Lawson explained how LLM plays on what they call politics without leadership. in a milieu in which a lack of conviction is deemed an asset, with no fixed star of principles by which to steer, policy is susceptible to the last pitch heard over cocktails. "The Labour government is always of two minds, it operates in a kind of schizophrenia. On big issues especially, they don't know what they are thinking. Blair himself doesn't always know what he is thinking."

Lunch at Number 10

Draper was now aware that he had competitors for our business, and he determined to display his prowess at opening the doors to power, "I took the chief executive of the House Builders Federation in to see Geoff Norris [Blair's policy adviser] the other day, and that meeting took place in the Downing Street dining room! It's not difficult for me to take people into these people."

Sensing I was not impressed with merely breaking bread with ministers, he offered a story certain to leave an impression. Draper's client PowerGen PLC has long hungered to buy a regional electricity company, but even Conservative trade minister Ian Lang had rejected such an acquisition as a naked attempt to create an electricity monopoly controlling a third of England. Lang's successor at the Department of Trade and Industry (DTI), Margaret Beckett, appointed by Blair, had already blasted such competition-killing combinations. PowerGen's case seemed lost. Now Draper told me he'd steered the chairman of PowerGen, Ed Wallis, around Beckett and brought him directly into the Treasury for a confidential meeting with a top adviser to Chancellor Brown. The PowerGen merger deal is now locked. Government rejection "will not happen again". Had Draper pulled off an extraordinary fix or was this merely hardsell horsefeathers?

I told Draper my own clients, representing US oil shippers and power plant builders, would need exemptions from environmental rules, in effect, a licence to pollute England. Draper had told me, "I don't sell my mates," but in this case, if we retained him, he would go straight "to Number 10 [to] one of my best friends, Liz Lloyd," whom Blair had put in charge of environment matters at the Downing Street Public Policy Unit.

Why would he not take us to the minister of the environment? In response, Draper introduced me to the ways of what he calls "Policy World, the little world of business people and politicians" with true authority. A good lobbyist not only opens doors, he steers his clients away from those who have fallen off the surface of this potent planet. "There is an environmental minister, Michael Meacher. He's very weak and basically he's irrelevant and nobody should have to take him into account. To be honest with you, he's a nobody going nowhere, so I wouldn't particularly sort him out. I don't think he'll be in the job much longer. Then the DTI obviously matter, but they're very weak, as people perceive Margaret Beckett to be useless and perceive [energy minister] John Battle to be pretty useless. So if you wanted to change the government's approach, quite frankly, you don't want to advocate to someone in the DTI."

Interestingly, Draper strongly advised against currying favor with Labour through political donations, though he could arrange a sponsorship of a Labour event, in which case, my clients' names could be shielded from publicity.

The Nigerian connection

Shandwick Public Affairs' annual revenues of 2.6 million pounds make it the biggest operator in the influence game. Shandwick's chief operative, Colin Byrne, formerly Blair's press aide, is older than his go-go competitors, more reserved and less given to boasting about a fix. Byrne never offered a stolen document, never tried to sell lunch at Downing Street,

Byrne's new partner is Chris Savage, recently of the Trades Union Congress. The firm advertises his services as "one of the few people on the Left who really understands industry policy". They are joined by Richard Aylard who, says his company profile, "drafted all of HRH's speeches and articles on the environment" from 1989 to 1996. Prince Charles need not lift his pen.

How did Shandwick employ these progressive and green credentials? According to Byrne, their signal accomplishment was what he terms "corporate reputation management" for Shell International. Their prime assignment was to create a political shield for Shell Oil's operations in Nigeria in the wake of the Nigerian dictatorship's execution of Ken Saro-Wira. Saro-Wira had organized indigenous protests against the oil company. Did anyone at Downing Street find Shandwick's defense of Shell in Nigeria a bit offputting? "No, not at all!" Byrne assured me. Indeed, with their reputation under Shandwick's management, "Shell are now perceived as very much being the Good Guys again."

In the entire tour of lobby shops, not one of these former environmentalists and anti-sleaze crusaders signalled qualms about flacking for a Shell or a GTech - with a single exception. A Labour-connected lobbyist handling a big-name corporate account passed me a note asking for help in landing a non-profit organization as a client, "So I can stop working for these pigs."

Part II: To London Understatement of the century

Monday, June 23. The investigation moved to the Sanctuary building at Westminster Abbey. Within this historic courtyard at Number 7, GPC Access's Derek Draper guides us through the peculiarities of British democracy.

"There are 17 people who count," Draper tells us. "And to say I am intimate with every one of them is the understatement of the century." This intimacy is based on a web of favors of which the lobbyist keeps a careful mental inventory. At Gordon Brown's confidential request, he put out a supposedly independent newsletter praising the chancellor's minimum wage proposal. In the Sunday Telegraph, he authored a 2,000-word profile of Ed Balls, a Brown aide. He'd given Balls editorial control and the Telegraph was none the wiser. As to Jonathan Powell, the prime minister's chief of staff, gatekeeper at Number 10, "1 got him the job."

Draper lectures us that one must not call in these chits in a crude manner. In seeking favors from government chiefs, "It is important to reference the New Labour mindset and flatter them into thinking their viewpoint is new. You say to Geoffrey Robinson, for example, that he is very important."

My "business partner", Mark Swedlund, interrogated Draper. We Americans have come for access, not lessons in Labour rhetoric. We needed proof of Draper's insider bona fides.

Draper rose to the challenge, literally. He stood up from his chair, removed a phone pager from his belt and, holding it above his forehead, read off one phone message after another, nearly two dozen, from the powerful and nearto-power. "Ed Miliband - call me, Dave Miliband - please call, Andrew Hackett ... that's [deputy prime minister] Prescott's office." The recitation continued. There were several messages from Liz Lloyd of the Downing Street Policy Unit, Balls from the Treasury and others, each pleading for a moment of the lobbyist's time for tea, advice or requests unknown.

The lobbyist was in a cheery mood. His walking the CEO of the Builders' Federation into Downing Street the week before was already paying dividends. Blair's adviser Geoff Norris agreed to resurrect the Builders' plans to dig up several greenbelt areas for houses. "Just a bloody bunch of mud tracts at the edge of town," as Draper described the lands at issue, despite the claims of local councils.

Such favors must be returned. "Tony needed ten environmental gimmicks" for a news release to support the government's green image. Draper rapidly provided a list, "electric cars, silly things like that". Draper rolled his eyes. "They loved it."

Message to Murdoch

Our next stop, Soho. There, in the trendy loft offices of LLM lobbyists Ben Lucas and Jon Mendelsohn, we endured a mindnumbing two-hour lecture on the Third Way, "analytically-driven evidence-based decision-making," a solid wall of New Labour-speak.

But what at first seemed like an aimless think tank seminar had purpose. Lucas and Mendelsohn's point was to introduce us to a world in which, as their manifesto told us, message matters more than content. For their fee of 5,000-20,000 pounds per month, these two Professor Higginses would instruct us in the political grammar of the Emerging World of Tony Blair.

Our cover story was that we needed LLM's help in defeating environmental restrictions, as they had done for Anglian Water. Mendelsohn advised we must recast our plan for new power stations, noisy and polluting, into something that sounded earth-friendly. "Tony is very anxious to be seen as green. Everything has to be couched in environmental language - even if it's slightly Orwellian."

But LLM demands more of their clients than adopting new PR gloss. LLM clients are expected to "reshape their core corporate culture", to get in sync with New Labour's vision, as their client Tesco had done to defeat the car park tax. Part of Tesco's cultural reshaping involved dropping 11 million pounds into Mandelson's Millennium Dome project.

Once we have changed our culture, we asked exactly how does LLM help us get a law changed? Lucas said, "This government likes to do deals."

He gave an example. Labour's anti-monopoly competition bill threatened LLM client Rupert Murdoch's media empire, a little problem with alleged predatory pricing practices. LLM carried the word from Downing Street to Murdoch's News International that, if their tabloids toned down criticism of the bill, the law's final language would reflect the government's appreciation. On the other hand, harsh coverage in Murdoch's papers could provoke problems for the media group in Parliament's union recognition debates. The message to muzzle journalists was not, said Lucas, "an easy one in their culture". However, the outcome pleased all parties,

Unlike his wheeler-dealer partners, Jon Mendelsohn, aloof and intellectual does not have an obvious ounce of fixer in him. Rather, he is their Big Idea man with a deep understanding of Blair's obsession with corporate and media contacts. "Labour's super-majority in Parliament means the only countervailing force is media and the business community. So when the economy turns soft, as it naturally must, we will make certain they stay with us. If we have business and media, the people will come along."

Given this grand plan, it was not difficult for LLM to secure places for their clients on official task forces. The problem was the opposite: LLM's challenge was to procure a steady supply of executives to feed Labour's insatiable appetite for industry contacts. Clients were complaining about the explosive number of task forces, panels and "quango" meetings that Labour asked them to attend.

Mendelsohn concluded, "'Lobbying' is a misnomer. The fact that you know someone is irrelevant. Friendship accounts for nothing."

But just in case, Lucas reeled off a list of their cronies and favors owed by each: "[Home Secretary] Jack Straw asked us to set up ... Gordon Brown asked us to host... . " And so on.

Lucas reviewed their awesome fee schedule, and we were on our way.

Over-priced claret

Rush hour in Soho. We walked down the street to the Groucho Club where we would be guests of an operative with yet another lobby shop. He'd got word that these Americans were looking for political help. Over a bottle of overpriced claret, we listened to one more young Blairite make his pitch for our business.

We then detailed what his competitors had on offer: Milner's purloined reports, Draper's deals with Ed Balls, LLM's insider information from the Exchequer.

I waited for him to top their accomplishments. He put both hands over his eyes. "It's appalling," he said, "It's disturbing." If that's what we wanted, he'd have none of our business.

This was political consulting's finest hour.(I'm withholding the firm's name - exposing a lobbyist's rectitude could cost them. I discovered they had already lost the business of an American power company seeking to get to the Treasury's Ed Balls to reverse another quasi-judicial decision by Minister Beckett. Their beau geste was for naught. Our information is that Blair personally stepped in over Beckett after a request from the White House.)

Mr Liddle's offer

The next evening, GPC held its annual bash at the Banqueting Room in Whitehall Palace. Under vaulted ceilings inset with nine canvasses by Rubens, GPC's 200 guests washed down thin canap~s with a never-ending supply of champagne (Lambray Brut) poured by discreet waiters. Lords, MPs and Downing Street powers by the dozen mixed with the nation's business elite. It was Derek Draper's phone pager come to life.

At the center of this swirl, Draper held court. Yet, he graciously took the time to offer us free samples of his connections, introducing us to several government luminaries who could be useful to our projects, including more than half the prime minister's Policy Unit. From the chairman of the Select Committee on Trade and Industry we endured an earnest discourse on the development of Parliament's energy review (and we confirmed how lobbyist Milner of GJW received advance information of his committee's report).

