Dark Money

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Is Oil Being Removed from the Wheels of Change?

For the past 40 years the oil industry has been engaged in what the tobacco industry had been engaged in before it. The manufacture of doubt.

Eventually, the scientific evidence overwhelmed the spurious arguments and pseudo science generously sponsored by tobacco companies. They quietly refocussed in parts of the world where less informed consumers could continue to provide them profits through their deaths.

Doubt for the oil industry, however, was, in many ways, an easier sell. Firstly, the link between harm and product was less tangible. People using an enormous amount of oil did not die from using it. Second, the damage it did was to one of the most complex systems in the world, climate, so demonstrating the link was open to far more challenge. Third, the essential benefits of using it were manifest, not least in the internal combustion engine and the freedom it provided.

In addition to this the scale of the industry was and remains daunting. The world uses approximately 100m barrels of oil per day. The current price of oil is around $50 per barrel. This means oil sales every day are worth about $5bn, or $1.8trn per annum. This compares to the the roughly $800bn per annum for the tobacco industry.

All this means there are enormous levels of vested interest in oil production and comparable levels of resource to be applied to defend it. The application of the interest and resource to political influencing has been documented by many.

Jane Meyer notably charts the relationship between the “Dark Money” of oil wealth and direct political lobbying, and the more insidious funding of law makers supportive of the industry with enormous campaign donations via the Political Action Committee (PAC) system in the United States.

In America both Democrats and Republicans were targets of the oil industry but it certainly found a more welcome and eager advocate in the GOP. The logical conclusion of which was a president who was a climate change denier, withdrew from the Paris Climate Accord, downgraded the Environmental Protection Agency and opened federal lands to carbon fuel explorations.

However, the growing traction of public concern is starting to impact the oil industry and other fossil fuel companies. It is now clear major changes needed, like the adoption of electric cars, are beginning to become real.

Uncertainty is the greatest fear of all major industries as has been made clear by the Brexit debacle in the UK where most businesses got to the point where they did not care whether we were “in” or “out” as long as it was clearly one thing or the other.

This craving for certainty partly explains the support for Joe Biden’s clear statements about climate change and the inevitable consequences for the motor industry from the industry itself. When they know there is a date for the abandonment of the internal combustion engine they can develop a strategy to achieve this. For all businesses, once the writing is on the wall, the job of the CEO is to read it.

Similarly, savvy investors can hear the change in the music and are starting to evaluate their strategies accordingly. Stranded assets, like oil that cannot be extracted if we are to avoid run away global warming, flash red light risk. What are the oil companies doing about it? How credible are the strategies?

Black Rock, one of the world’s largest asset manager’s with some $8.6trn of assets in management, has made clear it sees climate change as “investment risk”. Its Chairman and CEO Larry Fink states future investment decisions will be guided by how those seeking cash can demonstrate their business models are compatible with net zero emissions by 2050.

Much as the response of Boris Johnson to the pandemic has come to be seen as belated and lacking urgency at a critical time, so also, in the future, the response of the fossil fuel industry may come to be seen in a similar light. The timescales may be different, 12 months and 30 years, however so is the scale of change needed.

According to Bill McKibben’s book “Falter”, it was the oil industry itself which first identified burning fossil fuels as leading to changes in global climate back in 1977. After a brief period of transparency and cooperation, vested interest determined a revised approach of secrecy and “doubt manufacture” which has lasted for the best part of 40 years.

However, as scientific evidence piles up, real world weather starts to illustrate climate challenge and impacted populations begin to campaign the industry can see the “manufacturing of doubt” strategy has run its course. Having flipped once on the reality of climate change and it is not inconceivable, in fact, it is highly likely, the industry will flip again. Indeed there are all sorts of signs the change is happening.

As it happens the industry will no longer wish to support politicians who are swimming against the tide of history and creating uncertainty. They will want to develop new strategies within a clear national policy framework. Instead of impeding change to net zero they may well become powerful advocates for it. Ironically, this may be a rare case where oil lubricates a process more by its absence than its presence.

All of this adds to the current woes of the GOP in the United States. If the above has any relation to reality their wagon is firmly hitched to the wrong team. The “Dark Money” which has been flowing into their coffers may start to dry up as the wells are capped. What is more this may happen much quicker than they anticipate. We can live in hope!

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Dark Money

Dark Money by Jane Mayer covers a period from the early 1970’s to the run up to the Trump election. It documents in meticulous detail the amount of money spent over the period by super rich Americans, not just to secure the election of politicians  supportive of their radical libertarian views but more insidiously to shift the terms of political debate to the right.

DMThe process begins in the late 1960’s early 70’s when a number of very wealthy Americans began to fear the US was about to succumb to socialism. It may seem unbelievable now but looking back it was a time of radical foment, the rights of black Americans were being fought for, a nascent women’s rights movement was emerging, young people’s opposition to the Vietnam war resulted in 4 students being shot and killed in a protest at Kent State University.

Whilst all this protest were real worries to many on the right there were other issues about the role of the state that were of perhaps of more profound concern. The Democratic President Lyndon Baines Johnson had initiated a War on Poverty. Worse however was a proposal by Republican President Richard Milhous Nixon to create a modest basic income, an idea about which there is currently renewed interest.

In 1970 the Family Assistance Plan passed through Congress with a healthy majority but was lost in the Senate to Democratic opposition that it was not radical enough. At the time it was said “This bill represents the most extensive, expensive and expansive welfare legislation ever handled.” Not only was their bipartisan support for this proposed legislation, but it was supported by 90% of the press and popular in the country.

