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City Investors Just Have the Good of Common Folks at Heart

June 10, 2010

Britain’s financial class is very concerned about average people and their pensions. So concerned in fact, that they’re criticising US President Barack Obama for “excessively” criticising BP.

Wait, what? That’s the message of this article in the Telegraph. And before I begin to criticise it, I should point out that I do not have a television and my uterus is not wandering, so this nonsense from Jason Kenney, an oil and gas analyst at ING (no ulterior motives there, I’m sure!), doesn’t apply to me:

The US reaction is getting towards hysterical. Half of them seem to think the US is knee deep in oil. It’s difficult to underestimate the effect 24-hour TV dinner media coverage of the spill is having over there

A close-up of a  brown pelican covered in oil, resting on a beach. In the upper lefthand corner is a bp logo redone in tones of brown to match the oil.

A close-up of a brown pelican covered in oil, resting on a beach. In the upper lefthand corner is a bp logo redone in tones of brown to match the oil.

No, Mr. Kenney, I’m pretty sure that most US residents can step outside and observe that the country isn’t “knee deep in oil”. But what they have also seen, along with the rest of the world, are the images of dolphins with their skin burned away, birds unable to lift their wings because of the oil. We’ve heard (or read) experts say that they do not know what the long-term effects on the ecosystem are going to be. And we know that the reason the oil has continued gushing for so long is because BP did not have a backup plan.

How exactly do you define excessive criticism for all that?

BP and the financial class have an interest in making the issue seem to be one of nationalism and harm to the average person. They want to see the UK government try to protect BP from the consequences of its negligence (and the current coalition government can’t be too difficult to push in that direction).

One investment manager said: “Experts have said that the clean-up costs could reach a maximum of £20 billion which means the hit to BP is excessive on any scale.”

Huh? Being required to clean up your mess is excessive? Elsewhere in the article, there is reference to BP being punished though being expected to restore what you’ve destroyed is hardly punitive

One wonders exactly how much these fine upstanding members of the city (not to mention the Telegraph reporters and editors who gave them the opportunity to communicate their propaganda)  have themselves invested in BP. But that really is not the point.

The bigger issue here is structural. Corporations are designed to make it difficult to punish guilty parties. Responsibility becomes diffused throughout a hierarchy, and it is always possible to find some middle-class or lower people who have little to no decision-making ability who will be harmed by holding a company as a whole responsible for what it, as an organisation, has done. Without mechanisms for using the wealth of decision-makers within the company (CEOs who can generally afford to take a hit to their pensions) in order to offset these losses, innocent people do suffer.

Yet the outrage of the financial class is directed not at the unfair structures but at those trying to hold companies responsible for what they have done.

It is also worth noting that everyone quoted in the article (with the possible exception of those remaining anonymous) is a man. Such gender imbalances are typical when the interests of the wealthy and powerful are being depicted: after all, women are still underrepresented in this group.

All that said, there is one way in which the criticism of BP can be taken as excessive, and that is when compared with the lack of global outrage at what Shell has done and continues to do in Nigeria. Activists who have been trying to draw attention to the harm Chevron does to communities in the Philippines and other nations (h/t) have received little mainstream media coverage. While BP should be criticised and forced to pay, the only reason that it is being loudly condemned is that it created a disaster off the shore of a rich and powerful country.

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  1. Peter Reynolds permalink
    June 10, 2010 7:45 am

    [edited to remove link in compliance with Comments Policy]

    I can’t believe how narrow, short-sighted and bigoted your attitude is – almost verging on the racist!

    BP isn’t a British company any more than the great gods of evil Goldman Sachs is American. Wake up! We live in a international business world now. The utterly crass, propaganda trick of renaming BP back to British Petroleum is not worthy of you.

    What do you want? Do you want the problem sorted out or do you just want to blame anyone except yourselves?

    • June 10, 2010 7:59 am

      Dude, did you actually read my post or did you just drop in to call me names and leave a link to your wee blog? I didn’t use the term “British Petroleum”.

      And I’m not the one associating BP with the British; it’s the investors in The City who are doing so in order to discourage people from doing things that might further damage the stock price. Since you couldn’t be bothered to read what I wrote, here’s a pull quote addressing that issue: “BP and the financial class have an interest in making the issue seem to be one of nationalism and harm to the average person. ”

      Cheers for the mansplanation.

      • Peter Reynolds permalink
        June 10, 2010 8:08 am

        Yeah that’s right I just popped into call you names. Why else would I bother?

  2. June 10, 2010 8:11 am

    Because GAB has recently increased in visibility and dropping links seems like a good publicity strategy? I dunno, dude, it’s pretty suspicious when someone doesn’t engage at all with what you have to say, criticises you for using a term you didn’t use, and begins with a link to their own blog. *shrug*

  3. Jack Large permalink
    June 11, 2010 6:43 am

    Kate, I’m here because your comment on my FB post included your link there. Is that different, somehow, from others putting their own links in comments here? I don’t disagree with anything in your takedown of Poor Old Mother crowd, but you’re asking a lot for me to also include the gender issues in with spill issues. I guess I could if I tried, but I don’t have that much interest or energy to get it done.

    • June 11, 2010 11:21 am

      1) Who’s Kate?

      2) The difference is that Mr. Reynolds clearly failed to read my post and was insulting to boot. I don’t have to give him free advertising on a blog that I work on for free when he comes in and attacks me without engaging what I have to say.