We asked Draper to point us to someone who could vouch for his influence with government. He reached out, seeming to pull at random from the crowd the nearest figure. He grabbed a short, balding man with sweat beaded on his forehead. Derek told the official we were potential GPC clients, then walked off.

Roger Liddle is one of the more important men in government, in charge of European affairs for Blair's Public Policy Unit, with an office in 10 Downing Street. After some chit-chat about our electricity generators, we asked Liddle if Draper was as influential as he claimed. Liddle leaned forward. "There is a Circle." Liddle was now whispering. "There is a Circle and Derek is part of the Circle. And anyone who says he isn't is An Enemy." He reassured us that, "Derek knows all the right people."

Could Draper introduce us to key policy-makers? In response, Liddle handed us a card with his Downing Street and home phone numbers, and made this extraordinary offer. "Whenever you are ready, just tell me what you want, who you want to meet and Derek and I will make the call for you."

Derek and I. It was a strange locution. Swedlund remarked that Liddle sounded "more like a member of Derek's outfit than a member of the government". It was not until the next day we learned that Swedlund was not far off. Liddle had, until the general election, been managing director of Draper's firm. Officially, he'd placed his 25 per cent ownership interest in GPC Access into a blind trust when he took the post at Downing Street. Any new business Liddle cooked up for Draper could go right into the Liddle's "blind" piggy bank.

Jail

The next morning I received a call from the persistent lobbyist from the Groucho. He still refused to match his competitors' offers. "If Draper and Lawson delivered half of what they promise they'd be in jail! Half of Downing Street would be in jail!"

Phone call from Tony

"What I really am," said Derek Draper the next day, "is a commentator-fixer. Your Mayor Daley has nothing on me." We were sitting in the exclusive Reform Club on Pall Mall. Draper sipped his trademark champagne and sank into a red leather armchair under a tall painting of an aristocrat from another century. He tossed a copy of Progress magazine on the antique table. "I own it," he said of the Blairite journal, "100 per cent of it, all the shares." The funds to launch the magazine came from an unnamed "Labour billionaire", is a financial arrangement accomplished by "a single phone call from Tony". In the lobbyists' world, there are no last names. (Later, Barnett, my partner at the Observer, would find out the secret billionaire was Lord Sainsbury, rewarded by Blair with a cabinet post most helpful to his business interests in genetically modified food production.)

Draper had just filed his weekly column published in the Express. His writings are edited in an unusual manner. "I don't write that column without vetting it with Peter Mandelson. They say, Oh Gordon will be mad at Derek, but he won't because his press secretary has vetted it."

It was June 25. For Draper, it was a day of miracles he had prophesied. Only two hours earlier, the government released its energy review. The coal industry would be saved if PowerGen agreed to sell a few generating plants. Simultaneously, newspapers reported PowerGen would buy Midlands Electricity for 2 billion pounds, if the government approved. The suspicious alignment of the two announcements forced Trade Minister Beckett to deny categorically that a secret deal had been struck. "There has been no wink or nod to anyone about anything." But then, how would she know? Wallis's meeting at the Treasury was a quiet affair, no record of it was kept and, as Neal Lawson informed me, Beckett is "out of the loop".

Draper should have been pleased with his success. But his mood was philosophical. "I don't want to be a consultant," he said. "I just want to stuff my bank account at 250 pounds an hour,"

Of all the things Draper told me, the most astonishing is that he was only 33 years old.

Beer at Crouch End

From the Reform Club, Swedlund and I took a cab for a get-together with Will Baker, another lobbyist of sorts.

We joined up with Baker at a friend's flat in Crouch End. Baker works as an anti-poverty campaigner for a large organization based in Liverpool. The group is pleading with Labour to eliminate electricity and gas heating disconnections, and this puts them squarely up against Draper's and Milner's key clients, the utility companies. The antipoverty group lacks the 8,000 pounds a month to hire an LLM or other professional consultants, so Baker and his colleagues must themselves act as lobbyists on behalf of their low-income constituents.

Over Budweisers at the kitchen table, Baker said his group failed to get a meeting with a single key minister during the government's Utility Review, not even contact with junior civil servants. "We can't get in the door. They tell us to submit our comments in writing. We are just totally excluded." He could not imagine an invitation to sit on a Task Force. (Ultimately, the government, despite campaign promises, chose to continue the system permitting private electricity, gas and water companies to disconnect poor customers behind in their bills - a big victory for Draper's and GJW's clients over Baker's group of clerics and poor people. Special access is not a victimless crime.)

The curtain comes down

It's hard not to like Draper, Milner and Lawson. They each have that Bart Simpson charm: mischievous, a bit immature, yet endearing. And they exude New Labour's enthusiasm for the New Britain. Do any of these young men harbour misgivings about renting out their contacts? They see no reason for apology. It's their world after all. They are convinced that they crafted New Labour and now, through GPC, GJW and LLM, they are merely charging admission to enter the show they produced.

But even the best players of the game fear for its future. Derek Draper, in an unusually reflective moment, said he had worried thoughts about the inside access to government that goes under the rubric "public-private partnership". Draper said, "I think there will be a scandal here eventually. The curtain is going to come down. I'm sure it will happen." Then he returned to discussion of fees and lunch.

And inside the newsroom ...

Just before the story hit the streets, the Observer contacted Roger Liddle for his side of the story.

Liddle was the squat little man who offered to get "what you want and who you want to meet" at Downing Street. This was no small fish in the net. Liddle and Peter Mandelson had co-authored the book The Blair Revolution. ThL three of them were the key architects of that revolution-in-reverse, the program to seize the Labour Party, yank it to the right, and rename it "New" Labour. That was step one; step two was The Project - to merge New Labour with the LiberalDemocrats, Liddle's political bailiwick. Big business would provide the gilded glue, shepherded by the lobbying firm set up by Liddle and Draper, GPC.

Blair moved Liddle right into 10 Downing Street, and made him the real power on European affairs. Liddle's equity in Draper's lobby shop went into a "blind trust". Liddle's wife was a dear friend of the wife of my editor Will Hutton. When Liddle heard the story was about to break, he called Hutton at home, knowing full well that Will was about to turn Liddle's career into garbage with a pen stroke. Liddle begged. He claimed he was drunk, and when he's drunk he's a fool, everyone knows that, and he shot his mouth off, didn't mean it, didn't know what he was saying.

Hutton told me this on Sunday morning over croissants at a little bistro in Belsize Park. "Lobbygate" was on the streets, but we talked mostly, as we prefer, about industrial regulation and the political economy of Brazil. He was off that afternoon to Sao Paolo to meet President Cardoso - reluctantly, because of our influence-peddling story. I said, "Go. Brazil's the future, Britain's history."

In Hutton's view, Liddle was pathetic and sincerely remorseful. So Will gave him the benefit of the doubt and did not call for Liddle's resignation in the editorial leader. And besides, Liddle told him, he couldn't gain from swinging business to Draper: the blind trust had sold off his interest in Draper's lobby firm.

Hutton's as smart, maybe smarter, than his formidable reputation as Britain's leading intellect. So I paused to let him work it out himself. Liddle knew his interest had been sold? 'So, Will, the blind trust ain't so blind." Hutton, a big man, laughed so hard he almost knocked over the metal table. He'd been had. Liddle was a weasel and a liar. But not a very good one.

In the newsroom the next day, I met the deputy editor. With Hutton away, the wan young corporation man now in charge preferred to meet surrounded by a guard of lawyers and marketing people. By Monday afternoon, the full force of the New Labour government and their running dogs at the other papers were tearing our journalistic flesh. And the deputy wanted to throw them something to chew on. Preferably me.

In the meantime, he'd hand over our tapes to the government. 1 said, "Well, that's nuts, that's just straight fucking insane nuts." But he'd made an Executive Decision. "So give us the tapes."

I explained about my wife. Didn't have'm. He looked ready to die on the spot. He figured he would lose his job. (He did.)

In the meantime, he had another brainwave: he'd tell Alastair Campbell, Blair's press python, which accusations we had on tape, and which were "merely" backed up by witnesses and contemporaneous notes. How brilliant. I opined: "The sleazy little shit-holes will talk away with excuses anything we have on tape then flat-out deny anything from notes, say we made it up." But there was no stopping him from stepping on his own dick.

At 4 am London time, I reached Hutton in Rio. "There's a Concorde leaving Sao Paolo tomorrow. For Christ's sake, Will, get on it. "

Too late. The Observer showed our cards to Campbell and immediately, the government's guardians talked away what we had on tape, flat-out denied what we had from notes and witnesses, even though S w'edlund - he was with me at the meetings with Draper, in the hugger-mugger with Liddle - gave us a sworn affidavit under penalty of perjury.

Liddle was no longer the pathetic drunk contrite over his corrupt offer. At first, he announced he couldn't remember meeting me, certainly couldn't remember what was said. Once he knew we had "only" a sworn affidavit of a witness, he grew bolder, and in his third version, he suddenly remembered it all clearly. And what he remembered was that I was a liar; I'd fabricated his words.

Then the next morning, a hand-scrawled note came through the Observer's fax machine, no signature. "I've got your tape. What's it worth to you?" Linda thought she was quite droll.

Lobbyist Ben Lucas, smugly assured that I had no tape, flatly denied to Newsnight's cameras that he had detailed to me passing on advance information from the Treasury to his client, the Government Association. Meirion Jones, one very smart producer at the program, let Lucas swallow that grenade - then played on air my tape of him saying the words he denied.

Then it was Draper's turn to step on a landmine. Assuming I had no tape of our chats, Draper denied the words I attributed to him, but that day, Linda relayed the tape via phone, and anyone could hear Draper's incriminating statements about Downing Street cronies on the Guardian's web-site. Draper lost his job, but got a payout which will keep him in Lambray Brut for another decade.

In that first week, while I was The Liar and Blair's hands were shaking, I was sure I'd nailed Liddle. The mendacious little scamp was drunk, was he? Didn't remember me, did he? Never offered to bring me into Downing Street, give me his private numbers? In fact, the next day after his offer, and sober as a deacon, Liddle called me from 10 Downing Street to set up a time to get together, to seal the deal. He denied it, and that stunned me. Now I had him! All I had to do was go over the Downing Street phone records and point to my mobile phone number ... when I discovered that, in Great Britain, telephone records of a public servant from a public phone were "private", or confidential or some kind of state secret. I was screwed. Liddle walked away smelling like a rose; and Blair rewarded him with the highest increase in salary awarded anyone in government.

Mandelson was promoted to minister for trade and industry, replacing Margaret Beckett - who knew me and refused Blairite requests to denounce me (as the deputy prime minister, John Prescott, had done, denying, weirdly, that he knew me, and in case he did, he never borrowed any jokes from me. But that's another story.) From his new position, Mandelson would carry out several deals dear to the heart of Bill Clinton's and George Bush's friends, which Beckett had resisted. We'll get to that.

