The upside-down Archbishop

One of the greatest challenges for those interested in politics is to decide where to draw the line between political and personal criticism. As a general rule, the higher someone climbs up the greasy pole of political power the more open he or she is to personal attack. Jeremy Clarkson famously described our current so-called Prime Minister a "one-eyed Scottish idiot", I suspect he would not have described Gordon Brown in that way were he a junior minister. As a matter of inescapable fact he would still have been a one-eyed Scottish idiot, but he would not have been in the firing line for that sort of personal attack.

High rank puts one in the firing line for personal attacks whether or not they are fair or accurate. It's part of the territory - set yourself up above the little people and the little people expect a lot of you. In real life it is necessary for some to be above the little people. Like it or loath it, we need government and that means we need government ministers, and that means we need a hierarchy of government ministers, and that means there is someone at the very top of the pyramid. The higher you climb the more we little people will expect of you and, it has to be said, the more you will profit when your time in office has ended.

Let's go down a few ranks to workaday MPs. They don't have the glory of wielding real power but they are the Parliamentary representatives of all their constituents, on average something like 80,000 people. Of that 80,000, on average something like 78,500 will earn less than an MP's salary. Only a very few of those that earn more than their MP will not be under any pressure to justify their income. Maybe they are authors or musicians raking in royalties, or the sons and daughters of wealthy people living on the produce of historic family investments. Such people are few and far between. The other high earners are in business and answerable to customers and/or shareholders every day of the year. MPs' customers are their constituents, the vast majority of whom struggle to balance the family books from one month to the next. News that our MP has been paid by us for a personal rather than a work expense might receive a "tut, tut" when times are good, but in a recession it receives a "how dare you?"

The single reason we criticise our MPs for using loopholes and manipulating the rules as we might in our lives (if only we could) is that they are above us. They are above us constitutionally and practically, so we have every right to expect them to behave at least as ethically as they tell us to behave. That we might have turned a blind eye for years is neither here nor there, when circumstances change so does the way we all look at things. In particular something we would not have been too concerned about at one time can become a matter of fundamental importance which must be changed. There is no once and for all, right-or-wrong assessment of the matter. In relation to MPs' expenses/allowances it cannot rationally be said that the widespread criticisms being made of MPs now lack merit because they were not made before, nor can it rationally be said that we were wrong not to raise these criticisms earlier. It is all a matter of context. For example, adultery by senior politicians was far more of an issue after John Major launched his "back to basics" campaign than it was before because the government was openly promoting fidelity. Similarly, hearing politicians from all sides tell us to tighten our belts because of recession makes their financial waistlines fair game for comment.

Only time can determine when the criticisms have run their course. It's not like a guillotined debate in the House of Commons in which a vote is forced after a certain time whether everyone with a desire to speak has had their turn, these criticisms will be made by real people for as long as they feel there is a need to make them. Any MP who resigns or announces they will not seek reelection might find they drop off the comment radar, any who do not answer criticism satisfactorily will find they are just delaying the inevitable. In an article in yesterday's Times newspaper the Archbishop of Canterbury said "the continuing systematic humiliation of politicians itself threatens to carry a heavy price in terms of our ability to salvage some confidence in our democracy." I could not disagree with him more.

What is happening now is an essential part of a mature democracy. You do not damage a system based on the notion of representation of the people by forcing the main representational institution to meet the standards required of it by the people. No damage is being done to confidence in our democracy, only to confidence in the way Parliament is behaving. The answer is to force it to change, and that is happening. It is happening because, not despite, "continuing systematic humiliation of politicians".

Confidence in democracy is a deeply ingrained cultural force in Britain. Democracy is often described as the least bad system of government but it is much more than that. It is something that helps to hold the country together. We all know that our personal, individual power to change the law or influence government policy is so small as to be virtually nil, we also know that both the law and policy can be altered where the public mood (expressed in countless different ways) is so strong that government and Parliament have to accede to that mood. In recent times we have seen significant changes of policy on petrol taxes, the 10p income tax rate and, most recently, rights of settlement for Gurkhas; all of them brought about by public pressure and criticism. This has not damaged our democracy, it has enhanced it by showing that it works.

The only way our democracy can be damaged is by damaging the ability of the little people to influence the big people. If it takes the humiliation of dozens of big people in order to ensure that influence remains in place, so be it.

The Purple Peril turn to shares

It has been a fine day for ludicrous utterings from the seriously ignorant. I will not waste my stubby fingers on the moronic trade union dinosaur on Question Time this evening, but the Archbishops of York and Canterbury deserve mention. Canterbury has called for short-selling to be outlawed and York called those who engaged in it "bank robbers and asset strippers". It really is mind-boggling. Not quite as mind-boggling as Gordon Brown's reference to "short-term sales", but mind-boggling nonetheless. Let's look at the basics using baked beans as an example.

