WikiLeaks and the liberal mind

Transparency is not the only liberal value.

The release by WikiLeaks of US government cables is a sheer triumph for transparency.

Transparency in diplomatic and governmental matters is important, for behind the cloak of secrecy and plausible deniability can lie malice, selfishness and incompetence. Open access to reliable information enables us to participate effectively in a democratic society: in particular, voters can get beyond the self-serving spin of politicians and media outlets. In the wise words of Louis Brandeis, one of the greatest jurists in American history, sunlight is the best disinfectant.

But transparency is not the only liberal value. There are others, and these are important, too.

For example, there is the value of legitimacy: those who wield power in the public interest should normally have some democratic mandate or accountability.

However, no one has voted for WikiLeaks, nor does it have any form of democratic supervision. Indeed, it is accountable to no one at all. One may think that this is a good thing: that with such absolute autonomy WikiLeaks can do things that it otherwise might not be able to do. One could even take comfort that WikiLeaks represents the "good guys" and is "doing the right thing".

Be that as it may: one must remember that such self-assumed moral authority is conceptually indistinguishable from the vigilante. If transparency is important, then so is accountability.

Another liberal value is legality: the belief that actions – especially those that affect others – should have a basis in law. The Guardian and New York Times quite rightly have taken the newsroom of the News of the World to task because of the alleged unlawful and criminal conduct of reporters and investigators in gaining unauthorised access to mobile telephone voice messages.

But legality is not just for tabloid newspapers: it (presumably) applies also to broadsheets. Transparency may well be trumping legality in this particular instance, but this does not negate that legality is also important in a liberal society.

A third liberal value is privacy: the belief that, in certain human affairs, private space is required. Here, it is important that people retain the ability to conduct some communications strictly on the basis of confidentiality. If there is no such assurance of confidentiality, there may be no flow of useful information. For example, even the Guardian and its journalists do not publicly disclose their internal legal advice.

In dealing with those who can provide useful information about illiberal and perhaps dangerous regimes sometimes such an assurance of confidentiality can be crucial. Privacy will be less important than transparency in most cases, but such a presumption cannot be an absolute rule.

The disclosure of diplomatic cables appears so far to have been a good thing, and no obvious harm has yet been caused. WikiLeaks has come out of this exercise rather well, notwithstanding the off-putting moral certainty of some of its supporters and their eccentric tendency to un-evidenced conspiracy stories.

Nonetheless, WikiLeaks remains a powerful but undemocratic and unaccountable entity that shows a general disregard for both the rule of law and the practical need for certain communications and data to be confidential. So, from a liberal perspective, there is a great deal to commend WikiLeaks, but there is also a lot that should cause a liberal to be concerned.

David Allen Green is a lawyer and writer. He is legal correspondent of the New Statesman and was shortlisted for the George Orwell Prize in 2010.

David Allen Green is legal correspondent of the New Statesman and author of the Jack of Kent blog.

His legal journalism has included popularising the Simon Singh libel case and discrediting the Julian Assange myths about his extradition case.  His uncovering of the Nightjack email hack by the Times was described as "masterly analysis" by Lord Justice Leveson.

David is also a solicitor and was successful in the "Twitterjoketrial" appeal at the High Court.

(Nothing on this blog constitutes legal advice.)

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation