Free Radical

by Cable, Vincent

  The secretariat was a difficult working environment. It contained some outstanding, highly motivated and hard-working people, notably Ramphal himself. But it also had the bureaucratic culture typical of other intergovernmental organizations, including the UN. The more senior appointments depended on political patronage rather than ability. Some governments offloaded deadbeats into key positions. Lazy but well-connected officials would wangle a few years in a cosy berth in London on diplomatic terms. The disparities in competence and application were compounded by cultural sensitivities. The deadbeats, in particular, would surround themselves with cronies and a protective coating of pomposity. It was not difficult to generate a perceived cultural or racial slight or to fall foul of status-conscious colleagues.

  Somehow, Ramphal floated above all this and, during his tenure, the Commonwealth became a multilateral force to be reckoned with. The heads of government meetings, every two years, were atmospheric (if overlong and overloaded with pomp and formality). My first was in Delhi, and I was able to see the private sessions at first hand. Mrs Gandhi was at the height of her powers, having recovered from the loss of authority after the emergency. Mrs Thatcher was basking in the prestige of the Falklands War and a new electoral mandate. Bob Hawke was putting Australia on the world map. Lee Kuan Yew gave clarity and intellectual distinction to every exchange and Dr Mahathir spoke for the self-assured, emerging Asian ‘tiger economies’. The heroes of African independence, Nyerere and Kaunda, had not yet been tarnished, at least abroad, by economic failure and Kaunda in particular was capable of gripping oratory (the impact was lessened when I discovered that his tearful outbursts, needing resort to a handkerchief, were an oft-repeated stock in trade). The hero of the hour, however, was Robert Gabriel Mugabe, fresh from his triumph over Ian Smith, articulate and charming, without a hint of the tyrant he was to become.

  By the time of my fourth, and last, heads of government meeting the fascination of being a fly on the wall had palled and I became bored by the self-indulgence of many of the heads and the pointlessness of numerous interminable discussions on matters over which the participants had no influence. Except in relation to South Africa and apartheid, which became the only substantive issue on the agenda, and on which there was agreement to limited sanctions, there wasn’t a great deal to show for having up to fifty heads of government spending the best part of a week together. Although I disagreed with her politics, I came to appreciate Mrs Thatcher’s brisk and businesslike approach, designed to make progress on practical issues. My own role was a modest but interesting one, preparing and negotiating the communiqué which, in the economic field, involved triangulating the positions of the developed countries (usually led by the UK Treasury), the major developing countries such as India, and the large numbers of small states, particularly from the Caribbean and Pacific, for whom the Commonwealth was a more sympathetic and less overwhelming forum than the UN.

  Ramphal’s technique for keeping the Commonwealth at the centre of international diplomacy was to prompt a series of expert group reports on topical issues, to report back to the next heads’ meeting. The Delhi meeting asked for a report on the international debt crisis which had overtaken Latin America but also some Commonwealth countries, notably Nigeria. I was asked to be secretary and scribe to a group that was to be headed by Lord Lever. Lever had had great influence as a Labour Cabinet minister and was credited with having negotiated the IMF rescue in 1976. He was an affable, highly intelligent man with strong, clear views and wished to use the group to promote his own ideas for solving the (mainly Latin American) commercial bank debt crisis through a big increase in financial flows guaranteed by the IMF. My tricky task was to produce a report that was not likely to be rejected out of hand by Mrs Thatcher and other developed country leaders, but would also address the concerns of the poorer countries with difficulties servicing official ( government-to-government) debt. Lever himself became somewhat frustrated by these constraints and produced a book in parallel, written with a Guardian economic journalist, Chris Huhne, a future parliamentary colleague. Our report had, I think, some success in for the first time setting out an agenda for dealing with the debt problems of low-income developing countries; and the British Treasury – through successive Chancellors (Lawson, Major, Lamont and Brown) – made this issue central to UK international economic diplomacy, using Commonwealth meetings as a launch pad.

  The debt report led to several years of work on private financial flows to developing countries. My colleague Vishnu Persaud, who oversaw the economic work and persuaded Ramphal to back it, saw that the economic nationalism that dominated the thinking of much of the developing world in the 1970s and early 1980s was gradually yielding to a more pragmatic approach to direct foreign investment by multinational companies, and to international capital markets. There was, furthermore, a niche in the marketplace of ideas. Developing country governments would resist lectures from Western governments on the subject, or the imposition of policy conditionality by the IMF and the World Bank. The main UN agencies, led by UNCTAD, and much of development academia were still immersed in the doctrines of ‘dependency theory’ and ‘ self-reliance’. We saw that there was a role for the secretariat, dominated as it was by developing country governments and staff, to promote a more economically liberal agenda which could be received sympathetically and with respect. After a series of seminars with finance ministry officials, Persaud and I published a report, and a book, on foreign investment and development which would now be seen as anodyne but was quite adventurous at the time. I went on to produce other reports on the role that international capital markets could play in generating different forms of external equity and loan finance for development.

