Andrew Kakabadse, professor of international management development at the U.K.-based Cranfield School of Management, says oil companies have at various times pitted ethnic factions against one another for economic gain.

Kakabadse blames a lethal combination of outside oil interests, long-standing local conflicts and poverty for the sectarian strife. “In Nigeria the Christian-Muslim thing is the tip of the iceberg,” he says. “What’s underneath the water is a much more complex sociopolitical situation, which cannot be explained just in terms of the religious divide. You have a recipe ripe for conflict, and it just so happens to be Christian-Muslim.”

Read the full article here.

Now that the expenses have been fully disclosed (by both the Telegraph and Parliament itself), we’re learning now how bad the situation has been for years. MPs who were ‘caught’ have grudgingly paid back their expenses, but without regrets and seemingly only because they were caught. Many have said they would stand down at the next election, but once the election is set I imagine many will try to avoid standing down.

MPs say they acted within the rules, checking that their expenses were fine and being told they were. The civil servants who managed MP expenses were under enormous pressure not even to question the expenses that MPs were submitting, let alone reject them. They didn’t want to raise uncomfortable issues for fear of being sacked. I think a bit of digging would uncover numerous civil servants dismayed for decades by a House not governing itself, but forced to ensure that MPs got one privilege after another.

My fear is that civil servants who’ve known about the issue for a long time could be used as a scapegoat. The MPs putting the issue forward are saying the system needs to be clear and transparent. If any civil servants are asked to resign, under MP pressure, it will just be a reality of how Commons works.

Certainly MPs should be adequately compensated for the important work they do, with a fair salary and a fair allowance. The only variable in that allowance should be travel—MPs need to travel varying distances to work in their constituencies and in Westminster, and I think it’s fair for them to travel first class so they can have time and space to think and work. Other than that the allowance should be the same, to be used however the MP sees fit.

This isn’t currently being proposed because there’s tremendous reluctance for change in Westminster. However, there is demand for change elsewhere in UK Parliaments—the Scottish Parliament would like to break away from Westminster because they are so upset with its process of government. Legacy differences and feeling manipulated by Westminster also don’t help. On top of that, government practices in Scotland are actually much better than those in England—there’s more transparency, more efficiency and collaboration, and a much more community-minded ethos. Nada and I actually just finished an analysis of Tony Blair’s last cabinet, and we found cabinet members feeling fear and reluctance to speak in cabinet meetings, dysfunction beyond expenses or anything else.

The secrecy, old traditions and medieval practices running through the Houses of Commons and Lords reveal a level of institutional corruption not far from that which is operating in Bangladesh. Our ‘lovely’ British tradition is corrupt, and the current plans to revamp expenses—having the same system, with the same level of non-transparency, just fewer items to claim for—will allow for previous behaviors to repeat themselves. I wouldn’t be surprised to see the same scandal in ten years’ time.

Scotland has a more transparent system of government that’s working well, and it’s right on Westminster’s doorstep. However, nobody in Westminster seems to really want to embrace change.

Regarding understanding, the problem is that the general public knows neither what MPs’ actual, day-to-day responsibilities are nor how their expenses affect their ability to meet those responsibilities. It isn’t clear exactly what it means to have a first house versus a second house. An MP could have completely legitimate uses for the property and the media could be taking things out of proportion. When Harold Wilson was prime minister, there was a furor over his ‘six’ homes. But this turned out to be ungrounded: he did have four ‘homes’, but aside from his London apartment, they (the constituency home in Wirral, No. 10 Downing Street, and a government-provided weekend house) were all used for official meetings. In many cases their use was necessary for him to be an effective prime minister.

It can be expensive to be an effective MP – particularly if her constituency is far from London. MPs have a reasonable claim to business or first-class travel so they can use the time to think and work. But many MPs could stand to be more transparent about where their expenses are going, and the few who take egregiously take advantage of the system should be stopped.