The Politics of Emptiness

From the New Statesman

Humiliating Draper and his lobby buddies was a dumb move on my part. The real story, about Treasury and Trade Ministry deals for Murdoch, Tesco's, GTech, Enron - about the corporate powers getting the inside word, the inside track, the inside deal - was all lost. Suddenly, the story became the lobby boy-liars. I shrugged my shoulders and flew home. Two months later, I mailed off this intemperate screed to the New Statesman.

The Observer splashed the story "Cash for Secrets" by Antony Barnett and me, on Sunday, July 5. By Thursday, July 9, I knew our three months' investigation had been a waste of my time - and I got the hell out of your country. In the four days between publication and my escape, the media turned the story on its head. Derek Draper, on returning from his Italian vacation, hijacked the spotlight. Suddenly, it was all about Derek's Big Mouth and about other "boastful young men" exaggerating their insider connections. The story was now Lobbygate, or as Derek preferred it, "Drapergate". At Heathrow, I was tempted to write on the departure lounge wall, YOU'VE GOT IT WRONG. IT'S NOT ABOUT LOBBYISTS. The real story was about Tony Blair and his inner circle. I thought we had exposed New Labour's obsessional pursuit of the affection of the captains of industry and media. It was a tale of the highest men in government twisting law and ethics to win the approval of this corporate elite. But by Thursday, the New Labour faithful could take comfort in the conclusion of the New Statesman that the Observer revelations were merely about Draper's "overselling his product," and therefore, the allegations were "almost trivial".

Trivial pursuit

Indulge my penchant for trivia. Among other discoveries, the Observer disclosed lobbyists' revelations that:

... In return for Tony-praising tabloid coverage, the government offered Rupert Murdoch's News International valuable amendments to the competition and union recognition bills

... In secret meetings with the deputy prime minister following an11 million pound donation to the Millennium Dome, Tesco won exemption from the proposed car park tax. Value: 20 million pounds annually

... Using confidential government information and special access to Downing Street, American power company Enron reversed a government plan to block their building new gas-fired power stations

... A US investment bank and privileged UK businesses received advance notice of Gordon Brown's exact future spending plans. ("Valuable marketsensitive information," lobbyist Ben Lucas told me. "Worth a fortune," Draper confirmed.)

... PowerGen chairman Ed Wallis met a key Treasury adviser to obtain a sotto voce agreement to approve merger plans previously rejected by the Tory government. These deals were worth billions.

The list went on. We had not stumbled on a tawdry little fix or two. It was systemic. New Labour had opened up secret routes of special access to allow selected corporate chiefs to bargain, alter or veto the government's key decisions. Derek Draper was not the story, only my unwitting source. In his role shepherding his industry clients discreetly through back doors at Numbers 10 and 11, Draper, like the other young New Labour lobbyists, was nothing more than a messenger boy, a factotum, a purveyor, a self-loving, over-scented clerk.

Ubermensch of the New Labour order

Pouring sherry cocktails at my Tower Hotel suite - this front operation cost the Observer a pretty penny - I asked one of Draper's competitors, Rory Chisholm, if he could match Derek's setting up the meeting between PowerGen and Treasury to talk mergers. "Now hold on there!" Chisholm, a Director of GJW, a lobbyist of the old school, put down his drink. "That's getting a bit illegal. It's a judicial process. It's like approaching a judge."

Why would New Labour skate so close to the ethics edge? I found my answer in a confidential booklet, "Understanding the World Today", given only to potential new clients of the hot new consultancy Lawson Lucas Mendelsohn. LLM, named for key campaign advisers to Blair, Gordon Brown and Jack Straw, is no influence-for-hire shop that can be purchased by anyone with a checkbook. To obtain their much-sought services, corporations must, Ben Lucas told me, "change their culture" by embracing the statement of principles and methods in LLM's sales brochure-cum-manifesto. On page 3, LLM prophesies apocalyptic transformations: "AN OLD WORLD IS DISAPPEARING AND A NEW ONE EMERGING." LLM then helpfully divides all human thought and emotion into two long columns, one labelled "The Passing World", the other, "The Emerging World". IDEOLOGY and CONVICTION must be left behind in the Passing World. In the Emerging World, PRAGMATISM will replace ideals, and CONSUMPTION will replace convictions - BUYING takes the place of BELIEF. LLM admonishes new clients, "The emergence of this 'new world' has a profound effect on what is important." The listing shows that image is more important than accomplishment. Results from government are an obsolete concern of the Passing World, replaced by reputations. Style is everything. "WHAT YOU DO" is replaced by "HOW YOU DO IT" '

Here the investigation led me to the heart of New Labour. And I found nothing there at all. Stripped of ideology and lacking all conviction, nothing remained but ambition. Jonny Mendelsohn, brainy, aloof, bloodless, the perfect Ubermensch of the New Labour order, explained to me the party's addictive needs. [Our] super-majority in Parliament means the only countervailing force is media and the business community. So when the economy turns soft - as it must - we will make certain they stay with us."

In our hours of humorless discussions, I came to understand what a source told me: "LLM is not a lobby firm, they are an arm of government." Through LLM, New Labour has sent forth its young to scavenge for influential men of business and media and lock them into Labour through a skein of deals. Typical lobby firms bring their client's wish list to government. LLM inverts the process. As Lucas confided to us, Blair's circle made the initial approach to the Murdoch organization with the offer to trim the government's own union recognition and competition bills - in return for Murdoch's muzzling his papers.

It would be a mistake to view the politics of emptiness - in which ideals and beliefs are suspect - as a New Labour invention. Blair, Cardoso of Brazil, Frei of Chile, are all products of the factory that manufactured Bill Clinton, all bionic election machines who, in Mendelsohn's words, are "not ideologically constrained". LLM's manifesto dismisses "leaders who lead" as antique creatures of The Passing World. Today, markets lead. Industry CEOs lead. In the Emerging World, prime ministers and presidents LISTEN. Without the restraints of conviction, they are free to respond to the requests of the powerful while shifting their media images as the public mood demands.

All during the week after the Observer printed the expose we received an avalanche of calls of support and congratulations - from high inside the government. "You've got the little bastards. Keep digging." But outside of his longknifed cabinet, the prime minister had two key protectors, William Hague and Paddy Ashdown, erstwhile leaders of the opposition parties. Six months ago, no one could have imagined the Tory general lecturing Blair, "A government without convictions is a government for sale." But after the thrill of his initial attacks, Hague realized a full-scale investigation of sleaze could do him no good. Ashdown must have calculated that silence would reap more rewards than pestering questions. I waited to be called before a parliamentary committee. No one called. No one investigated. No one wanted to. The opposition seemed to go out of its way NOT to demand the release of Liddle's diaries, phone records or meeting notes, nor to call Gordon Brown's advisers for questioning on their dealings with PowerGen. Other suspect meetings - between Tesco and Prescott, between Liddle client Rio Tinto Corporation and Blair himself - drew no questions.

British commentators were quick to say that Lobbygate was no Watergate. But how would they know? The Watergate break-in was at first derided as a "third-rate burglary". It was the senators of Richard Nixon's own party who asked a hundred times, "What did the president know and when did he know it?" On television, I watched the US Congress grill every White House operative, open the files, play the tapes. But from this Parliament, nothing. I imagined some grand secret council of Britain's betters voting not to permit disclosure of the inner workings of power lest the lower orders become restless. And where were my fellow journalists? These little puppies yapped at the Observer's evidence, but none demanded the government open its records. The Financial Times did confirm Draper's passing confidential Treasury figures to a New York bank - but no one asked who in Gordon Brown's office made sure Derek had a steady supply of inside information. Instead, all media eyes turned on Draper's antics. To the government's relief, Derek put on his cap and bells, played the boastful court jester and created a sideshow distraction while all the king's men escaped. As I slouched toward Blackpool for the Labour Party Conference, I could hear the chant of the party faithful, "At least they're not as bad as the Tories." Said repeatedly, this seems to calm the troubled hearts of believers, even if it isn't true.

The New Statesman published this story in their special Labour Party Conference issue, flew me back to Britain and announced Id be their main speaker at their "fringe meeting", where I was to debate with Derek Draper. The boy flxer had enough sense to duck out, but I didn't and won my second front-page Mirror headline. I was The Liar again and worse. The Labour Party pulled my press credentials and, as a security threat(!), I was not allowed inside the cordon sanitaire of the New Labour faithful.

The morning after the "Liar 11" headline hit, Peter Wilby, editor of the New Statesman, called, frantic (or as frantic as the cool, cool Wilby ever gets). It was 30 minutes to press and he was going to retract a key accusation in my story. In the printed version, I'd identified Ed Balls, aide to Chancellor Brown, as the "Treasury aide" who met PowerGen executive Ed Wallis to arrange a secret merger approval, the fix that Chisholm described as "a bit illegal". Wilby printed an apology, accepting Balls's statement that he'd never met any representative of PowerGen.

Though I don't blame Wilby, the retraction was wacky, at least half of it: I had seen the receipt for the luncheon between Balls and Draper, PowerGen's lobbyist. But Balls was right about one thing: he never met Wallis. The name was wrong, but the story was right. Who could have made this complex deal fly and kept it under wraps? Who met Wallis to cut the mergerfor-coalcontracts trade? My partner Barnett got the answer to me within the hour: Chancellor Gordon Brown's PaymasterGeneral, Geoffrey Robinson. Robinson owns the New Statesman. (Wilby's a ballsy cat - he was prepared to print that Robinson met Wallis and was the center of the fix even though "This may lead to the unusual situation in which our proprietor will sue his own publication." I spared him the aggravation.)

You have to admire these guys. They simply have no shame. Exposure was embarrassing to the policy swapfest, but not an impediment. Three weeks after we revealed LLM's scheme to get Tesco's out of the 20 million pound a year car parking tax, I reported this for the Observer.

To the surprise of green campaigners, out-of-town shopping centers will be exempted from the car park tax. Congratulations are in order for lobbyists Neal Lawson, Ben Lucas and Jon Mendelsohn, the firm at the center of the cashfor access. Downing Street has derided the Observer's disclosures as merely "boasting" by the politically connected lobbyists. But in this instance, the outcome is exactly as predicted in a taped telephone conversation on June I I between an LLM lobbyist Lucas and the Observer.

On July 7, 1998, following the publication of the first cash-for-access reports, Blair's spokesman released a statement denying that Tesco's 12 million pounds sponsorship of the Millennium Dome was timed to influence the government's decision on the tax. A government spokesman said that the donation was made in February, whereas "there were no proposals for car parking charges even suggested until April", Both new information obtained by the Observer and previously unpublished portions of the recordings of lobbyist Lucas contradict the government's statement.

