Corrupt leadership is the reason systems fail

They say that frequently fact is stranger than fiction. In 1945, George Orwell wrote Animal Farm.

The book reflects events leading up to the Second World War and to Josef Stalin’s extended and tyrannical reign over the USSR before that war. It is about the corruption of the Communist Revolution of 1917 by its leaders and argues that, in any revolution or system, corrupt leadership is the flaw that will bring it down.

It was, at the time, a satire on Stalin’s USSR where “everyone was equal” only “some were more equal than others”. It would seem that the People’s Republic of China is not that much different today. Looking at events around the collapse of the western driven global economy, one could be forgiven for having a sort of déjà vu moment.

Similar to the communism of Stalin, capitalism has many questions to answer. Millions of column inches have been written about the Irish government making a commitment that the bondholders in failed Irish banks would be paid back and even rewarded. The last government brought it in.

The current Government recognising the general public’s disagreement with the policy promised during the election campaign “to burn all bondholders”.

However, on attaining power, both Fine Gael and Labour did an abrupt U-turn. It seems to have slipped their collective minds that these bondholders are capitalists and, as capitalists, they presumably agree that the market dictates. The buyer is taking a gamble that the price or value will increase.

Irish taxpayers will next week pay back, unless the sky turns pink, €3.1bn on behalf of a failed bank and a failing Government.

Last week’s so very public resignation of Greg Smith, an executive director of Goldman Sachs, takes one very quickly back to Animal Farm and to corrupt leaders being the flaw in the system. Banks or, more correctly, big investment banks, were the major perpetrators of the worldwide economic crisis.

Investment houses developed such an underlying culture of greed and entitlement that the bottom line was to keep the music playing and the money rolling.

So to keep the music playing they developed alleged investment products that were pure rubbish made up of sub-prime mortgages and other valueless dross. They then proceeded to sell them at inflated prices and it became a major case of musical chairs until eventually the music did stop and a lot of proverbial chairs had vanished. However, some chairs remained and are now safely in the possession of the same investment bankers who continue to attract large bonuses as the rest of the world scrambles to survive.

Over a week ago, Greg Smith resigned from Goldman Sachs and did it with a fanfare. As whistleblowing goes it was something else. He not only resigned from the company but wrote to the letters pages of the New York Times. He described the massive investment house “as toxic and destructive as I have ever seen it”. He said clients were called “muppets” whose interests were given short shrift and bemoaned the fact that “people callously talked about ripping their clients off”.

One wonders do we have any “deep throats” waiting in the wings of AIB’s redundancies to tell us exactly what went on in AIB? Let’s hope so, because we are not going to find out any other way, given Michael Noonan’s statement that he had no intention of publishing three internal reports carried out on the near collapse of AIB because they are allegedly “commercially sensitive” — one of the most abused terms in the English language.

The taxpayers of Ireland are not entitled to know what went on in a bank that subsequently required billions of taxpayer money to survive. Now that is transparency — Fine Gael style.

business@examiner.ie

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