Mafia capitalism takes the same route as the Titanic on its maiden voyage…

Capitalism with a dash of  socialism to add a restraining touch of morality  is, arguably, the least-worst economic option for running a country’s economy. Certainly better than Communism under inevitably self-perpetuating elites.

But shareholder-based capitalism is flawed and possibly doomed, because its aim is the short-term maximisation of profits for the shareholder rather than the long-term growth and health of businesses in which the shareholders invest. The aim is short-term profit-taking, not efficiency. In that sense, it has the same flaws as countries run by dictators or businesses run by criminal organisations… or, indeed, countries run by criminal organisations.

Which brings me to Italy.

I have just arrived in Milan for a couple of days.

I have blogged about the Mafia before…

According to a report issued two days ago, the Mafia is now “Italy’s biggest business”. But this is hardly news – ’twas ever thus in my lifetime.

Post-War Italy was, in effect, run by the secret Masonic lodge P2 (Propaganda Due) for around thirty years: an unholy alliance of politicians, big business, the military, the intelligence services and the Mafia. It was a conspiracy theorist’s most paranoid dream come true.

The real ‘new’ news story about the Mafia’s financial power seems to be that the current world financial crisis has particularly hit Italy and has partially unified the traditional Mafia groups.

In the current economic crisis, traditional banks are reluctant to lend, so many Italian businesses nationwide have been forced to borrow at crippling rates of interest from organised crime, including the three big Mafia groups – the Cosa Nostra, the Camorra and the ‘Ndrangheta.

As a result, the Mafia now have an alleged annual turnover of around £116 billion with reserves of 65 billion Euros, making them “Italy’s biggest bank”.

This is according to a report issued a couple of days ago by Confesercenti, a prominent employers’ association which represents 270,000 small-to-medium businesses. They simply called their report Criminality’s Grip on Business  and it says the Mafia account for around 7% of Italy’s Gross Domestic Profit – and we are talking very ‘gross’ here.

Marco Venturi, the president of Confesercenti, was quoted as saying: “According to our estimates, loan sharking caused the closure in 2010 of 1,800 businesses and destroyed thousands of jobs. Right now, Mafia Inc is the only business enterprise willing to make substantial investments.”

That sounds to me like a man with an eye for publicity.

But, basically, if you are running a small business facing ruin and potential closure in the current economic crisis where banks are only interested in short-term strategies, you have few options to try to save yourself except to borrow from the Mafia… which ironically may itself result in ruin and the potential closure of your business.

Small business owners with tight margins and limited cash flow also, as always, face extortion and straight robbery by the Mafia, at a reported rate of one crime every minute.

This week’s Confesercenti report says the influence of various mafias is now being felt not only in traditional strongholds such as Naples and Palermo, but increasingly in the wealthy north of Italy, in regions such as Lombardy – in other words, the country’s business capital of Milan – and the report says the mafias have expanded there with the “complicity” of some politicians, as well as lawyers and accountants.

Again – perhaps especially in Italy – that comes as no surprise.

Another report this week – by Libera, an anti-Mafia association – says the average adult Italian spends nearly 1,300 Euros every year on slot machines, bingo and other forms of gambling. This 76 billion Euro market is Italy’s third biggest industry and the Libera report claims the Mafia have also now moved into what the report calls ‘new’ areas of business such as public health, transport and logistics.

Milan is known for its fashion industry and now seems to have picked up the latest street fashion – criminal organisations running not just Big Business but the country’s infrastructure.

Well, that is the story.

In fact, I think, as I said earlier, this is hardly news – ’twas ever thus in my lifetime.

In Italy, traditions run deep.

Ed Miliband and Ed Balls – Are they the Laurel and Hardy of British politics?

What is happening with Ed Miliband and what has happened to the Labour Party’s once-feared PR machine?

Young Ed looks like he is being paid by the Tories to undermine his own party and Alastair Campbell’s once gleaming and perfectly-oiled Labour PR machine seems to have seized up with rust or is being operated by 5-year-old children who are too small to reach the levers they have to pull.

That Labour Party conference speech yesterday and all the interviews around it were an unmitigated piece of failed image-building tripe.