According to those who took part in the creation of the government "White Paper on Transport", the car park tax was first proposed to Deputy Prime Minister Prescott's Department five months earlier, on November 17, by green activists Transport 2000 in a meeting which included industry representatives.

Lobbyist Lucas claims he informed Tesco even earlier than that. After telling us (while we were under cover) he could obtain "intelligence which in market terms would be worth a lot of money," he offered a "couple of examples," including this: "Our advantage for Tesco, going back to the car parks tax issue, is not that we started work on it now but that we'd warned them about it over a year ago, and we can plot as it were."

In a segment of the recording of the June I I call, previously undisclosed by the Observer, Lucas laid out in detail the bargain he claims to have made with the Labour government. "We've been developing a strategy for [Tesco] to head the government off basically and push them in a different direction in the plans which they're about to announce next month and to get them to effectively do a deal whereby the contribution to community transport which is already made by this company is seen as an alternative to them having to pay this tax." (Lucas warned the Observer that this information was "quite sensitive".)

The White Paper released two months after the taped call follows the lobbyist's plan exactly. Tesco and the other supermarkets would be left free of tax. In return local authorities would "build on the initiatives which some major retailers have already taken" to subsidize bus routes bringing customers to their shopping centers. The White Paper notes that large retailers "already provide" subsidies. For Tesco, new contributions would be small or nonexistent per their lobbyists' plan.

The release date of the government report was delayed from June 23 (the day the Observer operatives met Lucas), and shortly after that, the supermarket tax exemption was added to the White Paper.

The wording in the White Paper used to justify the tax exemption followed exactly the language crafted by LLM and revealed to "American businessmen" (the Observer team) eight weeks earlier. Blair promised investigation and "reform", put into the hands of Parliament's Committee on Standards of Conduct. After piddling with the topic for over a year, Lord Neill's committeemen reached their conclusions, recommending against opening all government diaries and phone records. They'd heard Draper tell them, "I wasn't actually passed any confidential information about a government decision." The fixes, the meetings, the information swap, all denied - without a single probing question from the committee nor, heaven forbid, a demand for his phone logs and diaries, nor, heaven forbid, those of any accused minister.

From the lobbyist's testimony Lord Neill and his committee concluded, as one said, "We may have serious problems but they are not of the gravest nature. "

We must not think the committee acted without considering all the facts, although Lord Neill declined an offer to hear crucial new evidence from the Observer's investigations - tapes, faxes, witness statements. Apparently, the evidence was not needed. "The committee," said their official spokesman, "felt the subject matter had been covered completely in the testimony of Derek Draper."

Kissed Not Loved: Tony Blair, Globalization's Toy-Boy

AfterLobbygate, I picked up the vibe that Blair and friends no longer felt affection for me. But why the vicious response to any dissent? What drove this man?

As I built the files for "Principles of the Project' for Ecologist magazine, I began to see Blair in a different light; not the soulless poll-puppet, but a man in love ... with American "entrepreneurialism". In all the creepy little deals, who benefited? GTech corporation of New Jersey, Entergy orLittle Rock, Arkansas; Reliant of Houston, Monsanto of St Louis. Lobbygate was less about England than about Clinton, Bush and the projection of American corporate powers onto one tiny, cold island, and their welcome by the always-grinning native chief, Mr Tony. Like Cardoso of Brazil and Vincente Fox of Mexico, Blair is bedazzled by the invitation to board the good ship Globalization.

Here was Blair's passion.

Principles of the Project

In his heart, Tony Blair hates Britain. This prime minister despises a nation lost in "How Green Was My Valley", weepy over the shutting of filthy coal pits; fossilized trade unions who chain workers to dead industries rather than build new ones. He cringes at the little bell ringing over the door of the hamlet chemist, so quaint and maddeningly inefficient; at the grousing farmers with two little pigs and tiny plots edged with dry stone; and over his right shoulder, at the rabid blue-hairs who demand he keep the Queen's snout on the coinage. For four years, he gazed with an almost erotic envy at Bill Clinton, Chairman of the Board of America, Inc. The prime minister dreams of birthing the Entrepreneurial State but finds himself caretaker of a museum of nineteenthcentury glories made somnolent by the lullaby of easy welfare and low ambitions.

Blair's burden is that his nation doesn't understand him. The Left sees in the PM a hypocrite, toady to corporate campaign donors, traitor to Labour Party ideals. Writes a Mr Bob Spooner to stalwart gazette Left Labour Brieflng: "Tony Blair has betrayed everything that the early socialists believed in!" as if the PM could lose ideals he never had. Even those who merrily voted New Labour have the uncomfortable suspicion that there is no There in Blair, just an empty suit pulled this way and that by focus group puppeteers. One fool wrote, "Blair is a bionic election machine. He is a box of gears with a smile painted on the front. He could drink a glass of water and smile at the same time. The country is being run by people who are professionals at getting elected - they have no philosophy."

I was the fool. But one man got it dead right, minister Peter Mandelson. Days before he resigned for fraudulently concealing a loan from Geoff Robinson:

New Labour has to be more than a ruthless electoral machine. It has to be a political party of values and ideals.

Go ahead and laugh. You do so at your own peril. There really is a Project, with a moral design, international in scope, disciplined, principled, evangelical.

Blair's goal is nothing less than the transformation, the SALVATION, of his nation's social-economic soul. Blair has been to the Future, and from its source in Washington has taken the Promethean fire back to Bristol and Bournemouth. Tony Blair may be the most idealistic, visionary leader in the non-Moslem world. That should scare you.

Return with me to 1998. Treasury minister Geoffrey Robinson was Tony Blair's Can-Do Man. But taking care of PowerGen PIc and their Texas confederates would be a heavy lift. By 1998, PowerGen had managed to dictate 85 per cent of the prices bid for wholesale electricity in the England-Wales "Power Pool". Profits had been astronomical. But PowerGen's CEO, Ed Wallis, wanted more. He wanted East Midlands Electricity. But that seemed out of the question. Even the Tories had turned down his last request to take over a regional electricity company.

And Wallis wanted even more. His ambition was international, and his quick way to cross the globe was to propose a merger to Houston Industries, an unloved group of power pirates just past a brush with bankruptcy. For their part, the Texans were enticed by the invitation to own a piece of the fixed casino that is the UK power market. That too was out of the question: the Tories had killed a nearly identical American buy-out request in their last days in office - in response to the taunts of Labour in Opposition. PowerGen's dual merger scheme looked dead on arrival.

For Geoffrey Robinson to bring it back from the crypt, he would have to overcome two formidable obstacles: the law and Mrs Beckett. The law was clear: only the trade and industry minister, Margaret Beckett, could review and authorize mergers not even the prime minister could interfere. Beckett was an Old Labour war-horse, and the hell if she was going to go easier on industry than her Tory predecessor. She had already turned down one US power company merger. In Downing Street they called her "Minister No", the Can't Do Gal.

But Beckett was sorted. PowerGen's lobbyist (Derek Draper) had learned, and unwittingly informed me in June 1998, that Beckett would soon be sent to pasture in a post far away from the delicate levers of competition policy.

The only big problem remaining then was to work the PowerGen requests in a way that would satisfy the wishes and desires of the man with ultimate authority over Britain's energy system: President Clinton.

And Bill Clinton had quite a wish-list. According to internal US Embassy files, Clinton wanted to keep a lid on Britain's windfall profits tax on US companies that already owned half the UK electricity system; to get this Mrs Beckett out of the way of several American merger targets; and to let Clinton's most favored friends, Enron and Entergy corporations, build gas-fuelled power plants.

This last one was trouble. Power plants using gas wiped out coal mining jobs, so Beckett had slapped a moratorium on building new ones. Clinton's top man, Commerce Secretary Bill Daley - son of Boss Daley of Chicago and, like his dad, rarely defied - phoned Beckett to go over the US government's shopping list. He got no satisfaction. The Americans were getting testy, even the US Embassy got into the act, slipping strained communiques under Beckett's door as a crucial June 4, 1998, Cabinet meeting approached.

For Robinson, crisis was opportunity. He knew exactly how to take care of PowerGen's needs and Bill Clinton's with one stroke. If the government could arrange for the trade secretary to reverse policy and bless the PowerGen/East Midlands merger and, at the same time, PowerGen were to commit to a big contract for British coal, despite its premium price, the Trade Ministry could then grant American companies waivers from the moratorium on building new gas plants without causing the loss of those last beastly jobs in the coal pits. Secretly, near the beginning of June, Robinson met PowerGen CEO Wallis.

On July 27, Margaret Beckett was removed from the Trade Ministry. On September 22, her replacement, Peter Mandelson, signed off on PowerGen's takeover of East Midlands. The next day, PowerGen signed contracts for 25 million tons of British coal. The government granted Enron its waiver, then removed the moratorium on gas plants altogether.

What may appear to the ethically rigid as a creepy little fix, a deal at the edge of the law, are to the New Men of New Labour sword thrusts at the knots of government gone sclerotic with legalisms. That is why the real work of governance requires movers and shakers of business, the Geoffrey Robinsons, to move and shake the system to get the damn thing done.

But do not reserve all the kudos for Mr Robinson. According to the US Commerce Secretary's notes, it was Tony Blair himself who stepped over his minister Beckett to "intervene to water down the gas moratorium".

What on earth would move the prime minister of Britain to hop like a bunny to Bill Clinton's bidding, to let America swallow his own nation's power industry, then lighten the US investors' tax load, to grant special waivers to Texas Enron which ultimately, contracts or not, will seal Britain's coal mines?

US power companies were first on his gift list, but other adventuring Americans wiped their feet on the golden doormat at Downing Street. The international chief of Wal-Mart, the retail dragon of Arkansas, swallowed Asda stores following a private, unprecedented meeting with the PM himself. Britain waved in Wackenhut prison company, Columbia (private) Health Care, GTech the lottery men, televangelist Pat Robertson and his Internet bank, and Monsanto with its strange harvest in English fields - not one, but a stable of Trojan horses that Blair sees as a stud pool to breed with the mangy local stock.

Back to the power deal. The US Embassy's timing was flawless, knowing, says an internal embassy memo, that "the Cabinet may take up the issue at its June 4 meeting". How did they know that? There are Members of Parliament who can't get their hands on the Cabinet's agenda. But Enron's operatives had a pipe in to the Select Committee on the energy review. "Many friends in government like to run things past us to some days in advance." Enron, their lobbyist explained (unwittingly, and on tape), is "using us to influence that energy policy and we're having reasonable effects especially on the moratorium".

