Mon Jul 9th, 2007 at 03:34:41 PM EST
Larry Elliott's article in the Guardian today rang a few bells for me.
It was a pretty good critique of the iniquitous nature of the privilege of Limited Liability being granted with no balancing responsibility.
It also included a great sub-heading "Fools and Bourses" which I nicked for the title.
Plc: prerogative of the unaccountable few
I couldn't help but think that he identified at least three of the symptoms of the "Anglo Disease" ( ©Jerome á Paris ) in his conclusion. (My bold)
Three parts of Britain's institutional framework lie at the heart of all this.
The first is the ability of the commercial banking system to create credit; the second is the tax and planning system that ensures that demand for housing tends to exceed supply; and the third is the limited liability corporation.
In the face of all this, it is hardly surprising that the Bank of England has such a hard time steering a course for the economy between wild speculation and debt delinquency. That's the way the economy is, has been and - as far as one can tell - will be for the foreseeable future.
I felt this deserved an LTE, so I sent one in - below.
While I've had the odd jokey letter published in the "Grauniad" , and one re Islamic Finance, anything critical of the current financial system is invariably "spiked". Still, I live in hope....
Larry Elliott's excellent article today concludes with a succinct summary diagnosis of an "Anglo Disease" caused by a combination of credit creation, unavailability of land, and the iniquity of "Equity" in Joint Stock Limited Liability Corporations.
Larry sees no alternative in sight, but I would point out that the UK Limited Liability Partnership ("LLP") - which the UK government was coerced by the accountancy profession into introducing in 2001 - offers hope.
This new "open" corporate form (there isn't even a requirement for a written LLP agreement) makes possible simple but radical new financing options. For instance, it is open to any entity to raise finance simply by sharing production or revenues from an asset owned jointly or in trust on behalf of the Community.
While the "Private" sector is actually defined by ownership of assets by a Limited Company, we now see that transfer to Private ownership is not actually necessary when there exist other "asset-based" means (as opposed to the "deficit-based" bank credit Larry identifies as problematic) of investing in the development of public assets.
It is quite possible for assets to remain in public ownership, or be placed in trust, and for units or proportional "equity shares" in revenues (or even in production, of say, energy) to be sold in a simple "Capital Partnership" LLP giving rise to "Co-ownership" between a Public user of finance, and a Private provider of finance.
Where such investment is to develop land, there is no need to repay capital, since land does not depreciate. The resulting "Public Equity" in LLP's exposes the Chancellor's "Golden Rule" for the nonsense it is: demonstrably it is not necessary for the Public Sector to borrow for investment at all, and this fact completely changes the economics of public investment, particularly in "affordable" housing at the top of Mr Brown's agenda.
So nil desperandum, Larry, the LLP - "the Corporate that Dare not Speak its Name" - may rescue us yet.
Yours sincerely, etc etc