What would the first Tories have made of it?

A report published on 4 October 2014 by the union Unite [http://www.unitetheunion.org/news/tories-in-15-billion-nhs-sell-off-scandal/] has found that, since 2012, £1.5 billion of NHS funds has been contracted to private companies linked to 24 Tory MPs who voted for the Health and Care Act. Such contracts are legal; but is this very close relationship between elected representatives and private interests a form of corruption?

At the very least there is an irony here. The first Tory party, created in the late seventeenth and early eighteenth centuries, was highly critical of party politicians (their rivals, the Whigs) who sought to hoover up state assets by giving themselves lucrative contracts. At that period, of course, there was no national health service; but large amounts of government funds were spent on war with Louis XIV’s France and the same issue of contracts was at stake.

In December 1711, just over a year after the Tories had won a landslide electoral victory, a prosecution was launched by them against the duke of Marlborough, the military hero whose services to the country had been recognised with the gift from the nation of Blenheim Palace. To be sure, there was politics involved – Marlborough had been a Tory but had moved closer to the Whigs, and the Tories sought revenge. Marlborough's wife, the redoubtable Sarah, was also close to the Whigs. But in any case, the point at issue was a contract that the duke had to supply the army with bread, from which he made a 6% profit. Between 1702 and 1711, he received £62,000 (roughly the equivalent of about £5m in today’s money). Here, then, was public money being diverted into a contract from which Marlborough personally gained (and he had several crony friends who had also procured lucrative contracts to provide the army with clothing and supplies). The first Tory party was outraged. Jonathan Swift, by then a Tory partisan, satirised Marlborough’s avarice in his poem The Fable of Midas – the mythical king whose touch turned everything to gold – and in pamphlets Swift alleged that Marlborough, like other Whigs, was intent on profiteering from the war. Indeed, the object of the Tory attack included the whole new financial system – including the Bank of England that had been a Whig creation in 1694 – which Tories saw as a device to transfer wealth into the hands of their political enemies. ‘Corruption’ was a Tory rallying cry in the early eighteenth century, both in the reign of Queen Anne and then during the premiership of Robert Walpole, who was another of those prosecuted alongside Marlborough for his share in the contracts scandal and was expelled from the House of Commons for his ‘notorious corruption’.

The first Tories, then, saw it as their patriotic duty to oppose the corrupt and self-interested transfer of state funds into the hands of cronies by means of dubious contracts. What would they have made of today’s Tory party?

The text of the 1711 report into Marlborough’s contracts can be read at http://books.google.co.uk/books?id=tFMyAQAAMAAJ&pg=PT547&lpg=PT547&dq=1711+marlborough+contracts&source=bl&ots=7a69mwUvNu&sig=Gbfji9vU6ZhTNE0pLway3QPNALc&hl=en&sa=X&ei=-noxVNjcKcLO7gbJ44CwBg&ved=0CDoQ6AEwBQ#v=onepage&q=1711%20marlborough%20contracts&f=false

Image: A playing card satirising the duke of Marlborough as a money-making ‘rogue’

Mark Knights : 05 Oct 2014 19:47 |  Tags: Contracts; Funds; Marlborough; Prosecution State Walpole; |  Comments (0) |  Close comments |  Report a problem

GSK's Fine for Corruption

On 19 Sept 2014 the British pharmaceutical giant GSK was fined almost £300m by a Chinese court for bribery of non-government personnel (ie doctors) to use its products. This is the largest fine levied on a company in China. The head of the company’s China operations, Mark Reilly, was given a three year suspended prison sentence. The Chinese authorities alleged that bribery was ‘a core part of the activities of the company. To boost their share prices and sales, the company performed illegal actions’ [ http://www.theguardian.com/business/2013/jul/15/glaxosmithkline-china-bribery-allegations ]

The story of British companies being accused of bribery in Asia is nevertheless not a new one. In the eighteenth century members of the East India Company were also accused of corruption. Merchants returning to Britain having made a quick fortune in India were known as ‘nabobs’, an anglicisation of ‘nawab’, meaning prince. In 1787 one of the nabobs, Warren Hastings, who was called ‘the Captain of Iniquity’ by leading prosecutor Edmund Burke, was indicted by the British Parliament for bribery and corruption. The trial lasted seven years.

The charges against Hastings were, like the ones against GSK, designed to show that corruption was a core part of the East India Company’s activities. He was accused of accepting bribes or ‘presents’ from Indian princes; of handing out corrupt contracts (including for opium, which was sold to China); and of selling offices. In many ways Hastings personified a wider problem of endemic corruption in the East India Company. Like GSK, the Company’s share price was affected by its fortunes in Asia, and Hastings did all he could to promote the Company’s as well as his own interests.

Yet in 1795, in contrast to the recent verdict in China, Hastings was found ‘not guilty’ of the charges against him. In the eighteenth century, the dividing line between a ‘present’ and a bribe was an ambiguous one – this problem was all too apparent in Britain but was magnified in an India context because of a culture of gift-giving. Fostering a good economic network by cultivating social interactions was part of the merchants’ lives, creating muddy lines between personal interests and the interests of the company.

The eighteenth century East India men thought that a present was not necessarily a bribe that distorted how they behaved. George Vansittart, for example, wrote that ‘some presents I have certainly received but you will never hear of my bargaining for them or being influenced by them’ and he thought the same could be said of Hastings: ‘I would not say that Mr Hastings never has received presents but I think I can safely answer for his never having placed his private interest in competition with the publick advantage’. Another nabob was even more defiant: Richard Barwell protested in 1775: ‘I do not pretend …to say I never received a present, but I am certain I can defy any person to charge such to me as a crime’. This old notion of the defensibility of presents – that gifts did not necessarily corrupt - may still persist today.

One other thought is provoked by the GSK affair. The prosecution for bribery was, as GSK’s statement makes clear, ‘of non-government personnel’ (though how far Chinese doctors were non-governmental remains unclear). A common definition of bribery, used by the World Bank and others, is ‘the abuse of public office for private gain’. Here, however, the abuse seems to have been by a commercial company, and the Chinese state has gone after the corrupter rather than corrupted. In other words, the case challenges the economists’ definition of what corruption is and who should be prosecuted for it.

Image caption: Hastings was also accused of offering ‘presents’ to the royal court in order to secure favour during his prosecution for corruption.

Mark Knights : 02 Oct 2014 08:32 |  Tags: Barwell; Burke; China Company; Definition; East Gift; Hastings; India Present; Vansittart; |  Comments (0) |  Close comments |  Report a problem