Increasingly, government is acting more like a manager rather than a provider. They often seek private companies to deliver public goods under contracts. As government becomes more business-like, I believe that MPs should be treated more like business people—held accountable for their outcomes (without getting caught up in procedure) and incentivised to perform. But how do you hold someone accountable for an outcome when they have so many (often disparate) things to do, from handling constituency complaints to speaking in Parliament? On top of all the things they have to do, the constraints in which they have to do them can also be large. The myriad of different protocols, procedures, and administrative tasks makes effective governance difficult if not impossible.

If there were greater transparency about what MPs do, people might understand the difficulty MPs sometimes have in getting things done. But MPs are averse to change and have little incentive to make their governance system more dynamic if it would mean the demise of their old boy’s club (which could be a source of the perks they don’t want the public to know about). That MPs and Lords are so dependant on Oliver Cromwell-era procedures shows that it’s necessary to think more clearly about how political systems are operating. Gordon Brown will have to address the Telegraph’s leak, and has already called for a review of MP expenses, but considering the failures of previous enquiries in the 1970s and 1980s, I doubt much will change.

As MPs become more business-like, they also become professionalized. In their desire to be politically correct and please ‘the public’, they don’t say anything controversial; gradually their constituency loses faith in the MP’s ability to represent them, and voters become disenfranchised.

What could the UK (and the US and Australia, who are facing similar issues) do to ensure that MPs are really speaking for their constituencies? One option is to deprofessionalize the role of MP by creating a separate proportionate-representative system in which citizens are put forward for election to work part-time on community issues. These ‘non-public’ officials should be allowed to serve more than one term (if they’re accomplishing things for their community), but there should be certain term limits to ensure diversity. Canada has been experimenting with just such a system for some time.

Some new blood representing constituents could be really good for citizens, if these ‘non-professional’ MPs could cut through the bureaucracy that currently slows down the increasingly professional MPs in Parliament.

The crisis wasn’t the result of transnational collusion, intentional Ponzi-type schemes, or a failure of leadership as the media has interpreted it. The bankers weren’t bad people per se, but they shared some assumptions that turned out to be wrong. The crisis comes as the result of an intentional strategy that placed too much trust in complicated financial models; it was the result of policy design.

It is no secret that in 2006 the amount of derivative positions in the market was $596 trillion dollars, compared to a global output of $49.6 trillion dollars. All major governments and banks had this data, that the $50 trillion dollars of wealth created that year had been sold on by a factor of twelve. Sooner or later someone was going to say, “Can I have my money back?”

This overextension occurred in part because the demand for quick wealth creation and returns (from shareholders) and large bonuses (from bankers) was so large, and the investment banks provided a means to achieving these quick returns. Even if they could have transitioned to more traditional and conservative ‘slow’ banking before the crisis, the shareholders and bankers wouldn’t have wanted the decrease in wealth it would have entailed.

This borrowing mentality stemmed from Reagan (and Thatcher)-era economic policy, when the government began borrowing to a massive extent, greater than it ever had before, in order to fuel faster growth. It became an economic assumption that this borrowing was fine, and the political economy in the US and UK (including Labour Party reforms, but the political affiliation didn’t matter) became dependent on this economic assumption; they became dependent on financial services being profitable.

Let me expand on this economic assumption that all the borrowing was fine—it was based on short-term risk models and thus the assumption that the wealth being created would continue to grow. No one questioned where this growth could come from – in actuality, it was based on betting, derivatives, and other risky behaviours – and the financial models turned out to be unable to accurately assess the risks of a general loss of faith in the market. It didn’t take into account that people don’t always act rationally. They had assumed that incentivising supply (i.e. government offering companies tax incentives and subsidies in the hopes that these benefits on the supply side would trickle down to the rest of the economy) would create demand, which contrasted with the Keynesian view of designing policies that create demand through reducing income tax and keeping people employed.

Some leaders at the recent G20 summit share a fear that the Anglo-American equity form of financing could collapse; this would have great political implications. We’re now seeing a meeting of corporate strategy and policy design; the current solution proposed for the crisis is greater regulation. This won’t work, because it slows down the marketplace in the wrong way. So how should the G20 be moving forward?