  4. Christina Pacosz permalink
    June 11, 2010 9:02 am

    Ecocide is what BP has committed. Don’t let them off the hook. That oil will be on the shores of Britain soon because 100 million plus gallons and counting must go somewhere and the currents will take all of that death and destruction into the Gulf Stream of the Atlantic. This isn’t only the worst oil “spill” in US history but the whole universe. Ecocide.

  5. Peter Reynolds permalink
    June 11, 2010 9:38 am

    [deleted for bullying, derailing, and generally missing the point]

    • June 11, 2010 11:46 am

      Responding here for transparency:

      I think it’s better that we leave the comments open and simply ban Mr. Reynolds. Shutting off genuine conversation on the issue seems like letting the bully win.

      Also, anyone who is unfamiliar with the need to moderate comments to some degree should check out this post by s.e. smith and/or have a look at what happens on major media websites when comments are poorly moderated.

  6. Andrew permalink
    June 11, 2010 3:14 pm

    First of all, I have complete respect for everyone who publishes their own thoughts. I don’t find your words racist; however, I feel as though the article has missed the mark.

    You seem to posit that many in the “financial class” are attempting to rebrand the issue as one of “nationalism” and “harm to the average person”, and, as your title and prose suggests, you feel their ‘concerns’ are disingenuous. Pejorative typology aside, with 16% of UK pension dividend income contributed by BP (I had no idea it was that unbelievably high), I find their “harm to the average person” argument more than compelling. Although, I would probably agree with you that the motives behind their uproar are more self-interested than they would have us believe.

    Your response to the quote by the Investment Manager -“Huh? Being required to clean up your mess is excessive? “, best demonstrates your error. The Investment Manager is not stating that the projected $20 billion clean-up cost to BP is excessive, instead, they are merely observing that given the accepted maximum of those charges ($20B), BP’s market value has been inordinately effected. That is, the share price of BP has dropped much further (or taken a “hit”) more than what could be expected even considering the emergence of a $20 billion liability. This implies that the market is fearful that, given the rhetoric espoused by the US government, increasingly punitive measures will be taken by the administration in months to come – above and beyond the costs to clean-up, restore harmed ecosystems, support effected economies, etc.

    Their position then is, the US government is imposing undue costs on the shareholders of BP (mostly pensions funds and by extension, everyone), simply by continuing to slam and thrash and threaten. And, of course, with mid-term elections approaching the shareholders of BP feel this is mostly due to political expedience. I think then we must concede that the same disingenuity exists among politicians as it does with fund managers and oil executives. Their contention is not with the demands of BP to compensate those effected, but with the constant threats of the administration and the impact that the “political rhetoric” is having on the market value due to the uncertainty it creates w/r/t future financial demands. I can’t really blame them for making this case and I think, from this perspective, you would agree.

    Anyways, just a few thoughts. All the best.

    • June 11, 2010 4:47 pm

      Thank you for providing a model of civil disagreement. 🙂

      First off, I should point out that I did acknowledge that the bigger problem is the structure of corporations which passes costs on to the average people. Seems to me that the degree to which pensions are invested in a single corporation and can easily be lost would be a better argument for changing how pensions are run than for not criticizing a corporation that is responsible for a really horrific catastrophe. (Even if US politicians are largely being as tough as they are in their rhetoric because of the upcoming elections, can you really say that it’s undeserved when you look at the pictures, many of which BP tried to prevent coming out?)

      Your argument for the meaning behind the anonymous quote is plausible, but I must point out that even if that was what was meant, it wasn’t what said, and I think there’s a reason for that: even if what you say is what said individual wanted to be understood by colleagues, leaving out the fully detailed explanation creates the impression to the casual reader that the amount possibly being charged is excessive in and of itself–and I think that’s intentional. But really, either way, it’s an argument for paying less or for potential costs being kept secret.

      Let me ask you this: if an investment company downgraded a stock or a investment magazine derided it and it had the same impact on pensions, would city investors be this critical? No, because that would be within their system. Criticism from the outside threatens their system: it’s about more than immediate profit.

      • Andrew permalink
        June 11, 2010 11:35 pm


        Thanks for taking the time to respond to my overture.

        I would have to disagree w/r/t the structure of corporations. I don’t believe there is anything fundamentally inherent in the corporate structure that unjustly distributes losses to average folk. Everyone, pensions included, risk their capital in hopes of a return when they invest in a company. If a catatrophe erases that expected return and losses ensue, then so be it, that’s part of the detente. (You might have an argument for the deficiencies of corporate law – but that’s another story.)

        The difference between a downgrade (or bad press) and what the US Gov’t is doing is not as nuanced as one might imagine. Markets don’t necessarily mind negative news – pensions funds employ teams of people to evaluate companies and they generally know what names will be downgraded, etc. – what they (markets) don’t like is uncertainty. The Gov’t, with their rhetoric, are creating a cloud of uncertainty regarding the financial punishment BP (and it’s shareholders) will be subject to – with calls to halt dividend payments and the like.

        Petrol-laced Pelican pics aside, BP deserves to clean-up the mess, restore the ecosystem, support the effected economies and implement strategies to avoid another spill – I believe there is a limit to which they should be punished, as I’m sure you do. (e.g. I am sure you would not endorse a plan to execute BP employees.) After all, we all consume the oil BP extracts and we demand it at really low prices. In fact, I am sure plenty of oil was used in the production of the servers and cooling equipment GAB uses to keep this site running – although I am sure you would agree that the benefits, at least in this case, outweigh the costs.

        All the best.


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