The long-thought-out line – they are supposed to have worked all night on the speech – seemed to be:

“We, the Labour Party, would like to apologise for the things we did wrong which we humbly admit, sort of, but it’s the Tories’ fault for anything we did really and, if they are doing now what we said we would do or what we would have had to do, well, that’s what comes of all those years of Tory… erm… government… erm… oh…

“Oh… and the government should make things better and tell other people to make things better. We have had long discussions about this and decided that both the people and the country would be better off if the Economy were in a better state and not worse. Vote for us next time because we are new people not the ones who made any of the mistakes before. Well, sort of.”

One of Ed’s problems is he cannot ‘do’ passion. Someone is writing passionate speeches for him, but he is unable to deliver them. He tries to be passionate, but his lightweight voice is just not up to it and his heart is clearly not in it. It is like he is reading Chaucer to the English class.

I saw an interview he gave a couple of days ago in which he said, basically: “The government should not lecture the Europeans and tell them how to make things better. The government should make things better and, if we were in power, we would be pro-active and tell the Europeans how to make things better.”

The main problem young Ed has is not difficulties in writing credible speeches and an apparent lack of any actual policies. The even bigger problem is a superficial presentational one.

Before Margaret Thatcher came to power, she listened to her very wise advisors. She softened her hairstyle and she lowered the pitch of her voice.

Tony Blair was already a master of fake sincerity when he got the Top Job – that’s what comes of being a good lawyer – lots of experience telling barefaced lies. His technique was so good he almost made me believe in David Icke’s theory that all the top-nobs in Britain are actually alien lizards in human skins.

But no-one seems to have given poor young Ed any advice at all. He is an apprentice lizard.

He still looks like a scared schoolboy unexpectedly made into a prefect and, with his rabbit-in-the-car-headlights eyes, looks shit-scared that people will find out that even he does not believe he is up to the job.

A couple of days ago, there were staggeringly mis-judged PR pictures of slim Ed Miliband and chunky Ed Balls – and there is an image problem here to begin with, as Ed Miliband looked like Stan Laurel to Ed Balls’ version of Oliver Hardy and who wants Stan Laurel as their Prime Minister?… I almost expected Ed Miliband to scratch his head and stare at the camera in innocent confusion with those big open calf’s eyes.

Anyway… there were the two of them walking across a square, being filmed smiling for the TV News, smiling and chatting in an attempt to look in relaxed conversation, but the separated body language and the appallingly stilted audible conversation appeared to show there was no chemistry, no amiability, no ability nor desire to communicate with each other.

They looked as if, in a party – let alone in a Party – they would stand alone at opposite sides of the room and try to avoid ever meeting because they knew there would be an embarrassing, awkward silence.

In this case, two Eds were not better than one.

The greatest mystery in all of China is to be found in a Northwood restaurant

I will be going to see more movies in the China Image Film Festival in London later today.

In round figures, there are 4,000 cinema screens in the UK.

In China – a vastly larger country – there are only 6,000 screens.

But, within the next five years, China will have 20,000 screens and will become the second biggest film industry in the world after the US – larger than India’s Bollywood. In the last year alone, there were 500 films made in China.

I had a meal in a Chinese restaurant in Northwood last night, not far from ’the bunker’, and got home to watch yet more on the BBC News channel about a world economic situation that is barely – or perhaps not – under control. All the ‘advanced’ countries seem to be in debt that will stretch decades into the future.

But China is sitting on vast amounts of money. The irony of a Communist country becoming rich on capitalism.

The last decade was all about China making things but the next decade will be all about China owning things.

Which reminds me of something a history teacher once said as a throwaway line at my school when I was about 13.

He said: “Civilisation and power moves westwards because invading armies have always ridden westwards, following the daylight.”

Trite, of course.

But, in the northern hemisphere, it is roughly true.

At the moment, power is moving from North America to the Pacific Rim (a phrase that always sounds to me like a dubious sexual practice).

What confuses me is that the Chinese are very expansionist of late.

They have been putting money into Africa, especially into very suspect regimes, for a couple of decades. They are building an aircraft carrier or, at least, have refitted a Russian one. They are now investing heavily in the West.

This seems very un-Chinese. The Great Wall was built to keep the uncivilised long-nosed foreign devils out and to preserve the integrity of China which, with quite a lot of justification, looked inward at itself as the only truly civilised place.

Japan was always the regional expansionist power, not China.

Of course, there was the invasion of Tibet in 1949, but that seemed an unfortunate exception to the rule and a knee-jerk reaction after Mao Tse-tung’s Communists took power.