For some, all of this represented an unwarranted intervention by the state in the operation of the market economy. An intervention that would expand the role of the state, require increased taxation and thus impact directly on the fortunes of the very wealthy. Some decided it was time time to act.

Ms Mayer’s book focuses primarily on the brothers Charles and David Koch. The brothers engaged in active politics in the 1970’s providing financial support to the Libertarian Party. In 1980 David Koch ran as the running mate to the party’s Presidential candidate, Ed Clark who was challenging Ronald Reagan, from the right. They got 1% of the vote. From this point on the Koch’s receded from public view and over the next three decades according to Ms Mayer gave well in excess of $100m “…to dozens of seemingly independent organisations aimed at advancing their radical ideas.”

The book charts how the brothers “weaponised philanthropy”, maximising the tax benefits of establishing charitable trusts, thus avoiding inheritance tax, and then using the money from the trusts to support a series of educational and social welfare groups to promote their libertarian viewpoint. Over the years a variety of think tanks were established or supported all with the aim of ensuring that conservative ideas were made respectable.

Over time the thinking evolved and there was a recognition that in order to change opinions the elite educational institutions of the US had to be “penetrated”. This led to the “beach head” theory which was about establishing conservative beach heads at “…the most influential schools in order to gain maximum leverage.” By 2015 the Charles Koch Foundation was “subsidising pro-business, anti-regulatory and anti-tax programmes in 307 different institutions of higher education in America.” Interestingly the book reports a comment about the Golden Rule of philanthropic giving – those with the gold, rule. This was taken to a higher level when a donation of $965,000 to West Virginia University by the Charles Koch foundation came with strings. The foundation was to have a say over the professors it funded, fundamentally undermining academic independence.

The Koch’s were not alone in this enterprise but they did, and continue, to play a major co-ordinating role such that at one point the sprawling breadth of their influence in right wing political promotion was described as Kochtopussy. Ms Mayer’s book makes clear that this was not the outcome of a series of more or less random individual initiatives. Rather it was an evolving, but very conscious, political strategy to move the political goal posts. It responded to a very clear cri de coeur set out in a memo by Lewis Powell in the late 1970’s urging American capitalists to wage “guerrilla warfare” against those he saw as trying to insidiously undermine them. Ms Mayer claims his call to arms inspired some of the super rich, “to weaponise their philanthropic giving in order to fight a multi-front war of influence over American political thought.”

You may wonder whether these people were driven by a bizarre but genuine belief in radical libertarianism, where the state, taxes and regulation were perceived as demeaning constraints on the freedom of the individual. In truth their idealism was always tempered by a strong regard for their personal advantage. When congress was considering the Troubled Assets Relief Progamme (TARP) the Koch’s and their radical caucus were opposed to the massive package of  state support. This changed however when the stock market started to tank. Suddenly their wealth was at risk and opposition to the TARP was dropped.

Another fascinating insight into the motivation of the Koch brothers comes from a post mortem conducted into the right’s failure to prevent a second Obama term at one of their annual seminars. Arthur Brooks, President of the American Enterprise Institute funded generously by the Koch brothers, made the point that if the 1% want to win control of America, “… they needed to rebrand themselves as champions of the other 99%”. This theme was built on in 2014 in a paper that Richard Fink, Charles Koch’s “grand strategist”, gave to a meeting of one of their annual seminars of the libertarian super rich. The paper was entitled “The Long Term Strategy: Engaging the Middle Third”. In a perfectly candid way Fink asked the question, “We want to decrease regulations. Why?” he then answered his own question, “It’s because we can make more profit, okay?.”

One third of the electorate who were perceived as solidly on the side of the libertarians, another third never would be. This mean the battleground was about gaining the trust of the middle third. To do this it would be necessary to convince the them that libertarian intent was virtuous. “We’ve got to convince these people we mean well and that we are good people.”

Following a Supreme Court decision in 2010 known as Citizens United it was found that corporations had the same rights to freedom of speech as individuals. This overturned a century of restrictions banning corporations and unions from spending all they wanted on the election of candidates. This opened the floodgates to political spending to support congressmen and senators and the Koch Brothers took maximum advantage building a real power base which was in but not of the Republican Party.

In 2014 the Koch network invested $100m into House and Senate races for the GOP plus almost twice as much into other kinds of activism. The result was they won full control of both. Their aim was to spend $889m in the 2016 presidential race. Whilst they could not legislate for the Trump wildcard the first attempt to replace Obamacare was such a shambles because of the intransigence of the right wing caucus within the Republican Party largely made up of Koch supported Congressmen and Senators who thought the Trump proposal was too generous!

Dark Money is a sobering work which casts an unflinching light on the very private world of the super rich in America and specifically on the brothers David and Charles Koch estimated to be worth $41.6bn each. It raises all kinds of issue about the role of multi-billionaires in undermining democracy in America and reinforcing a process which is concentrating ever more power and wealth in the hands of a smaller and smaller group of super rich plutocrats.

The influence of the Koch brothers, and many others of the same ilk, is not confined to the States however. They have played a part in shifting the terms of political debate across the whole of the developed world, dragging the centre of politics so far to the right that people like Richard Nixon look like lefty softies. If one thinks about how a proposal to increase taxes on the rich in Britain today would be greeted it is a testament to how far the super rich have captured common sense and shaped it to their benefit.

This is a book that should be read widely. It’s scale will probably prevent this which is a real shame. It is a tremendous summary of a long and sustained process of the exercise of soft power through the expenditure of vast amounts of private money. If the process is not stopped it will ultimately undermine democracy.

Dark Money. Jane Mayer. Scribe Publications 2016