Buying Brazil

One humid night in July 1998, Peter Mandelson boogied until dawn in Rio with a young man named Fabrizio. Or so reported our moral watchdogs, the Express, Mohamed Fayed's Punch and William Hague. "Lord Mandelson of Rio." What the minister did without his portfolio is none of our damn business. But there were other names on his dance card - President Fernando Henrique Cardoso, tycoon Olavo Monteiro and the British Chamber of Commerce of Sao Paolo. And there was something on the Tropic of Capricorn more attractive than an expendable toy-boy: the Gas Company of Sao Paolo and other state assets, boodle worth one hundred billion dollars which British and American companies believed was rightly theirs, despite Brazilian resistance.

To Brazilians, an Englishman shaking his booty may be a little off-putting, but no scandal. What caused a ruckus was Mandelson, a foreigner, endorsing Cardoso's re-election on national television, supposedly a slip of the tongue, but brilliantly crafted.

While Old Labour cannot help but think of the Project as a coup d'etat by the faction of their party who sneer at singing "The Red Flag" at party conferences, this view is small and provincial. Blairismo is the UK subsidiary of an international community, which encompassed Clinton, Mexico's Fox, India's Manmohan Singh, Jerry Rawlings of Ghana and a wide group of modernizers. Their golden child was Cardoso, whose new Brazil will provide the transforming Miracle for the Third Way religion, much as Chile provided the genesis fable for Thatcher's free market cosmology.

However, in July 1998, Cardoso's re-election to the presidency hung by a thread: his ability to maintain the stunningly high value of Brazil's currency, the real.

The World Bank and International Monetary Fund dangled a loan (ultimately $41 billion) to prevent the real's collapse, but they would hand over nothing until after the elections. Mandelson's crafty endorsement was a clear signal to Brazilians that only Cardoso had the safe hands into which EuroAmerican leaders would place the bail-out check.

Cardoso squeaked back into office in October. Thirteen days later, with Cardoso's re-election secured, the US Treasury gave the nod, a trap door opened and Brazil's currency plunged through, dropping 40 per cent.

Crisis has its uses. To pay its new multi-billion dollar debts, Brazil held a fire sale. British Gas picked up the SaoPaolo Gas Company for a song. As Brazil sank, our Texans Enron and Houston Industries picked up Rio and Sao Paolo electricity companies and a pipeline.

On November 23, just days before Mandelson, now trade minister, was scheduled to return to Brasilia for his victory samba with Cardoso, World Bank brass flew in to London to lay out what it modestly titled a "Master Plan for Brazil". At its center was a check-list of the bank's five measures for a "flexible public sector workforce":

Reduce Salary/Benefits;

Reduce Pensions;

Increase Work Hours;

Reduce Job Stability;

Reduce Employment.

The World Bank and its Latin stepchild, the Inter-American Development Bank (IDB), described for Britons the game plan for implementation, including the bankers' rewrite of Brazil's constitution. Five days later, Mandelson's wellbriefed contingent arrived in South America ... but without the Secretary. That week, the UK press broke the story of Mandelson's Saturday Night Fever in Rio from his earlier visit, and it seemed impolitic for him to return at that moment. (And a month later, he resigned in disgrace over a secret loan from Mr Robinson. Both resignation and disgrace were temporary.)

The Transatlantic Business Dialogue

On November 13, 1998, the New York Times printed a truly curious letter, "IT'S TIME TO REPAY AMERICA", by Tony Blair. Britain's chief of state gushed and bubbled and, editorially speaking, lifted his skirt over his head, to thank Bill Clinton and the whole of the United States (often conflating the two) for introducing him to the simple pleasures of bombing selected dictators and to leadership the American Way. "Governments should not hinder the logic of the market ... results not theology ... free from preconceptions and bureaucratic wrangling." It was a wee bit embarrassing, like getting a Valentine dipped in perfume from an office mate. For Tony it was love; Clinton thought it was just a business relationship.

Yet there was more to this twosome than I had credited. In May 1998, Blair and Clinton together acknowledged the birth of their love-child, the Transatlantic Economic Partnership. This was not a press release, but an extraordinary commitment to the program of the Transatlantic Business Dialogue (TABD).

For all you conspiracy cranks and paranoid anti-globalizers who imagine that the planet's corporate elite and government functionaries actually meet to conspire on their blueprint for rewriting the laws of sovereign nations, you may in fact get the schedule of the TABD's twice yearly confabs on the web. However, you aren't invited.

Who are these guys? The Transatlantic Business Dialogue is the working group of the West's 100 most powerful CEOs. Before presidents, prime ministers and other transitory heads of state meet at the World Trade Organization, this more permanent grouping provides them the details of their agenda.

According to an internal US Commerce Department memo, in their September 1997 meeting, the US Secretary was to tutor his British counterpart, Mrs Beckett, on TABD. "TABD is the most influential business group advising governments on US-EU commercial relations. Your encouragement," he was to instruct Beckett, "would be helpful."

The TABD's system is masterfully efficient. One US corporate Big is paired with one European CEO for each of three dozen "sectoral" or "horizontal issue" groupings. For example, Monsanto's Robert Harness and Unilever's F.A.H. Vigeveno are in charge of Agri-Biotech. Here's where the corporations get their power: both the US government and the EC assign one official each to report to an industry pair. The TABD pairs' privileged access is not to small fry either, but top bananas such as Pascal Lamy, European Commissioner for Trade, and Erkki Liikanen, Commissioner for Enterprise and the Information Society (what you and I call Telecommunications).

In May 2000 government assignees had to report to their corporate duo on the headway they had made on each of the items on a "TABD Implementation Table". The table listed 33 environment, consumer and worker protection laws in selected nations, which TABD would then defeat or defang. The corporate chiefs then judged each minister on their progress and rendered their verdict on what TABD call "the scorecard", which was turned over, along with a new Implementation Table, including agenda items for the next WTO summit meeting. The 1998 Implementation Table, one of the first documents obtained (grudgingly) from the EC under its Access to Information disclosure rules, makes good reading for those wanting to know what's planned for our brave new world. For example, several of the "tetra-partite groups" (the two-on-two government-business trysting sessions) seek expansion of MRA. MRA stands for "Mutual Recognition Agreement", what the TABD describes as "Approved once, accepted everywhere." It is the globalizers' cruise missile. "MRA," US Secretary Daley tutored Minister Beckett, "shows how influential the TABD can be in moving governments to act on business priorities."

Here's an example of how MRA works. Years ago Pfizer company defectively fabricated heart valves which cracked and killed more than 169 patients in whom it had been surgically implanted. Understandably, this made Europe wary of accepting contraptions merely because they were blessed by the US Food and Drug Administration. MRA brushes aside individual nations' health and safety regulatory reviews - including individual regulation of medical device manufacturing plants.

Given the ill feeling of Europe to genetic modification, the MRA rules for GM products are devilishly complex and savvy, effectively applying only to the developing nations. Does Brazil have a problem with Monsanto's bovine growth hormone? Sorry, approval by the WTO's Codex Alimentarius committee means Brazil must accept the product or face WTO trade sanctions.

The US too is a target of TABD's contempt for consumer protection. TABD's Products Liability Group, under the guise of eliminating "non-tariff" trade barriers, takes aim at American citizens' unique right to sue corporate bad guys. One TABD proposal would reverse the $5 billion judgment against Exxon in the Exxon Valdez oil spill case.

Businessmen lobbying their way into government offices is an old story, but the supercharged TABD version of infiltration by invitation began only in 1995 as the brainchild of Ron Brown, Clinton's first commerce secretary. Brown, who died in 1996 when his plane crashed during a sales promotion tour of Bosnia, was Clinton's Mandelson, architect of the scheme to turn Democrats into New Democrats, party of business. When Brown died, Clinton's passion for pairing with business passed also, not uninfluenced by the demolition of the New Democrats in the 1994 Congressional elections. Clinton lopped off the "New" label - take note, Tony - when his good buddies in industry, sensing his weakness, rushed back to their natural home in the Republican Party.

"But Blair really believes!" says economist Jagdish Bhagwati of the prime minister's globalization fervour, who attended a gripe session with business bigs in Budapest in 2000 where they rejected "dialogue" with NGOs such as Amnesty International. "I don't believe that those who were in Seattle represented somebody with a legitimate stake," fumed Peter Sutherland, head of investment banking giant Goldman Sachs UK. Sutherland, who jumped to Goldman from his post as the WTO's director, prefers the company of his own kind. "We have to be very careful on engaging in this debate as those NGOs should not have a say with government!" Interestingly, the Goldman bank chaired the TABD when Sutherland directed WTO.

Bill Clinton could blow a mean "Heartbreak Hotel" on his sax. Clinton can feel your pain. (And several women attest he felt theirs.) But Blair has none of Clinton's cynical cool, nor Bush's. Blair believes. He can't help it. Those handsome arched swastika brows over eyes that never blink give him away.

Dr Faust had the great advantage of knowing he sold his soul to the Devil; he could always redeem the pawn ticket. But the prime minister, giving over Britain's high streets to Wal-Mart, jails to Wackenhut, power plants to Entergy, is convinced he's sold his nation's soul to Santa Claus. The Americans will sprinkle the fairy dust of commerce know-how over his laggardly island and - presto! - Enterprise will take flight.

It's sad, really. Unlike Clinton who wised-up quickly, Blair confuses the TABD crowd's self-serving wish-list with a program of economic salvation. He trusts his industry darlings will never leave his side. But eventually, as flies to faeces, industry will return to their Tory pile. And when that happens, Blair will find that, as they say in Arkansas, he's been kissed but he ain't been loved.

[Chapter] 8 - Kissing the Whip

Napoleon said that England is a nation of shopkeepers, but then, the Little Corporal never tried to purchase simple dietary staples (organic milk, Red Bull) from Tesco's Express in Islington. I queried the manager as to why they were out of stock again.

"It's Friday," was the answer, as if that were an unforeseen occurrence, like a rogue tidal wave engulfing Upper Street and preventing deliveries. I began to explain that "Friday" is what accountants call a "recurring event" and HAVEN'T YOU BRITONS EVER HEARD OF COMPUTERS - YOU KNOW THOSE THINGS THAT LOOK LIKE TELEVISIONS WITH TYPEWRITERS ATTACHED ... and by then, everyone was looking around at that despised figure, the Complaining American.

I like that. In 1999, I left America in disgust, then discovered, to my surprise, I was some kind of freaking patriot.

Americans bitch, moan, complain and demand their tights. Sometimes. When our TV infotainment hypnosis wears off, when "Have a nice day" is an insufficient answer to getting screwed by the powers that be, Americans can surprise themselves, rise up and say, No thanks, we won't eat shit.

You can read my chapters up to here and get darned depressed: the big boys, the bullies, the brutal always seem to win. When your daddy was a president and your brother, the governor of Florida, counts the ballots, you don't have to win an election to become president. They don't call it the "privileged" class for nothing. Corporate cash beats democracy every time. So it seems.