One way to get out of the crisis would be for the Euro zone, with its relatively stable currency and surplus wealth, to consume more, thereby helping to reduce the deficit in other (primarily Anglo-American) countries. If the Euro zone did start to consume more right now, they would have more buying power than before, and would get good value for what they purchased. However, getting the Euro zone to consume more would require them to break the protocols that allowed them to have sustained growth without class problems in the past—it would make them take on more of an Anglo-American model, which they (for the most part) don’t want to do. Smaller countries are considering breaking these protocols, but if they consume more, the essence of their success is undermined further as they slip into the Anglo-American system.

What will emerge is a slow, insidious way of thinking whereby certain countries will say they don’t want any hint of an equity-based financing system for sourcing wealth in their societies. These countries could align and, refusing to purchase any Anglo-American debt, we might even see the emergence of a United States of Europe, with its own foreign policy, banking system, continental army and the removal of NATO. Such a regional bloc could be rich compared to the rest of the world.

We haven’t yet seen the policy design implications of a stronger European bloc or a riled-up China, who have said they’ll support their allies and their centralized long-term financing system against Anglo-Americans. The intentional strategy that led to the financial crisis is now redesigning boundaries, and we have yet to see where these boundaries will settle.

It’s true that markets haven’t been regulated as carefully as they could be, but there’s a reason for this: governments have always wanted wealth to be created quickly in their countries. Making the greedy banker a symbol of the financial crisis has detracted attention from the fact that the system of equity-based financing (in the UK and America) needs to stay intact.

In turn I’ll comment on the value of regulation, the demonization of the banker, and the different international approaches to financing.

Through our study of top teams and board performance, Nada and I have amassed a huge database of information about companies and their boards. Looking at this data, we’ve found that the amount of regulation hasn’t made a difference in terms of performance or quality of governance. Regulations haven’t worked to prevent the betting that quick-moving entities involve themselves in. They don’t sufficiently monitor and curtail certain type of corporate activity; despite the many recent cases of corporate largesse, no one from companies other than Tyco and Enron has gone to prison in the past decade. Government and the financial services sector have had a long-standing relationship to ensure that the financial services sector continues to make money.

Government in the UK and US can add regulations now, but they’ll just have the same system, albeit with greater regulation. I don’t think this will stop a future crisis after we’re out of this one, perhaps around 2014. People who are quick and smart in the marketplace will still be able to make money, in fact they’ll be encouraged to – the point of being a greedy banker is to create wealth quickly, doing anything to get the deal.

Have the bankers been acting irresponsibly? I don’t think it’s as bad as the media has portrayed. If we take Fred Goodwin as an example, his pension is a pittance compared to the £500 million or £1 billion bonuses others have received. It’s true that Goodwin was taking some risky positions in the marketplace, but he was also actually trying to build an infrastructure. Perhaps he can be criticized for purchasing ABN AMRO, but before that did he not use the same tactics to turn NatWest around and integrate it into RBS?

Goodwin’s villianization has been out of proportion compared to the actions of other chief executives. In the context of the failures of Lehman Brothers and others, Fred’s failures look like a breakfast bill at Harrod’s.

A responsible system starts at the source, so it’s worth taking a step back and looking at what we (in the US and the UK) have now and what the alternatives are. There are three fundamental funding systems:

There’s the equity-based financing system, which is the Anglo-American model that was created by the Dutch and the English (where people discussed business around ‘the board’ of wood with a ‘chairman’ who sat on a chair while everyone else worked on stools). In this system, quick money is created through investments and what are essentially bets. However, there are disproportionate incentives for making these bets and taking risks—success highly rewards the individual and firm, while failure gets spread across society (as we’re seeing now in the financial crisis).

On the other extreme, you have financing systems that are centralized with long-term planning (the communist system).

In the middle is the European stakeholder-based financing of the economy, in which the whole community is responsible for financing projects. Germany is a good example; for instance, their retail banks with low interest rates and laws of codetermination in which all stakeholders have a say enabled them to finance large projects.

At the moment, the quick money, equity-based financing model is under fire, and regulation won’t fix it – you can’t have long-term regulation when you want short-term profit. At the recent G20 meetings we saw Europeans with stakeholder-based financing and the Chinese with long-term planning speaking out against the Anglo-American equity-based system of financing, not wanting it to become the way of the world. At the same time we saw the greedy banker image promoted, taking attention away from the fact that regulation won’t work. What are the countries of the G20 to do? I’ll discuss this in my next post.