  Encouraged by the political response to this work, Persaud decided to go one step further and set up a fund that would channel portfolio equity finance from City institutions into developing countries’ embryonic stock markets. I was asked to carry the plan through. The idea was not entirely original. The International Finance Corporation had launched a fund of this kind and Templeton had established an emerging markets fund. But in the mid-1980s there was still widespread scepticism in City institutions about emerging markets and it was hard work attracting any kind of serious interest. Nonetheless, we prepared a proposal for the heads of government meeting in Malaysia, backed by a leading fund manager. Governments made a series of (modest) concessions that would open up their stock markets to portfolio investors. The fund was launched, and others followed with the Commonwealth brand. While the sums mobilized were modest, we acted as a useful catalyst and helped reduce the barriers of fear and suspicion between private investors and emerging markets.

  Ramphal himself was not greatly interested in these rather technical matters but was preoccupied with the bigger picture: getting rich and poor, big and small, capitalist and communist, countries engaged in a ‘dialogue’ to produce consensus on the big international economic and strategic issues. He saw the UN as too cumbersome, procedurally hidebound and inhibited by the veto powers; the Bretton Woods institutions as too dominated by the West; the G7 as too exclusive. Two decades later, the G20 would emerge to fill this gap. But there was an appetite in the 1980s, among Europeans as well as developing country political and opinion leaders, to find some common ground outside the Reagan–Thatcher camp and that of the dinosaurs in the Kremlin (and whatever, mysteriously, was going on in China). This was the climate that led to the Brandt Commission, and the Palme Commission, in which Ramphal was a key player. I played a modest role in these, but he asked me to play a big part in the third Global Commission, headed by Gro Harlem Brundtland, the Norwegian prime minister, which was to look at the environment and development.

  Environmental issues, then, were a second-order issue in the Western world but were making an increasing impact, especially in Canada, Germany and Scandinavia. In the developing world there was a growing worry about the loss of tropical forests and dwindling water supplies, and thinkers like Dame Barbara Ward
had started to sound warnings about widespread environmental damage. These various concerns had led to the UN Rio Conference in 1992 and the establishment of the United National Economic Programme (UNEP).

  But there was still a vast gulf between the passionate warnings of environmentalists and the indifference of public opinion in most countries, and between the differing interpretations of environmental problems, especially as between rich and poor countries. The Brundtland Commission had the task of narrowing the gulf. The commission quickly got into difficulties when developed country environmentalists tried to steer it in their own direction: pessimistic about growth and resource use; romanticizing the simple, if primitive, world of the South American Indian tribes. An exceptionally bright Indian, Nitin Desai, was drafted in to head the team of scribes and to correct the balance and I was to work with him. The concept of ‘sustainable development’ emerged, and has become a mantra of the environmental movement. At its core was (and is) the belief that the alleviation of poverty is both an objective in itself and central to reducing environmental degradation. The disappearance of tropical forests was seen as owing more to the poverty of encroaching farmers than to the timber demands of rich countries (though, of course, overexploitation of forests for commercial use is a factor). Economic growth is to be welcomed, and is necessary in order to reduce poverty, but has to be modified in the direction of sustainability. These arguments may now seem contrived for political purposes, but were important then in securing a common approach among a very disparate group of countries.

  In retrospect, one of the most important contributions of the Brundtland Commission was to pick up the early signals in the mid-1980s from a group of climate scientists who were warning about man-made climate change and global warming. I had helped draft the relevant sections and became fascinated by the issue. Then, the following year, at the 1987 heads of government meeting, the Maldives’ president raised the issue of global warming and rising sea levels. He had read an article in a magazine on the subject: did it explain the partial inundation of his country of low-lying coral atolls, and could anything be done? A group was assembled under the British scientist Sir Martin Holdgate and I was made secretary. With the enthusiastic help of climate scientists at the University of East Anglia, a geographer, Martin Parry, at Birmingham, and an environmental lawyer, Philippe Sands, and through a series of case studies on the potential impact of sea-level rises in Bangladesh, the Maldives, Tuvalu and Guyana, we were able to pull together a report that was perfectly timed to address growing interest in the issue. The report, which appeared in 1989, was evidence-based and cautiously expressed; emphasized the potentially greater threats to poor people in developing countries, who would be more exposed to disaster and had less capacity and fewer resources to adapt; and argued for a combination of adaptation and prevention, the latter based on a cost-benefit approach. My attempts to explain these qualified conclusions to the press were not a success. The Sun ran an article describing global warming in terms of a Venus-like climate with streets running with molten lead. The report also provided Mrs Thatcher, who had been persuaded of the seriousness of the problem by Sir Crispin Tickell, with an opportunity to display her (now largely forgotten, but considerable) interest in global environmental issues. These took concrete form in the Montreal Protocol on measures to counter depletion of the ozone layer, which established a template for the much more ambitious Kyoto Protocol a decade later.

  One personal spin-off from the expert-group report was that it attracted the interest of Shell’s planning department, which had seen the enormous long-term implications of climate change and environmentalism for an oil multinational. This, in turn, led to an invitation to join them. Since my political interests had by this time receded into the background, I saw no reason to do other than accept and move on.

