Banking interests make representations to legislators, but there is no organised counter analysis, writes Eithne Reid O'Doherty
SOCIETIES ARE at a crossroads. The survival of democracy itself is being questioned due to the present financial instability, increased nationalism, protectionism and xenophobia – the same factors that led ultimately to the rise of fascism in Europe in the 1930s.
This is sharpened by the lack of balance in the debate on the financial crisis, which is amplified by the close connections between the financial and political elites. The quality of democracy has accordingly been diminished.
These themes were discussed at the annual conference of the European Women Lawyers Association on June 3rd and 4th in Brussels this year, which was on the theme, Law as Politics in Societies at a Crossroads.
The conference marked the 10th anniversary of the foundation of EWLA in Brussels in 2000. Folly, greed and a massive speculative frenzy have fundamentally changed our societies since then.
The EWLA conference held in Reykjavik in 2009, entitled European Lawmaking and Practice – Fundamental Rights and Financial Markets, also explored this theme of democratic stability.
On June 16th, 2010, a call was made to civil society from 37 European elected officials urging the formation of non-governmental organisations with the expertise to analyse and critique the activities of the main financial operators.
The underlying rationale for the call is that currently there is no organised counter analysis of financial activity or of emerging recovery policy and attendant legislation that could inform the media and make submissions to governments.
Financial sectoral interests can and do make representations to legislators. This asymmetry is not balanced by a counter opinion and as such poses a threat to democracy.
In environmental matters a bank of expertise has been developed which can counter corporate interests. A counter voice, through NGOs, has similarly arisen in the area of public health which challenge corporate or government interests.
The voice of trade unions is seen to balance that of employers.
National governments and European legislators therefore hear counter positions and policy is developed or legislation enacted after taking both opinions into consideration.
However, according to the signatories, this is absent in the area of finance.
At the Reykjavik EWLA conference in 2009 Eva Joly, a former French magistrate now working with the government of Norway and one of the 37 signatories of the call for a counter voice, outlined the challenges posed by international finance.
She said of the incentivising bonuses paid to financial executives: “These are ordinary people, doing ordinary jobs. There is nothing special about them to command these immense salaries and bonuses.”
Joly was responsible for bringing French public officials, including French foreign minister Roland Dumas, to justice on charges of corruption in the Elf oil company investigation. Tax havens, she said, are a breach of the social contract and are estimated to account for total assets almost the size of the US’s GDP. Eva Joly was not a banker when she began the Elf inquiry, yet she conducted a global financial investigation.
Meanwhile, in Ireland the report of Central Bank governor Patrick Honohan refuses to pinpoint the cause of the national meltdown and prefers to see a systemic problem. He refers to “timid” regulation and ironically excuses the failure to pick up on national financial weakness by referring to the time and resources spent on the implementation of Basel II/EU Capital Requirements Directive (CDR) framework. The failure to name individual financial institutions is attributed to the confidentiality requirement of “section 33AK Central Bank Act 1942, as amended and overall constraints under EU Law”. Section 33AK (5), of the same Act, however, provides for wide disclosure.
The Honohan report, the Department of Finance Review, the Central Bank Reform Bill 2010 and all emerging data require a co-ordinated response and critique, but little has been forthcoming.
There is much happening at European level. Europe 2020: A New Strategy for Jobs and Growthprovides for assessment of overall financial stability, based on the input from the European Systematic Risk Board. The ESRB coupled with Basle II on capital requirements will lead to the generation of much European-wide data.
The Capital Requirements Directive 2006 was amended on July 7th and will now include a cap on bankers’ remuneration and bonuses. Arlene McCarthy was the rapporteur in charge of the negotiations for the European Parliament and is another of the 37 signatories to the call for a counter voice.
Some meeting of minds was achieved at the G20 summit between European monetarism and the US Keynesian approach. The financial and social structures are, however, finely balanced and in reality the extent of the systemic financial toxicity remains unknown. This uncertainty is coupled with China’s currency manipulation which contributed to the expansion of cheap American credit, leading to calls for revenge in the form of trade tariffs.
Collaboration and the recognition of mutual interdependence are the better options. A different economic order is emerging with principal players India, China, Japan, the US, and the euro zone. The environmental NGOs have demonstrated that the knowledge, language and expertise particular to a sector can be learned and used to inform a position which is then presented to governments and the media.
The Irish Women Lawyers Association wants to play its part in this and to this end has initiated a series of lectures on white collar crime, the first of which was held in the Law Society, Blackhall Place on July 3rd. The next in the series will take place in the autumn term.
Eithne Reid O’Doherty is a barrister and secretary of the IWLA.
The text of the call for a counter-voice is on finance-watch.org