But not always. It may seem like a battle of bears versus bunnies, but sometimes we little critters stand on our hind legs, fight it out and win. There's a long history in the US of biting back, from Andrew Jackson's challenge to the creation of these creatures called "corporations" to the Populist Movement's demand for public utilities commissions to limit monopolists' price gouging. In the USA, trade unions may fall, but credit unions rise.

The point of this chapter is that America has something to offer the planet besides McBurgers, cruise missiles and Madonna. Admittedly, it is a small chapter.

Blood on the Volvo

On April 4, 2000, I called America and, to my surprise, it was still there. Mom and dad in California and big sister in Washington, coming up out of their deep shelters, squinted into their first glimpses of sunlight since the night before, when judge Thomas Penfleld Jackson dropped The Bomb - his ruling to break up Microsoft,

Microsoft's CEO Steve Ballmer had warned that a judgment in the US justice Department's anti-trust case against the company would mean the end of "the freedom that is driving our economy". The American way of life was at risk! Who knew what civil upheaval would ensue and the prudent barricaded themselves in preparation for the worst.

Yet, America survived intact. Its lovers still cry, its poets still dream and McDonald's employees still lack health insurance.

The value of Jackson's ruling to the British public - beyond the giddy satisfaction of watching a centi-billionaire nerd pantsed and paddled by the court - eluded me until, dozing through the drizzle that passes for journalism on the topic of Monopoly Bill, I was jerked awake by my newspaper's advice to the judge. Our editorial admonished the US court to impose heavy fines to punish Microsoft for ripping off Joe and Josephine Bloggs with unconscionably high charges for Windows.

Strange advice from a newssheet in London. The suggestion is better directed down the street to Her Majesty's Office of Fair Trading (OFT) which, only a month earlier, gained the legal authority to fine monopolists. For OFT, this should be a no-brainer. Judge Jackson ruled the Microsoft's evil-doings were "worldwide" in scope. And to make OFT's work easier, unlike secretive European monopoly investigations, the US Justice Department posts all its evidence on the web. UK authorities and curious insomniacs can download hundreds of hysterical, petulant and self-incriminating e-mails by Bill Gates and his buddies at www.usdoj.gov.

For the record, OFT informs me they have "no investigation and no plan for investigating" of Microsoft.

The Guardian (besides aiming its advice at the wrong nation), in emphasizing state-imposed fines, evidenced a common misunderstanding of what makes American competition law work - at least by comparison to the sorry codes in Europe. The simple brilliance of US anti-trust law is not in punishing the pricefixers (though it does that, with fines or jail time) but in compensating victims. If Gates's bully-boy tactics added $20 to the price of Windows, then every PC jockey in America gets a check for $60, triple the overcharge.

Americophilic columnist Jonathan Freedland postulates that tougher, citizen-friendly anti-trust laws in the US are rooted in the progressive theories of enlightened turn-of-the-century capitalists seeking to keep the marketplace free and fair. Washington anti-trust lawyer Kenneth Adams has a closer view. "Americans have 200 million hand guns. We've always had guns. If we didn't have a way for the average guy to get his money back, there'd be war." The 1890 Sherman Anti-Trust Act was the desperate defense of America's monied class aimed at defusing the Populist Movement, a million armed farmers on the verge of insurrection against the railroad barons.

Moreover, in the US, no victim has to wait for the government to nail the bad guys. Any overcharged customer can file a Sherman Act suit, even if the government concludes no monopoly exists. That's what drives the system. While Joel Klein, head of the US Justice Department's trust-busting unit, deserves credit for bringing Gates to heel, the government's case only followed on the path cleared by private suits brought by Microsoft's injured competitors, Netscape and Sun MicroSystems.

Klein's unit has slammed monopolists for nearly $3 billion in fines over the past decade; but that is peanuts compared to the collections by millions of victims in class action suits totalling many times the government's take. In Britain, rippedoff consumers have to wait upon timid, befuddled, underfunded and politically vulnerable agencies like OFT to take up their defense. Their targets are few, action is rare and compensation is out of the question.

A month before the Microsoft ruling, Britain's OFT uncovered a ring of 14 Volvo dealers in a secret price-boosting pact. But the limp trust-buster did not order them to give the 4,000 pounds in overcharges back to their customers. (It's against the law to fix prices in Britain, but in the past 100 years, the number of price-fixing victims who have won compensation is exactly zero.)

No question that if it happened in the US, there would be bullet holes in the salesrooms and blood on the bumpers.

Hot water again. That column got Volvo's knickers in a twist. Apparently, I was guilty of 'attempted mockery'. Well, there was nothing I could do but apologize to the company and my readers ...

Is my face red! In an ungracious screed about Volvo and its dealers illegally fixing car prices, I noted that the auto company had not, despite news reports, publicly confessed to whacking their customers for 4,000 pounds each.

The day after my story went to print, the postman brought a sharp note from Volvo UK challenging the figure of 4,000 pounds. Oh, really? In other words, Volvo now admits it fixed prices?

Well, not exactly, the official company spokesman tells us. "I think that all our customers felt comfortable that they were getting a deal that was right for them. "

Despite the jacked-up price, customers were happy?

"Yeah, or they wouldn't have bought the car would they?" You cannot assail such logic. Accept my apologies.

But the real steam in the letter - from Company Secretary Nick Conner no less - was over this column's "attempting to mock" Volvo's program for compensating their customer-victims. That was not my intent. In truth, I had no idea the company had any compensation program at all, a misimpression shared by Volvo's Customer Relations office which told a Volvo "owner" (actually, an Observer volunteer) that they were "not aware of any program'? for repayment. It seems some Volvo customers are also in the dark about the restitution program. Volvo sold over 100,000 autos in the three-year period over which the company was accused of punishing dealers who discounted, yet fewer than 50 customers have sought money back. This is another sign of customer satisfaction, says the flak, not the result of the company's failing to notify overcharged customers.

Rather than send a cold letter to ripped-off shoppers, Volvo has concocted a more exciting system for paying its victims, kind of like a game show. First, the consumer must get past denials of its customer service gatekeepers. Then, the buyer must correctly guess the three-month period for which the company will acknowledge "isolated" dealers conspired on prices. The purchaser must then correctly name a shady dealer. Volvo's spokesman assured us all the information, names and dates, are clearly laid out in the stipulation the company signed with the government - a copy of which they would happily give us if it weren't confidential.

Might Volvo at least give customers a sporting chance by listing the bent dealers?

"That's unfair to go back retrospectively to pick out individual cases."

Have you taken any action against those dealers? Confiscated the bonuses they received from Volvo for participating in the conspiracy?

"Retrospective action is not how this company works."

One lucky woman who did match both time period and dealer came within inches of compensation. But then Volvo decided she received a high trade-in allowance on her old car. No pay-out prize for you, miss!

I accept the 4,000 pounds figure is wrong. What, then, is the average restitution paid out?

"We haven't yet compensated anyone."

Oh. Despite such minor glitches in the program, I am quite proud this American corporation (Volvo is a unit of Ford Motor) would voluntarily compensate customers. This proves the wider policy point: there is no need for governments to impose the kind of "retrospective" price-fixing punishments found in US law, criminal fines, triple compensation for victims, jail time for conspirators.

Interestingly, the Consumers' Association notes that Volvo's cooperation with competition authorities began in earnest after the Americans took over. I am certain Ford/Volvo's rush to a deal with the OFT was not motivated by a desire to preempt the "Long Arm" provisions of the Sherman Anti-Trust Act. The Long Arm empowers US courts to impose draconian Sherman Act penalties on American firms conspiring to fix prices anywhere in the world - unless another government acts, as did OFT, more or less.

Phil Evans, Consumers' Association auto expert, dissents from my praise of the Ford/Volvo compensation package. "They will pay you if you suffered a loss, but they've already decided you can't have suffered a loss, so they will compensate you but it will probably be nothing. It's something out of Alice in Wonderland. " I had to warn Mr Evans he was getting dangerously close to mocking Volvo's commitment to compensation and that I could not allow him to use this column for that purpose.

Wanting to give Ford/Volvo the beneflt of the doubt, I took Mr Clair to his local Volvo dealer in Cobham, Surrey. The man had been cheated, the dealer and company admitted, so I simply asked if they'd give him back the overcharge. They didn't want to talk to me. It was either my hat that put them off or my BBC camera crew. Anyway, Mr Claire got nada, nothing, bupkis. So we went to Volvo headquarters in Swindon, then to Washington DC, Brussels, New York ... and finally, Mr Claire got a check for 173 pounds. Who says there's no justice?

Ni Tuya, Ni Mia, De Todos

New York, New York, it's a helluva town. just 15 years ago, you could walk down Third Street on the Lower East Side and count 23 boarded-up, abandoned buildings and only seven buildings inhabited. On the comer at Avenue B, the awnings of the local bank provided shelter for the open-air market where you could buy smack, crack, angel dust, you name it. In 1984, one of those dealers (no longer in the business) took over the bank - and heralded a revolution in US flnance.

Mary Spink, out of prison for running a drugs network, heard news that the bank, a branch of Manufacturers Hanover Trust, was about to shut its doors and re-open in a tony Midtown location. "Manny Hanny" was the Lower East Side's last bank - if you don't count the loan sharks - and without it, the neighborhood would finally die. Spink teamed up with the parish priest and local housing activists (including a former Weather Underground wannabe terrorist) and picketed Manufacturers' Hanover Manhattan headquarters. They won a face-to-face meeting with the bank's executives hosted by the Federal Reserve Board.

In the Fed's elegantly appointed Wall Street conference room, the Lower East Side crew demanded that the $80 billion bank corporation hand over their branch building to the group to house a community credit union. They also demanded the bank kick in several hundred thousand dollars to get the credit union off the ground. The executives balked, but the Federal Reserve reminded them of the power of the Invisible Hand of the Marketplace (i.e. the iron fist of Alan Greenspan) - and the Community Reinvestment Act, CRA, a then new law obliging banks to serve the credit needs of communities in their areas of operation. Manufacturers' Hanover caved in. The launch of the Lower East Side Peoples Federal Credit Union, a novel use of the CRA, quietly marked an extraordinary shift in political power from boardrooms to the public. Their slogan: Ni Tuya, Ni Mia, De Todos - "Not Mine, Not Yours, But Ours". Today's monster-sized mergers of financial behemoths, such as the Citicorp/Travelers Group combination, are akin to elephants mating. It is such a fascinating spectacle, we forget about the effect on the ants below - the poor and workingclass customers for whom bank consolidation usually means bank abandonment.

But now in the US, the ants are fighting back and their weapon of choice is the Community Reinvestment Act. Armed with CRA, America's anti-poverty campaigners are holding mega-mergers hostage until banks cough up millions, and sometimes billions, of dollars for loan funds pledged to low-income borrowers. In March 1998, 130 angry citizens testified at Federal Reserve Board hearings against the takeover of Philadelphia's Core States by First Union Corporation. To avoid further challenge under the CRA, the banks settled with community groups by pledging to make $5 billion in lowand moderateincome loans over five years, a huge jump over current lending rates. Then Bank of America made the mother of all pledges, $350 billion over ten years, in return for the right to gobble up NationsBank. In all, merger-bound banks have signed 360 agreements to provide $1.04 trillion in targeted financing to underserved communities.

