Anyone out there know what 1MDB is? You likely guessed the singular of 3,4-methylenedioxybutanphenamine, who wouldn’t, and you’re not wrong, but it’s also something even more interesting. The good news is that it has nothing to do with coronavirus, racism, or the temperature of the planet. The bad news: it has to do with Wall Street, and if that makes you shiver, it should. 1MDB has an indirect but real impact on the quagmire Canadian oil and gas is in.
1MDB stands for 1 Malaysia Development Berhad, and 1MDB is now synonymous with the word “scandal”. It was a Malaysian state development fund that raised billions through bond issuances for use in investment projects and joint ventures. Where the phrases “government fund”, “raising money”, and “joint venture” are all used, you should add “vulture” as an inevitable corollary. A lot of the money (billions) appeared to have flowed to cronies/Hollywood-wannabes that bought the usual mega-pig-at-mega-trough assortment of yachts, art, jewellery, real estate, and an A-list celebrity contact list.
What is important to know is that Goldman Sachs was involved, and when you hear that, you should know that it will be an interesting story, and their presence also makes one think in a metaphorical way that no one really knows what sort of scary creatures live at the bottom of the deep dark ocean.
The long and the short of the story is that GS was involved and (therefore?) there was some sort of settlement. GS didn’t admit wrongdoing and is – you guessed it – “vigorously” defending against all charges. Having never been involved in such shenanigans, it’s hard to fathom how “defending vigorously” includes offering one-plus billion as a settlement (kind of a weird way to say “I didn’t do anything”, but maybe that’s just me). The Malaysian government wasn’t interested in such picayune olive branches; they said they’d start listening when the first number was a four or larger.
Viewed in isolation, the 1MDB scandal is pretty shocking and repugnant. But we can’t view it in isolation, because it came hot on the heels of some far worse behaviour, behaviour that was so deplorable that the GS defence was not even remotely vigorous.
GS was one of the main players in the 2008 global financial meltdown. The firm was a pioneer and heavyweight in the financial engineering sport of packaging garbage debt into aesthetically pleasing bundles (officially stamped as high-quality by public ratings agencies more worried about their share price than their integrity) and selling them to duped investors around the world. Michael Lewis captured the whole saga perfectly in The Big Short; both the book and movie offer an excellent overview of how it all unfolded.
For the purposes of this discussion, it is worth noting that GS admitted culpability, and agreed to pay a $5 billion penalty. If you think that’s substantial, consider this: Banks and other financial institutions have in aggregate paid $150 billion in fines and settlements for the appalling behaviour that played a large part in creating the meltdown. And that tally was as of 2015.
In the end, after the financial crisis, all the big banks were left standing there sheepishly like a dog that crapped on the rug. It was a horrible chapter in the history of the financial industry. But what came next was in some ways even more horrible, because it showed that, despite the magnitude of the chaos, the size of the settlements, and the obviousness of their complicity, they changed their ways not a whit.
What came next was 1MDB. The “funding irregularities” in this fiasco happened between 2009 and 2013, the period when the world was figuring out just what happened during the financial crisis and deciding how they were going to make that outwardly contrite gang of bankers pay.
The public outcry against the financial sector for the 2008 crisis led to the “Occupy Wall Street” movement. It was a spontaneous reaction from a public that was crying “enough”, and I initially cheered them on. Sadly, the movement was co-opted by a cast of weirdos and others that chose to politicize the movement, and that, as we will see with climate activism, ultimately disarms the power of the initial movement, because political battles cannot be resolved harmoniously.
The Occupy Wall Street movement may have faded away, but the underlying anger and mistrust did not; that hostility merely regrouped and came back in a mutated way as one of the central planks of radical political schemes like the Green New Deal.
The significance of this is not to be underestimated, and it helps to understand some of the quagmire we’re in today.