It seems to be very un-Chinese to be expansionist. It is a great mystery.

Though, sitting in a Chinese restaurant in Northwood last night, it was secondary as a mystery in my mind to the greater ongoing mystery of why the Chinese – who, let’s face it,  invented pretty much everything – never invented the teacup handle not the knife-and-fork. And why on earth were chopsticks thought to be a good idea in a nation where the staple diet was and is based around small grains of rice?

Life is a constant mystery.

The distortion of the UK tax system by socialist ideology

For a few months, when I was much younger, I read the Sunday Telegraph.

I stopped after reading an article on the UK income tax system. I could see no logical flaw in the newspaper’s argument, but it made me morally uncomfortable.

The article argued that a tiered system of income tax in which higher earners pay a higher percentage of their income in tax is illogical, unfair and both economically and morally indefensible.

Intellectually, I had to agree with the Telegraph‘s logic. The argument went like this…

In a capitalist system – or in the mixed capitalist system which we have – people are, by and large, paid their worth to the company and industry in which they work and to the country’s economy in general. The ultimate goal is always to maximise profits to the company and to the shareholders. So, with competition from other companies for the better executives and workers, a fair salary is reached for each working person by the workings of the market.

It is morally correct that people who earn more should pay more to the community in taxes. But that ideal and morally correct situation is reached by a flat rate tax on earnings not by a tiered system.

Someone who pays 20% of a £100,000 salary pays far more to the community than someone who pays 20% of a £25,000 salary. They pay according to their wealth. As their salary increases, their tax payments increase. They are taxed according to their ability to pay at the same flat rate. And, of course, it is right that people who earn a low salary beneath a certain amount should pay no tax.

The tiered system we currently have in which people on a high salary may have to pay 40% of their salary while people who earn a lower salary may have to pay only 20% of their salary is not moral, is not fair, it distorts the market forces which create ‘fair’ wages and it is punitive on the more successful workers who should be not discouraged but encouraged.

The fact that some higher earning people may be able to ‘cheat’ the system with clever accountants is not relevant. Distortions like that are inevitable in any system and are the fault of the government’s incompetent bureaucracy – they should prevent those frauds. It does not affect the principle that a flat rate tax system is fair to all taxpayers and the fact that a tiered tax system is fundamentally unfair – a political decision not a moral or economic decision.

If there is a tiered tax system, it distorts the market forces which decide salaries because, if people are losing money for reasons of political tax ideology not for genuine economic reasons, their salaries will have to increase to take account of the loss. Thus you get distorted salary scales.

A tiered tax system makes no economic sense and is morally unfair. It’s object is to blindly redistribute wealth on ideological grounds.

I could not and still can’t disagree with the cold logic of this argument. Yes, someone who earns more should pay more. But why should they pay a higher percentage of what they earn? Taxing higher earners a higher percentage is blind knee-jerk socialist ideology not economics.

I felt morally uncomfortable with the fact I could not fault the logic in the article and stopped reading the Sunday Telegraph because I felt somehow my moral values were being undermined and skewed by cold logic.

This quandary in my erstwhile youth was brought back to me yesterday when I read a report in The Scotsman that RBS, which the taxpayer had to bail out with millions and of which the government owns 83%, was about to pay 100 members of its staff £1 million each in bonuses.

The chief executive of the Royal Bank of Scotland, of course, has been awarded a pay-and-bonuses package worth £7.7 million for 2010. So his 300 underlings getting bonuses of £1 million are merely getting the left-over scraps.

These awards were made at the time RBS was making a £1 billion loss.

Coincidentally yesterday, I also caught up with a small piece in Saturday’s Daily Telegraph about Tony Blair’s Sports Foundation – a charity – which, in its first financial period, made £348,233 of which it spent £33,929 on charitable activities and £37,621 on its staff.

So I am in two minds about high earners and extreme right wing politicians like Tony Blair.

Bankers, Cockney rhyming slang and a very wise woman

There’s a report out today about the British banking system. About whether the banks are too big. The problem for me isn’t size, it’s efficiency – and I wish I could say that in reference to other areas of my life.

The words “piss-up”, “brewery”, “in”, a”, “organise” and “couldn’t” spring to mind and the Cockney rhyming slang for “wankers” comes as no surprise to me.