Mr Bloggins wants to set up business making baked beans. He has a recipe which results in hugely tasty baked beans so he wants to make them in bulk, tin them and sell them. Mr Bloggins needs a factory and machinery but he cannot afford to buy them for cash. He could borrow the necessary money but an ordinary loan requires regular repayments of interest and he might not be able to establish steady sales for some time, so he cannot raise a loan. He decides to invite people to invest in his new business by offering them the chance to share in future profits. He needs £1million so he asks one million people to put £1 each into the pot. Because he cannot guarantee when, if ever, a profit will be made all he can offer is the chance of sharing in profits in the future. Spreading the cost of raising £1million in capital by selling shares means each investor only pays £1 so the most they can lose is £1 each. In return for their £1 investment they are given a piece of paper giving them each a 1,000,000th share in the value of the company.

The value of the company is determined by the value of its assets. The factory and machinery have a value and so does the future profit from selling baked beans. All the time only £1million has been raised from investors. If the value of the Bloggins Baked Bean Company rises to £3million because the land the factory is sited on has risen in value or sales of beans are very strong, each share goes up in value to £3. If the value of the company's assets falls, so does the value of each share because each share is necessarily worth one millionth of the value of the company's assets.

Some investors will want to hold on to their shares forever in the hope of steady profits from sales of the flatulence inducing product but others might wish to withdraw their money and invest it elsewhere. A market starts in the shares and the value of the company's assets determines the price of each share. Except that no one really knows the value of the company's assets, it can only ever be estimated. Changes to land values and changes to the likely future demand for tinned baked beans will determine how much people are prepared to pay for shares. If it is anticipated that the business might hit troubled times, perhaps through the threat of an EU tax on methane inducing products, holders of shares will want to sell them before they fall in value and buyers will only be prepared to buy if the price is right. Today the threat to the business might justify a 10% reduction in price, tomorrow some good news might justify an increase of 20%. It is often thought that shares have a value of their own but they do not, they are merely a reflection of the value of the company.

Short selling is all about anticipating a fall in the value of a company. If shares are priced at £3 today and you think they will fall to £2 because the company is in trouble you want to sell for £3 and then buy later for £2. If you already own shares it is easy, you just sell what you have, take the money and then buy once the price is £2. If you do not own shares in the company you can borrow someone else's shares, sell them and then buy back later and hand the newly bought shares to the person you borrowed from. You pay him a fee for allowing you to borrow his shares and you pocket the balance of profit. This is short selling: borrowing shares so you can sell them now and buying later so you can hand the correct number back to the lender. There are various theories about where the term "short selling" came from but the most compelling is that the person who wishes to sell does not have any shares, he is short of shares, he borrows so that he can sell even though he is short of shares himself.

Short selling is a very risky business. You sell at £3 expecting a fall to £2 but instead the value rises to £16.50. Your lender demands the return of 1,000 shares in the Bloggins Baked Bean Company and you must deliver so you have to buy at £16.50. The sale brought you £3,000 and buying replacements costs you £16,500. Ouch.

Short selling can also induce a collapse in the value of shares. All of a sudden instead of the average turnover of, say, 1,000 Bloggins Beans shares each day there are 200,000 for sale. People ask why. It looks as though a lot of people think Bloggins Beans is in trouble and the price falls through the floor. Even if Bloggins beans is highly profitable it appears that people think it will not continue to be profitable which can cause problems for Bloggins Beans itself (for example it might find credit hard to come by) and for other holders of shares in the company. People who have used shares in Bloggins Beans as security for a loan find their lender calling in the debt because there is now insufficient security. Investments based on the capital value of shares rather than dividend receipts produce lower returns and so it can go on. In other words, short selling can become a self-fulfilling prophesy.

The only valid criticism of short selling is that it can artificially deflate the value of shares and that can have knock-on effects. However, this can only happen in the short term where the company in question is strong. The other side of the coin is that short-selling can bring to light little known weaknesses in a business. Enron's shares started to fall as a result of a spate of short selling after rumours circulated about its accounting practices. Those rumours were true and the effect of short selling was entirely beneficial - a business based on deceit was brought to its knees thereby preventing future losses on an even grander scale than those resulting from Enron's collapse.

Where a sector of the economy is under pressure there is an argument for preventing the short selling of shares in that sector so that it has a chance to find its feet again (if it can) without the threat of an artificial downward force on its share prices. That is why the shares in a number of UK banks and other financial institutions are subject to a ban on short selling at the moment. Banning the practice completely will merely delay the day failing companies are exposed, and the knock-on effects of that are far worse than the limited consequences of a sound company being artificially undervalued for a limited period.

As for those who engage in short selling being "bank robbers and asset strippers", that comment merely shows the Archbishop of York to be ludicrously naive. Like so many men who spend their working lives in fancy frocks, he is best kept well away from the real world. Let him hold his shepherd's crook and pontificate about his god all he wants, then tell him him his stipend and eventual pension come from the profits the Church of England makes on the stock exchange. I wait with baited breath to hear that he will repay every penny he has received over the years from the profits of short selling.

