When does a marketing expense become a bribe?
This morning I treated myself to breakfast at Wealden Wholefoods, a little vegetarian cafe in Wadhurst, East Sussex, where I ate the nicest scrambled eggs, drank coffee, and read the Financial Times: a really lovely start to a working day. I normally read the FT online so it was a nice, if dexterously challenging, change to have large sheets of pink paper to fold repeatedly as I read the business news: it was intelligent origami and good exercise too.
As a wrestled with the now unfamiliar broadsheet format (I’m just out of the habit) the paper got in a bit of a muddle (in my defence, I was trying to eat at the same time) and two stories fell on the floor together, as if I was meant to read them. When I did I couldn’t help but wonder at the ironic genius of editorial types who make the decisions about what to “run” on any particular day: the first story was about the review of the law on bribery, the second on how top British civil servants frequently retire from public service to take up lucrative jobs in “industry”.
In my mind at least Tony Blair connects these two apparently distinct stories: he is currently paid £2.5M per annum by JP Morgan Chase, in his part-time role as an advisor; and when still Prime Minister he also famously concluded that any further investigation into the accusation that BAE paid a Saudi prince $1Bn, to facilitate the UK’s biggest ever weapons contract, “was not in Britain’s best interests.”
My question to you is this: what exactly is the difference between the services provided by Tony or, allegedly, by Prince Bandar bin Sultan bin Abdul Aziz al-Saud? Maybe that is what the FT’s editor is asking, rather more subtlety than I am, too.
Tony gets paid for access, influence, and to provide insight into the workings of governments and particularly the UK government. Surely he gets paid to give his employers a commercial advantage? For £2.5m a year I’d want something back for my money; I’d want a good return on my investment. Isn’t this also exactly what the story about the UK bribery law is all about? It seems it is too harsh at present and there is demand for it to be watered down, as it is discouraging innocent British exporters from selling into countries where “facilitation” payments are normal. My point being that, although we justify it in different ways and use a different vocabulary to describe things, paying for influence is normal here too; we are just a bit more subtle about it and more discerning in who we pay and how we pay them.
This sort of facilitation cost doesn’t create new business; it just gives access to greater market power and share than you would have otherwise: economists call it “rent”. “Marketing costs” like this are an investment in economic rent and an awful lot easier to do than have a better product offering, even if you could compete any other way: sometimes you just can’t. The difference between bribery and a marketing expense is semantic, cultural in its broadest sense and, critically, it is political. It’s all a bit “elephant in the room-ish” – we all know that the world, politics, and big business in particular, is not quite the straight-forward place we pretend it is, but I think we fear that if we stop pretending it all might get an awful lot worse.
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