For many years, my current account has been with Bank of Scotland; I also have an account with Halifax, which is part of Bank of Scotland. Both are now owned by Lloyds Bank.

Because of the lack of Bank of Scotland branches in London, I have long paid money into my BoS account via Halifax: I just walk into any Halifax branch with my BoS Cashcard and pay money into my BoS account.

If I want to pay a bill – a gas or electricity bill or anything else, I can now just go into any branch of Lloyds Bank with the appropriate paying-in slip and pay the bill using a Bank of Scotland cheque.

Yesterday, I attempted to pay a Virgin Media cheque into my own Bank of Scotland current account at a Lloyds branch.

I was told I could not pay anything into my Bank of Scotland current account – not a cheque, not cash – because, although Lloyds own Bank of Scotland, it is “a separate bank”.

Well, chums, Bank of Scotland and Halifax are equally separate, but I can still pay money into BoS via Halifax – and I can still pay a bill via Lloyds using a Bank of Scotland cheque.

So I can pay money into other people’s accounts with other banks via Lloyds, but I cannot pay money into my own Bank of Scotland account, despite the fact Lloyds own Bank of Scotland.

We appear to have entered a surreal parallel universe here.

So I am moving my account to Royal Bank of Scotland. They have not-a-lot of branches in London, but they do own NatWest Bank and I can simply walk into any NatWest branch and pay money into a Royal Bank of Scotland account. No problem.

Lloyds may not be too big to survive. But it is certainly too incompetent to survive.

I remember standing in Liverpool Street station in the heart of the City of London one Friday afternoon at 4.30pm watching City workers going home, early, paralytically drunk. Not just swaying but staggering, their limbs jerking erratically like headless chickens with Parkinson’s Disease wearing dark business suits.

These were not old drunken men; they were bright young City dudes in their twenties and early thirties and they must have been drinking all afternoon, while foggy-mindedly running the UK economy in the financial powerhouse that is the City of London.

I had money in two Icelandic banks when their entire financial system disintegrated in 2007. Those two banks were each more efficient than Lloyds Bank – and they both crashed. I suspect those Icelandic bankers did not drink ‘on the job’.

British bankers do.

Whither the British banking system?

Whither Lloyds?

The mother of a friend of mine used to live in various dodgy foreign countries (her husband was in the RAF and she later worked for NATO). She wore a series of thin but pure gold bracelets on her wrists because she knew, with them, she could buy her way out of any country if it suddenly collapsed.

A very wise woman.

“Killer Bitch”, a UK crime crisis and “Citizen Kane”

I was talking to one of the Killer Bitch cast yesterday and (as one who knows) he came out with the legendary line: “I’ve got no money at the moment and xxxx xxxxxxx ain’t got no money either. The bottom’s fallen out of Crime.”

Has Britain fallen this low? Sir Francis Drake made England great by robbing Spanish ships of their gold and the East India Company built Queen Victoria’s glorious British Empire on the heroin trade.

We live in difficult economic times. Or do we? Opinion varies.

A recent report said organised crime caused “an estimated £30 billion a year in social and economic harm” to the UK. I’m not quite sure what “harm” means in this context. Presumably it means there is a £30 billion black economy underpinning the ‘legitimate’ economy. But it’s all guestimates on guestimates. A recent report by the Association of Chief Police Officers claimed the UK underworld economy is now worth around £40 billion a year.

I’m more concerned that fake DVD production is now reckoned to be worth £300 million in the UK. I had vaguely hoped Killer Bitch might be fairly immune to this because I had hoped that the people most likely to rip us off were actually involved in the movie in some way – and therefore highly unlikely to rip us off. I had, however, reckoned without the international nature of modern movie rip-off-dom.

Still, I am filled with hope for the future of Killer Bitch because Michael Deeley, the highly-regarded head of British Lion Films reportedly said, when his company released The Wicker Man in 1973, that it was the worst film he had ever seen. Years later, the equally highly-regarded Cinefantastique magazine devoted at entire issue to The Wicker Man, famously calling it “the Citizen Kane of horror films”, while the Los Angeles Times said it was: “Witty & scary! No one who sits through it to the end is likely to find it easy to shake off.”

Likewise, no-one who sits through Killer Bitch with an increasingly dropped jaw and open mouth is ever likely to forget it. Bland it is certainly not.