I don't really do god

Many years ago I went to church voluntarily. As a child it was compulsory, but as a young adult it was a matter of choice. My general opinion was inclined towards the concept of god and, as a chap who likes to seek out evidence to test his beliefs, it seemed sensible to take a closer look. The church I attended, for just a few weeks, was very popular among students and the vicar had a reputation as an excellent speaker. What struck me on my first visit was that his reputation was entirely justified. He spoke with clarity, humour, conviction and an unashamed evangelical purpose. It was advocacy not oratory. My friend who recommended that church told me the vicar had been invited to take a position higher up the church's hierarchy but had declined because he wanted to continue preaching at this particular church. I attended Sunday evening services and, on a couple of occasions, a midweek bible study course. Nothing could have done more to knock faith out of me than what I witnessed in those few weeks.

Looking back I cannot say whether I originally attended because I wanted my tentative belief to be affirmed or because I wanted an excuse to abandon it. What I can say, however, is that from my first Sunday evening there I felt uncomfortable.

The first disquieting thing was the makeup of the congregation. Looking around I identified several different categories of people.

There were the middle-aged, middle class people you used to see in the Church of England all the time. No one knew whether they had any belief and it really did not matter, attendance at church was something they felt was expected of them so they were there. It was a matter of social duty, like buying a pot of home-made jam at a village fete.

Then there were those whose belief was a result of rational choice. They had studied the biblical texts, done some research into the history and concluded that they believed what the texts said (or at least sufficient of what the texts said to justify hitching their wagon to the Church of England horse). No doubt some approached the exercise with a presumption in favour of believing and some with a presumption against, yet their conclusion was guided by the evidence as they interpreted it.

Thirdly and, for me, most worryingly, there was the Moonie-ist tendency. They got very excited and lifted their hands to the heavens as the vicar spoke. They were hearing what they wanted to hear from someone they seemed to view as their god's representative on earth. The impression I had was that their minds were completely closed and they would do anything he suggested. I wanted to find out more about them.

I could understand the first and second groups, their positions made absolute sense to me, but the third were a complete mystery - how could anyone just accept what he or she was being told without standing back and asking himself whether he really agreed with it? That question presupposes that they really were absolutists, a supposition proved correct at the bible study evenings where we were looking at the gospel according to (or is it "of"?) Saint Mark. During the second, and last, evening I went to the simplest linguistic examination showed that the words on the page could carry any one of several different meanings. Oh no, there was only one acceptable meaning. "Why" I suggested "can it not mean ..." and then gave one of the more obvious interpretations. All around me were people who had been insulted to the very core of their beings. A fresh steaming dog turd in my seat would have received a more cordial response. There was just no arguing with these people, they were not prepared to engage in rational debate, they had received the truth from the vicar and that was that.

That led me to ask why they had attended the bible study evenings. It cannot have been to learn something they did not already know because they did not hear anything from the leaders that they had not heard many times before. It cannot have been to develop their understanding because their minds were made up already and were closed to argument. It cannot have been to explain their interpretation to an ignoramus such as me because no explanation came forward, merely assertion that I was wrong. It cannot have been to gain confirmation that their views were correct because that would require them to have a doubt that needed to be allayed. The only explanation was that it was a social club, pure and simple. A social club into which they fitted.

This explanation corresponded with another observation I had made, which was that the members of the Moonie-ist tendency were, almost universally, the sort of people who did not fit in anywhere else. No ready wit, no charm, no ability to engage in discussion, no social graces. They were the children we all made fun of at school and called "Nobby Nomates" (or, usually, far worse). They would never join a cricket or rugby club, go to the pub for a pint and a chat after work, chew the cud with a neighbour over the garden fence or engage in any other activity which might be termed "clubbable". They would only ever be comfortable in one social club - a social club which requires no social skills and to which anyone would be welcomed with open arms of "fellowship" provided they believe. For the first time they were not Nobby Nomates they were among unquestioning allies for whom the act of belief was sufficient to make them bosom buddies.

The following Sunday I attended my last evening service. The vicar was talking about marriage. He decried sex before marriage and the misfits smiled smugly. So proud at their virtue. Unable to hide their pleasure in receiving praise for abstinence. And wholly unable to see that they wouldn't get any in a month of Sundays anyway. The sermon continued and the vicar asked a rhetorical question: "What is the most important thing to look for in a possible spouse?" I knew what his answer would be, and it was: "That they are Christian." More smug looks in the adoring audience. But did I see something else in their faces? Did I see them turn an exclusive proposition into an inclusive one because it held a promise of sex? Did I see them thinking "a Christian cannot marry a non-Christian, therefore if I am a Christian I will find a Christian spouse and finally get some action"? Maybe I did, maybe I didn't, maybe I just wanted to because of the view I had already formed that they were nothing but social inadequates in their own little club.

I walked out at that point and never returned, convinced of one thing if nothing else. When religious belief is used by its leaders to encourage the believers to treat others as a lower class, as lesser beings who are not worthy of marriage, it loses any claim it might have to being a force for good. One only needs to change one word in the vicar's answer to his rhetorical question to see what I mean. Substitute "white" for "Christian".