It is absolutely right that the press and the media should bring to the surface the social issues that we face, particularly one as worrying as the collapse of the financial system. I can see why MPs would wish to take the line of blaming greedy and selfish bankers and an insensitive press and media. The reason we have such problems is that both corporation and government had a powerful and implicit understanding to continue taking a derivative position in the market that would ultimately lead to the collapse that we are now experiencing.

Heads of State meeting at Davos still seem to believe that we can go back to the way we were before, if only we could get rid of the right wing neoliberal influence that stimulated the current phase of greed. However, we can no longer afford to have liberal economics as the basis for our global way of working. Our concern is to have a much more sensitive social democracy that allows for cosmopolitanism, sustainability and investing for a long term future. Why for example should be continue with quarterly reporting?  Why do we not have a much closer relationship between citizen, corporation and state, ensuring that the wealth creation process does not focus on shareholder value but on stakeholder benefit?

On this basis we need a balance of power whereby smaller countries can better represent themselves on a global stage. The only way forward is for a region to become a country. If we take Europe as an example, Europe becomes a country and the former countries of Europe become states of Europe. By having a European Parliament where emphasis will be placed on the lower house, the forum of the citizen, social policies can be created which will prevent the old Anglo American boom and bust cycles and allow for long term growth and investment.

The recent reporting on what we need to do to get ourselves out of this global downturn has largely concentrated on the economic levers that we need to pull in order to dig ourselves out of the present crisis. What needs to be understood is that we face a global political problem and not just an economic problem. Europe in particular needs to politically reposition and allow a mass market of 480 million consumers to influence the world in very different ways from the Anglo Americans of the last century.

In an analysis entitled Turning the Tide, Deloitte yesterday said central and local government must seize the opportunity “to take radical steps to emerge as leaner, more commercially savvy entities”. In practice, it argued, the downturn “provides a chance for public sector organisations to drive through reforms they could not necessarily achieve in more prosperous times”.

Deloitte’s comment on the challenges facing government is simply much of the same that we have seen over the last decade.  The theme pursued by the whole article (by Nicholas Timmins) is that government has to be even more commercially capable and emerge as even leaner.  Why should this happen?  Our concern in pursing shareholder value thinking in both the private sector and government is that this philosophy has dramatically failed.  Shareholder value thinking and practice simply helps the rich get richer and the rest of us suffer ever poorer service.  It is long overdue that focus on customer and the citizen predominate over this ridiculous mania of ensuring growth in mature markets, which is little more than increasing debt to the point where paper is just worthless.

Yes we need new thinking but it certainly has nothing to do with the line that Nicholas Timmins has taken in the FT.

Never mind 2025–how about 2009? The current financial crisis is going to evoke a distinct geopolitical backlash. John Pilger’s recent article in the New Statesman draws attention to the fact that with Obama at the helm, there is going to be very little difference in terms of US foreign policy. In fact, Pilger draws attention to emerging evidence that the US has its sights on Iran and Venezuela.

For a start, expect that a bombing and ‘carve-up’ of Iran is likely to occur in the late spring of 2009, instigated by the nuclear technology development excuse, which will only be an excuse. This won’t only affect the western world; it will also disrupt China’s plans for growth–redesigning the political structure of Iran will cut off 40% or so of China’s oil lifeline and will considerably limit the rise of China. In fact, with such an energy shortage, also expect riots and street violence in China: all those new inhabitants of new apartment blocks in new cities will be wondering what happened to their hot water, heating and electricity.

It is true that the climate change issue will progress at its own rate, but the immediacy of foreign policy pursuit by both Britain and the USA is likely to bring the 2025 scenario to us all–just 16 years earlier.

In the UK, informed sources place UK debt levels nearer £2.5 trillion pounds. By the way, the UK’s GDP stands at about £1.5 trillion pounds.

What debt are we talking about? – Housing debt, credit card debt and debt ridden financial instruments, such as derivatives, all of which undermine the confidence of the market.