  Chapter 9

  Big Oil

  Most politicians pontificate about markets and companies without ever having participated in any entrepreneurial venture more demanding than a school tuck shop or a fund-raising raffle. To a degree, this lack of experience doesn’t matter. There are brilliant football managers who were hopeless footballers, and battle-winning generals who couldn’t shoot straight. But when the government’s Treasury bench is composed entirely – as it has been in recent years – of former lecturers, teachers, charity workers, criminal lawyers and professional politicians, it is difficult to believe that the quality of decision-making is not affected.

  For many years my own understanding of the economic world was likewise largely confined to the public sector and to books. I had an acute sense of incomplete personal education. I looked, unsuccessfully, for a worthwhile role in the private sector. Somewhat late in life – now aged forty-five – I was invited to join Shell’s group planning team and jumped at the chance. One of my attractions to them was that I was an economist who knew quite a lot about the developing world and about environmental issues and, in particular, about the new issue of climate change. Capitalist enterprises are often attacked for being short-term in their outlook, but this could not be said of Shell. It had made massive investments with a perspective of decades, and it was starting to worry seriously about the implications for an energy company of global environmental threats from greenhouse gas emissions long before governments or environmental campaigning groups had grasped the significance of the issue.

  Shell’s group planning is (or was) a unique institution in the corporate world. Many companies closed their corporate planning functions after the 1970s when there was a reaction against mechanistic forecasting and when headquarters staffing was stripped to its essentials in a leaner and meaner business environment. Shell’s, however, survived and flourished, and those who led the planning team – Pierre Wack, Peter Schwarz and Ari de Geus – later became almost legendary figures in the rather specialized and lucrative world of business gurus.

  Shell’s team had earned its keep by developing a system of scenario planning which did not involve predicting the future but posed plausible if uncomfortable ‘what if?’ questions about the business environment. In a very large and successful company, largely invulnerable to takeover and inclined towards conservatism, senior managers saw value in this kind of regular internal challenge to their strategic assumptions. It had proved its worth in the late 1970s when it was almost universally assumed that high oil prices were here to stay. Shell planners warned that markets were working to reduce demand and increase supply and that oil prices could well crash for a prolonged period (as they did in the 1980s). This insight helped the company to survive and flourish in almost two decades of cheap (or low-priced) oil. When I joined, the company was trying to make sense of, and respond to, environmentalism, the cracks appearing in the Soviet Union, the growth of China, and the creation of monetary union in Europe. I was one of a handful of outsiders recruited to work on the scenario team addressing these issues and their attendant energy implications.

  The company has changed in many ways in the last two decades, but the company I joined had enormous institutional self-confidence: a multinational which had grown and flourished for a century. It was, on the basis of market capitalization, one of the top three companies in the world, alongside Exxon and General Electric, and had an enviable balance sheet with little debt. It prided itself on its professional and engineering excellence, the loyalty of its staff and its ability to sail, like its oil tankers, serenely through rough waters that would sink most companies.

  The unique corporate culture was the product of a marriage between Royal Dutch and (British) Shell Transport and Trading. The relationships were complex and have since been simplified and streamlined. But in essence the company was the same animal that had emerged before the First World War from the complementary interests of British and Dutch components. A British trader, Marcus Samuel, who started life selling shells on an East End market stall (hence the company name), developed an extensive business shipping Russian (or more precisely Azerbaijani) oil to Asia via the Suez Canal
. In due course Shell teamed up with the Royal Dutch exploration company, which had been producing oil in the Dutch East Indies (Indonesia). The British arm contributed trading, transport, marketing and logistics; the Dutch, exploration and production technology. Roughly the same division of labour and corporate structure continues to this day despite the upheavals of war – the German occupation of Holland led, notoriously, to collaboration by the Dutch head of Shell, Henri Deterding – the switch from colonialism to decolonization, and then post-war nationalization (as in Venezuela and Indonesia).

  It would be a caricature to say that the company reflected a creative tension between British accountants and Dutch engineers, but the distinction is recognizable. The Shell elite were trained at Delft, one of Holland’s top educational institutions, a school of engineering and architecture. The exploration and production function of Shell, dominated by Dutch geologists and petroleum engineers, has always been based in The Hague and, particularly after recent corporate upheavals, is unambiguously the profit and power centre of the company.

  The Dutch and British staff had rough parity at senior management level, with a slight Dutch majority reflecting the 60:40 shareholding. The marvellous bilingualism of the Dutch ensured that there was at all times excellent communication, in English, and the chemistry between the two nationalities worked extraordinarily well, as in other Anglo-Dutch groups like Unilever. Another eccentricity was the absence of a single ‘boss’. Shell, as the wits often put it, was the last major institution in the world, apart from Yugoslavia, ruled by a committee, comprising (at that time) seven managing directors (four Dutch and three British). The executive chairman was primus inter pares, and when I joined Shell the post was held by Loew van Wachem, an austere, punctilious former mining engineer, regarded with some awe by the lesser mortals in the company. His particular obsession was trying to anticipate the iceberg that might sink his otherwise impregnable ship, frequently citing the experience of Exxon, which had almost capsized after the Exxon Valdez disaster. His instincts were to be proved right.