We are now seeing a generation of people in a foul mood, like a hangover from decades of these ethical black holes. They grew up seeing the nonsense from the Financial Crisis, they’ve seen The Big Short, they’ve seen/heard about 1MDB, they see guilty faces and weaselly lawyer admissions and settlements, and they see that nothing changes. These fed-up people then become willing audiences for political activists who will use the situation to smuggle in a whole different agenda.
That’s how lunatic movements gain traction, and that’s how clever adversaries of not just Wall Street but also capitalism and hydrocarbons seize the moment. They lump a bunch of institutions in their crosshairs together, claiming it’s all rotten.
That’s why we see groups cataloguing how many times CAPP talks to the federal government, and why activist groups love to talk about largely-imaginary fossil fuel subsidies. Activist groups funnel all these hints-at-impropriety into a narrative about backroom skulduggery between governments and industry, and paint the picture that the antics of GS’s brazen financial engineering are no different than when CAPP meets with the federal government to discuss energy policy, or when ExxonMobil does the same in the US. That, of course, doesn’t mean industry is unaccountable or infallible. CAPP may well push for things that are over the line; for example, someone decided that all environmental monitoring was too risky due to coronavirus, which seems preposterous to me. Some, maybe, but all? But even if CAPP did push too far there, it’s no excuse to paint the entire industry with a certain brush, even though that’s exactly what happens. They’re all complicit, none of them care about the environment, and see there’s another example of why we have to throw it all out and start again.
The narrative spreads like a virus, with no social distancing to limit it. The story goes: We’re doomed because of a demonic, monolithic, underhanded, secretive, financial/government/energy complex (what used to be called the military-industrial complex in the 1960s, the last time that social upheaval was so widespread) that is out to suck every penny it can out of the system, at any cost.
This is how outlandish schemes like the Green New Deal gain traction. There is enough validity in some of the pillars, irrefutable validity (particularly when self-defence by the accused is not-vigorous), that people start distrusting all institutions, and there are many anarchic-types more than willing to help poison the atmosphere and provide a revolutionary solution for you.
And it’s all very sad because it’s now binary. There is no grey anymore, and no middle ground is allowed, particularly on social media. To take a stand against schemes like the GND is to implicitly stand behind the antics of Wall Street. To take a stand in favour of a healthy Canadian hydrocarbon sector is now seen as evidence of not caring about the environment. There is no quarter given, no matter your track record; even one incident of questioning a fundamental of your chosen side’s platform is unacceptable (ask Michael Moore, exiled from the entire left side of the political spectrum after decades of yeoman’s service). Years ago, I wrote an article saying Rachel Notley couldn’t be held accountable for previous Conservative government shortcomings, and I received more threats and insults from that than anything else I’ve ever written. That is how modern politics works; you’re for us or you’re against us, and if you’re against us you’re against everything we do because we’re against everything you do.
To be crystal clear: This is not an endorsement or excuse for radical schemes like the GND. It is an explanation of how we got here, how we can stand and look across the divide and wonder, “How on earth could anyone be stupid enough to believe that?” And they’re looking at us and saying the same thing. If we analyzed some of absolutes on either side, we might find that there are definitely institutions and practices in need of reforming and that we could agree on which they are. But extremists of either stripe don’t like that concept. They need villains; life is much easier with villains to blame for everything.
The lesson of the story is, as always, that we have to deconstruct the lunatic positions we see on social media, in comments sections, and in the belligerent apes we see in the news at either end of the spectrum. We need to sift through the rhetoric and the layers of people that get ever-more-crazy the closer you get to the top, we need to speak to the masses lower down, and work on similarities. Poll after poll shows that a majority of citizens support rational goals: a majority support responsible resource development, and a majority supports rational initiatives that protect and preserve the environment (as opposed to the political rhetoric of hard core activists that has moved far beyond the environment, as in this shocking admission by an Extinction Rebellion founder that their movement really isn’t about the climate).
We need conversations where people can look at one side and demand better, and also do the same to the side they’re on, when it’s the right thing to do. Based on the current state of the media and social media, such conversations won’t start there. But they can start with us.