But Matthew Lee isn't satisfied. Lee, now head of New York's Community on the Move, rejected a plea by Citibank and Travelers to end his challenge to their merger in return for the new bank's establishing a $115 billion ten-year loan program for low-income customers and small businesses in poor neigbourhoods. An alumnus of the Lower East Side Peoples credit union, Lee is the Che Guevara of poor folks' banking rights. Like Che, he sports a beard. Unlike Che, he puts fear into the hearts of American capitalists. His convincing, detailed analysis of banks' lending patterns have exposed the dark, racist side of "red-lining", the practice of cutting off credit to deteriorating neighbourhoods, thereby accelerating the deterioration. Lee wrested a commitment of $1 billion for loans to low-income customers from Charter Bank of Ohio after he exposed data showing the bank was three times as likely to reject loan applications from Blacks and Hispanics as from Whites, despite little discernible difference in creditworthiness.

Lee, in rejecting the $115 billion offer from Citigroup, emphasized that CRA compliance is not a game of piling up gargantuan loan funds, but a matter of justice for the poor in the provision of credit. He cites a case of unscrupulous treatment of an African American family, the Harrises, by Citigroup's Commercial Credit Unit. While homeowners in white neighborhoods receive mortgages at a 7 per cent interest, the Harrises paid 12 per cent despite their solid credit rating. The Harrises had signed blank loan forms, counting on the integrity of the world's largest financial institution. That was a mistake, one that Lee himself did not make by signing off on the Citigroup merger deal. Lee insists that the Harrises' predicament is not isolated, that Citigroup operations systematically overcharge and underfund poor and minority communities.

It would be easy to list CRA's weaknesses - biased access to capital remains a fact of American life - nevertheless, CRA has helped boost the total number of home mortgages for Black Americans by 72 per cent in its first four years the books. The Republicans' chief banking spokesman charges that the loan funds are simply extortion payments to activists. Yet he could not find a single banker to testify against CRA's continuation. No mystery there: banks turn a profit on these mandatory low-income loans.

CRA's producing a heap of cash for depressed areas has not gone unnoticed by Britain's New Labour "social exclusion" policy mavens. Over the last three years, HM Treasury has sent teams to the US to meet with "Che" Lee, community credit union experts and activists - and brought some of these finance industry savages back to London for display before government task forces. Introducing the Americans to her task force the then economics minister, Patricia Hewitt, proclaimed, "This government believes strongly that wider access to financial services - through positive action by the banking community - is vital." Undoubtedly, imposing a community reinvestment obligation on British banks could revolutionize the credit system.

But don't hold your breath waiting. Hewitt immediately reassured the assembled bankers - the task force was headed by the Deputy CEO of the Royal Bank of Scotland - that New Labour had not the slightest intention of mandating any new lending requirements. "I should emphasize that we are not planning to copy the US legislation." Rather, she merely hoped that tales of money-making low-income loans in the US would encourage British financiers to seek "profitable banking in our poorer communities".

Back on the no-longer-mean streets of the Lower East Side, Mary Spink, dealer-turned-banker (today she's treasurer of the National Federation of Community Development Credit Unions) warns the Blair government not to assume they can cajole banks into doing the right thing, into voluntarily putting money back into Liverpool instead of into international hedge funds. The Blairites believe they can win over the hearts and minds of the banking community with sweet talk of profits from lending to the working poor. But Spink suggests that CRA succeeds in the US because it obeys the dictum of General Westmoreland, "When you've got 'em. by the balls, their hearts and minds will follow."

In March 2000, about a year after I wrote this, the Royal Bank of Scotland, which headed this task force on excluding small and low-income citizens from finance, finally did something about it - the bank closed scores of branches all over the United Kingdom. Barclays Bank CEO, Matthew Barrett, would not be outdone: he closed 172 branches, a tenth of his system, mostly in rural areas; and Barrett picked up a bonus of 30.5 million pounds ($46 million).

On the Lower East Side of New York, Father Jack Kenington aided Mary Spink's activist crew by organizing immigrant members of his parish for non-violent, but in-your-face direct action, which led to the takeover of the Manufacturer's Hanover bank by the community.

When the banks closed in Britain, another cleric wheeled into battle, Rowan Williams, Archbishop of Wales. He called for turning Britain's abandoned banks into community credit unions. But rather than surround the local Barclays with pickets or sitting-in at the offices of shoulder-shrugging officials, the Archbishop seemed resigned to administer last rites to the closing branches. "It's a bit utopian to imagine that government can intervene to make the banks behave."

The meek may inherit the earth, Your Grace, but seizing the bank buildings will restore your communities' financial services. So there it is: when a good soul like the Archbishop disparages his own demand for reform as "utopian", the call to action decays into another lesson in public acquiescence.

Kissing the Whip

After he was charged with treason, Daniel Ellsberg, who made the Pentagon Papers public, was beaten nearly to death by a group of thugs on the courthouse steps. "God Bless America," he told me. In Britain, Ellsberg noted, he would have been thrown in the slammer and never heard of again. The United Kingdom has an Official Secrets Act, libel laws that effectively privatize censorshipof journalism, privacy laws protecting politicians, no legal freedom of the press and there's not much dissent over it. An unholy number of British journalists seem to have fallen in love with their shackles. (Don't get smug, America. We may have no Official Secrets Act, but we are on the cutting edge of creating a corporate secrets act - see 'Silence of the Lambs' in Chapter 1). I put this notice in Index on Censorship:

On March 17, 1999, on an order from the London Metropolitan Police, my fellow reporter from the Observer, Martin Bright, our editors at the Observer and lawyers for the Guardian were called before a judge at the Old Bailey. On pain of imprisonment and unlimited fines, the British court ordered them to turn over all internal notes relating to stories about a former MIS agent. Bright and the editors, Roger Alton and Alan Rusbridger, refused.

One week later at a black-tie soiree at the Hilton Hotel, I found myself in a meandering, champagne-lubricated debate with a disturbingly articulate gent defending the government's right to censor and restrict news reports. My interlocutor (and my boss), Guardian editor and Observer CEO Alan Rusbridger, the very man facing time in the Queen's dungeon for refusing the court order.

I was not surprised.

It is the subtle brilliance of British censorship and news suppression that its prime victims, the nation's editors and reporters, have developed a nodding acceptance of the principles justifying limits on their freedom, a curious custom of English journalists to kiss the whip that lashes them. Rusbridger challenged me, "You wouldn't want a [news] photographer taking pictures of your family over your garden fence, would you?" Well, no. The death of Princess Diana - in the public's mind, a victim of invasive press hounds - has turned a concern for protecting privacy into a treacherous obsession. Privacy has become the first, attractive step down that slippery slope to journalists' accepting state censorship.

Under this banner of respecting privacy, Prime Minister Tony Blair's government obtained a court order blocking publication of his children's nanny's diaries. The convenient tool of privacy also was the cloak to conceal public ministers' salaries. Even the records of a phone call from Downing Street in which a Blair adviser privately offered to sell me access to government office - that was private too.

The news community's response to the writs against editor Rusbridger, reporter Bright and their papers was slow to form. In a land of cautious protest and measured defense, the Observer itself delayed for a week covering its own punishment, unsure whether readers found their paper's repression newsworthy.

Weeks passed. Finally, Stuart Weir, the first Briton since Tom Paine to understand the word "freedom", got up a petition signed by media notables. However, with their plea to the government to drop the prosecutions, the petitioners conceded, "We recognise the need to protect national security," a mannered diffidence to the state's ultimate authority over the printed word grating to my American ears. The journalists also demanded: "The Official Secrets Act should be reformed to allow a public interest defense." Reform? The Official Secrets Act prohibits the publication of almost any document or fact that the government chooses to conceal, from crimes by M16 to educational statistics. The polite protesters would grant the right of the Crown to arrest journalists, but they requested wide exceptions. Petition organizer Weir knew a demand to abolish the repressive Act outright would have chased away key signatories.

The Guardian editorialized in its own defense, but again, its complaint was carefully circumscribed. The paper targeted the plain silliness of the government's writ. The Guardian had done nothing more than print a letter to the editor from a former M15 agent, David Shayler. The government demanded the newspaper hand over the physical copy of the agent's letter (as it turned out, the computer tape holding an e-mail message) - despite the fact that David Shayler himself sent a copy of the letter directly to the authorities.

Similarly, the Observer report contained little more than a note that a US Internet site had posted information corroborating agent Shayler's accusations. Apparently, Shayler had tipped the Observer to this public information. While any communication by an ex-agent violates the Official Secrets Act, the police did not need the reporter's letter files, as they claimed, as unique evidence of Shayler's alleged violation of the law - Shayler himself had sent the government copies of his messages to the paper. Yet, the sheer foolishness of the government's demanding documents already in its possession is evidence of a more sinister aim. By showing it will punish minor infractions of its secrecy laws, government succeeds in freezing any journalist's attempt to dig out deeper and more dangerous truths concealed within secretive agencies. Worse, journalists, defending their minor infractions, trap themselves into justifying the greater censorship. "As a newspaper," wrote the Observer, "we have no difficulty with secrets or with the principle that secrecy, where necessary, should be protected by the law."

By acceding to limit itself to "legitimate" inquiries, to use the timid terminology of the journalists" petition, the papers open the door to state policing to root out the "illegitimate".

Most American readers, who still think of Britain as mother of our democracy, will be surprised to learn that the United Kingdom remains one of the hemisphere's only nations without a written constitutional guarantee of free speech and press. That changed in October as Article 10 of the European Convention on Human Rights becomes UK law. The Convention will allow Britons, for the first time, "to receive and impart information and ideas without interference by public authority".

The court and government were quick to agree that the new Human Rights law applied to the current prosecution of reporter Bright and the newspapers. This was not good news. Whereas the US constitution states, "Congress shall not restrict the freedom of the press nor of speech" - no ifs, ands or buts - the European Convention adds a nasty little codicil, "Part 2". In the March 17 hearing, the judge ruled that the right to "receive and impart information" - freedom of the press - was subject to Part 2's "restrictions and penalties in the interests of national security". How fitting that in the land of George Orwell, the law bars the government's controlling the press - unless the government decides to do so. Prime Minister Blair's minions clearly intended the Guardian Group case to establish from the inception of the Act that a right is no right at all.