What value is better governance and tighter regulation when this deeply worrying financial calamity arose because of the close inter-relationship between government and the financial services sector? A cursory examination of Gordon Brown’s best practice recommendations for the future are likely only to scratch the surface. The very reason debt arose is the irresponsible adoption of “off balance sheet accounting.”

Please remember that Enron executives were prosecuted and found guilty for misleading the markets and the public with their financial misdeeds. What the US and UK governments have done under comparable circumstances is bail out the banks. Instead of prosecution, billions of tax holder moneys will be used to safeguard the banks whilst also supporting bankers’ bonus payments. Where does the justice lie in all that?

In response, the citizen is unlikely to simply display their distaste and then leave it at that! There is likely to be a political fall out!

In order for the US to pay off a debt of between 11-26 Trillion dollars, citizens are unlikely to be tasked with considerably tightening their belts for the next 3 years or so. Informed but unofficial comment from the White House highlights that the Fed is likely to simply print its way out of this problem. Something like 26 trillion dollars plus will swamp the market on the basis that America considers itself to be as good as the gold standard. The effect of that on smaller nations, and Europe as a whole, is just unimaginable.

So what will be the European response?

First a questioning of why? Why have we as Europe linked ourselves to a bankrupt nation that will do anything it can to pull itself out of its woes at the expense of everybody else?

Second, there’s an evident public distaste for shareholder value. Whatever capitalism and shareholder value are, what many will come to recognise is that quarterly reporting, consolidated at the end of the year, drives the corporation.  How can striving to make a profit every three months positively facilitate addressing our current problems? For example, flooding in the UK, as much as it’s due to climate change, is a vexed concern. The real problem is not just climate change, but that of underinvested, outdated Victorian-built drainage systems. We need a ten year public works programme spending billions to get our social infrastructure right.

Further, how many more Katrinas will hit the US? How many more Lehman Brothers-like collapses will stretch the insurance market in London to breaking point? We need to structure our finances to allow large scale project investment do its job. We need clearly structured stakeholder financing that takes account of the long term. The citizen benefits! The insurance companies and pension funds benefit! Health services benefit! The only ones who lose out are the very rich who make their money through speculation and the non-transparent hedge funds. So, the question that is already being asked is why are we working to make the rich and hedge funds richer and, by implication, us all poorer?

Third, there is likely to be an emergence of a new political movement to have Europe as one nation as much  as possible to ensure our financial and communal future. In order to achieve that target, the removal of NATO from European soil will be the first priority. Then we’ll see the founding of a continental army supported by an independent European armament industry. Only through strength through unity can Europe shield itself from Anglo-American excesses.

Fourth, this political pushback will question the value of the European Commission, which is in fact a collection of clever civil servants who ensure that European policy is determined by the completely opaque Council of Ministers. The Council of Ministers is a politician’s dream: Be elected in one country and then do whatever the hell you want across Europe, exclusively shielded from being held publically accountable by Brussels doublespeak. It is long overdue that the skills of the Commission be transferred to the European Parliament in Strasburg. What is then needed is a debate on the nature of the new Upper and Lower House, the shape of a European federal government and the functions of that Federal entity and its relations with the States of Europe. From that we will have true social democratic union.

The fifth response is a complete rethink of European foreign policy. Why should Russia be demonised and be seen as the enemy? Partnership with Russia, fully utilising the 50 or so million Europeans who are fluent Russian speakers, in order to jointly and positively exploit the resources of Russia, will guarantee Europe’s energy and resource future for over 100 years. Of course, dismantling the missile sites targeting Russia is going to be an absolute requirement. The same thinking applies concerning Europe’s relationship with the Middle East. Make no mistake, we are being dragged into the bombing and dismantling of Iran. No one, not even the US, will benefit from this action. In fact, the resultant terrorist activity will reach a scale few of us can imagine.

Where this possible political backlash is likely to leave the UK is the critical question. If Alex Salmond continues with his Scottish separation policy and as a result, forges stronger links with Europe, England is likely to be isolated. With the bastion of US hegemony in Europe undermined, do not be surprised to witness how powerful the ‘Europe as a one’ movement will be.