, there is a high probability that this fad will become a self-sustaining industry unto itself. Sooner than later, this industry will spit out all kinds of resources like conferences, consultancies, certification programs, trainers, and books, all devoted to its teachings and the miracles(!) it can achieve.
In fact, they work through a whole lot of religious metaphors to build up their picture. There are the “apostles”, management gurus who promote the word. Sometimes they are very aware of the limits of the approach, but businesses want to believe. Whatever complexities are in the approach get flattened out because businesses, they say, want Silver Bullets instead.
And then there are the missionaries:
Each management religion also seems to have its own army of consultants and trainers that act as their missionaries...Once they have infiltrated the organization, they first convince the leadership that their employees can only master their management religion after they have attended a series of silly workshops. It is at this point that you will find yourself in a workshop playing with ballpoint pens, marshmallows, paper airplanes, Legos, Playmobils, or any other random bullshit prop.
As the Corporate Rebels point out, these processes effectively require employees to be doing a second job, on top of their day jobs.
aside from their normal work, employees have all kind of new mandatory activities — like scrums, stand ups, and tacticals — on their plate, as dictated by their new management religion. It also forces any non-believers into role-playing. To keep their job, this group just plays along and pretends to drink the Kool-Aid.
What they don’t get into in the piece is why businesses find Silver Bullets so attractive. There a whole lot of theory that might sit behind this, but my guess is that it comes down to this. Modern business doesn’t really work any more. It’s caught between old fashioned ideas about control and complexity, and newer ideas about more open values. Business systems generally focus on what you can supply, but value comes from aligning yourself with what your customers want from you.
But the people in businesses who know anything about the staff, or know anything about customers, generally have little status inside actual businesses. (Don’t shout it out too loud, but often they’re women.) So it’s a lot easier to go through the charade of sorting out your problems through some new fad, rather than doing the more valuable but lower-status work of listening.
Ukraine notes
The British weekly the New Statesman has put most of its Ukraine coverage outside of its paywall. One outstanding piece in last week’s magazine is a collection of illustrations from Ukrainian artists on the war. (You need to scroll past the promotions for other articles to get to the rest of them.)
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