D-Notice Blues

On April 15, the censorship/self-censorship vaudeville opened a new act. That day, reporter Bright saw a copy of a fouryear-old M15 document detailing the security agency's bungled attempt to recruit a Libyan spy, a cock-up which appears to have led to the murder of a Libyan dissident living in London. The "TOP SECRET DELICATE SOURCE UK EYES" document can be read by anyone with a mouse and time on their hands at www.cryptome.org. Observer reporter Bright drafted a story (with Antony Barnett) about the information on the website.

Despite its open publication on the site, repeating this information invited criminal and civil penalties. (In fact, reading the web-site's content is a crime in the United Kingdom.) And if you think that's a joke, Blair's thought Gestapo arrested college student Julie-Ann Davies for reading letters from Agent Shayler published on his French web-site. To avoid another writ, the Observer contacted the Defence Advisory Committee, the "DNotice" committee, a kind of government confessional where journalists may whisper their unpublished thoughts and information and ask, in confidence, "If we publish, will we have sinned against the state?" The agency suggested that if our paper could prove our news report contained no new news - an interesting restriction for a newspaper - then prosecution might not follow.

However, there was another censor yet to contact, the Treasury Solicitor, who held a two-year-old injunction against any British newspaper publishing any information whatsoever from former agents. Just five minutes before the printing deadline, the Treasury telephoned. Four hours passed (and four editions with front-page filler where the article could have run) as the government bargained with the editors and the paper's lawyers who, in the face of ruinous fines, found themselves with little choice but to fax to MIS the unpublished draft of the story.

The paper asked two simple questions: Would publication violate the law? And, can we publish? The government said it would not stop publication, but neither would it promise not to prosecute the reporters and editor if publication went ahead. MIS's position had a serpentine brilliance: blocking the article would get them an "OBSERVER GAGGED AGAIN!" headline. By keeping open the hint - but not the threat - of prosecution, the official spooks meant to lure the paper into withdrawing the story, while the government could claim it censored nothing.

Laudably, the paper went ahead with publication for its last edition, though it "voluntarily" left off the web-site's address. Reporter Bright finds the procedure deadly to the ethics of news coverage. "It's crazy, but the law says we can't do what journalists should always do: check with the sources, review the key documents. We have to break the law to break the news."

Self-censorship is in the breeding

The D-Notice Committee, the reluctance to ban publication outright, the seemingly sympathetic bargaining, all serve to foster the habit of self-censorship. Rarely does government have to brandish the implements of coercion because British news people are bred to a strong sense of the boundaries of public discourse. In this class-poisoned society, elite reporters and editors are lured by the thrill of joining the inner circle of cognoscenti with ministers and titled military intelligence men. The cost of admission is gentlemanly circumspection.

Britons, as they constantly remind me, are subjects not citizens. British-born journalist Christopher Hitchens, scourge of authorities on two continents, stunned Americans by submitting to deposition by US government prosecutors during the impeachment trial of President Bill Clinton. Clearly, habits of subjugation die hard. The state extends its power to punish unruly reporters through libel laws, which, in effect, privatize enforcement of state censorship. I have yet to publish a single column in a British newspaper as written, uncarved by lawyers fearful of ruinous court action by well-funded litigious bullies running the gamut from McDonald's Corporation to the prime minister himself.

Astonishingly, some British journalists are not shy about borrowing this brutal weaponry of the state to censor others. The government's writs to the Guardian followed just after closure of the magazine LM. The lefty periodical had disclosed that a powerful piece of British anti-Serb war propaganda, a photo of starving Bosnian prisoners behind barbed wire, was "manipulated". The pro-government photo-journalists, backed with corporate funding, made good use of the British court's revulsion with LM's admittedly vile and preposterous denial of Serbian fanatics' war crimes. The legal fees, more than the judgment, bankrupted the dissident publication.

These libel laws, while crippling the work of investigative reporters (the Guardian's computer won't accept any copy prior to a reporter's answering the machine's query, "LAWYERED?") hardly protect the public. England's tabloids like the Daily Mirror are notorious cesspools of character assassination, rumor and vicious fabrications.

When other arguments against unfettering the press fail, the ultimate defense by officials eager to censor and journalists ready to comply is that a government open to scrutiny is "not British". Certain freedoms offend what some Britons call their "culture" which, on examination, is nothing more than a debilitating combination of long-established habits of subjugation mixing too comfortably with the preferences of the powerful.

Talk about hot water, we'd done it now. Frank Fisher, managing editor of Index on Censorship and the type of troublemaker journalism desperately needs, was left in charge of publication while his superiors were out of London. Frank slipped into the piece the actual web-site address where anyone can read MI5 and MI6 documents. In case readers missed the point, he illustrated the story with a secret service document marked confidential.

When the chief editors returned to find the thousands of copies already printed, they called a meeting. Should Frank be boiled in oil or merely turned over to the authorities with a note pinned on him, "Do as you will"? How can we preserve the computer disks, keep the magazine running, out of bankruptcy, when the Metropolitan Police come to take the computers as they had done to the student arrested earlier? How do I prevent seizure of my passport?

No matter the consequences, the issue would go out.

But we were not prepared for the stunning attack about to come by electronic post: Greg Palast's hastily-written article entitled, Kissing the Whip ... What on earth is Index doing when it allows its space to be wasted, and its reputation for seriousness lowered, by ignorance and pettiness of this sort?

Christopher Hitchens, a British transplant in America, whose posh accent and carefully hedged nastiness made him New York's favorite cocktail party revolutionary, was in high dudgeon. The mild reproving mention of his collaboration with Republican officials would not be countenanced.

Everything in this passage is either false or irrelevant. The House Judiciary Committee, which prepared the case against Clinton, is not an arm of the US government ... I did not "submit' to any process, but freely agreed to a request for my testimony ... If Mr Palast does not understand the impeachment provisions of the US Constitution, he has no business patronising the hapless Brits for their lack of a Bill of Rights.

Chastened by this dressing-down, I replied with humility.

Mr Christopher Hitchens Washington DC

Dear Sir,

I write to you to offer a sincere apology for my words in print which appear to have deeply wounded your pride and your justly earned sense of your own worth. I did not mean to offend a person as important and accomplished as yourself in the arts of essay and condescension.

I often say that social critics such as ourselves, whose profession it is to censure others, should withstand with grace and humor that which so easily we dish out. But, given your stature and deserved celebrity, I agree we should make you an exception, and grant you an immunity from any and all criticism. For though your work seldom discomfits the powerful, it does flatter the Left at a time when we so need an appreciation of our prejudices.

I must admit that had I edited, as well as authored, the piece, I would not have concluded with any mention of your story ... your antics in Washington were not as noteworthy in my estimation as you believe.

Forgive us, for we had other things on our mind as we approached publication. Index exposed the vicious system of British censorship - and came close to crossing the line of the Official Secrets Act as interpreted by MIS and MI6. We had long discussion about what to do in case Index were charged under the Act, our computers seized or the editors and I arrested. I admit, while focusing on the difficulties of facing down state repression, I did not give more careful attention to your personal feelings.

I am horrified that in what you rightly term my "ignorance and pettiness", I stated you "submitted" to a request to provide testimony in Kenneth Starr's prosecution of President Clinton. Had you done so, it would have been a violation of American journalistic ethics: reporters must never provide source information to aid a state prosecution. I now gladly correct the record. You did not "submit" to testify but, as you say, "freely agreed" to take part in Kenneth Starr's official witch-hunt.

Therefore, I would ask Index to run the following retraction:

Mr Greg Palast wishes to apologize unreservedly to Mr Christopher Hitchens whose actions are at all times honourable, commendable and always, without exception, beyond the criticism of so-called investigative reporters such as Mr Palast. Mr Palast is terribly ashamed.

Sincerely, ...

In the end, Her Majesty's intelligence services and Christopher Hitchens backed off. An English court of appeals ruled that the new European Human Rights law trumped British official secrets hysteria in this silly matter of publishing already public information, though the pernicious Act remains to punish those who cross a line, drawn at a place unknown, in revealing official evils.

[Chapter] 9 - Victory in the Pacific - A Conclusion

I'm told readers want to know what it all means. What's there to say? Well, here's something I wrote for the International Herald Tribune. I got some hate mail, so it must mean something.

In 1995, veterans of Silver Post No. 282 celebrated the fiftieth anniversary of their victory over Japan, marching around the catering hall wearing their old service caps, pins, ribbons and medals. My father sat at his table, silent. He did not wear his medals.

He had given them to me 30 years earlier. I can figure it exactly: March 8, 1965. That day, like every other, my dad and I walked to the newsstand near the dime store. He was an LA Times man. Never read the Examiner. He looked at the headline: US Marines had landed on the beach at Danang, Vietnam.

As a kid, I really loved my dad's medals. One, embossed with an eagle and soldiers under a palm tree, said "Asiatic Pacific Campaign", hung from a ribbon. It had three bronze stars and an arrowhead.

My father always found flag-wavers a bit suspect. But he was a patriot, nurturing this deep and intelligent patriotism. To him, America stood for Franklin D. Roosevelt and the Four Freedoms. My father's army had liberated Hitler's concentration camps and later protected Martin Luther King's marchers on the road to Birmingham. His America put its strong arm around the world's shoulder as protector. On the back of the medal, it read "Freedom from Want and Fear".

His victory over Japan was a victory of principles over imperial power, of freedom over tyranny, of right over Japan's raw military might. A song he taught me from the early days of the war, when Japan had the guns and we had only ideals went, We have no bombers to attack with ... but Eagles, American Eagles, fight for the tights we adore!

"That's it," he said that day in 1965, and folded the newspaper. The politicians had ordered his army, with its fierce postwar industrial killing machines, to set upon Asia's poor. Too well read in history and too experienced in battle, he knew what was coming. He could see right then what it would take other Americans ten years of that war in Vietnam to see: American bombers dropping napalm on straw huts burning the same villages Hirohito's invaders had burned 20 years earlier.

Lyndon Johnson and the politicians had taken away his victory over Japan. They stole his victory over tyranny. When we returned home, he dropped his medals into my twelve-year-old hands to play with and to lose among my toys.

A few years ago, my wife Linda and I went to Vietnam to help out rural credit unions lending a few dollars to farmers so they could buy pigs and chickens.

On March 8, 1995, while in Danang, I walked up a long stone stairway from the beach to a shrine where Vietnamese honor their parents and ancestors. Halfway up, a man about my age had stopped to rest, exhausted from his difficult, hot climb on one leg and crutches. I sat next to him, but he turned his head away, ashamed of his ragged clothes, parts of an old, dirty uniform.

The two of us watched the fishermen at work on the boats below. I put one of my father's medals down next to him. I don't know what he thought I was doing. I don't know myself.

In '45, on the battleship Missouri, Douglas MacArthur accepted the surrender of Imperial Japan. I never thought much of General MacArthur, but he said something that stuck with me. "It is for us, both victors and vanquished, to rise to that higher dignity which alone benefits the sacred purposes we are about to serve."

Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure.

Nelson Mandela